Supply Chain Blog

Supply Chain, Supply Chain: What’s That All About?

Posted by Dave Jordan on Wed, Aug 22, 2018

I started my career as an R&D type who helped bring new FMCG products to the market. Nobody really knew how a product made the transition from bench top and pilot plant testing to the supermarket shelves. Somebody must have been involved somewhere but this was hardly a cohesive team with job descriptions let alone aligned roles and responsibilities. Even then “somebody” was not part of the project team so with hindsight it was inevitable delays and mistakes would occur. “Somebody” was to blame every time!

Supply Chain Small resized 600Supply Chain departments started to spring up in FMCG and Pharma companies as formal organisations around ERP deployment. Recruits were taken from other departments; commercial, manufacturing, sales and even R&D! Very few had any real understanding of Supply Chain requirements and they certainly did not have any formal qualifications or training. Qualifications and training are now widely available through many organisations such as CIPM and the Supply Chain Council.

I am not sure who coined the term Supply Chain though, do you know? I have taken a few Supply Chain definitions from the internet and started with the individual word basics from an Oxford English Dictionary:

Supply noun

1. An amount of something that is available for use when needed.

2. the action of supplying something.

Chain noun

1. A row of metal rings fastened together.

2. a connected series of things e.g. a chain of events.

Seems reasonable but what about a more technical definition taken from the Council of Supply Chain Management Professionals (CSCMP)?

 “Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.”

Wikipedia chips in with “A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.

Who can resist asking the people at the aptly named Supplychaindefinitions.com?

“… the movement of materials as they flow from their source to the end customer. Supply Chain includes purchasing, manufacturing, warehousing, transportation, customer service, demand planning, supply planning and Supply Chain management.  It is made up of the people, activities, information and resources involved in moving a product from its supplier to customer.

Although this Supply Chain definition sounds very simple, effective management of a Supply Chain can be a real challenge.”

Investopedia.com offers up this definition which I particularly like as it highlights Supply Chain as a “crucial process”.

“The network created amongst different companies producing, handling and/or distributing a specific product. Specifically, the supply chain encompasses the steps it takes to get a good or service from the supplier to the customer. Supply chain management is a crucial process for many companies, and many companies strive to have the most optimized supply chain because it usually translates to lower costs for the company. Quite often, many people confuse the term logistics with supply chain. In general, logistics refers to the distribution process within the company whereas the supply chain includes multiple companies such as suppliers, manufacturers, and the retailers.”

Rightly, Supply Chain is now part of every serious company aiming to put a product in front of consumers whether this is FMCG, Pharma, Telecoms etc. However, is it seen as “crucial”? Even today I feel some companies still underestimate the value a “storming” Supply Chain team brings. In some companies Supply Chain does not have a discrete representative at the “top table” and if you delegate Supply Chain management to your Sales Director then you should reconsider that decision and/or pray. One way of ensuring sustainable sales uplift is NOT to report the Supply Chain community into another non-specific, non-skilled company director.
 

Tags: FMCG, Dave Jordan, Pharma, Supply Chain, Forecasting & Demand Planning

Digital Supply Chain: This is the way, its Analytics!

Posted by Dave Jordan on Thu, Aug 16, 2018

Rather a lot of blogging going on around the area of Digital Supply Chain and Analytics at present. Amongst all the serious stuff I thought it about time we took a well-earned break and enjoyed a bit of Supply Chain Comic Relief.

SUPPLY_CHAIN_ANALYTICS_COMIC_RELIEF

A very catchy tune and a very topical subject.

This the way, its Analytics (Is this the way to Amarillo)

When results are falling
And your boss is always calling
How I long to see why
Business success passes us by.
All our monthly measures continue to be flat
What I really need to know is where our supply chain’s at.

This is it, its analytics
See your chain and everything in it
See the power of analytics
It’s SupplyVue, it waits for you.
This is it, its analytics
Seems like we are wasting ages
Pouring over endless data
And SupplyVue, it waits for you.

Sha la la la la la la la
Sha la la la la la la la
Sha la la la la la la la
And SupplyVue it waits for you.

Supply Vue takes your data
Turns it into something much greater
Providing information
To back up the decisions your taking.

Look beyond the numbers
No more guessing again
Opportunities are all tested
Through future modellin’.

