Supply Chain Blog

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

FMCG Supply Chain: What is your 2018 Planning Priority?

Posted by Dave Jordan on Wed, Jan 17, 2018

We already find ourselves at 17th January so not many days left to ensure your monthly top and bottom lines are on target. Good luck with that if your business (& body!) is only just shaking off the holiday excesses. What is top of mind? The sagging month to date sales rate? The slow return to normal of the S&OP meeting schedule? The upcoming corporate audit? No. Top of mind is where to go on your summer holidays and to get this booked as soon as possible.

Get your holiday slot booked at the office and make sure you sync with school holidays and soon you will be surfing the internet checking out all the best deals. Flight only or hotel included? What about airport transfers? Do we go with full service airlines or suffer the middle of the night, cattle-class treatment on a low-cost flyer? Long term car parking at the airport? Oh, look at the kids go free offers – no I don’t believe it either; nobody gets a holiday for free, well except possibly Mrs Queen and free-loading MPs.

You may even create a dreaded Excel spreadsheet listing potential destinations and a matrix of all the travel options and applicable costs. Carefully you will fine tune the list until you really have found the best deal with the most convenient and least expensive travel. After the briefest of discussions with the rest of the family the bookings will be done and dusted well before the end of January. What a personal masterclass in forward planning!

FMCG_ACTIVITY_PLANNING_SALES_WINE.jpgYet you still have no idea on your FMCG acivity plans for the next 6 months let alone a much longer horizon. If you left your holiday plans to the last minute you would probably struggle to find something decent. Yes, if you are single or a couple minus mini debt creators then you can just turn up at the airport and see what seats are available and take it from there. You may well be sleeping on a beach or in a hostel where there are more joints than an orthopaedic ward and the only pillows are inflated wine box bladders but so what, you will cope. However, with small people in tow that last minute gambling option will rarely be entirely appropriate.

Back to your activity planning or lack of it. Some of your major in-market initiatives will be annual events around Spring Cleaning or Easter or a seasonal weather peak so being late with those is unforgiveable as they should be fixtures in your rolling plan. Other promotions will be tactical or at short notice due to market dynamics such as competitor activity or price increases (prices rarely drop do they?). Nevertheless, most of your activity planning for the next 12 months should be firm with a further 12 months of tentative plans which firm up as the S&OP process passes through each month.

Short notice opportunities are ok if you can manage the same without affecting those that have been carefully planned. Marketeers may demand a special promotion to take account of some topical and usually scandalous news or about the latest air-head to emerge from the Big Brother house. If you can, so be it but let these impact on the ones that really matter at your peril. Topical opportunistic activities will probably be sexy and raise a guffaw, but seldom do they contribute much to your top and bottom lines and they don’t impress the suits at HQ.

People outside of supply chain somehow think that promotions and special offers magically appear outside of all the usual planning processes. They don’t. If you stick in a last-minute giggle promotion, then be very sure you are disrupting regular day to day activities about which you will no doubt complain.

You should try inflated wine box bladders; great for camping!

Image courtesy of recyclethis.co.uk

Tags: FMCG, S&OP, Forecasting & Demand Planning, Sales, promotions

Your FMCG Supply Chain in 2018: 5 Problematic Predictions

Posted by Dave Jordan on Wed, Jan 10, 2018

Chris Rea has finally found the correct turn off, a lot of people in Africa still don’t know its Christmas and the novelty Santa toilet seat cover is back in the box. Oh, and chocolate Easter eggs are in the shops 4 months in advance. Christmas and the New Year holidays are well and truly over, and the clock is already ticking down on the month of January.

FMCG_PLANNING_S&OP_INVENTORY.jpgAs I type it is the 10th of January, so you have 15 working days left to get your year off to a flying start. And once January has gone and the short month of February flies by you will be well into the 1st quarter. Time is already running out so do you know your supply chain priorities for 2018?

Here I make 5 predictions on what will happen with your FMCG supply chain this year:

SKU Complexity

The one in/one out policy for new SKU introduction will be overridden by sales and marketing plans that overestimate the benefit of additional SKUs. Despite the usual guarantees and commitments, you will end the year with far more complexity than you started. You will retain the same number of key SKUs that account for 80% of your business but maintaina rat’s tail of SKUswhich contribute little to turnover and profit.

Inventory

Your inventory cover will remain high as demand planners knee-jerk stock build as they do not understand which specific SKUs are driving the excess. You will set stock reduction targets by shaving the number of days cover and while this may allow you to tick a KPI box it does not remove the underlying causes. You belatedly consider some clever supply chain analytics to see past the one-dimensional limitations of ERP functionality.

