Supply Chain Blog

FMCG Supply Chain: KPI Scorecards - Don’t look back in anger

Posted by Dave Jordan on Wed, May 30, 2018

UK has been my base for a few days and even in that short time I have started to genuinely think I must now be a different nationality if not from a different planet. When my denim jeans rip at the knees it is time to throw them out.  I do not have a badly drawn and inappropriately placed tattoo. Nothing on me is pierced or decorated with metal, precious or otherwise.

I do not have a preference for Ant or Dec – the “best” UK double act in a sea of tepid TV reality dross? What is Keith Lemon all about? So many TV channels yet so little talent and even less TV shows worth watching. I put litter in waste bins. I still know how to queue. Even my waistline is now considered trim. I own music recordings where the performers wrote the lyrics and play the instruments and don’t get me started on that things like the Kardashians. 

Nevertheless, there is something consistent. Something that has not noticeably changed since I packed my company leaving gift suitcases in 1991 and departed for the Saudi desert. Traffic Wardens.

FMCG_KPI_SCORECARD_SUPPLY_CHAIN.jpgBeing a Traffic Warden is a universally hated career choice and possibly third on the detest list after Tax Inspectors and Bankers these days with Politicians being universally disliked, of course. In the UK wardens patrol the streets looking for vehicles illegally parked even for a short time or even if the front bumper/fender overlaps the authoritative  yellow lines by a few mm.

Why do they exist; the role that is, not the people? What good are they doing for the general public and the fuel duty/road tax cash-cow motorist? Are they here to keep the Queen’s highways, byways and pavements clear of transportation obstacles to allow free flow of vehicles, people and prams? Or, are they here to generate as much revenue as possible for councils and police authorities?

Is their role to gently correct errors, show understanding and guide people on their future behaviour or are they here to discipline, penalise, visually allocate blame with a sticky yellow ticket and generally strike fear and hate into drivers? Should people hide and shy away from traffic wardens and treat them with mistrust or should they be seen as a welcome, integral part of day to day UK living.

Friend or foe? Beauty or beast? Pariah or paragon? 

So what does your Supply Chain team think about your monthly KPI Scorecard discussions within your IBP/S&OP process? Is it a meeting all about blame and backwards looking fault finding and discipline? Or is it what it should be, an open discussion about what needs to be done better by everyone in the current and coming periods?

You certainly must learn the lessons of past shortcomings but applying the learnings to the future is a far more positive and healthy experience for everyone. Supply Chain Analytics can assist you in reaching a much more mature approach to running your business effectively and without people being at each others throats.

Applying a “…don’t look back in anger” approach will lead you and the business to a much more profitable oasis within the market place.

Image courtesy of iosphere at freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, Performance Improvement, KPI, S&OP, Supply Chain Analytics, IBP

An FMCG Success Story; Focus on customers and enjoy the consumer benefits

Posted by Dave Jordan on Mon, May 28, 2018

Once upon a time there was an FMCG company that I will refer to as “Foresight”. “Foresight” had spent many years and many Euros creating a slick inbound Supply Chain.

  • Top class global, regional and collaborative buying
  • Flexible manufacturing network
  • A state of the art ERP
  • Rigorous S&OP as the key business process

Slick inbound Supply ChainWith all those important boxes ticked they must be successful.....but they were not; not even close. In their peer group they were not number 1, top and bottom line growth was getting harder and harder. Throw in difficult economic conditions and the consumption of their product offering plummeted – double digit style. A large FMCG business and quite a few personal reputations were not looking pretty.

The problem was a surprising lack of focus at the customer end of the Supply Chain. Both International Key Accounts(IKA) and the Traditional Trade (TT) were being poorly serviced.

A lot of hard work upstream was being wasted through inefficiency and actually, ignorance. The situation had existed for a number of years but as the same malaise was common in the industry nobody could see the benefit or indeed the need for “getting ones act together”. “Last amongst equals” was hardly a motivating and compelling business proposition for an international big name.

