Supply Chain Blog

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

Posted by Dave Jordan on Mon, Aug 06, 2018

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

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

Common errors in Customer Service measurement and management:

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

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

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

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

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

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

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

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

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

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

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

 

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

FMCG Co-packing and Re-packing Management

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

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

The best location for these operations?

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

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

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

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

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

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

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

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

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

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

CTA 3PLs in CEE 0.03 Small resized 600

Image credit: Wincanton

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

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

Manage Supply Chain Expectations with Service Level Agreements (SLA)

Posted by Dave Jordan on Wed, Jul 11, 2018

If you do not specifically agree on what is expected between two parties before you start a relationship then anything and everything but success is likely.

You buy a new car and you get a contract that tells you what is covered by the guarantee and for how long in time or in distance travelled. From your side you will be expected to pay the same people to periodically maintain the equipment at peak condition.

Travelling by air? You buy a ticket to Bucuresti and you know when and where it will take off and hopefully land you and how much baggage you can take. There are rules in place for delayed take off and excess and lost baggage. You might not like these rules but that is what you have agreed to by investing in the ticket. (Before you say it, I know certain airlines stretch the boundaries here yet people still fly on them!)

Service Level Agreement resized 600While it may not be as popular as it used to be, marriage is still perhaps the most widely used Service Level Agreement (SLA) in the world. The names of the two parties are made very clear to a number of witnesses and depending on your brand of religion there follows a list of statements you have to agree to or the marriage ceremony does not continue. You even get a certificate which is in effect a contract or your SLA. Of course, this does not go down the detail of who does the washing up or who gets up at 3am to feed the baby but it does set out clear expectations.

Should the husband run off with the woman for the chip shop then a divorce is highly likely. Think of the arguments about who gets to keep Eric the hamster if there is a parting of ways. Alternatively, you could use one of those “pre-nuptial” agreements favoured by plastic Hollywood-types who think a long relationship is several months in their world so far away from reality.

In all cases, it reflects “you scratch my back and I scratch yours” or sometimes “you stab me in the back and I take you to court”.

Despite SLAs being a vital part of daily lives why do FMCG. Brewing, Pharmaceutical companies fail to have the same in place for their suppliers, IKA/TT customers and internal departments within the S&OP framework? Such an approach holds people accountable for the service they provide and at the same time making the penalties clear in the event of failure.

SLAs do not have to be a lengthy tome of text but should contain enough information for both parties to be 100% clear about what is expected from the relationship. Include some relevant and why not stretching KPIs and you have the basis of a relationship that may flourish rather than end up in the divorce courts.

No relationship in business or in private life is perfect but why not start out by writing down what level of service you expect to provide to each other?

 

Tags: FMCG, Route to Market, Logistics Service Provider, Dave Jordan, Performance Improvement, Supply Chain, CEE, Traditional Trade, Logistics Management

Supply Chain: A top 10 Supply Chain faux pas!

Posted by Dave Jordan on Thu, Jun 28, 2018

I have just had one of those mornings. I missed the alarm and the 10-minute snooze and from then on everything went downhill. Jumped in the shower for a brief cleanse but then I realised there was no soap, not even a sliver. So, soaking wet I get out, but can I find anything remotely soapy? There was no time to waste so the Charles and Di souvenir tablet had to be sacrificed.

Obviously, it was quite a few years old and completely lacking in perfume but if I could generate a foam that would do the trick. I actually found myself apologising to the princess as I showered! Finally clean, I quickly sprayed shaving foam under my arms, brusupply chain exec tipical problemsshed my teeth with some really vile tasting skin cream and I was set to face the world. Well, I would have been if I hadn’t managed to put my Polo shirt on inside out.

I know students turn their underwear inside out to get a few days extra wear but I’ve started to put shirts on inside out. I was in a Birmingham Vodafone shop with the heiress when she leaned closer and told me what I had done. I just took the shirt off and put it back on again proving that you’re never too old to embarrass your daughter!

Only shoes left before a rushed mobile breakfast before finally getting on my way. How knotted can a shoelace get. There are only 2 ends about 40cm apart, yet they get into knots a Rubik’s Cube genius could not release within 48 hours.

