Supply Chain Blog

How to Master Technology in Route to Market Strategy to Save Resources and Fuel Sales

Posted by Ross Marie on Fri, Jan 11, 2019

When we discuss Technology in terms of Route to Market (RtM) Strategy we are looking at our overall approach to and use of Technology at every stage of our RtM Strategy and Execution.

rtm-technology-webThis includes, for example, the hand-held system we take orders on, the ERP system the company uses, the tracking method we have for targeting the RtM team, the way we measure and track our key account agreements, how we optimise our route planning, and everything else across the RtM space.

The key in many cases will be minimising the number of systems we use, facilitating their integration, ensuring their simplicity and allowing them to minimise human intervention.

Welcome to my blog series on the 20 Steps to Route to Market Excellence model. Over the past number of months, we have gone through the first 13 steps of my model. The purpose of my blog series is to stimulate your thought processes around RtM, and to allow a moment to think and to ask some key questions. The focus of this post is Step 14 ‘Technology’.

Here are some examples of questions you can ask under Step 14 ‘Technology’:

  1. Based on the RtM Review in Step 1, what is our current approach to and use of Technology across our Route to Market?
  2. What is the Systems Landscape operating across our RtM function? To what extent are the systems integrated?
  3. Do we use an ERP system? Is this linked to any other RtM systems? How does this integration work? Have we adopted systems that are no longer fit for purpose?
  4. Do we get distributor, customer or third-party sales data? If so, what do we do with this? Is this fed into our own RtM system? Can we measure and report on this? What manual intervention is involved?
  5. What is our use of spreadsheets across the RtM function, including strategy, execution, monitoring and reporting? How many different departments are using them? Have we looked at this aspect in the past and what view did we take at the time? To what extent are we managing the risks associated with spreadsheet usage?
  6. What is the current order capture method? Do we use a CRM? Do we use a hand held, tablet or phone? If so, what is their current ease of use and performance? How integrated is the order capture method into the overall company system(s)?
  7. What systems for we use to monitor the performance of our RtM representatives? For example, do we know how many calls they are doing per day, what their location is at any given time, what their stock levels are, etc.?
  8. Do we track our distribution and RtM vehicles electronically? If so, what do we do with the data?
  9. Do we have a solution for setting and monitoring our RtM targets? Is this automated and integrated into our overall RtM system?
  10. How do we measure product display across our retail, Horeca and customer network? Is there a technology solution for this?
  11. How do we track, monitor and report on compliance to customer agreements, whether they are national trading terms with key accounts, of single store contracts?
  12. Do we have any connectivity constraints in our marketplace? Does our RtM team have access to mobile/cellular data across the country or does connectivity wait until the end of the day? How does this impact on our approach to Technology?
  13. Do we use RtM data analytics across our RtM? If so, what do we do with the data? If not, have we looked at this in the past? What are our next steps for RtM data analytics?
  14. Do we have a solution for capturing cost to serve data across the RtM? Is this a simple automated process or does it require manual intervention? If so why? What are we doing with this information?
  15. To what extent do we use technology to set up sales territories and look at route planning? If not, why not? If we do use Technology here, what have the results been?
  16. What is the current amount of time our RtM team spends using technology? Is this what we want and expect? Is this the best use of the RtM team’s time or have we over complicated any process?
  17. Do we use social media and other form of digital marketing for RtM? Does it form an integrated part of our RtM strategy or has it been deployed in silo from other RtM initiatives? What have we used it for and what have the results been? Who in the organisation uses social media for RtM? Do we have a clear strategy and guidelines in place for the use of digital tools?
  18. Do we train our RtM team on all aspects of Technology that we use in RtM strategy and execution? Is it very clear which aspects of Technology are ‘in scope’ and ‘out of scope’ for certain roles/departments?
  19. Does our RtM team currently employ workarounds due to current system set up?
  20. What are the current technology gaps in our RtM? Where are the manual processes that need to be automated? On the other hand, are their examples where we are over complicating an area or issue for the sake of technology?
  21. Given all the above, what is our overall Technology plan across the RtM, Sales and/or Trade Marketing and Distribution function?