Seeking external expert assistance “Foresight” started out on an adventure that would change the way they approached business at the customer end of the chain.

Customer Service.   This was something “Foresight” thought it was already good at providing but critical aspects were lacking:

  1. Customer Service responsibilities were fragmented and lacked clear and unambiguous leadership.
  2. “Customer Service personnel” had received no training in the subject - nobody really wanted to take responsibility.
  3. “Customer Service” was actually limited to invoice preparation. Proactive interaction with customers and problem solution were not in job descriptions.

This hardly projected an image of a caring “Foresight” and this was a huge risk considering the increasing power of the retailers…. 

Route To Market (RTM). “This is under control for TT and it seems to work”, however RTM was in the Sales black box and that box needed opening and shaking upside down vigorously!

  1. The Distributor RTM network had been in place for several years and was decaying. “Foresight” salesman interaction with Distributors was far from an open win-win relationship.
  2. Several Distributors were simply incapable and/or ill equipped to represent such a major company. Some actually did not wish to be involved.
  3. “Foresight” did not know on whom they could rely in their network or how large and obvious opportunities could be targeted.

In-house Sales bonuses were linked to sell-in and the remaining steps to the consumer were ignored at “Foresight” level and left in the hands of some indifferent distributors.

The cures were not simple or quick but they were effective and the payback was fast and sustained.

Customer Service Centre“Foresight” now operates a centralised Customer Service department looking after customer needs in a standardised and caring manner. Phone calls are answered by someone who wants to help and the customer is not passed from pillar to post trying to find someone interested in their problem. Retailers now see CS staff face to face as they proactively take steps to understand the needs of both sides of the partnership. The Retailer office was once “sales only” and off bounds to other departments but not now and the benefit is clear and significant.

In RTM, “Foresight” carried out a comprehensive assessment of their distributor network making evaluations of all aspects of each distributor’s organisation. The strengths and weaknesses of each partner are now known and understood. “Foresight” now knows where there is receiver capacity to take more responsibility and a leading role in market deployment. Similarly, they also know to tread carefully with a number of distributors who are struggling financially or simply not equipped to meet expectations. “Foresight's” efforts are now focused on those areas providing maximum opportunity and reward. The “one size fits all” approach has gone and distributors are managed as important partners.

In combination these changes have transformed the business and success has been quick to materialise.  “Foresight” enjoys a leading position in its sector while competitors scrap around trying to find growth that is clearly there but they cannot reach.

For “Foresight” at least, they really are able to live happily ever after!

 

Tags: Customer service, Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Performance Improvement, Distribution

Balanced Scorecard KPIs: Keeping Track of Business Performance 

Posted by Dave Jordan on Thu, Mar 29, 2018

How do you keep track of Supply Chain performance within your FMCG, Brewing or Pharmaceutical business? You do, don’t you? If you are not measuring any KPIs then perhaps you should stop here, read this KPI piece and then pop back and carry on.

You can measure and report in many formats as long as you measure appropriate KPIs for your business. One of the most pointless tasks is calculating and reporting a “KPI” which is in fact worthless and of no beneficial interest. Colleagues in Sales & Marketing usually assume they are immune from KPIs as they gleefully sit back and let the Supply Chain guy take the flak at Board meetings. In reality however, the actions of everyone in the company must be reflected in one or more KPIs. If there is anyone in your business who is not impacting a KPI in some way then perhaps you might consider a round of head-count reduction!

The following is a demonstration example of a Balanced Scorecard of business KPIs. While many are indeed Supply Chain related you need only look at Sales Forecast Accuracy to see how other departments can influence that measurement to a far greater extent. KPIs are designed (usually 2 or 3 per discipline) and presented within the company Scorecard.  Target performance threshold levels are agreed (RAG – Red, Amber, Green) and presented monthly within the S&OP process to measure success and target further improvement.

Supply Chain KPIs

There will undoubtedly be more PIs calculated around the business but those in the scorecard really must be the priorities; those that provide actionable information.