Does that sound rather like your Supply Chain?  The 2 ends may well be continents apart but some of the supply knots companies get themselves into are incredible. Here is a list of top 10 totally terrible Supply Chain knots we have seen in the last 12 months alone. As ever, no names, no pack drill!

  1. A snacks company tried to sort out their Supply Chain challenges using internal resources and ended up disbanding the SC structure.
  2. A well-known DIY retailer “found” over 1000 pallets of product that were on the books but had expired.
  3. A regional Brewer boasted of a cutting-edge S&OP implementation when in reality staff were just going through the motions as Sales colleagues had become disengaged.
  4. An African FMCG business had over-stocked the distributor network so much that they could stop manufacturing for 4 months without any impact on sell-out.
  5. A global agri-business outsourced their logistics operations to the cheapest tender quote and quickly paid for this with severe out of stocks.
  6. A new ERP will solve all of our problems said a Printing CEO. After paying a huge price for a vanilla deployment they are now shelling out again to actually have an ERP that fits their needs.
  7. An Eastern European tobacco company opened more warehouses than were actually required and as is the rule, they were quickly filled with unnecessary working capital.
  8. A direct supplier to the motor industry was carrying Eur 2.5M of spare parts for vehicles that are no longer in production.
  9. A Brewer invested heavily in their RTM network with proven success only to mimic a later competitive move and see sales collapse during the peak season.
  10. A garage forecourt operator allocated Supply Chain activities to the Sales Department and soon realised very different skills were required for success.

All relatively easily avoidable if only some expert advice had been sought. Some of these problems make my disastrous morning seem like a walk in the park.

Image courtesy of imagerymajestic at freedigtalphotos.net

Tags: FMCG, Route to Market, Logistics Service Provider, Dave Jordan, Supply Chain, Inventory Management & Stock Control, Spare Parts

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

CEO FMCG Letter to Santa Claus (aka Father Christmas) 2017

Posted by Dave Jordan on Sun, Dec 17, 2017

FMCG/Brewing/Pharma CEO Letter to Santa ClausDear Father Christmas,,

I have been a very good FMCG CEO this year, I promise. If you want, you can check with my colleagues and shareholders. They know how good I have been this year. Apart from the out of stocks of course, oh and the little mistake when we had to write stock off and waste lots of our money. But that is not so bad is it? Other CEOs were naughty last year and they still got what they wanted from you.

I had better be honest because you will know if I am not telling the truth. We also had a problem starting S&OP and so our planning, forecast accuracy and therefore  sales were not very good. They were not really big problems so I hope you can forget about them this time, please. Next year I promise to do better, I do, honestly.

I forgot about the Route To Market (RTM) mess we had in the peak sales months but that really was not my fault. I also promise to do something about RTM next year and make sure it works properly so people who buy our products are not disappointed. I know it is bad when people come to buy our products and then spend their money on something else. I will talk to our distributors and find out what we need to do.

I know, I know, when the new ERP computer system was switched on we were not really ready for the change but we did make it better as fast as possible. I did not think we needed any outside help for the new IT but I admit I was wrong. Next time I will get it right, hopefully without having any lost sales.

The factory thing was not my fault, I think. The factory man promised me lots of product but his machines kept breaking down at the wrong times and we had to wait for the fixing men to arrive. They took ages to get the machines working and then they broke down again and again. No, it is not a very reliable factory, yet.

Does the warehouse problem count against me as well? We could not find our products when we wanted them and then when we did find them they were old and out of date and of no use. This was very sad but it will not happen again next year, I hope.

I have just read my message again to make sure I did not spell any words wrong and I see I was not as good as I thought. Actually, after reading this I am going to the chimney to take my stocking down and put it away in the Christmas storage box. I will try again next year, Santa.

Bye bye and Happy Christmas.

