Supply Chain Blog

FMCG Inventory Shrinkage & Control - It's a Dog's Life

Posted by Dave Jordan on Mon, Jun 18, 2018

Do you find yellow dog biscuits stuffed in your window frames? 

Well, I’d expect such occurrences to be as rare as a squirrel with a nut allergy but I find it all the time. Our house has mosquito nets on the windows as our summers are rather hot and the little blighters bite with pure human hatred.  The nets slide up and down between 2 small, vertical brushes on either side of the window to make them impregnable to blood seeking buzzers.

Within these brushes is where I find yellow dog biscuits. Not brown or red or any other colour, only yellow canine munchies. (And while we are on this important subject, if dogs are colour blind why do we give them different coloured biscuits?) You might presume that our half Jack Russell-half Mr. Bean dog Patch is responsible. Is he hiding them away for a sneaky midday or midnight snack? Does he know about some impending global dog chow shortage? I doubt Patch is the culprit as some of these windows are 7 metres off the ground and our dog is yet to work out how to find and climb a ladder and then put the ladder away without me knowing.

FMCG Stock inventory controlSo, how do the biscuits find their way into my window frames? Not surprisingly perhaps, the biscuit thieves are birds; magpies to be precise. I guess they are storing up for a rainy day or winter or some other event. They are known to be attracted by shiny objects but I cannot see the connection with a fairly bland crunchy snack. Also, as Patch eats inside the house they cannot be my/his biscuits so the magpies are stealing them from another poor dog in the area.

The house has many windows so the amount of stolen food is quite high and as I now regularly clear out the stash, the amount really starts to add up.  Some pooch somewhere is not getting his or her full share to eat. That poor dogs’ human probably thinks their poodle is really content and eating well when in fact a magpie is regularly taking the yellow biscuits away. Of course, maybe the poodle doesn’t like the yellow ones. 

Ok Dave, what do we have here and what is this to do with Supply Chain? Let us take a look at what is happening:

1. Supply Chain inventory is not secure as stock shrinkage is occurring on an almost daily basis and yet nobody appears to notice. When did you last see your stock count?

          2. Stock is in the wrong location to serve the needs of the intended customers and consumers. When you have stock in the wrong places you will inevitably develop an overstock in your Producer warehouse network.

          3. Consumer demand is artificially high resulting in over-stocking and unnecessary spend along the Supply Chain.

          4. Ultimately, the final consumer is receiving poor Customer Service.

About the only aspect impressive in this is the quality of the logistics in getting the stolen biscuits from a dog bowl into my window frames. I will keep a look out for any stolen jewellery but I fear I will only have biccies to clear away.

Put simply, if you do not take great care with your own inventory somebody else will!

Image courtesy of bplanet at freedigitalphotos.net

 

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

Supply Chain Analytics smooths production planning AND reduces inventory?

Posted by Dave Jordan on Thu, Jun 14, 2018

May Day falling on a Tuesday meant a rare 4 day “weekend” break was enjoyed and the sun shone, in Romania at least. Time to dust off the BBQ for the first time this year and chill in the late April heat. We had some Romanian bred ostrich meat to grill – yes, honestly and what’s more the Romanian word for Ostrich is the perfectly apt Strut!

Everything was rather last-minute, but the salad was done, bread buns cut and buttered, potatoes wrapped in foil were ready and the Prosecco had already popped. Man dons apron with a life size image of a girl in a bikini plus a Knorr chef hat and we are ready to roll.

Well, we would be ready to roll if we had any charcoal!

SUPPLY_CHAIN_ANALYTICS_INVENTORY_PRODUCTION_PLANNINGI guess I could have popped out to the garage to pick a bag up but it ruins the flow of things and anyway I was Prosecco’d up. To a background of female tutting we resorted to another process and turned the gas on in the kitchen.

I only had 6 items to plan but goofed with one of the most important but the absence of any would have scuppered the day. Our last-minute change of plan was not dramatic but we used expensive gas rather than charcoal. This minor domestic challenge shows how unexpected shortages can impact on otherwise smooth processes.

Putting the strut steaks aside let us look at a case study where materials more critical than charcoal were causing problems and how Supply Chain Analytics played their part.

The Challenge

Despite having relatively predictable demand and high stock levels, an FMCG manufacturer still suffered stock-outs of different RM/PM and had to change production plans and schedules constantly to try and maintain service levels. As a result, operating costs were unnecessarily high, and the day-to-day running of the supply chain was absorbing a disproportionate amount of management time due to fire-fighting. Staff morale was dipping – much like mine on Sunday afternoon!

The Solution

SupplyVue took a detailed analytical look at the production sequence using the line changeover matrix and demand plan. This work sought to create the lowest cost manufacturing sequence and a set of “Golden Rules” to maximise efficiency. Using this optimum sequence, SupplyVue used production wheel methodology to create a rolling 16-week production plan. Scenarios were generated showing the trade-offs between manufacturing cost, manning and inventory levels, and between levelling capacity and inventory. In doing this, the management team was able to decide on the production policies that most aligned to their business objectives and specifically, Customer Service.

The Impact

1. A 15% reduction in changeover time through an optimised production wheel approach.

2. Levelled demand to prevent overtime and disrupting shift patterns.

3. Inventory levels plummeted through reduced cycle times and increased conformance to plan.

Supply Chain Analytics would not have saved my BBQ or my ear from a bashing, but you need something with high powered deep data diving capability to understand what is really going on in your supply chain.

