Supply Chain Blog

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

SC and Sales senior team squabbles: Always bad for business

Posted by Dave Jordan on Thu, Jul 05, 2018

Another sign of getting old I guess. When was the last time you watched a football match when no tattoos were on show and the haircuts did not look like something out of the Time Warp musical? As I write England is still involved yet we are all waiting for the inevitable elimination on penalties. At least it won’t be to Germany this time – what rotten bad luck boys!

sales-supply-chain-disagreementIn other news I see The Donald and Kim Jong-un have finally met face to face after a great deal of public bitchiness. That must have been the bad hair day to end all bad hair days; an orange bird’s nest and something that looks like a greasy black croissant. Funny, after so much apparent dislike that these 2 diverse characters actually seem to get on well with each other, in public at least. Even if you don’t like someone you may still have to do business with them and that can be difficult.

The bird’s nest-croissant situation reminded me of many FMCG and Pharmaceutical companies where the Sales and Supply Chain Directors do not co-operate very well. Commonly they fail to see that doing business is just that and difficult discussions and criticism is not personal. However, when relationships break down (or don’t even start) you find that precious time is spent trying to prove the other party wrong.

While the focus should be on beating your competition, you may find that 2 of your key operational directors are motivated in a very different direction. You can hear your competitors laughing as the in-fighting worsens and the conflict cascades down the business to those operating at lower levels. Decisions are being made in order to trick or trip the other department and ensure KPIs are missed and fingers can be pointed. What a complete waste of time, effort and experience!

Such behaviour has to be tackled head-on and it needs the Chairman or CEO to bang heads together and quickly. From a leadership perspective it is vital that the CEO does not appear to take sides or knee-jerk react to information received.

One of the frequent causes of Sales-SC conflict is a poor alignment of Key Performance Indicators. When setting KPIs for the senior team it is important to ensure that a few principles are observed:

  1. Some KPIs must be shared. If a bonus relies on performance of some common KPIs then you are more likely to put the personal stuff aside and do what is best for the business. Stop allocating silo based KPIs.
  2. KPIs should be equally stretching. Any imbalance will surely lead to a bitter and twisted relationship for all involved.
  3. Share out the recognition. Sales tend to be seen as the in-market heroes yet everyone else in the company is working to support that success. If the quarter has gone well, congratulate everybody.

If the Presidents of USA and North Korea can get along despite many, many differences in style and opinion then surely there is hope for your Sales and Supply Chain Directors.

Image courtesy of Ben Schonewille at freedigitalphotos.net.

 

Tags: Dave Jordan, CEO, KPI, Supply Chain, Sales

FMCG ERP and The Beatles.......? Spreadsheets cause damage.

Posted by Dave Jordan on Wed, Jul 04, 2018

Some time ago I wrote about the way spreadsheets were undermining expensively assembled ERP’s in FMCG, Brewing and Pharmaceutical companies. They still are, by the way.

Not too long ago a paper on Public Debt and Austerity published by 2 eminent Harvard Professors was found to contain errors in the Excel coding. Several significant countries were excluded from the data analysis and therefore the conclusions could not be accurate.

The glitch was spotted by a student who like everyone else, believed he and not the professors must be wrong. If you can make mistakes at this level then think what may be happening in your demand planning office. A decimal point in the wrong place or a misplaced cell could lead to market place challenges in stock availability or indeed, excess.Beatles_ERP_Spreadsheets

The bug in that Public Debt spreadsheet leads me to the Beatles – what a segue! Here is what Lennon & McCartney might have written about spreadsheets and ERPs.

Yesterday, an IT man took my Excel away
Now I have to plan a different way

How I wish it was yesterday

Certainly, I’m not as comfortable as I used to be
There's a new ERP in front of me.
How yesterday came shockingly

Why Excel had to go I don't know, IT wouldn’t say
Did I plan something wrong? How I long for the Excel way.

Yesterday, spreadsheet planning was the only way
Now I need to learn a different way
I need to believe in our ERP

Why Excel had to go I don't know, IT wouldn’t say
Did I plan something wrong? How I long for the Excel way.