CEO FMCG

Image credit: HikingArtist.com

Tags: Route to Market, Christmas, Logistics Service Provider, Dave Jordan, CEO, Humour, Performance Improvement, Traditional Trade, S&OP, Sales, Inventory Management & Stock Control

Supply Chains – Managing internal & external 3/4PLP expectations

Posted by Dave Jordan on Wed, Feb 22, 2017

American sit-coms. With very few exceptions I personally do not find them at all funny. At times the funniest part is hearing the hilarious canned laughter when nothing in the least bit humorous occurs. MASH, Taxi and Cheers are the only sit-coms out of hundreds that managed to connect with my sense of humour. This is a personal thing of course but I do not like Raymond and I never got into Friends or what I consider its males deceased sequel, The Golden Girls.

Maintaining the comedic theme, not everyone likes Donald Trump either. The recently installed POTUS has certainly ruffled some feathers and while I am not going to dwell on the content of what he has done or said, the fact is that he is essentially doing what he said he was going to do. The Donald was voted in on certain promises and he appears to be trying to deliver. That ends my toe dipping into American comedy and politics (is there a difference anyway?) and now to Supply Chain stuff!

SUPPLY_CHAIN_3PLP_4PLP.jpgSo how is the above relevant to Supply Chains across the globe? In preparation to outsource or renew transport and/or warehousing contracts to 3PLPs or 4PLPs, an important part of the process is gathering the views and expectation of the key stakeholders. This will ensure the tender process and tender documentation are designed specifically for the company in question and also in good time.

Even within a small FMCG company board team the motivation for outsourcing will vary widely.This table shows where priority interests may lie across the management team and with customers. There is no guarantee any outsourcing arrangement will achieve one or more of these benefits but each is possible.

 4pl-3pl-expectations-supply-chain.jpg

As you can see, individual functions may have very different expectations from outsourcing the corporate logistics operations. Of course, everyone in the team should be working for the best all round company performance but these are the benefits at the core of their functional expertise and requirements. For example, lower working capital will excite the Finance Director but will be met with a blank stare from S&M colleagues.

A key step at the start of an outsourcing process is to find out what the internal and external stakeholders expect and equally importantly, tell them what they can expect in reality. Managing the various and often competing expectations will be an important task for the outsourcing team to avoid wasteful post project debate and mudslinging. Care though, benefits will not be delivered from day 1 so ensure the current and following annual plans reflect a sensible phasing.

If the project delivers broadly what was agreed after the stakeholder interviews there will be no place for any board room dramas or even alternative facts!

Image courtesy of vectorolie at freedigitalphotos.net

Tags: FMCG, Logistics Service Provider, Dave Jordan, Humour, 3PLP, 4PL

FMCG CEO 2016 Letter to Santa Claus (aka Father Christmas)

Posted by Dave Jordan on Tue, Dec 20, 2016

FMCG/Brewing/Pharma CEO Letter to Santa ClausDear Santa,

I have been a very good FMCG CEO this year, I promise. If you want, you can check with my shareholders. They know how good I have been this year. Apart from the out of stocks of course, oh and the little mistake when we had to write stock off and waste lots of our money. But that is not so bad is it? Other CEOs were naughty last year and they still got what they wanted from you.

I had better be honest because you will know if I am not telling the truth. We also had a problem starting S&OP and so our planning, forecast accuracy and sales were not very good. They were not really big problems so I hope you can forget about them this time, please. Next year I promise to do better, I do, honest.

I forgot about the Route To Market (RTM) mess we had in the peak sales months but that really was not my fault. I also promise to do something about RTM next year and make sure it works properly so people who buy our products are not disappointed again. I know it is bad when people come to buy our products and then spend their money on something else. I will talk to our distributors and Enchange and find out what we need to do.

I know, I know, when the new ERP computer system was switched on we were not really ready for the change but we did make it better as fast as possible. I did not think we needed any outside help for the new IT but I admit I was wrong. Next time I will get it right, hopefully without having any lost sales.

The factory thing was not my fault, I think. The factory man promised me lots of product but his machines kept breaking down at the wrong times and we had to wait for the fixing men to arrive. They took ages to get the machines working again and then they broke down again and again. No, it is not a very reliable factory, yet.

Does the warehouse problem count against me as well? We could not find our products when we wanted them and then when we did find them they were old and out of date and of no use. This was very sad but it will not happen again next year, I hope.

I have just read my message again to make sure I did not spell any words wrong and I see I was not as good as I thought. Actually, after reading this I am going to the chimney to take my stocking down and put it away in the Christmas storage box. I will try again next year, Santa.