I hope you find this useful, as always views and comments are welcome. Next, I will cover Step 15 ‘Distributor Partnership Programme’. Please subscribe to the blog on this page, to ensure you don’t miss the latest updates on RtM excellence in execution and the 20 Steps model. If you would like to know more about the 20 Steps click here.

Tags: 20 Steps to RtM Excellence, RtM Strategy, Ross Marie, ERP, Promotions, RTM, Retail, Information, RTM Assessment Tool, Distribution, Sales, Cost Reduction, Traditional Trade, FMCG, Brewing & Beverages, SKU

A Crystal-Clear Sales Incentive program is Fundamental to Route to Market Success

Posted by Ross Marie on Thu, Dec 06, 2018

When I say Sales Incentive Program (SIP) in the Fast-Moving Consumer Goods (FMCG) sector, I am referring to the internal company incentive program that is used to motivate and influence the behaviour of sales people and teams to deliver company specific results. This is not to be confused with a Trade Incentive Program, designed to motivate Retailers or Distributors or other Trade Partners.

SIPs in the FMCG sector are crucial in the delivery of Route to Market (RtM) goals. The old adage is true, what gets rewarded gets done. But is it that simple? Well, no. Putting a SIP together can be a minefield unless all the bases are covered. Let’s dig a little deeper.

sales-incentive-program-fmcg-rtm-webWelcome to my blog series on the 20 Steps to Route to Market Excellence model. I am writing this blog to offer guidance on the things that should be considered when putting a RtM strategy together. Over the past number of weeks, we have gone through the first 10 steps of my model. The focus of this post is Step 11, ‘Sales Incentive Programme’.

Here are some examples of questions you can ask under Step 11 - Sales Incentive Programme (SIP):

  1. Based on the RtM Review in Step 1, is there a SIP in place? If yes, what is the current SIP? How is it performing? What were the key factors that led to any past successes?
  2. What does the current SIP measure? How is the performance of the sales people measured and what are their targets?
  3. To what extent are we targeting volume, revenue, profit, share, brand distribution, display, range, TM&D activities, point of sale material, promotions, new accounts, new brand introductions, out of stocks, cash in, etc.? What are the top 3 or 4 metrics that we currently measure? How would this be used in developing any new SIP?
  4. How do we currently assign targets between the different Regions, Areas, Channels, Territories, Key Accounts, etc.? How will this be done in the future?
  5. Is the current program complex and difficult to understand or administer? Or is it simple, easy to follow and understood by all?
  6. How attainable are the rewards in the current SIP and how will this inform any new programme?
  7. Is the current programme based on short terms incentives, e.g. monthly or quarterly, or is it based on longer term, annually or 3 yearly? How will this influence any revised programme?
  8. How achievable is the current SIP? To what extent are targets achievable? Does it favour a small group within the sale force? How will this knowledge be used to develop any new programme?
  9. Based on the new, revised or reviewed RtM approach, what measures will we use in future for our sales/RtM department?
  10. How will we report the new SIP? What method of reporting will we use and what will the frequency be?
  11. Will we operate a leader board system where every sales person knows where they rank? Will sales people have real time visibility of their and others performance?
  12. What are the primary motivating factors within our organisation, country, culture, etc? Are they financial, recognition, skill acquisition, team based, career progression, etc.? Are they a mix of them all?
  13. If we choose a financial route, will it be a percentage of the sale, their salary, the monthly revenue, a fixed amount? Have we considered using a physical item equal to the value of the financial reward as the incentive? Would a personal item that the sales person keeps in their home be more rewarding than cash?
  14. Will any targets and rewards be individual, or team based and how does this reflect how the sales people actually work in the real world?
  15. What will be the elapsed time between achievement of an incentive and the attainment of the reward? Could we lose motivated sales people through extended time lapses?
  16. Have we ever asked our sales people for feedback on the current SIP? Have they ever been asked how they would change or structure a programme? Do we know what motivates them? Have we directly asked them what they want as an incentive?
  17. Will managers have the ability to adjust sales targets or quotas based on specific factors? Will there be a need for a process for this? If so, what will the process look like?
  18. How will any new or revised programme be ‘sold’ into the organisation? How will we achieve, and measure buy-in?
  19. Has any new SIP been tested and modelled before rolling out?
  20. Based on the above, what will the new SIP look like?