Yesterday, poor planning was the only way
Error riddled spreadsheets everyday
Now I don’t believe in yesterday
Mm mm mm mm mm mm mm

You can catch up with the classic Beatles track by clicking here.

If you do not run an ERP that relegates spreadsheets to useful and reliable supporting tools then you are risking poor planning in your business.  If you are running an ERP you might check exactly where the data comes from, where critical calculations are really made and how secure is the information.

Image courtesy of artur84 at freedigitalphotos.net

 

Tags: Dave Jordan, CEO, Pharma, ERP/SAP, Supply Chain, Forecasting & Demand Planning, ERP

FMCG New Product Development (NPD) is a key part of S&OP

Posted by Dave Jordan on Mon, Jun 25, 2018

There is enough disruption and discontinuity in supply chains without the necessary evil or pleasure of new product development (NPD) and product change getting in the way.

Just when everyone has become used to ordering, storing, picking, delivering or merchandising that pretty blue bottle with the picture of a carrot on the adhesive label, someone decides it is a good idea to relaunch the brand/SKU or replace the label with a shiny shrink-wrap label featuring a spud. The vegetables of choice are irrelevant as I just did not want to highlight any particular sector but no doubt the farmers will be up in muddy arms.

If your business operates a classic innovation funnel then well done to you. However, if you do not run one at all or you do and it is not linked to S&OP then you run the risk of:

  1. Out of Stock (OOS) and real lost sales
  2. Poor Customer Service.
  3. Overstocked inventory
  4. Write off and destruction costs
  5. Losing your job.......

The funnel is not rocket science although the people at the Brand Gym reckon an “innovation rocket” is far more effective for growth. The funnel can be depicted in many ways but all are very simple, e.g.

Integrate NPD with S&OP

At each decision gate the relevant NPD leader must feed information into the S&OP process to avoid the 5 pitfalls listed above. Existing stocks can be run down in a controlled manner and new stocks ramped up to ensure continuity and more importantly, correspond to any breaking TV or other advertising campaign. Is there a bigger waste of marketing budget than appearing on TV when the product is not yet ready for consumers to buy?

Inevitably there may be write off when you relaunch or make a product change but as long as you co-ordinate within your S&OP process these amounts can be minimal and manageable. What the CEO does not want is an unexpected cash loss from write off appearing in the results unexpectedly. Marketing might well claim a successful launch but the profitability could be shot to bits and actually be negative once obsolescence costs are allocated.

Depending on your accounting convention the cost of write off will end up in “supply support” or “supply chain others” when in fact the funds should be deducted from the fat marketing budget. If marketing people do not manage the innovation or change process closely then they should feel some of the pain. Far too often they crack open the celebratory bubbly while causing problems in other departments and for the company in general.

Change is inevitable and supply chains have to continually manage change as it will not and should not go away. However, wouldn’t it be a refreshing change if marketing fully bought into S&OP?

 

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, S&OP, Forecasting & Demand Planning

Supply Chain Analytics helps international retailer in business turn-around

Posted by Dave Jordan on Thu, Jun 07, 2018

Many will recall that famous Four Yorkshiremen sketch first seen the At Last the 1948 Show and later Monty Python. Four dour characters recall how tough it was when they were younger with each trying to out do the others in a downwards spiral of harshness. While the claims were outrageous and equally ridiculous it had me thinking about how things have changed. If you beamed an 18-year-old back to 1970 what would they see?

  • An analogue telephone attached to a wall with a wire and to call anyone you had to literally dial the numbers with 1 finger using the rotating plastic ring.

  • If you didn’t have a telephone wired into the house you had to put your coat on and walk to a red K6 telephone box, usually in the rain and there’d be a queue. You would need to carry 2p and 10p coins to keep the call active.

  • A television which was probably a black and white model operated by valves housed in a huge rear section. To change channel (there were only 3!) you had to get off your backside, walk across the room and turn a dial, or push a button if you were posh.