The use of simple colour notation allows business managers to see exactly where problems exist allowing them to focus resources. Conversely, you quickly see what is going well and where you might have to raise the bar to maintain and improve further.  (If you are measuring your KPIs at the same level as 5 years ago then that may reflect a business which is stagnating.)

Whatever design you use it does not really matter but:

1. You must measure KPIs relevant to your overall business strategy and performance.

2. You must report them promptly and widely.

3. They must be discussed at the top table, routinely.

4. You must review and delete/insert new KPIs as the business need develops.

5. You must ensure the targets are stretching but achievable as a constant red display is demotivating.

While KPI stands for Key Performance Indicator it could easily be considered as Keep People Interested!

Image courtesy of Enchange.

 

Tags: Brewing & Beverages, FMCG, Dave Jordan, Performance Improvement, Pharma, KPI, Supply Chain, S&OP

Key Performance Indicators or just monthly data dumping? 

Posted by Dave Jordan on Tue, Mar 27, 2018

Last month I spent a few weeks enjoying the UK weather disaster as 10mm of snow brought life to a halt. While there I moved the heiress into her new apartment - not a flat now as student days are over, very posh. Hopefully, that will be the last time I have to manage boxes down a narrow and winding staircase and my glass back can get a much needed rest.

Job done, I made my way back to base with an unpleasant 15 hour delay on BlueAir but at least there was no jobsworth amongst the crew.  Despite the weather I continued my minimalist approach to clothing to ease my way through the various security screenings. I wore no belt, no watch, no metal at all in an attempt to glide through the checks without being patted, prodded or made to make a second pass through the metal detector. Unfortunately, my innocent pack of UNO playing cards looks like plastic explosive, apparently.

The end of the world was in progress on arrival back in Bucharest. Heavy dark and angry clouds were dispensing precipitation by the bucket load and it was relentless. The sleet quickly soaked my UK grade Arctic coat and everything underneath including socks.  Futile attempts at shelter included the held-aloft flat newspaper and the rather dangerous shopping bag with eye holes over the head. Even the all in one little black bin bag number a girl was wearing (or was it a dress?) was ineffective in diverting any of the torrential downpour. This was a real storm without escape where complete saturation was guaranteed and inevitable. 

I felt rather like an FMCG CEO. Saturated by data that people believe he/she needs to see in order to run the business. Not actionable information but raw data. Completely submersed in meaningless numbers and perceived trends. Often, that data is aimed at passing the buck to other departments for failure or lack of success or to ensure backside protection during the post-mortem that takes place long after the month or quarter or whatever period has closed.

Even if you do not run a swish ERP you need to be able to address in-market issues while you still have a chance of making a difference. However, to do that you need to receive information which quickly converts to relevant knowledge and then facilitates actions. To actually see the reality of market performance you don’t need masses of numbers, you need facts.

image.pngIf you don’t have a KPI or Balanced Scorecard then sort one out quickly. If you already monitor performance in this way then take a long hard look at what is actually being reported; is it for the benefit of the reporting colleague/department or for the benefit of the entire company?

Remember that KPIs never tell the full story. When a KPI refuses to improve despite all efforts it may well be due to the impact of another completely different and apparently unrelated measure. In such cases you should adopt a Supply Chain Analytics Approach to deep dive into the detail and really see what is happening all along your Supply Chain.

Image courtesy of SupplyVue at Concentra

 

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, Pharma, KPI, Supply Chain, Supply Chain Analytics

Time to Spring Clean your Supply Chain in FMCG?

Posted by Dave Jordan on Thu, Mar 22, 2018

Are market conditions getting any better, really? Many big name companies are heading for indifferent full year 2017 results and all caution about the continuing “difficult market conditions”. Ok, so 2017 has been put to bed but many will be paying the price for the mammoth last quarter efforts which must have made the advertising and promotional agencies extremely wealthy. I wonder what a snap-shot of bottom line profitability looked like over the final 3 months of 2017?