I hope you find this useful, any views and comments are welcome. Next week I will cover Step 12 ‘Trade Tool Kit’. Please subscribe to the blog on this page, to ensure you don’t miss the latest updates on RtM excellence in execution and the 20 Steps model. If you would like to know more about the 20 Steps click here.

Tags: 20 Steps to RtM Excellence, RtM Strategy, Ross Marie, Promotions, RTM, Retail, RTM Assessment Tool, Distribution, Sales, Traditional Trade, Route to Market, FMCG, SKU

The Right Data and Metrics are Vital for FMCG Route to Market Success

Posted by Ross Marie on Thu, Nov 29, 2018

For a successful Fast Moving Consumer Goods (FMCG) Route to Market Strategy, we must be able to measure our performance across the market, internally within the company and externally against the competition and wider benchmarks. For example, we must be able to measure our own sales performance, our brand/SKU distribution, our new product introductions, our volume, our revenue, our share, our displays, our in-store facings, our pricing and promotion performance, etc.

essential data and metrics for rtm strategy successWe must be able to do this by territory, by area/region, nationally, by channel, by sub-channel, by key account, by distributor, by retail group, etc. We then need the ability to easily compare these measured results against our targets, our competition and any other benchmarks. We must have the functionality to do this historically, against the current performance and against future targets.

The goal here from a RtM standpoint is to get as detailed, reliable and up to the minute information as possible, to allow us to take corrective action against problems or to recognise success as early as possible to spread it far and wide.

Welcome to my blog series on the 20 Steps to Route to Market Excellence model. Some of you reading this may have gone to ‘Mr Google’ for some help. What I am trying to do here is to point you in the right direction to create an amazing RtM strategy.

Over the past number of weeks, we have gone through the first 9 steps of my model. The focus of this post is Step 10, ‘Data & Metrics’.

Here are some examples of questions you can ask under Step 10 – Data & Metrics:

  1. Based on the RtM Review in Step 1, what is the data that is currently available to us?
  2. What are the performance measures that we are currently measuring against?
  3. What are our current data requirements, in absolute terms and in terms of data capture and maintenance?
  4. Based on the RtM strategy we have chosen what are the likely future data requirements?
  5. To what extent are there any specific areas we need to measure based on external factors (e.g. wider organisation requirements, legislation, regulations, brand launches, restructures, etc.)
  6. Do we currently receive data from our distributors, our retailers, our key accounts, any other customers or partners? What is the data – e.g. sales, stock, etc. If we do, what are we doing with it? If not, is this possible in the future? Have we tried to get it in the past?
  7. Is the data that we will look to measure currently available in the marketplace? Do we need to pay for it? Do we have it internally within our own systems?
  8. If we do not have the data available, will we be able to use a third party to provide it?
  9. Do we currently measure our levels of display, facings or adherence to planograms in the market? How do we do this? How effective it the measurement and our adherence?
  10. Do we have an existing Revenue Management Model? If so, what does it measure? Does our model capture the difference between pricing, mix and volume changes?
  11. Do you have volume that is moving from the traditional trade to the organised trade and eroding margins? Does our Revenue Management Model capture this?
  12. Are our Trade Discounts out-pacing our sales growth? To what extent are we capturing this?
  13. Do we have a cross functional approach to revenue management? Are sales, supply chain, marketing, trade marketing all involved in the process? Are we feeding this information into the correct departments for action?
  14. Which department controls pricing and promotions in our organisation? Is it part of the RtM function and how will it be measured, and the information captured?
  15. Is the current Revenue Management Model fit for purpose? If not, what might a new model look like?
  16. What systems are we using to measure all of this and keep track of performance? Do we have an infield CRM or hand held linked to a back-office system? Can we generate reports with ease or do we have information on spreadsheets? Do we have a system to consolidate this data and information? To what extent are we reliant on spreadsheets for this?
  17. What are the actions that need to take place to have these KPIs measured?
  18. Do we have access to external KPIs, either from the wider organisation or from our marketplace, so that we can benchmark our local activities?
  19. What are the agreed data requirements and set of KPIs that we will capture to measure the success of the RtM strategy going forward?
  20. What is our agreed Revenue Management Model?