This is it, its analytics

Provides clarity on the business

Showing the way to success
Its SupplyVue, it waits for you.

This is it it’s analytics
I now see my chain and everything in it
The futures bright with this
And SupplyVue, it waits for you.

Sha la la la la la la la
Sha la la la la la la la
Sha la la la la la la la
And SupplyVue it waits for you.

Sha la la la la la la la

Sha la la la la la la la
Sha la la la la la la la
And SupplyVue it waits for you.

How long will you have that tune in your head? Enjoy.

Image courtesy of rakratchada torsap at freedigitalphotos.net

Tags: Supply Chain Analytics, Humour, Dave Jordan, Supply Chain

10 Top Tips to Successful Mergers & Acquisitions (M&A) Integration

Posted by Dave Jordan on Wed, Aug 15, 2018

The ink is dry on the deal, the celebratory corks have been popped and the sharp-suited lawyers have gone off to bank a small fortune. The projected negotiations to thrash out a deal to buy or merge with another company are finally over. Relief all around, smiley faces, back slapping; cigars; done and dusted! Although through-the-night negotiations on a diet of poor coffee and poorer cigarettes are not easy, integrating the two or more entities will be substantially harder and a potential minefield.

M&AsConsiderable time, effort and cash are expended in calculating the business case of M&A activity before completion of a deal. Elaborately crafted press releases tell the world about the benefits the new relationship will deliver. However, very few people involved up to this stage in the process will actually be accountable for future success or more likely, failure.

Whether your M&A is a local, regional, national or global event here are 10 top tips to getting as close to the glossy press release promises as possible.

  1. Team. Appoint a team to lead the change and ensure there is a Change Manager in the team with deep and recent experience in the field. The overall project must be led by someone of suitable seniority in order to make an easily accessible two-way bridge between junior and senior groups. Don’t select the team members from one entity only!
  2. Objectives. Make your intentions and targets clear and get buy-in from all parties and particularly the acquired team. If you genuinely make everyone feel part of the process you will have greater success in implementing difficult decisions later on and for sure these will come!
  3. Assets. If offices and factories are involved and your intention is to centralise/ harmonise you need to approach this delicately. The “bought company” will always assume their workplace is most at risk so all evaluations have to be transparent and honest and impartial 3rd party expert help is advised.
  4. Culture.  There will inevitably be differences in company culture but if both sides can accommodate modification towards a new halfway-house then that can be a win-win but it is extremely difficult to achieve. If culture is forced on one group or another then you are likely to fail.
  5. Rumour Control. Have you ever heard a good news rumour about someone? Most rumours are negative or critical or someone or something and they will plague M&A integrations. If you get your communication policy in order and people feel free to raise concerns then damaging coffee machine whispering can be nipped in the bud.        
  6. Communicate, communicate, oh and communicate. M&A integration worries people and worried people are not as efficient and diligent as they should. Invest in a website and/or newsletter that very clearly keeps people informed on progress and next steps. Keep them fully involved with Q&A sessions and proactively sought feedback.
  7. Keep the business going! Sounds obvious but getting distracted by integration ups and downs can severely damage your business. You must keep close control on maintaining good practice in all integrating businesses.
  8. Complexity Reduction. If the businesses have similar SKU ranges then take the opportunity to understand where there are clear overlaps and where an SKU cull can free up human and cash resources.
  9. Constantly review. Integration is a real moving feast! Assumptions will change and plans may have to be modified and these should be embraced rather than receive critical attention. Do not be afraid to revisit the objectives and plans frequently and modify as prudent.
  10. Celebrate. When significant milestones are achieved be sure to get the cakes and champers out. Reassure people that the journey is progressing well and particularity those not directly involved in the process as they will feel the most pressure on job security.

When you consider the amount of time and money that went into securing the M&A deal a generous budget for integration will pay back extremely quickly. A degree of early planning and preparation on the actual integration will see you reach the press release objectives – if anyone ever checks!

 

Tags: Mergers & Acquisitions, Dave Jordan, CEE, Cost Reduction, CEO, FMCG

FMCG cost savings versus sales & marketing budgets!

Posted by Dave Jordan on Mon, Aug 13, 2018

There is your dilemma. You need to save cash towards an expensive year-end holiday but you really do not know the best place from where to take the money. Do you take it from your day to day current account which is already set up to pay the routine monthly bills and invoices? Do you take funds out of an investment account that has not yet actually matured?