Image courtesy of Peter Orseved at freedigitalphotos.net

Tags: Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics, Production Planning

7 Deadly Sins: Why FMCG Distributors are Overstocked in CEE

Posted by Dave Jordan on Wed, Jun 13, 2018

How I guffaw when I hear producers complain about traditional trade distributor overstock.Make no mistake Mr. Producer, YOU put the stock there, oh yes you did! Distributors don't buy stock for something to do or a laugh and a giggle. Excess stock blocks up their warehouses and locks up their cash.

Why does this happen in even the largest companies?

1. Month, quarter and year-end push. "Targets have to be met so push as much stock as possible into the Distributors." This is simply loading and is not real sales.

2. Failed launches. Unrealistic Producer sales objectives leading to slow moving goods which sit in warehouses.

3. Old label stock. Perfectly good stock but the pack with the new artwork is being sold already and nobody wants this "old stuff".

4. Old and expired promotions. Funding support has ended so what do we do with all these left over promo packs? Don't expect sales and marketing colleagues to help.

5. Returns from customers. Still arguing about who is to pay for these returns? You should have had clear SLAs and contract in place.

6. Producer forecasting errors. Nobody wants to lose face at Producer HQ so the stock sits and gathers dust until it expires or is stolen.

7. Damaged and expired. Damages happen, get them written off AND destroyed and get over it. You can avoid expired goods - see above!

Overstocked Distributors

You might think your Distributors have a healthy 21 days of cover but in reality they are operating with a much lower level of saleable stock, ie what consumers actually want to buy.The rest sits in their books and in your stock cover numbers but it contributes nothing to sales. In fact, it negatively affects sales as stock that is in demand is available at too low levels or not at all to meet customer requirements.

"Those distributors have so much stock but my Customer Service level is rubbish".  IT IS NOT A SUPPLY CHAIN PROBLEM!

 

Tags: Dave Jordan, CEE, Traditional Trade, Distribution, Inventory Management & Stock Control

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

7 Top Tips for Spare Parts Management in Factories

Posted by Dave Jordan on Mon, Jun 04, 2018

Well, I find it strange anyway. Some very large companies spend countless hours and cash in finding and securing a third party logistic provider (3PLP) to take great care of their finished goods assets. The performance of the chosen 3PLP is then measured and monitored very closely using a suite of KPIs, e.g. damages and losses are recorded and usually debited to the 3PLP under the contract terms. A 3PLP is charged with “storing your stuff” as safely and cost effectively as possible and providing easy picking for dispatch.

I often wonder why some blue chip companies fail to adopt similar warehousing and logistics principles in the operation of in-house engineering stores. Depending on the industry, the value of the components can be several millions of Euros. If you do not pay attention to this area then the same things happen as they do with finished goods warehouses, including:

1. Shrinkage or more accurately, theft! Your spare parts stores will be helping to repair private cars, replenish home tool-boxes and raise personal funds through the sale of stolen goods. This might seem harsh but I have seen it first-hand and continue to in large organisations.

Bottling line resized 6002. Important parts are not in the right place. If you do not have clearly labelled storage bins you can stop production lines very quickly losing valuable operating time. At the end of the day an idle line can probably lead to more lost sales than a badly picked finished goods pallet.

3. Spare parts not replenished. If stock control is not rigorous then you will go out of stock on important items just when you need them. Sod’s Law dictates that they will also be the parts with lengthy lead times.

A few simple principles loaned from big scale warehousing will help:

  1. Operate some sort of stock management system. This can be done on Excel with some discipline but specifically designed software packages are available. You need to know where each spare part is located just like in a finished goods warehouse.
  2. Carry out cycle and annual stock counting. Keep a close eye on your high value and production-critical items by counting them on a rotating basis. Do not wait for a year-end count to reveal a gaping hole in your stock value.
  3. Carry out an ageing analysis. Many large stores are full of spares for machines that were last running when “Shep was a pup”. They are of no use to you yet they sit on a shelf and on your books as working capital. Any materials with specific shelf lives also need regular checking to ensure you are not holding something which is at best useless or at worst dangerous!
  4. Secondary store for critical items. Items of high value or those which will stop production can be held in a “store within a store”, e.g. a wire cage with 2 locks. Access to these items requires a more senior employee to be present at issuance, e.g. maintenance manager.
  5. Operate some relevant KPIs. These do not have to be wide ranging or difficult to calculate, e.g. ageing, stock rotation, shrinkage etc. An important KPI can be the value of your spares as a % of the operation asset value. Do you know yours?
  6. Order and stock only what you need. Avoid the temptation to buy in bulk as the price is keener. If you are able to calculate a forecast plus some safety stock then you can minimise your inventory and your working capital. Also, ensure that spares purchasing and receipt are spilt responsibilities or you may find you are buying items you do not actually use in the factory..………
  7. Restrict access to the spare parts stores. If you allow anyone to wander in and remove items then your stock control will be out of control, no doubt. If you require access to spares on a 24 hour basis then ensure the facility is staffed appropriately at all times. Leaving the stores unmanned and the door open should be a disciplinary offence.

When looking at factory operating efficiency people will often focus only on the production line and RM/PM supply. Take a look at how you manage spare parts and you may be able to influence your level of efficiency from an unexpected source close to home.

Image credit: Hi.WTC

Tags: Logistics Service Provider, Dave Jordan, Manufacturing Footprint, KPI, Logistics Management, Inventory Management & Stock Control, Spare Parts

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

Time to Spring Clean your Supply Chain in FMCG?

Posted by Dave Jordan on Thu, Mar 22, 2018

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

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

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

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

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

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

Image courtesy of Stuart Miles at freedigitalphotos.net

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

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

Posted by Dave Jordan on Wed, Mar 14, 2018

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

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

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

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

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

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

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

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

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

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

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

Image courtesy of Loveluck at freedigitalphotos.net

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

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