I hope you find this useful, any views and comments are welcome. Next week I will cover Step 11 ‘Sales Incentive Program’. Please subscribe to the blog on this page, to ensure you don’t miss the latest updates on RtM excellence in execution and the 20 Steps model. If you would like to know more about the 20 Steps click here.

Tags: 20 Steps to RtM Excellence, RtM Strategy, Ross Marie, RTM, Retail, ERP, Promotions, Information, RTM Assessment Tool, Distribution, Sales, Traditional Trade, FMCG, Route to Market, ERP/SAP, SKU

Retail Outlet Classification in RtM Strategy, an Essential Element or a Complete Waste of Time?

Posted by Ross Marie on Thu, Nov 01, 2018

Firstly, what is Outlet Classification? It is a process of segmenting every individual outlet, meaning every point of purchase, based on a set of company specific agreed criteria that you will design, e.g. volume, location, consumer profile, footfall, opening hours, engagement opportunity etc. This will then allow you to target specific activities, resources, brands, SKU’s, promotions, metrics, etc., at a specific outlet groupings level. The main benefit of Outlet Classification is the ability to target your product offerings at specific outlet groupings, regardless of who own them or what their retail format is.

fmcg-rtm-outlet-classification

Outlet Classification must not be confused with Channel Classification. Channel Classification, which will be covered in my next post, tends to group outlets together based on format. For example, an FMCG company may service the retail outlets across a country through 4 main channels, Grocery, Convenience, Horeca and Wholesale. These 4 channels may be further split into sub channels, Convenience could be further split into Organised, Mom & Pop, etc. This is mainly based on the format of the stores and who owns them. Outlet classification focuses on specific factors pertinent to your industry and company. It allows you to become much more targeted with your service model. A specific Outlet Classification grouping could contain retail outlets from all channel classifications, but grouped together based on specific consumer profile or location criteria set by you.

Here are some examples of questions you can ask under Step 6 – Outlet Classification:

  1. Do we know all of the outlets in our geography – including name, address, etc? If not, do we have plans to reach the total target universe?
  2. Will we call on the points of sale ourselves?
  3. Will our distributors call on them or will the outlets collect the product?
  4. What percentage of outlets will we cover either directly or indirectly?
  5. What are the criteria that we could classify our outlets under?
  6. On which criteria can we classify using existing data we or our distributors have, and what criteria requires an outlet visit?
  7. Should we classify and visit all outlets, or should we focus on a subset based on a certain criteria?
  8. Do we have the skill set, coverage and resource to do this ourselves?
  9. If not, then is the service available in my market and what are the resource requirements?
  10. Are there options to do a phased on the job classification or is a specific focus and resource required?
  11. Will we have a different approach to dealing with the outlets based on size, total volume, our volume, category volume, share, display, location, accessibility, consumer profile, footfall, opening hours, engagement opportunity, owner vs staff operated, shopper entry, time spent in outlet, potential growth, TM&D opportunities, credit risk, etc?
  12. What will those different approaches be?
  13. Do current key account agreements effect how we may classify/treat/service specific outlets?
  14. What is the timing required to finish the classification?
  15. What are the criteria for assigning call frequencies and resources (people, money, time) based on the classifications?
  16. What are the training needs arising out of outlet classification?