In effect, the money in the current account is already committed and the expected appreciation in the investment account is still to be delivered which puts me on my soap box for today’s topic.

When times are tough and cost savings are required why do the senior bods always look to Supply Chain in the first instance? Unlike those colleagues with a fondness for endless agency lunches there is very little discretionary spend to be found in the vast majority of Supply Chain operations. OK, there may be some team building budget, business travel and a small entertainment allowance but where else can you save money?

There is not a lot you can do to have an impact in the short term. What could you do?

1. Negotiate better RM/PM prices? Yes, but this will not filter through to the bottom line very quickly.

2. Increase efficiency in your factories? Yes, but again not likely to hit the balance sheet any time soon.

3. Reduce head count along the Supply Chain? Certainly effective but think about notice periods and compensation obligations and not least the effect on efficiency and reliability.

FMCG Pharma cost savings supply chain resized 600You will have contracts in place for most services with 3 or 4PLPs for warehousing but as long as pallet space utlisation, storage efficiency and shrinkage etc is under control there really are few opportunities and certainly no “low hanging fruit”.

People often rant on about how sales and marketing people are the real stars of any FMCG or Pharma show and without them nothing happens. Think about it, if you do not have any product available to sell it does not matter if you have the best sales pitch or the most memorable TV advert, does it? In simple terms the SC gets the stuff there and S&M might, repeat might, sell it!

Supply Chain people and processes get the product into Traditional Trade and Key Account outlets and how they do it is relatively inflexible in terms of discretionary spend along the way. So when you are looking for savings why do you assume they must come from Supply Chain and not from the huge sales and marketing budgets? The promised client discounts have not yet delivered and the proposed new TV advert is a long way from having an in-market impact.

Certainly, you have to keep control of costs and a rolling annual target is a sensible plan for any business but 2-3% Supply Chain reduction every year is commonly small beer compared with multi-million S&M expenses. Diverting your valuable Supply Chain resources to scrimp and save these small percentages simply takes people off the day to day priority of getting your SKUs onto shelves.

Those Supply Chain “savings” may not actually be money in the bank.

Image courtesy of cooldesign at freedigitalphotos.net

Tags: FMCG, Dave Jordan, CEO, Pharma, Supply Chain, Traditional Trade, Cost Reduction

FMCG Supply Chains – The most important roles?

Posted by Dave Jordan on Thu, Aug 09, 2018

I am often asked which job in the extended Supply Chain is the most important. For FMCG producers this may be the demand planner while for retail partners the key role could be innovation planning. I do have a view on this so park the question for now and read on.

I was in Tunis recently in the final few days before the eid holidays celebrations commenced. At just about every traffic junction farmers were selling sheep and goats for the upcoming big family feast that is a very important part of the local culture. Possibly incongruous when surrounded by so much soon to be red meat, I was eating a delightful fish lunch when I studied a temporary pen containing about 100 sheep and goats.

I noted how straw and other feed was being offered to each of the animals almost on a personal basis. Normally, farmers would drop a bale of straw or hay and leave the flock to fight it out on who gets the largest share and who goes hungry. Not here; each animal was encouraged to eat, eat and eat again. Why would they be so generous?

Of course, with the sheep sold by weight it was a cheap way to increase income. A kilogram of hay and feed costs a lot less than a kg of lamb!

I didn’t think I had seen this trick before then I remembered I had and it was much closer to home. If you are ever lucky enough to visit the Danube Delta in Romania then on the road back towards Bucharest you will see men and women standing at the side of the road with outstretched arms. This is not a weird salute to the Village People but it seeks to tell you they have very large fish available for sale.

You have floated on the Danube and probably seen many fish so why not buy some fresh local samples to cook at home in Bucharest or wherever your destination may be? Good prices too but more often than not you will find your fish has been stuffed full with stones. When you buy thee fish by weight you are paying for stones at the price of quality fish.

Ok, so if you don’t live in Romania or visit countries celebrating eid you may not have seen this cunning slight. Hold on! Yes, you have. This same is happening in virtually every country and I guarantee you have been on the receiving end.