If the economy is not much better than last year what exactly can you do differently to keep ahead of your competitors in 2018?  If you had all the time in the world you could apply all of the Top 10 New Year Supply Chain Resolutions. You might not have the time and resources to tackle all of them but there are a couple you can take advantage of for some quick wins. Give your Supply Chain a much needed Spring Clean (I know, it is snowing heavily as I type this in Bucuresti) and see the difference this can make.

Most businesses will have carried out a stock count at year end. You do count your stock don’t you? If you don’t then I suspect you will have less inventory than you thought! You should now have a clear list of those items which are clearly overstocked, close to expiry, old label etc. Every day you keep hold of this stock destroys value as the expense slowly but surely chips away at your bottom line making your life unnecessarily difficult. Get rid of it! Give it to charity. You could even sell it! If you clear out your stocks you will naturally create a slightly more responsive and faster Supply Chain that focusses on value creating SKUs.

FMCG_SKU_COMPLEXITY_REDUCTION_SPRING_CLEAN.jpgDo you know how many “must have” core and promotional SKUs you added in 2017 in order to get as close as possible to top down HQ targets? In difficult times it is easy for processes and procedures to be overlooked in the search for ever more sales. Every SKU costs you money even if it may be  difficult to quantify in your business. 

Do all of the SKUs actually contribute to profit? If you do not monitor profitability by SKU then a considerable proportion may exist for little or worse still, negative benefit. You need to be dispassionate about culling SKUs that are not performing. As far as possible you should keep Sales and Marketing out of that decision making process until your business case is water-tight. Otherwise, these colleagues will always come up with a reason why XYZ SKU is critical to the future of the universe!

Each of these initiatives is relatively straightforward and certainly not resource intensive. Carrying out this simple Spring Clean and getting your house in good order will help you focus your efforts on winning in the market place.

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: SKU, FMCG, Dave Jordan, Pharma, Inventory Management & Stock Control

A Practical Guide to FMCG SKU Complexity Reduction 

Posted by Dave Jordan on Tue, Mar 20, 2018

If your business is struggling to cope with day to day sales while managing innovation and range extensions then give your SKU list a thorough review. Not just a cursory glance but a scientific evaluation of what brings in the profit and what eats at the same. Few businesses are lucky to operate with just one or two monster SKUs but an excessive list of items on the price list can severely affect your customer service performance.

In the customer service link above we looked at the cost to have a single SKU on the books and it is not insignificant when you take all elements of supply into account. If SKUs do not pay for themselves and contribute to the bottom line then why do they exist? SKUs plodding along with low margin AND low sales turnover cannot be worth the cost and effort of maintaining them, can they? They are simply getting in the way of potentially more profitable SKUs.

If you could base your business on high margin/high turnover SKUs then of course you would. Life is not that simple and the market place is ever more competitive so you need to constantly review the wisdom of what you are putting in front of consumers. Unless your business is in dire straits a large proportion of your SKUs will be either low margin/high turnover or vice versa. Both situations can provide reasonably healthy growth but wouldn’t it be better if you could edge them towards the high/high green quartile as per the diagram below?SKU ComplexityThe first step is to make a very rough estimate of what your business spends on keeping an SKU on the price list. This is not an accurate science but you need to put a “stake in the ground” and agree a number, say 30,000Eur. If the margin of a particular SKU does not at least break-even then delisting should be considered. Staff who look after those SKUs in the yellow segments need to be challenged on a quarterly basis to get their SKUs away from the red and towards the green, or delist.

If you carry out such an assessment and find that a majority of your SKUs are in the red segment then you might benefit from a professional spring clean of your portfolio. Such an approach will remove any emotion and bias when clinically assessing what you should be placing on shelves.

Image courtesy of Enchange at Enchange.com.

 

Tags: SKU, FMCG, Dave Jordan, Performance Improvement, Pharma, Supply Chain Analytics

Supply Chain Improvement via Analytics - well worth a closer look!