Arguments can be made against Outlet Classification. If you are in a market entry scenario, with limited resources, with established distribution channels, you may decide that Outlet Classification at this stage would be a drain on resources. But if you are a national player looking for country wide distribution, effective Outlet Classification as part of an overall Route to Market strategy could be the difference between winning and losing in that market.

This post is part of my blog series on the 20 Steps to Route to Market Excellence model. One of the main goals of this blog series is to demystify RtM strategy and to provide FMCG leaders with a step by step guide to follow when reviewing or building their RtM plans.

The overall 20 Steps are split into 4 phases, Assessment, Strategy, Design and Implementation. This post focuses on Step 6 ‘Outlet Classification’. This is the first step in the Design phase and would be undertaken after a full review of your current RtM (Assessment phase), and the development of your new RtM Strategy (Strategy phase). You can read about the steps under the previous phases here.

I hope you find this useful, and I welcome any views and comments below. Next week I will cover Step 7 ‘Channel Classification’. Please subscribe to the blog on this page, to ensure you don’t miss the latest updates on RtM excellence in execution and the 20 Steps model. If you would like to know more about the 20 Steps click here.

Tags: 20 Steps to RtM Excellence, RtM Strategy, Ross Marie, RTM, Retail, RTM Assessment Tool, Traditional Trade, Route to Market, FMCG, Brewing & Beverages, SKU, Promotions

Distributor Assessment Essentials to Deliver Sales Growth and Improve RtM Strategy

Posted by Ross Marie on Fri, Oct 12, 2018

Welcome to Step 3 of the 20 Steps to Route to Market Excellence. You can read more about the overall model and the steps I have already discussed here.

fmcg-distributotor-assessmentThe third step is ‘Distributor Assessment’. Whether you are looking to build a RtM strategy from scratch or review your existing sales and trade marketing execution, assessing the current and/or available methods of distribution is crucial. Distribution in FMCG is typically complex, with many layers, levels and combinations. There may also be local geographic nuances, and/or historical challenges to deal with. You may own and control every element of the distribution network, known as Direct Distribution. You might contract out the distribution to 3rd parties who then distribute on your behalf, also falling into the Direct Distribution category. You may sell to distributors who then distribute on to retailers themselves (or via other intermediary wholesalers or cash & carry’s), known as Indirect Distribution. You may have a mix of any of these methods which effects both the level of control, and the complexity involved.

No matter what is in place now, you must evaluate every step in the current method of distribution, from an independent point of view, and consider the possible alternative methods for getting your products to retail.

Here are just some examples of questions you can ask under Step 3 – Distributor Assessment:

  1. What is my current method of distribution?
  2. Is my distribution all ‘direct’ to my customers via my own owned or contracted distribution network?
  3. Is my distribution all ‘indirect’ to my customers through distributors that work either exclusively or non-exclusively for me? What are the layers of distributors, sub-distributors, wholesalers, cash & carry's, etc.?
  4. Is my distribution a mix of the above?
  5. Is this the way it has always been for us or did we change and if so why?
  6. Is my current point of sale coverage a function of my distribution model, or of my route to market strategy?
  7. What are the total number of distributors in my market?
  8. What is their coverage map? How many, if any, am I using? Why is this?
  9. How are my direct and indirect competitors servicing the marketplace? What is their distribution model? How do we feel is it performing for them? Is there anything we can learn from them?
  10. How regularly am I assessing the distribution network or the distributors?
  11. Do I have a distributor assessment tool to conduct the assessment? Feel free to gain inspiration from our Distributor Assessment Guide and Distributor Assessment Tool available for download.
  12. After conducting visits, and using my distributor assessment tool, what is the current performance of my distribution network and /or each one of my distributors?
  13. Where are the gaps in performance vs my ideal distribution network?
  14. What are the current levels of brand and SKU availability at the distributors retail level? What are the levels of out of stock?
  15. Is POS material available and visible at retail level? Are planograms being adhered to? What are the overall levels of display in retail?
  16. Is there an awareness of my brands at a retail level? Are trade engagement programs being run at retail level?
  17. What are the current service levels of my distributors? How does this compare to our contract and our KPIs?