When I was younger I remember my mother buying fruit and vegetables from a little green van driven by a fellow Tranmere Rovers fan, Mr Talbot. Mr Talbot would weigh the requested fruit and veg in an old fashioned scale that had a detachable bowl. The contents of the bowl would then be poured into whatever bag was available. You wanted a kilo (well, 2.2 pounds at the time) of potatoes and that is exactly what you received in return for your hard earned cash.

FMCG RETAIL SUPPLY CHAIN IMPORTANCE resized 600Today of course, supermarkets provide rolls and rolls of bags for you in which to collect your fruit and vegetables and then weigh the contents............ and the bag. I know, it is a small bag but you are paying for the bag at the price of the items you have purchased.

I used my local medium sized supermarket for a one off survey. Their bags weigh a surprising 1.5g but even so if you are buying potatoes at 0.15 Euro cents a kilo you are not losing much to plastic. However, if your tastes include lemon grass at 15 Euros a kilo then it starts to get significant.

My local shop tells me they use 1400 bags on a typical day so if there is a run on expensive stuff like lemon grass – I know, highly unlikely – then they are selling 2.1kg of bags at a price of 15 Euros per kg. A quick search of the internet shows that the most expensive purchase would be something called hop shoots which retail at a staggering 1000 Euro per kilo. Now that would be on expensive poly bag! I wonder how many bags are "sold" across the globe each day? When possible you should weigh your larger purchases and THEN put them in the bag if you can.

So at least one part of the original question now has an answer. The most important role in a retail supermarket Supply Chain is the person who makes sure those hard to open bags are always available. Having no bags makes it difficult to buy any loose fruit and vegetables while having bags is a real money spinner!

Image courtesy of stockimages at freedigitalphotos.netfreedigitalphotos.net

Tags: FMCG, Dave Jordan, Supply Chain

10 Top Tips To Tip-Top Customer Service in FMCG, Drinks & Pharma

Posted by Dave Jordan on Mon, Aug 06, 2018

Do FMCG, Drinks & Pharma Companies delude themselves on Customer Service? I think some may well be doing this and may or may not know it! Whatever service related KPI you measure, the KPI is designed to asses how you are performing both internally and at a retailer or outlet level, against peers.

Customer service improvementThere are many ways of measuring the performance including OTIF, CSLM, CCF and CCFOT amongst many others. Essentially you are measuring how much of the right stuff you delivered to the right place at the right time. Importantly, it is not value based – you might measure that internally for monthly progress monitoring and sales bonuses but it is irrelevant for service measures.

Common errors in Customer Service measurement and management:

1. Service should be measured per SKU thus avoiding the possibility of hiding poor performance in one area with exceptional performance in another. Measuring by SKU allows you to hold the right people accountable and ensure resources are appropriately applied.

2. Are you measuring against what the customer ordered or what your team said he could order? This is a common error particularly when order capture is in the hands of staff rewarded via value based sales incentives - “We don’t have that but you can have some extra of this”. You need to see the raw, unconstrained demand from your customers to really understand what they asked for and what they actually received. There is no problem with substituting products with customer agreement as this maintains the relationship and should result in sales but this must be a visible process.

3. Yes, of course the customer may ask for unreasonable amounts of a certain standard SKU or promotion pack but hiding the “data blip” is not the answer. Addressing the issue with some collaborative planning would help both parties. For some reason they asked for a huge shipment; find out why and be more ably prepared to service the demand next time.

4. Use an ERP that automatically allows you to allocate reason codes for service failures and get them investigated promptly. Focus on the big wins using the 80/20 principle; don’t spend too much time finding out why you did not deliver 5 boxes of washing powder and do spend time on the failure to deliver large volumes of high value beauty products.

5. Get your service level on the agenda of the top table in the company. Your service level is a function of every single person in the company and is a reflection of how well you are performing in the market. This means the Marketing guy and the HR guy and others must be involved. Celebrate successes widely and noisily.

6. Do you have a Customer Service department led by a talented individual who is graded as highly as peers within the company? CS is a very important function and it should enjoy equality of importance within the business. Also, CS is not just about taking orders and printing invoices as customers deserve the opportunity to talk to a real human being (avoid answer phones!) about their problems and concerns. Small issues in invoice accuracy which can delay payments of thousands of Euros can be sorted out by knowledgeable and concerned staff motivated to help.