  • Need to send someone a message? You did that by writing (possibly typing) on a piece of paper, putting it in an envelope, buying a stamp and popping it in 1 of the red post boxes dotted around.

  • You want to listen to music? Take the black vinyl 7 or 12-inch disk out of the sleeve and place it on the Dansette record player the size of a small suitcase. Manually lift the stylus, place it on the disk and away you go.

I could go on and on and list many examples of life in the pre-digital age. Youngsters today don’t know they’re born!

SUPPLY_CHAIN_ANALYTICS_RETAIL_GLOBALAll of the examples above would also have been used in industry in some form and business has seen equally dramatic changes to how they operate. I will focus only on 1 area here and that is Supply Chain Analytics. No more guessing at how decisions may affect your performance, a good analytics package offers you a virtual crystal ball! Let me take you through a case study.

The Challenge

A well-known international retailer was suffering high levels of inventory in warehouses and in retail outlets plus this stock was the wrong mix for the sales pattern. The company was unable to accurately coordinate the flow of goods from long lead time suppliers to outlets. As a result, expensive emergency air-freighting was used to avoid out of stocks yet, despite this cash draining initiative, working capital was well above target.

The Solution

SupplyVue Analytics reviewed the demand profiles in outlets and at an aggregated level in central warehouses. At outlet-level granularity, the demand was far too sporadic to be forecast, however, at central warehouses, product flow was sufficient to determine a reliable forecast. Analytics demonstrated that a switch to a Kanban pull approach from the central warehouses to outlets would transform inventory levels and eliminate the need for air-freight. In addition, the company implemented a complementary demand-driven replenishment mechanism from central warehouse to multiple suppliers.

The Impact

1. A sustainable 25% reduction in overall inventory levels across a complicated Supply Chain.

2. A deeper understanding of demand profile enabled the company to provide a more predictable and stable signal to suppliers which in turn raised their reliability.

3. Completely eliminated air-freight costs caused by product shortages with an associated increase in Customer Service.

So, progress in this digital age is not all bad and once you have taken a Test Drive or Pilot in Supply Chain Analytics you will wonder how on earth you previously managed. If you need further information please get out your quill and ink write a letter to Enchange!

Image courtesy of photostock at freedigitalphotos.net

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

FMCG – Hunker down and find Supply Chain Analytics

Posted by Dave Jordan on Wed, Jun 06, 2018

Have you ever “hunkered down”? I remember being asked to hunker down during a business game training course many years ago and I had no idea what I was supposed to do. Eventually I had to ask as failing to follow the hunker downwards request appeared to be causing a bit of a problem for the American presenter.

This hunkering failure occurred during one of the many versions of the Beer Game in which I have taken part or delivered over the years. Anyone who has been involved with supply chain activities will probably have taken part in the Beer Game, or the Moussy Game as it is sometimes known in dry countries of the Middle East.

What does the beer game do? The rules are relatively simple and in summary, the overall objective is to meet consumer demand for cases of beer in a complex, extended supply chain while controlling unplanned expense on back orders and inventory. The game involves four overlapping and inter-dependent supply chains, i.e. source, make, distribution, and a retail outlet. There is a cost penalty for holding excess stock and any backlog unfulfilled orders.

Players rely on colleagues in the other departments to do the right things at the right time for the business but frustration soon surfaces. Usually, things do not go well and players feel frustrated because they are not getting the results they expect. Assumptions are made about consumer demand and erratic patterns emerge as backlogs mount and/or massive unnecessary inventory accumulates. It was at this stage in the game I was invited to “hunker down……….”.

Does that sound like your own supply chain – not the hunkering bit? Frustration is common between departments who all aim to do the right thing but only have the necessary data and information to do the right thing for their specific area of responsibility at that specific time. Even after careful consideration and informed debate, the real effect of an adjustment can only be seen in the future.

supply_chain_analytics_fmcg_inventory_performance.jpgIF - a big if -  nothing else changes and all assumptions are correct and accurate then there is a chance the desired effect will develop as predicted. However, life is not like that and certainly not supply chain life.

 

What can happen?