Posted by Dave Jordan on Wed, Mar 14, 2018

Just when we thought winter had been and gone it bit back nastily with a short, sharp shock of bad weather including snow and bitter cold. Typically, UK was unable to cope and as an example I spent 5 hours looking out of a cabin window at Birmingham airport while 10mm of snow gently fell. Eventually I arrived back in Bucharest to find significantly more snow yet very little disruption, as usual.

What else is hitting the headlines at the moment? POTUS Donald Trump thinks it’s a good idea to tackle the problem of gun attacks in schools by arming teachers. Is your cuppa too sweet? Of course, add more sugar. Waistline too big? Eat more food. Everybody except POTUS and the NRA considers introducing more guns to schools is a bad idea.

On the business front, February is over in its usual short, yet sweet way and we are now well into March as the end of the first quarter for many companies draws near. Your ability to make an impact on the Q1 results is slowly vanishing and if you are short at the top or bottom then you should still resist the urge to push stocks into the trade.

Just as arming maths teachers is plain daft, pushing more stock into the trade is similarly unwise yet it remains a go-to solution for some. As bad as this is, what is worse is that it is highly likely you already have too much inventory dotted along the chain. From a planning manager perspective this is about just in case rather than just in time!

A few questions to honestly ask yourself:Supply_chain_analytics_inventory_control_&_reduction.jpg

  • Do you know the precise stock level that will deliver your target service levels and in market sales?
  • Do you know what you need to change to achieve your supply chain and ultimate business targets?
  • Do you genuinely understand what is happening inside your own supply chain?

Like those mustachioed David Bedford money lending look-alikes, you are not alone.

In the last 10 years or so, despite investments in sophisticated ERP and other supporting systems, huge opportunities to further improve supply chain performance have become available.

Why should you be interested in Supply Chain Analytics? It’s………

  • Free: An initial free test drive on a sample of your data will indicate the potential benefits.
  • Fast:  A proven step by step data loading process from your existing source systems.  You don’t have to wait for a lengthy IT implementation to benefit from Supply Chain Analytics.
  • Instant: The software is pre-built with analytics reports, calculations, trends and data collation capability.
  • Accessible: A secure cloud-based platform with access from your PC, tablet or mobile.
  • Profitable: You are weeks away from starting the process of saving millions of Euros AND reaching those ambitious sales targets.

Don’t be frightened by Supply Chain Analytics; they are the future leading towards your Supply Chain excellence. A selection of stunning case studies will be published shortly. Take a look and then get involved.

Image courtesy of Loveluck at freedigitalphotos.net

Tags: FMCG, Dave Jordan, Pharma, Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics

FMCG Supply Chain: Chaff innovation, is it worth it?

Posted by Dave Jordan on Wed, Feb 07, 2018

By the end of February over 19% of the year will be behind you. Think about that for a minute. If you follow a financial calendar year you probably put your Annual Plan to bed in October and now nearly 20% of the available selling time has already gone. Shocker!

How would you describe progress so far? Pick a phrase:

Steady progress in a challenging environment.

Defending share under concerted competitor pressure.

Starting to deliver anticipated operational improvements.

Bottom line erosion due to conversion rates.

Sales dip on change in consumer behaviour.

Excuses, excuses, excuses!

FMCG_SUPPLY_CHAIN_INNOVATION_GROWTH.jpgCertainly, there are many, many reasons why performance is not up to expectation and not everyone in a particular sector can achieve their objectives. Unless you are creating new demand, there is only 1 pie for you and your competitors to feast upon. What’s up your sleeve could be innovation.

After the mad rush to end last year and kick off 2018 now is a great time to review your innovation programme. In the same way in-market activation planning should reach far into the future, your innovation funnel should be planned on at least a 12-month rolling basis and longer depending on your specific lead times.

So, do you have some big bold innovations on which your annual plan was designed? Something that competitors do not have? Perhaps your boffins in white coats have come up with a new ingredient or chemical combo that really does make colours brighter and whites whiter. Being able to bring something genuinely new to consumers is a marketing and sales dream to drive growth.