7. Make the CS measure highly visible around the company – everyone should be aware of the overall CS their company is offering to customers. Don’t fall into the trap of accepting low or “sand-bagged” targets – you are likely to achieve them and that gets you precisely nowhere. If you deliver to Retailer platforms you might wish to check where your measure is recorded.

8. Make cross functional visits to customers - they need to see people other than sales reps. Not every day, of course but an annual review with all interested parties present can smooth relationships and assist in times of difficulty.

9. Agree Service Level Agreements to ensure both parties know exactly what is expected as providers or receivers of service. The SLA should contain a few KPIs which allow you to understand the current state and drivers of CS.

10. Celebrate successes both internally and when appropriate, with customers. You need to maintain a rigorous approach to business principles but an above the board dinner does no harm.

Customer Service = Satisfied Customers = Sales = Pay/Bonus = Growth = Satisfied & Retained Staff

 

Tags: Customer service, FMCG, Logistics Service Provider, Dave Jordan, Pharma, KPI, Logistics Management, Brewing & Beverages

FMCG Forecasting: Ice Cream, chocolate & pregnancy

Posted by Dave Jordan on Thu, Aug 02, 2018

You will have to bear with me for a while on this one. Do you know that on average 85% of expectant women suffer food cravings during pregnancy? Apparently, the top 5 are:

Pickles   5%  - yuk, that surprised me too.
Cheese  11% - get those calories in.
Crisps/chips 15% - much needed salt.
Chocolate 17% - feel-good food.
Ice Cream 23% - junk food craving or just indulgence as you put on weight anyway?

Satisfying these cravings over the 9 months must lead to a significant extra expense (which might actually gently prepare prospective parents for the post-natal costs that will not go away for a very long time).  This leads me to consider that there are specific windows in the calendar when opportunities for cost effective pregnancy cravings exist.

If you crave chocolate, then the best time for a pregnancy should include Christmas when you can take advantage of everyone buying you chocolates anyway plus the post-holiday BOGOF and more promotions to get rid of all the excess stock in retail. If you need a chocolate fix it does not matter if it is in the form of a stack of standard bars or if it is a box of chocolate Wayne Rooney/Shrek figurines. As long as you satisfy the chocolate fix then all is very well with the world.

If you are really clever with your timing you might be able to stock up with discounted chocolate products in January that last you until Easter. Then, everyone aware of your craving can buy you chocolate again and then you can gorge on endless stocks of 2 for 1 bunnies.

ice-cream-demand-planningLike the majority of women in this survey my wife craved ice cream. This would have easily manageable had we been in UK but were located in Jeddah, Saudi Arabia. Even in the cooler months getting ice cream from a shop to the home freezer required an ice box. Without some sort of chilling system anything you bought would quickly revert to sugar, fat and water. To avoid emergencies, we had to overstock at home but ease of availability meant this rapidly diminished and led to numerous middle of the night dashes to find more ice cream.

So, if your must-have food is ice cream when is the best time to be pregnant and not break the home budget? If you are in the northern hemisphere then September/October is the ideal time to have an uncontrollable ice cream craving. Take a look at your local supermarket and you will see that the most promoted/discounted products are ice creams. BOGOF is common and as the time passes you will eventually see buy 1 get 4 free or more until the stock is finally exhausted, the product expires or the store wants the retail space returned.

I know it is very difficult to forecast demand for ice cream. Global weather is becoming increasingly unpredictable and even a few short weeks of a gloomy summer can ruin producers’ sales campaigns. Producers do have very sophisticated tools that monitor the weather, providing indexes and algorithms to understand likely demand but nothing can be 100% perfect.

Weather sensitive businesses must be expending considerable resources on trying to get more reliable demand signals as the annual write-off costs continue to hit results. These financial loses will probably rise as our climate becomes even less predictable.

Good news for expectant mothers but bad news for shareholders, CEO’s and CFO’s everywhere.

Ice Cream Image courtesy of David Castillo Dominici at freedigitalphotos.net

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

FMCG Co-packing and Re-packing Management

Posted by Dave Jordan on Mon, Jul 30, 2018
Whether you call it co-packing or re-packing this involves the further manipulation of a previously finished and complete SKU. Look around the shelves and the evidence of extra expense and work is displayed by special stickers, multi-packs and banded promotions amongst many others. The impact this has on your Supply Chain is potentially huge.