Bye bye and Happy Christmas.

CEO FMCG

Image credit: HikingArtist.com

Tags: Route to Market, Christmas, Logistics Service Provider, Dave Jordan, CEO, Humour, Performance Improvement, Traditional Trade, S&OP, Sales, Inventory Management & Stock Control

Logistics Outsource Tendering in CEE - Top 7 Hazards

Posted by Dave Jordan on Wed, Nov 16, 2016

This process can be straight forward but a little extra care and knowledge will ensure you achieve the best warehousing and/or transport solution for your business.

Just a quick reality check, do you need to outsource? Before embarking on a complicated and potentially disruptive tender are you convinced your current in-house operation is unsuitable? Think long and hard about outsourcing or you could be trapped in a long-term relationship with someone who may not care about your business as much as you.

Assuming you have taken the correct decision let us look at 7 things that can go wrong.

1. Process Leadership If possible, appoint a leader from outside of the Supply Chain team, e.g. Finance. This will promote impartiality and in any case, many of the key debates will be in the Finance area. For complete impartiality, you might consider hiring an experienced Interim Manager or Consultant who has no long term interest. All contenders will be trying to pick up snippets of advantageous information and you must not compromise the tender process in any way.

2. Qualification. Get an idea for which companies are likely to be interested in and capable of being your 3PL partner. Do not be surprised if your list is relatively small but you should aim for 8-10 contenders in this first sweep. Contact these companies with a questionnaire asking them to outline their capabilities, pedigree and reputation in your geography and follow this up with a face to face meeting where you can get a better feel for competence and commitment.

3. Cost Comparison. Outsourcing is not always about cost reduction but the costs of the 3PL contenders will be a major element in the decision. Ensure you know your accurate current costs for the entire service you are expecting the 3PL to provide. You need transparency on your own cost structure to make a valid and meaningful comparison.

4. Time Expectations. Don't rush the process despite the pressure from above (or below) to make a change. You will be reliant on your 3PL to support your business so make sure a timetable is agreed with all stakeholders, including your own Supply Chain people. The tender process will not be a secret however hard you try and your people will be nervous. The changeover should fall in a slack period so avoid your seasonal peaks and major promotional periods.

5. People. If you are outsourcing your existing in-house Logistics function, then you are either going to make several staff redundant or you will be looking for the new 3PL to take those staff on board. Either way you must treat people in the best way possible or your service levels will suffer as you make this difficult change.

supply_chain_3pl_logistics_transport.jpgIf you are making staff redundant you must keep them fully informed at each critical step. Why not consider an escalating loyalty bonus linked to performance? If existing staff members are being offered the opportunity to join the new 3PL then it is your responsibility to ensure terms and conditions are fair. From experience in CEE it is wise to build a "parachute" agreement into the new contract ensuring existing terms and conditions are maintained for a period of say, 12-18 months.

 

6. Beware of well- meaning Distributor partners trying to step up to the mark as a 3PL and be similarly aware of any of the big names who are not present locally but "expect to be". This means they are unlikely to enter your market unless they get your business and you will not appreciate being their new guinea-pig!

7. Start-up Phase. Ensure your tendering process includes a clear understanding of what will happen as the business is transferred. How soon will KPI's be at the required level? Does the 3PL have the necessary staff with relevant skills, e.g. narrow aisle FLT drivers. Do they have extra FLT batteries than can be swapped to maintain the operation? Has the WMS been robustly tested? Do they have sufficient trucks and drivers?.........Even some of the big name 3PLs make mistakes at this crucial time.

Taking care of these 7 elements will help you move through the all-important implementation phase to a steady business state without surprises.

Some 3PLs tend to be very slick at securing new business but some of them are not very good at keeping it!

Want to know more about logistics in the CEE region?  Check out these posts too!

Logistics: Working With 3rd Party Logistics Providers in CEE 

Working With 3PLP's in CEE - When did you last see your stock count?

Top tips to improve your cycle counting & avoid suffering stock shock 

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Tags: Customer service, Logistics Service Provider, Supply Chain, Cost Reduction, Transportation, 3PL