What a carry on!
British cinema goers of a certain age may notice I have based the article title on Carry On Chloe, one of many cheesy comedies of the 60s and 70s. However, there is often nothing to smile about when considering FMCG inventory, whether it be too high or too low.
Amongst the many variables in running a Supply Chain, the one certainty in FMCG businesses is that inventory is solely in the eye of the beholder. Nobody else but Supply Chain actually sees the full unedited and excuse-free realism on inventory and what this stock is doing (usually having a negative effect) to overall company costs, service and performance.
I see no stocks!
I hear a lot of Management Accountant types shouting that they know what is going on better than anybody else in the business. Complete tosh. They certainly do and should know the total value and the weeks or months cover but that does not begin to tell even half of the full story. Knowing that your working capital is below, on or above target is a necessary piece of data for reporting requirements but what information and more importantly, what operational actions might be prudent and productive?
Should Sales & Marketing know everything about inventory levels? They know and react when something is unavailable and out of stock but rightly do not care too much about the underlying causes. However, sales forecast inaccuracy and lack of innovation delivery rigour are in the middle of their ball-park. Their view of inventory is usually restricted to what happened to upset the monthly numbers rather than what is beneficially possible with some forward looking collaboration.
Taking stock of inventory
Is anyone in your FMCG business actually checking what is out of stock or overstocked, what this means now and more importantly, the future implications? The future for sales certainly but also the future for demand planning, supply planning and production facilities. One thing is certain, when you do not have full visibility and modelling capability of your inventory chain then you will have too much and what you do have will not be aligned to market demand.
Without close attention to such detail you will find inventory follows the JIC or 'just in case' principle. Stocks slowly creep up along the chain as non-analytically derived contingency is built in by different functions. Sooner or later you end up with more stock than Marco Pierre White can shake a cinnamon stick at.
Inevitably, this excess is unhelpful and actually hinders the capability to supply the demand. A continuous check and challenge of inventory levels along the chain (including seasonal trends and promotions) is required to ensure the correct stock is being held for different SKUs. Not brands or categories or ranges but the individual SKUs consumers actually want to buy now, not tomorrow or next week.
Forgive Excel?
A majority of the commonly used basic IT tools do not actually permit meaningful analysis of future possibilities. They can certainly tell you what has taken place in terms of forecast accuracy, bias, inventory level, value, out of stocks, service levels etc, etc but they are not best positioned to help you model future possibilities.
Ok, so what can you do without investing in an all encompassing ERP that does what it wants to do and not what you need it to do? You can get your best spreadsheet people and throw reams of data at them but that will be wasteful and futile. What you could do is look at a specific inventory tool for modelling your future possibilities of which plenty are available at relatively low cost.
If you have applied each and every Supply Chain improvement initiative you can find and still need cost savings to satisfy your FMCG HQ and shareholders, then inventory modelling is where significant benefits to cost and service will almost certainly remain unexploited.
Help, I need somebody!
If you have any Supply Chain or Route to Market problems or opportunities you would like to discuss, then please reach out to Enchange.com via telephone, email, or live chat.