Wincanton_Copacking_SmallI will park the question of the value (or waste) of these activities for another day but where is the best place to carry out such operations? When you consider that some blue-chip FMCG producers co-pack/re-pack a majority of the volume coming out of their factory gates you realise this is not a small issue. How many products carry the original bar code into consumer’s houses? Not many!

The best location for these operations?

1. At the producing factory? From an operating company (OPCO) perspective this provides the least complexity downstream in the chain. For factories seeking higher and higher efficiency and asset utilisation this can be nightmare for cost and complexity. Even if the factory is part of the same company many will refuse to entertain “abnormal” requests from sister operating companies.

If an SKU requires a label that can be applied online without affecting speed then you might be ok. However, anything like banding together 2 different SKUs is unlikely to get a positive response. In any event, the 2 promotion-bound SKUs may be produced in different factories, countries and even continents.

2. At the OPCO warehouse? The stock is certainly closer to the final market destination so this makes sense but there are drawbacks to what providers call “added value services”. Seldom is a third party logistics provider (3PLP) set up to operate what is essentially a mini factory. If promotional volumes are low then you can deal with them on an ad hoc basis but where levels are higher you need a factory mentality and facilities and this is not common in 3PLPs.

Stock control is vital and a good quality WMS with added value functionality is a must. Knowing what product is where requires meticulous attention to master data detail. What goes into a re-packing location will come out with a completely different bar code – chaos prevails otherwise.

You are essentially locked into your 3PLP and he may well take advantage of that when it comes to pricing the work. Get this wrong and you will suffer unexpected and rising costs, stock “shrinkage” and a resultant drop in Customer Service Level.

3. At a specialist 3rd party? They do exist and if they are set up well and sensibly staffed this can work. You can expect a professional service and a well managed operation. Quality and flexibility will be higher and costs can be keen as the assets are not dedicated to a single company. Such a 3rd party is likely to have a wider portfolio of promotional options available and will invest in plant against a sound business case.

Of course, the downsides frighten potential clients away. You have the added cost and hassle of moving stock in and out of your logistical 3PLP and the associated longer lead times.

4. At the point of purchase (POP)? No, not as crazy as this might sound. If you can manage to get the same unadulterated SKU from the factory gate to the shelf then you are very lucky and secondly, you probably operate a slick chain.

Obviously, you will not be able to carry out the full menu of promotion assembly and display but this route does provide a tactical advantage that can catch competitors napping. An unannounced special price sticker or “buy 1 get 1 free” (BOGOF) promotion can pay dividends. You need the cooperation of the retailer but when there is mutual benefit, why not?

A blend of all 4 sounds like quite a unique opportunity. What do you think?

CTA 3PLs in CEE 0.03 Small resized 600

Image credit: Wincanton

Tags: Logistics Service Provider, Dave Jordan, Manufacturing Footprint, Logistics Management, FMCG, Customer service

FMCG Mergers & Acquisitions - Why acquired brands fail to deliver

Posted by Dave Jordan on Wed, Jul 18, 2018

Let me get straight to the point on this one. Why do so many FMCG mergers or acquisitions frequently result in the apparent death-knell of once proud and promising brands? I am not going to name any names but if you think about it there have been some real clangers dropped by blue-chip FMCG giants.

Purchased companies or individual brands are usually already reasonably successful in order to attract new owners. Yes, sometimes companies will divest weaker brands or brands no longer core to their portfolios but you will struggle to sell a clearly decaying brand name. A real hospital pass if ever there was a branded one.

I am studying such a case in Europe at the moment where the FMCG brand acquisition is about 12 months old so plenty of time for smooth integration or so you would think. Marketing activity has not changed and I am also assured above and below the line advertising spend has been maintained at pre-acquisition levels. That in itself is unusual as sellers usually spend big to make a brand more attractive at sale time.

So why does an apparently attractive acquisition fail so quickly? Nothing at all to do with marketing or finance but everything to do with the extended Supply Chain. Just to be clear here I do not consider the Supply Chain to end at the distributor’s warehouse in Traditional Trade markets you commonly find in CEE, Africa and the Middle East. You need Supply Chain skills to get products on to shop shelves and then keep them replenished. With due respect to salesman and women, they are trained to sell.