Spring/Easter/Ramadan Campaigns

Preparations will be last minute as deadlines for receipt of artwork are missed despite the supposed rigours of the NPD and SAP processes. Agreed volumes will be eventually be shipped only to sit on the shelves after the target period causing a knock-on detrimental effect to subsequent promotional schedules and regular demand. Your target for reduction of write-offs and waste will not be achieved and by some distance.

Sales Peaking

All your best efforts to avoid selling huge amounts of product in the final week of the month fall on deaf and dumb ears. The business continues to struggle as insufficient resources are available at month end to manage the sales push. Despite the source of the problem the sales team bleat on about lost sales when they actually mean lost bonuses.

S&OP

This should be the most important process in the business, but it isn’t working and you know it! In companies where all departments fully buy-in to the success of the process, the in-market results are stunning. Despite spending a fortune of the ERP your staff operate the business in a series of silo based, underground Excel spreadsheets which are littered with cell errors and inconsistencies. Business results are reported in the ERP but this is not a true reflection of how processes are applied.

Perhaps that is an imperfect storm on what may happen within your supply chain, but one thing is certain. If you do not do something different to what you did last year, then you are looking at best at flat results rather than a fat bonus.

A happy new year to you and your supply chain!

Image courtesy of Aimee Jordan at AimeeJordan.co.uk

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

FMCG Noddy Holder & Slade Implement S&OP

Posted by Dave Jordan on Tue, Dec 19, 2017

Christmas is coming around faster than ever and who better than Noddy Holder and Slade to celebrate Sales & Operational Planning (S&OP). This festive song has been heard at Christmas every year since 1973! If you have been living in a cave on a remote island and don't know the tune you can click here for the original, boring non-S&OP version.

Ok, let's go, 1 2 3 4.......

Are you looking at your sales chart on the wall? Sales and Operational Planning
Is it the time you have to stop the fall?
You’ve tried overpaying salesmen,
You’ve loaded up the trade
Do you need to find a better way?

Chorus:
So here it is S&OP
Everybody should run one
Look to the future; how?
Six months or even one.

Are you guessing how much you’re going to sell?
Are you suffering high out of stock as well?
Does supply chain always tell you, pre-SOP is the best?
So why not work together for a test?

Chorus:
So here it is S&OP
Everybody should run one
Look to the future; how?
Six months or even one.

What will the salesmen do
When they see their targets being met?
Ah ah
They’ll be changing the chart gradient on the wall.
Not for them will sales fall and fall.
When you implement S&OP you make quite a change
Looking back, the old way will feel so strange.

Chorus:
So here it is S&OP
Everybody should run one
Look to the future;  how?
Six months or even one.

Noddy knows best so why not find out about S&OP now and give your business the perfect Christmas gift that will keep on giving.

Image courtesy of Nora Ashbee at Enchange.com

 

Tags: FMCG, Christmas, Dave Jordan, CEO, Humour, S&OP, Forecasting & Demand Planning

An FMCG Distributor Is For Life & Not Just For Christmas

Posted by Dave Jordan on Thu, Dec 14, 2017

Ok, so you are unlikley to see this on a car bumper sticker but FMCG Distributors will have a significant impact on your sales performance, probably your variable pay bonus and therefore your CEO aspirations! How have you treated your Distributors this year? Were they the usual pain in the proverbial - failing to achieve targets, not paying on time, always moaning about trading terms? Of course, some Distributors do fit this stereotype but others are keenly trying to be treated as and to be, equal partners in your business success. But do you see this?

How are things going in Q4? Have you fallen into the trap of the “sales bonus push”? Year end stock clearance FMCG Breaking all the supply and sales phasing rules you have been trying to drum into Distributors? Did you strictly maintain discipline on Sales & Operational Planning or did the last quarter deteriorate into a “sell whatever we've got in the warehouse” scenario?

Companies that spend time and effort in proactively guiding their Distributors, providing relevant training and support inevitably succeed in the market place. Yes, at the end of the day Distributors have to stand on their own two feet but so many FMCG companies assume an organisation calling itself an “FMCG Distributor” inherently knows how to properly support any specific business.

If you do not pay attention to the Traditional Trade (TT) distribution side of your business then you are asking for trouble and that trouble usually ends in divorce along with all the discontinuity baggage separation brings. You need to avoid your choice of Distributors becoming like the English Premier League where managers get about 5 minutes to make an impact before being shown the door. (Strange though, that all these football managerial failures usually find another highly paid role; the latest being Big Sam Allardyce)

So, as we approach a special time of the year why not think about your Distributors and ask yourself if you have given them a fair crack of the whip?  If not, then you might consider a New Year resolution to develop a strategy for mutual success. This is far better than continually highlighting deficiencies and using backward looking, discipline focussed KPIs to bash them on the head.