Or is your ‘innovation’ simply another round of at best cosmetic refreshment and at worse, not really innovation at all? If your funnel is packed full of chaff you may not understand how this can adversely affect your supply chain. Here are just a few examples of chaff innovation which probably cause more damage to the business than what is generated in return.

  1. A new label for a bottle.
  2. ‘New & Improved’ when the new formulation is a cost saving tweak.
  3. A salami job on your SKU, e.g. the incredible shrinking chocolate bars.
  4. Economy packs which need a degree in mathematics to understand the offering.
  5. X% extra free and BOGOF.

Don’t get me wrong, you do need to do some of this type of stuff but don’t kid yourself you are innovating.

Many companies fill up their innovation funnels with events which are activities rather than growth generating innovation. Don’t do it! Activities rightfully have a place in your business model, but it is important to understand the impact these have on your business. Each activity requires resources to be deployed across all functions to get the SKU in front of consumers. Is the benefit of the activity really paying back when you consider the cost and time expended?

Look at the dictionary definitions and bear these in mind when you are next presented with an innovation funnel update.

Innovation:  the introduction of new things, ideas, or ways of doing something

Activity: a thing that you do for interest or pleasure, or to achieve a particular aim

Image courtesy of Stuart Miles atfreedigitalphotos.net

 

 

 

Tags: FMCG, Dave Jordan, CEO, Supply Chain, INNOVATION

FMCG Supply Chain dates to remember: Advanced Planning

Posted by Dave Jordan on Wed, Jan 31, 2018

February is here but blink and you will miss it as it is not a leap year. You cannot change January performance and February should be quite firm by now, so you need to be looking further ahead in your S&OP. Much further ahead.

What is coming soon in the wonderful world of FMCG and others?

Valentine’s Day 14th February. Yes, I know it is cheesy, but it is a prime time for chocolates and greetings cards and if your stock is not in place already, don’t bother. I can still see discounted Christmas chocolate on the shelves and I am sure the same will be true after the big red heart day.

Spring. An important period particularly in eastern Europe where a thorough house cleaning is the order of the day. Surfaces and fabrics are thoroughly cleaned and presents an opportunity for homecare producers to get an early boost in sales.

Easter April 1st. A huge confectionery event and fairy early in the year so you get to nibble nice, crisp chocolate rather than warmish stuff – ugh! Take care though because as mentioned above, you will probably be discounting your stock for several weeks after the event. Perfect for chocolate lovers but not great for retailers, your profit or core SKU brand planning.

Orthodox Easter 8th April. Usually a more religious and less chocolatey event but increasingly becoming like the earlier Easter. The dates are very close to each other this year, so this should not cause any significant planning and distribution challenges for global and regional producers. If you are slick enough you could transfer any obvious excess from the April 1st event into Orthodox markets, labelling permitted of course.

Eid al-Fitr. Mid-June. The holiday marking the end of the fasting month of Ramadan. A huge, huge surge in the demand for food and drink across several work-free days. If food and drink producers in Middle East and North Africa get their planning wrong during Ramadan and the following Eid, then the annual results are immediately in danger.

FMCG_PLANNING_ADVANCED_S&OP_DAVE_JORDAN.jpgSummer. While some events are fixed and in the diary years in advance, the appearance of the sun in the northern hemisphere remains unpredictable. This is an annual nightmare for drinks and ice cream producers as despite all the algorithms and predictive tools demand is difficult to guage, in Europe at least. In the hotter months the key aim must be for your key SKUs to be available 100% of the time. This may lead to future write-offs but if the sun pops out and your products don’t…….. 

Eid al-Adha late August. Another Islamic celebration which is perhaps not as grand as Ramadan Eid but as it is in August this year you can be sure chilled liquids will be in high demand. Unike in Europe, the sun is not shy in shining brightly in the ME and NA regions.