Supply chain rtm m&a resized 600The newly acquired brand that was purchased with buoyant sales and a high profile has been dragged down to the level of the existing brands by inadequate Supply Chain and Route To Market (RTM) operations. Frankly, it did not stand a chance and it is no wonder the company wanted to buy a top selling brand when their own were performing so badly. However, the reasons for failure were all in-house as the once top selling brand plunged the depths.

There was no formal Supply Chain department with planning, logistics and customer service roles scattered around in Finance and Sales departments. There was no focus and no single person to co-ordinate and run a functioning Supply Chain. Forecasting accuracy; what’s that? Stock cover; no idea. S&OP; forget it Customer service; no!

Couple that level of disorganisation with a bonus-centric, forecast averse sales force trying to run the distribution chain through to the TT shop shelf and it is no wonder all the presentation arrows were red and pointing south.

When considering an acquisition to bolster sales and profit make sure your existing SKUs are not already blighted by lack of care an attention to your Supply Chain and RTM.

Image courtesy of renjith krishnan at freedigitalphotos.net

Tags: FMCG, Route to Market, Mergers & Acquisitions, Dave Jordan, CEO, Traditional Trade, Forecasting & Demand Planning, Distribution

FMCG & Pharma: Top 10 Tips for a Tip Top Supply Chain

Posted by Dave Jordan on Mon, Jul 16, 2018

Only a few months into the year and I am hearing the same old complaints about the economy and business being in general ill health. However, there is a new recurring theme which popped up at various parties and gatherings over Easter; “my company doesn't seem to do anything different and just hopes business will improve”. Not going to happen, no way!

FMCG_PHARMA_SUPPLY_CHAIN_TIPSCertainly learning by your mistakes is a powerful message but banging your head against a brick wall for a number years is a rather pointless and painful experience and reflects dire leadership. Those companies that identify failings and shortcomings in their supply chain AND do something about them will be best prepared to beat the competition.

Based on client feedback and impact analysis of “before and after” performance I list our top 10 tips to tip top Supply Chain performance. 

  1. Route To Market – Has the march of the International Key Accounts stalled? Traditional Trade Distributors may still be a large chunk of your business and they are capable of scratching out growth but only if you support them. Give your RTM a thorough service and your Distributors will serve you better.
  2. Sales & Operational Planning - If this is in place and working well, great but there is no doubt you could improve it. If there is no S&OP you should use it! If you are not yet a believer of S&OP check out “What has S&OP ever done for us?".
  3. Reduced Inventory – Why not give your sales a boost with some unexpected and low cost support using stock that will be otherwise written off? I detect numerous companies “encouraged” stock into the trade for year end and only the residual stock disposal companies will benefit if stock gets too close to expiry.
  4. SKU Complexity – When did you last study your complexity? Do you have any idea what complexity is doing to your business? Understand your sku complexity and check if it appropriate for your business.
  5. Improved Customer Service – A number of major global companies still do not measure CS to any degree of accuracy or honesty.  Companies that fool themselves on Customer Service rarely succeed.
  6. Proactive 3PLP’s – Are they meeting the agreed KPI’s? If they are then perhaps you need to review them and revise targets upwards, again and again.
  7. Sales & Marketing Buy-in – This is still a problem, I fear. If only everyone in your company was aligned to the same volume/value plan and 100% mutually supportive. Think what sort of competitive edge that would provide.
  8. Use the ERP - Avoid uncontrolled spreadsheets like the plague! They undermine your business and waste time and effort. If you are considering a fresh implementation of an ERP then chose a partner with experience in the field. I mean real operational experience and not bought-in fresh out of university, suited “experts”.
  9. Continuously Improve – If you are in the same position in 12 months time then you will be dropping towards the back of the pack and will be ill equipped to compete. Keep innovating and improving your Supply Chain.
  10. Supply Chain Awareness – A very important tip top number 10. There is more to supply chain than trucks and sheds - for the uninitiated this is what Supply Chain is all about.

Check out the top 5 as a priority and then seek an expert partner to lead you through the process of change in the next 5. Don’t be in the same position this time next year; do something!

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: FMCG, Route to Market, Logistics Service Provider, Dave Jordan, CEO, Performance Improvement, Pharma, KPI, Traditional Trade, S&OP, Cost Reduction