Sit down with your RTM Distributors regularly, evaluate their strengths and weaknesses and agree to do something about the latter. Simply running through a Route To Market evaluation together can work wonders in establishing trust and cooperation. Do yourself a favour and do this now before Q1 next year also becomes history that you cannot change.

Click on the RTM link below and go!

CTA RTM Free Download resized 600

Image courtesy of stock.xchnge at freeimages.com

Tags: FMCG, Route to Market, Dave Jordan, CEO, Performance Improvement, Supply Chain, S&OP, Distribution

FMCG Food Waste: Supply chain speed and agility v inventory.

Posted by Dave Jordan on Mon, Dec 11, 2017

Hooray! Many supermarket chains now sell imperfect or misshapen fruit and vegetables at a discount. As you may know I am a big fan of buying this type of food as taste has nothing to do with shape based on my massive culinary knowledge. Whether my potatoes are knobbly, or my parsnips look like Donald Trump, I simply don’t care.

My other food gripe has always been about “best before” and “sell by” plus the simply ridiculous, “display until”. Food producers and legislators don’t make it easy for consumers, do they? Surely there can be 1 definitive statement for a food safe shelf life measure, for example “do not consume after….”. Slowly but surely progress is indeed being made to remove this confusion for consumers and waste for everyone in the supply chain including you.

This charity in Denmark collects close to expiry, expired and slightly defective product from producers and supermarkets and sells to the public with at least a 50% discount. This has helped to reduce unacceptable food waste in difficult economic times. Unfortunately, this charity has been so successful it has started the process of turning their operation into a branded supermarket and will have 3 shops open in 2018.

FMCG_FOOD_WASTE_PLANNING_FORECASTING.jpgAll good stuff then as long as the waste mountain is reduced. Well no, not at all. Why are some big name FMCG companies producing so much food stock that is either destroyed or as in Denmark, redirected to a charity. If you look at the video in the earlier link you will see some well-known names who will publicly claim to enjoy supply chain excellence. Getting their products to the consumers on time in full and at lowest cost is all very well but if the stock ends up as not required, it is surely a hollow boast?

I agree there will always be some inaccuracy in forecasting – there must be – but the volumes involved are not 1 or 2 cases, it is pallet loads. These companies will all be using various clever IT tools to forecast and supply the market demand but are they guilty of pushing too much into the retail end of the supply chain? Competition dictates that your products must always be available, and the consumer decides on the spot if she/he buys Coke or Pepsi.

I am still not convinced sales colleagues get forecasting in the way supply chain people must. The forecast must be based on what is being pulled along by consumers rather than what is pushed in to reach a monthly top line number. If sales forces in a number of foods companies do this then inevitably there will be waste at the far end of the extended supply chain.

Someone will get their forecast horribly wrong and when thinking about huge brands even a small inaccuracy can mean a hefty contribution to the waste mountain of food and expense.

You cannot ask your competitors what their volume plans are for the month to make sure there is no over-supply, but you can bring more agility to your supply chain. Demand fluctuates across the month irrespective of those companies still “enjoying” unrealistic month-end pushes. You might look at how much safety stock you have built into the plan and along the chain, reduce that cost and invest it in speed and flexibility instead.

Lose some fat from your inventory waist and you will be able to move much faster when the market or a competitive move demands.

Image courtesy of Stuart Miles at freedigitalphotos.net 

Tags: FMCG, Forecasting & Demand Planning, Inventory Management & Stock Control, WASTE, Food

FMCG: I’m a Supply Chain expert…Get me out of here!

Posted by Dave Jordan on Sun, Dec 03, 2017

The definition of celebrity is a famous person, VIP, very important person, personality, name, big name, famous name, household name, star, superstar, celebutante, leading light, giant, great, master, guru. In that case why do I only know 3 people from the 2017 series? One boxer, a footballer with an ironic surname and Boris Johnson’s father. I don’t know Mr Johnson either, but he helped produce Boris the buffoon so probably deserves to endure a degree of hardship.

I guess I have lived outside the Brexit zone too long and simply do not appreciate the celebrity importance of this collection of egos but some of these people are obscure. If they are stars or household names, then surely everyone will get a go at being handsomely paid to eat crocodile tongues on holiday down-under. My turn must come!

What’s more the show is being presented by the best UK double act since Morecambe and Wise……UK TV is becoming a veritable talent vacuum.

FMCG_CONSULTING_TALENT_HUB_INTERIM

Dare I say it, but a similar dynamic is emerging in the world of supply chain consulting. With business media site like LinkedIn being unregulated you can add whatever you wish to your profile and work history. Unless someone notices a blatant fabrication and takes the time to suggest a text correction, this becomes the accepted reality where the term “expert” is overused. I even recall one LinkedIn member set his status as “Current Company: Unilever – Position: Owner”!