Back to school September. Paper, pens, pencils and Peppa Pig lunch boxes will fly off the shelves in preparation for the new school year. Look at the major retailers and you will see a very wide choice and surely not everything is sold. In fact, I remember seeing a huge stock of Bob the Builder merchandise on sale in rural markets in Uganda one Christmas. You have to get rid of it somewhere!

Thanksgiving 22nd November. A mainly North American food fest but with similar celebrations in Netherlands, surprisingly. Large family feasts and open-house entertaining ensure a peak for foods and drink manufacturers.

Christmas. Not much to say here except sales of everything in FMCG-land and many others reach a crescendo of demand as December progresses.

There are many other important peak seasons which may be global, continent-wide, regional or very local but all of them must be considered in your forward planning. If you don’t get it right someone else will push their products in front of consumer's faces.

If you want to be successful, then all these events and more should already be in your 2019 planning process. No typo there, yes 2019! Rather like driving a car on a long motorway, the further you are able to look ahead the easier it is to deal with unexpected hazards.

Image courtesy of Supertrooper at freedigitalphotos.net

Tags: FMCG, Dave Jordan, S&OP, Forecasting & Demand Planning, Integrated Business Planning

Your FMCG Supply Chain: The end of January is nigh!

Posted by Dave Jordan on Wed, Jan 24, 2018

Where has that first post-holiday month gone? Suddenly it’s the 24th of January and there are only 7 calendar days and 5 working days until you close the month. Adopt panic stations despite what Corporal Jones of Dad’s Army would say.

Are you ahead of the required run rate or are you suffering the usual FMCG malaise of looking to push stock into the trade in the last few days? After all, nobody at HQ likes missing the first period target of the year, do they? I’d guess you have about 60% of your turnover complete which leaves you with 40% to plan, make, deliver and most importantly, invoice in those last 5 business days.

The chaos this causes to supply chains is rarely fully understood in other disciplines. This is what month end loading does and this list is not exclusive. Selling stock that is not actually required in the market only because you need to generate turnover and profit…….

  1. Blocks up warehouses AND wallets for the next period.
  2. Overloads capacity in warehouses as high levels of stock try to get in and out at the same time and often through the same doors.
  3. Raises costs as transport availability is stretched and prices are at a premium. (You know who is loading the trade when the truck queue snakes around the warehouse late into the evening!)
  4. Distorts demand signals for sold SKUs not in the plan.
  5. Creates huge pressure and long hours for the supply chain team and 3PLPs.
  6. Disrupts promotional planning due to stock not being available for co-packing.
  7. Causes inevitable errors in picking, packing and invoicing due to excess volume against a ticking clock.

….and then a very, very quiet first week of the succeeding month.

Nobody expects you to achieve 4-6% of monthly sales on each working day; life is not like that. Everyone along the supply chain including customers and consumers have cash flow and space constraints as well as competitive pressures but over loading the last week of the month must stop. Blindly loading stock to meet numbers is an unsustainable practise and against corporate codes of business principles. Add this to the disruptive chaos caused and there is no doubt it is negatively impacting your long-term business aspirations.

FMCG_S&OP_SALES_LOADING_TRADE.jpgIf trade loading is a problem, then you just have to bite the bullet and take a hit in the month and why not in January to continue the rest of the year as you mean to go on? Of course, you will not win the corporate monthly sales award but stopping the routine of heavy loading in the last week of the month will put you on a far more secure and reliable footing both in terms of market performance and reputation.

You need to take steps to erradicte this behaviour but your pain can be minimised by…..

  1. Running a genuine S&OP process, which is visibly led from the top team.
  2. Encouraging staff to pass actionable information throughout the business and avoid data bombing the next functional silo. Stop trying to prove others wrong; prove them right!
  3. Being brutally honest as it’s always the best policy. It’s business, not personal.

We are in the final week of the month, what lengths will you go to in order to reach the monthly target? Think very, very carefully.

Image courtesy of vectorolie at freedigitalphotos.net

Tags: FMCG, Dave Jordan, S&OP, Forecasting & Demand Planning, Sales, Inventory Management & Stock Control