On a daily basis the amount of care we give to the human body is remarkably little. When you are feeling in good shape, the best the body can hope for is a good wash, a brush of the teeth and a slap of moisturiser. What else? Haircut, skin peel and manicure perhaps oh, and possibly a check that your weight has not dropped 10% overnight – you wish!Considering the complexity of the human body and how we cannot live without it, we do not spend too much time analysing how it is performing. We probably spend more attention on our cars and IT gadgets. Why is my PC running so slow? The car is overheating, I must check this now. Such symptoms are immediately of prime importance and top of mind and must be addressed!
With COVID 19 in mind, this all changes when we have a real possibility of being seriously unwell. Suddenly we are taking our temperature, blood pressure and pulse rate. Blood tests may be needed, now! You may be wired up to monitor to see how the heart, lungs and brain (ignore brain for British politicians) are functioning. The body is now getting the intensive care it needs in the best place in a hospital. Recording and monitoring this raft of data plus sensible social distancing (not the celebrity understanding of social distancing) is the route to a hopefully full and speedy recovery.
In normal times – whatever they were - if your business is operating well and there is even some modest growth then the usual keep-fit, heart monitoring Supply Chain Scorecard KPIs are reported weekly or monthly. The focus is usually on getting your stuff to customers and onto shelves at the right time, in the correct quantity and at the lowest cost. Along with other company measures, e.g. Finance, HR, SHEQA, etc the scorecard shows the general health of the business.
After a stunningly disruptive 2020 we can be certain 2021 will not go smoothly for most and the Supply Chain Scorecard may need supplementing with other measures. In companies with seasonal business where sales are below expectations and cash flow has dried up, you need intensive care focus in those areas. This does not mean you stop generating the regular monthly Scorecard as this will contain important financial and non-financial measures but instead, you do need to place the sensors in new and critical locations.
Measuring the usual set of KPIs is all very well but when you are in a mess you need something special, different, e.g. Intensive Care. For businesses struggling with tight cash flow here are Ten Top Tips for some relatively simple Recovery KPIs which have been proven in FMCG, DIY and Pharma:
- Portfolio. Perhaps the most important action you can take as you cannot apply 100% focus to everything so do not waste time and energy looking after every single SKU - apply ABCD segmentation principles. This year actually presents an opportunity to activate a “Crisis Portfolio” of SKUs that really matter. No, I mean really matter and not “nice to haves” or Marketing range desires. Determine which SKUs are important, sell regularly and make a healthy profit - focus here. (In these difficult COVID times is your favourite restaurant offering the full menu range for take-away? No, and for good reason. Chicken and chips is no problem but one Lobster Thermador is not worth the hassle even for a blue-chip client.)
- Sales-out. Sales-in may generate motivational bonuses for the salesforce but they do not guarantee you cash collection from a consumer so focus on the final sales transaction. Pushing too much stock into the trade will bite you on the backside, eventually.
- Discounts. Control how much discounting is being offered by those generous sales colleagues. They will take every opportunity to by-pass the discount policy, so ensure all adjustments are authorised in advance and at the correct level in the business.
- Debtor Days. This is money owed to you for completed sales so you must be rigorous and negotiate favourable terms accompanied by a weekly review of cash flow challenges. If lengthy debtor days have been the norm for years then it is about time this was challenged so apply some pressure.
- Overdues. Where Debtor Days control has failed you need to act. This money is due to you for goods you have manufactured and if the client has exceeded the agreed terms you need a persuader to get on top of late payers.
- Creditor Days. This may sound like double standards but is the game you must play. You owe this money but if you upset suppliers they will stop supplying! Renegotiate where possible and do your best to pay on time as you never know when you really do need a favour. In 2021, I think good professional/personal contacts will be vital for successful business.
- Lost Sales. When the going gets tough, sales people will look for every possibility to explain away the failure to achieve targets. Investigate every significant lost sale and systematically apply a 100-year fix so mistakes do not recur. This includes being extremely specific about what is and is not, a lost sale.
- Potential write off. While some damage and write-off are expected, this really is self-inflicted and frankly, crazy. Monitor stock age internally AND at in the trade and avoid this criminal waste of cash and resources.
- RM/PM stock. If you are overstocked you should not re-order and you might consider selling some items back to suppliers or even competitors – you rarely compete on unique RM/PM. Your stocks should be tightly aligned with those important SKUs identified in the Crisis Portfolio suggested above.
- Finished Goods stock. Again, ensure your key SKUs are always available in the required quantities. Promote any excess, slow-moving or failed promotional stocks to generate income (with tight terms) and minimise potential write-off and excess storage costs.
In addition to the sensible, tight control of discretionary spend by all departments, this approach can stabilise your vital signs and guide you back to a healthy glow without the intrusive glare of those expensive suits from HQ.
These tips are not only relevant to COVID-19 but to any of the potential crises that can hit your Supply Chain.