Welcome to the Deliver edition of our FMCG supply chain guide. The related Source, Plan and Make overview articles can be found here. Each discipline is a key room in the Enchange Supply Chain House which provides a guide to your supply chain improvement journey.
Ok, so you have sourced the raw and packaging materials, planned volumes versus demand and produced finished goods which are available for sale. All you have to do now is get your product in front of consumers. A formality? No. The Deliver side of business has moved on from when it was considered only as logistics or even disparagingly, as just trucks and sheds.
The dictionary definitions of deliver are relatively straightforward but hide a multitude of activities that are required for a successful FMCG Deliver operation.
1. Carry and hand over (a parcel, or goods) to the intended recipient or location, eg. the gifts are to be delivered in time for Christmas".
2. Provide something that has been promised or is expected, eg. he was able to deliver a high number of votes in the election.
3. Produce something at a precise time, eg. the baby will be delivered in 9 months.
Indeed, they are very simple definitions and perhaps the third is the toughest example given it is a deadline for an ‘SKU’ which cannot be easily delayed or postponed. Giving birth is not quite in the same league as delivering washing powder, cheese or paint but if you have given a commitment (and wish to be successful) you must do your best to be in the right place at the right time and at the optimum cost.
Dependant on the current level of supply chain maturity, your Deliver function may well be restricted to relatively simple transport and warehousing management. Alternatively, you may have or seek a more professional approach where simple handling and movement of goods is a relatively small part of your Deliver deployment.
Deliver in the Enchange Supply Chain House
In subsequent articles I will take you through more detail but for now, here are a few words on some of the important elements you must consider for a successful Deliver operation.
Your business will require warehousing somewhere along the chain. This could be on site attached to a factory or at a distribution centre receiving finished goods from multiple sources. Increasingly, warehousing responsibilities will be outsourced to 3rd parties as you focus resources on core competencies. Have you explored outsourcing your warehousing activities? Are your warehouses sized and located sensibly? Is your stock really under close control and losses negligible?
Unless/until we see throngs of drones delivering our goods you will need to use some form of road (possibly rail) transport to move product from A to B. Again, you might own and operate your own trucks but that can be inefficient of CapEx and OpEx unless you are able to continually optimise space, weight and distance. Outsourcing your transport requirements to a 3rd party logistics provider (3PLP) or 4PLP and often integrated with warehousing, is the common solution. Have you invested in assets which do not pay-back? Do you seek back-hauling opportunities? Could someone do the transport task better than you?
Unless your market is predominantly populated by Key Accounts (KA) you may use direct or indirect distribution or a mix of the two. Although responsibility for distributor management may rest with the sales department, the skills required for getting SKUs to distributor locations/point of sale are firmly within supply chain. Do you operate a customer logistics department with specific responsibilities and skills? Are your distributors sensibly located? Can your distributors operate as 3PLPs for onwards distribution of your stock, even to KA?
3PLP/4PLP Tendering & Operation
If you decide to outsource your logistics operations you will need to carry out a confidential tender process focussed on performance and not just cost. Cost based tenders are prone to rapid failure, particularly in dynamic economies and emerging markets. A more mature 4PLP partnership is a further step which you may consider. Do you know how to run an outsourcing tender? What should you expect from your logistics partner? Do you have Service Level Agreements (SLA)?
Keeping your customers and consumers happy must be one of your biggest priorities yet misunderstandings prevail in the absence of SLAs. An SLA makes it clear to each party exactly what is required, expected, measured and when penalties (even bonuses) are appropriate. If your internal Customer Service (CS) level is 95% it is useless if the client expects 97.5% case fill, OTIF, CCFOT or whatever other measure is in use. Have you sat down with your customers to understand their needs? Do they know your constraints? You do speak to them, don’t you?
Your supply chain may not be a one way street with various items moving backwards from consumers and end user. Reverse logistics may be restricted to wooden or plastic pallets, crates and glass bottles or to more specialised thermal containers from pharmaceutical industries. If you need to recover items which are probably booked as assets you need to pay as much attention to this journey as you do to the outbound supply chain. What do you need to recover? Who is responsible, internal or external? Have you assessed the cost of the return mechanism?
Order to Cash
After so much effort described above, what do you receive in return? The order to cash or OTC process is how your business documents, receives, processes, manages, and completes a sale. This means creating and issuing invoices, collecting the payments and KPI reporting of the OTC process. Is your OTC responsibility in sales or supply chain or even finance? How efficient is your OTC process? Are overdues monitored and flagged for senior team attention?
Customer Service (CS) is a measure of the success of your performance to buyers of your product. This is usually B2B, e.g. Tesco, Lidl, Mega Image or B2C in some markets and sectors. Big name retailers see this interaction as a critical factor in ensuring corporate buyer satisfaction and ever closer collaboration. Even though a degree of customer service is handled by digital systems, the regular opportunity to speak to a producer counterpart is beneficial. Do you have a CS department? Do you meet clients at the correct level of seniority? Are your SLAs agreed together?
In subsequent articles we will look in more detail at the specifics you need in place to support and fuel the extended supply chain and your Route to Market deployment.
Read all posts in my series on the Supply Chain Excellence page of our blog where you can also subscribe to our updates.