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Route to Market & Supply Chain Blog

Guide to FMCG Supply Chain - Planning Function

Posted by Dave Jordan on Wed, May 05, 2021

Last week I introduced you to the Enchange Supply Chain House; a one stop shop/house for the elements you need to allow your supply chain to operate effectively.  The Enchange Supply Chain House is a simple and easy to understand reference model which provides you with a clearly defined and proven understanding of your supply chain status and importantly, its or your, future potential.

Slowly but surely we will visit every room in the house to start a journey from raw materials to consumer and towards supply chain excellence. Firstly, let us take a look at some definitions of plan as a noun and as a verb.

  1. A detailed proposal for doing or achieving a task, e.g. COVID vaccine roll-out plan.
  2. An intention about what you are going to do, e.g. I have no plans to leave the company.
  3. Define and decide arrangements in advance, e.g. they were planning a trip to the moon.
  4. Design or make a plan of something to be built, e.g. she had planned the kitchen from top to bottom.

fmcg-planning-in-postSimple stuff and all easily relatable to daily business processes in any sector but so many fail to plan properly or not to plan at all. Planning within the supply chain is the focus of this article and this is the one discipline which applies to every room in the Enchange Supply Chain House. Benjamin Franklin famously said, “If you fail to plan, you plan to fail” and those few, simple words succinctly describe the importance of planning in business.

Even scruffy old Baldrick from Blackadder had a plan, always cunning and ultimately doomed to failure but at least he had a plan. He had an outline idea on what he wanted to achieve and a comical approach to how he would go about it. If Baldrick could plan, so should you.

In the coming weeks we will delve into more detail on each of the planning activities but here is a precis.

Demand Review

  • How much of each SKU is actually being taken off the shelves? Not sales-in to Distributors but actual purchases leading to consumption. Critically, the short and medium term forecasting tasks are a job for the sales and marketing departments, not supply chain.
  • Which new SKUs are ready to exit the innovation funnel? New launches must never be a surprise for any sales-facing colleagues.

Supply Review

  • Ok, so we know the sales forecast but can this demand be supplied from stock, factories or 3rd parties? Ideally, yes but don’t chase perfection as always having everything available is very expensive. If something is not available, what can be substituted? Can production be adjusted to produce the more popular or profitable items on the price list?

Finance Planning

  • The commitments made in Supply and Demand events above have an impact in terms of cash flow, working capital and cash collection. Do the estimated sales meet monthly, quarterly or annual turnover and margin expectations? Will there be enough cash incoming to cover business expenses including forward RM/PM purchase?

Sales & Operations Planning

  • The glue that holds your processes together ensuring demand and supply are balanced along the supply chain and everyone, everyone operates to the same set of numbers. Do you suffer out of stocks, excess inventory, write offs and lost sales? You need some sort of Sales & Operations Planning.

Weekly Control Cycles

  • What if something does not go to plan? Even with S&OP working well you do not sit back and take your eye off the ball. The market is dynamic and your sales forecast – however scientific your process - will never be 100% predictable. Short-term plan updates are required to keep S&OP on track and allow staff to make prudent adjustments to current activity and forward planning.

Demand Execution

  • How is the available stock transferred to each distribution centre, distributor or warehouse? How much goes where to meet the market demand? DRP is the stage when forecasted sales are converted into sales orders and invoices. Yes, important but often overlooked as a priority.

Supply Execution

  • Ok, we have invoiced but that is not a dead end in the planning process. The S&OP process continues and fresh RM/PM and 3rd party goods must be replenished to fill the pipeline once more and so the process continues its next cycle.

Planning is required everywhere you choose to look in your business; planning is omnipresent.

I will end this article with an excellent quote from Richard Cushing who said “Always plan ahead. It wasn’t raining when Noah built the ark”.

Tags: Supply Chain, Forecasting & Demand Planning, Production Planning, Supply Chain House

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