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Route to Market & Supply Chain Blog

FMCG Supply Planning: 4 Frequent Flaws to Avoid

Posted by Dave Jordan on Mon, Feb 28, 2022

The Enchange Supply Chain House is available for those wishing to embark on a structured, journey towards Supply Chain excellence.

What about those companies who need change now with no time to waste? What can they do to effect meaningful change sooner rather than later in Supply Planning?

The Enchange 6-Part Model

In a simplified view of supply chain, the priority of FMCG players work to get their stuff in front of consumers but with so many hurdles, this is not necessarily easy. The 6 simple steps:

Step 1: Sourcing

Step 2: Demand Planning – Supply Planning

Step 3: Manufacturing

Step 4: Warehousing

Step 5: Transport

Step 6: The all-important Consumer Shelf

dj-rapid-change-source-in-post

The approach helps people to understand the day to day operational difficulties and challenges experienced by colleagues along these 6 steps and what you can change, now.

  • What happens at the important handovers/pinch points?
  • What can go wrong at these interfaces?
  • How do you identify and solve problems?
  • How can you improve the data and information hand-shakes?

Four Frequent Flaws – Supply Planning

Planning is important across the extended supply chain and last week we looked at Demand Planning. In this article we will look at Supply Planning which is often considered the poor relation to Demand Planning but it is at least equally important. Get either wrong and you achieve the same disappointing results in the market.

Once again, when it comes to any sort of Planning, the best tool is not an expensive 3 letter acronym but the human brain. To get the best out of people you should be providing basic Supply Chain education, build on this with some hands-on Supply Planning training and top it off with a sprinkling of expert coaching. IT can make tasks simpler and faster but their output is only as good as the quality of the human input in system build and deployment.

Here are four frequent Supply Planning flaws which you can avoid.

  1. Rein in your promotions. Planning your baseline portfolio is hard enough even in predictable market conditions. Converting the demand signal into material supply plans, production schedules and distribution requirements may not be glamorous but it is a core element of the supply chain. If you have slipped into the trap of having a substantial percentage of sales as constant promotions then the resources deployed behind supply planning will be stretched. Inevitably, your organisational structure will be designed around regular SKUs and as a result, high levels of constant promotional activity cause strain. Mistakes will occur.
  2. Golden Rules. Are your sales people talking directly with factory managers trying to influence production plans? That line of communication needs breaking as it is counter-productive but you do need to be transparent about your factory capability. A set of Production Golden Rules defining factory versatility limits and change protocols will come in handy. Written simply and based on hard manufacturing reality, this will avoid unwelcome distractions and allow colleagues to focus on reliability in the short term. This provides one consistent voice from the factory and avoids misconceptions and misunderstanding.
  3. Keeping stock of Inventory. Are you carrying too much inventory? You have paid for it; you are paying to store it and every day it nibbles away at your performance numbers. Why is it there? Are your safety stock levels inaccurate or is the volume demand signal always negatively biased? Only a few months of negative bias will see your stock holding rise and start to collect dust (see below). Review the safety stock calculations, investigate and eradicate that constant negative bias and turn down the dial on production.
  4. Business Waste. Frankly, a crime! As a CEO is there anything more galling than signing a write-off proposal for hundreds of thousands of Euros? In addition to the loss of product you have also wasted storage and transport costs amongst others, plus the expense of physical destruction. Don’t wait for the year end to find out the value of your business waste, find out now. Identify every single waste stream and put actions in place to understand why it is being generated and actions to minimise recurrence. Zero waste is a tough ask but what if you were able to halve your annual cost of write-off?

What next?

In subsequent articles we will look at more handshakes in the chain and consider some potential focus areas for quick wins.

If you need to make supply chain change in the next 2/3 months and before the northern hemisphere summer season kicks in, we are just a call away.

Feel free to use any of our contact routes including Live Chat, if you have any questions about how the Enchange Supply Chain House can assist your journey to supply chain excellence. 

Read more articles on Supply Chain Excellence and Route to Market on our website where you can also subscribe to our frequent updates.

Tags: FMCG, supply chain excellence, SUPPLY PLANNING

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