Another definition for you; expert - having or involving a great deal of knowledge or skill in a particular area. That level is not achieved easily or in a few years and being employed for many years in supply chain does not mean you can simply switch to become a credible consultant. From personal experience making that change after almost a lifetime in an FMCG multinational (no, I wasn’t the owner either) is not easy.

There are 2 important elements to being a successful consultant after working on the other side of the fence. Real and deep expert knowledge is a given but the task of imparting that to often cautious or even suspicious clients is the difficult part of the job. When you work in industry you have the authority of your work level or job title which make things happen. When consulting you have diddly-squat authority and making things happen and stay happened is a tough new skill to learn.

When you are in the market for consultancy expertise you must carry out some degree of due diligence. Check out and corroborate the claims of past success with particular focus on how expertise was deployed in the receiving organisations.

Don’t be taken in by the “expert” moniker and use something like the Talent Hub to find out who is availableand what they have actually achieved in the wonderful world of consulting.

It's a jungle out there!

Image courtesy of Stuart Miles at freedigitalphotos.net  

 

Tags: FMCG, Interim Management, Supply Chain, CONSULTING

FMCG Trade Loading & 4th Quarter Challenges - deja vue all over again!

Posted by Dave Jordan on Mon, Nov 27, 2017

Some things never change and FMCG 4th Quarter challenges certainly do not. The same challenges are clearly present and what is astonishing is that some companies are still making short term, expensive efforts to “make the sales numbers”. I don't think that is very clever; instead of pouring cash into a black hole without guaranteed return why not divert resources to sort out the underlying problems? They will not go away on their own!

There is a little bit of growth in the market but those green shoots are still relatively puny. Assuming growth is to return, those companies that had the vision to be critical of how they do business in difficult times will be the winners. All the others will be achieving the numbers by loading the trade….again and again.

You should have a good feeling for how things have gone in Q3 and what is still needed in Q4 to reach the numbers you committed to over 12 months ago. "Committed" may well be the wrong word as you were probably forced/cajoled/persuaded to accept figures you knew would be difficult if not nigh impossible to achieve. However, for the greater corporate good you took it on the chin and said “yes, we will do it” (no idea how but cést la vie).

Exactly how are you going to achieve those seemingly distant numbers? The corporate world remains in trouble but so are consumers. The two groups are not disconnected; consumers are having a very tough time considering the increasingly clueless government austerity measures that continue to drip out around the globe. Consumers simply do not have the money to prop up your annual plan and what money they do have is likely to be rationed to be sure of a reasonably happy Christmas. Remember, consumers owe you nothing, not a penny!

One thing you may consider if sales are not going well is to fall into the trap of month-end loading. Let us consider this scenario which is far from uncommon even in “blue-chip” companies. Let us assume October sales are poor in the first 2 weeks and then the word is given to “push” stocks into the trade. Discounts are given, favours called in and hey presto, the required target number is achieved and you and your bosses think you are back on tSupply_chain_sales_planning_results.jpgrack.

You have pushed so much stock into the trade that distributors are short of cash and International Key Accounts platforms are overstocked. Consumers do not drink more beer or wash their hair more often or eat extra snacks because you sold at a discount. They have taken advantage of your offers and have filled their own domestic warehouses ready for Christmas and possibly beyond.

Then we get to November. This time sales are poor into the third week and the rallying call of the stock push does not seem to be working. Support  and discretionary spend budgets are raided again and yet more stock is forced into places where it has no demand. Despite this, the motivation of achieving targets and securing a bonus ensure that the right number is flashed to HQ at the end of the month.

Now just December to get through……even if it is really only a 16/17 day month for selling. You are so close that a few more discounts and the promotion of high value SKUs means you close the year on target. It’s that champagne moment, get the fat cigars out!!!!

Sit down and think about what you have just done for the sake of a slap on the back and a bonus. You have turned the operation of the company upside down, contravened numerous policies, abused S&OP (if you use it) and unfairly stretched your staff in all departments. 

If you are brutally honest you will know you have sold January’s demand over the last quarter the year. You will not get away with that for long as it will come back to bite you eventually!

With stretched resources it is difficult for companies to see what is really happening across all departments and how decisions in one area cause a detrimental effect in another. If you insist on chasing the full year numbers/bonus then you might at least take on some professional support and understand the damage you are causing to yourself.

Image courtesy of Stuart Miles at freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, S&OP, Forecasting & Demand Planning, Sales, Distribution, Integrated Business Planning