1. New launches kick-in and are successful, or perhaps not.

2. Competition by definition is designed to try and disrupt your plans.

3. The weather turns out rather different to the forecast and nobody wants beer.

4. The economy takes a turn up or down, again.

5. Factories, 3PLPs and distributors all suffer performance variability.

6. Customers and consumers change their needs and habits.

Etc., etc., etc., this list really is endless. Absolutely anything can happen to turn apparently sensible decisions into foolish, future forecast failure.

Hey, what about all that expensive IT we have? Doesn’t that help us understand what is going on and what is going to happen? No, not necessarily. Common supply chain IT tells us what has happened, what is happening, where and when but not precisely why an event happened or what will happen.

Subtle differences perhaps but to up your game you need to hunker down with Supply Chain Analytics to gain a full unexpurgated understanding of how changes you make today will impact the future and more importantly, how you can change that future.

Yes, you can change the future with a classy analytics tool.

Image courtesy of Enchange at Enchange.com

Tags: Customer service, FMCG, CEO, Inventory Management & Stock Control, Supply Chain Analytics, IT

Supply Chain Analytics drives dramatic spare parts inventory reduction

Posted by Dave Jordan on Thu, May 31, 2018

What business would I like to run or even own? If you had a choice what would it be? A huge global FMCG player or a niche craft brewery in Bourton-on-the-Water? What about starting a pottery in your own home as per the ages old Barclays TV ad? If I had a choice I would buy the company that makes Allen Keys for IKEA.

Every single item you buy contains an Allen Key. Cupboards, shelves, beds, kitchens, chairs. I think you even get an Allen Key when you buy their 4-packs of fresh salmon! How many Allen Keys do they “sell” in a year? The number must be in the millions worldwide; surely, it’s time for a key return initiative?

SUPPLY_CHAIN_ANALYTICS_SPARE_PARTS_INVENTORYAnyway, not all the keys are the same size as IKEA also uses a huge number of different bolts, fixings, screws and nuts and taking their success into account that is quite some inventory. I know IKEA uses a lot of third party manufacturers, but this means huge spare parts inventories are scattered across the globe. I wonder how they manage? I suspect they use some form of Supply Chain Analytics and being IKEA, the package is probably called something like Levy Pupus (it’s an anagram).

While this is not IKEA, I do have an example of how Analytics unlocked working capital and made a significant difference to 1 company with a large spare parts inventory.

The Challenge

This engineering business sold components require for new-build constructions as well as ensuring spare parts availability for subsequent repairs and maintenance. Demand signal profiles were different for each stream and with large differences between individual components, inevitably this was difficult to manage. However, supporting both business streams at high service levels was a USP of the company and therefore vital for success. Perhaps inevitably, the operation was struggling to keep inventory levels under tight control.

The Solution

Analytics was used to segment the demand between the new construction and ongoing spare parts businesses. The team then used SupplyVue to further segment demand for spares into multiple similar granular boxes and analyse the flow of parts through the chain. This analysis reset the replenishment policies and parameters and the resulting inventory availability and stock levels. The analysis revealed inconsistent and poorly matched supply and inventory parameter settings across the portfolio. This provided a significant opportunity to establish a coherent and more appropriate set of policies for each spares segment.

The Impact

1. Pockets of gross excess inventory were identified, and the analysis indicated an 80% inventory reduction was achievable. This resulted in dramatically reduced working capital, lower storage charges AND better service.

2. In addition, the application of more repetitive based replenishment methods and parameters created a much more predictable and smoother demand signal for in-house manufacturing and 3rd party suppliers.

This may be a little more complicated than my desired IKEA key supply business, but it needed a powerful analytics tool to really understand what was going on in a complicated operation.  Analytics can be a once off diagnosis or you can purchase a licence and embed something like SupplyVue into your routine business management.

Why not try a free of charge Supply Chain Health Check?

Image courtesy of hadkhanong at freedigitalphotos.net

Tags: CEO, Inventory Management & Stock Control, Supply Chain Analytics, Spare Parts

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

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