Regardless of which method we choose to assess our distributors by, one fact will not change. We must get out into the field, see the distributor and retail environments first hand, and assess effectiveness of what is really happening, not what we believe is happening. Information, reports, and monitoring tools are essential in RtM execution, but nothing replaces actual field work.

I hope you find this helpful, and I appreciate your views and comments below. I will be continuing my series on the 20 Steps to Route to Market Excellence, with Step 4 Competitor Analysis in my next post.

Please subscribe to the blog, on this page, to ensure you don’t miss out on the latest updates on RtM excellence in execution. If you would like to know more about the 20 Steps to RtM Excellence, please visit our website here.

Tags: 20 Steps to RtM Excellence, RtM Strategy, Ross Marie, Retail, Logistics Service Provider, RTM Assessment Tool, Distribution, Performance Improvement, Traditional Trade, Route to Market, FMCG, SKU

Supply Chains - Whats do all those initialisms mean?

Posted by Dave Jordan on Wed, Jun 27, 2018

Like many business functions Supply Chains use multiple initials and/or acronyms to describe various tasks they manage on a daily basis. Those not familiar with SC-speak will often sit bemused in meetings as various initials are quoted and debated and then usually blamed for some tenuous lost sale claimed by Sales and Marketing. Here we take a look at just a small selection of those initials.

SC – Super Colleagues. Well, I may be biased but that is what you find is usually the case. Supply Chain people have to react to wildly varying demands and impossible timings but more often than not they succeed to get stock in the right place at the right time.

SOP - Secures Our Performance. If you do not follow an S&OP process and your business is doing well and is robust then a pat on the back is for you. If your business is struggling then you might consider the benefits of S&OP which can make all the difference.

SC Abbreviations resized 600

SAP - Spreadsheets Are Preferred. A common problem in many businesses and what is also common is the number of CEO’s who believe spreadsheets are not being used in their workplace! They probably are but what can you do about it?

IKA- Irritating, Keep Away. In Western Europe the big name Key Accounts may well be the future of retailing in the FMCG sector but in many other parts of the world the reality is quite the reverse. Traditional Trade is a very important part of many businesses yet most fail to pay sufficient attention to the continued development and growth of the TT channel.

SKU - Sales Keep Upping. Introducing new SKUs really should be a cross business decision taken within the context of S&OP and with sound financial analysis. Sadly, this does not happen very often as businesses rack up lengthy SKU lists where the tail items do not even pay for themselves in turnover and/or profit.

KPI - Keep People Interested. The old adage of “if you don’t measure it then you cannot improve it” is certainly true here. Be careful not to have too many KPI’s but make sure you have a small set which ensures everyone knows how they impact team performance and results. Reward against the relevant KPIs and your staff will target them keenly.

3PLP - 3 People Loading Products. Think long and had before outsourcing your logistics operations to a 3rd party. They may not be ready to take on your business seamlessly.  Prepare thoroughly and ensure you know exactly what you want from them and the relationship. A big step that is difficult to reverse so be very careful!

WMS - Where’s My Stock? Your 3PLP partner should be left to run their own business as that is what you pay them for. However, you need to be involved in the stock counting process or you will lose sales through out of stocks (OOS , there's another one) and experience costly year-end write offs.

4PLP - 4 People Loading Products ………..but perhaps slightly faster? If you have successfully used 3PLPs for some time you might wish to take a look at what a 4PLP can offer your business. This is not for everyone but can be very effective.

RTM - Retail Takes Money. Whether your focus is on IKA or TT how you manage your distribution network will be a key driver of your success in the market place. It is a fact that companies spending time and effort getting their TT distributor networks in good order are far more successful.

There are many, many more initials used in Supply Chain but this set will do for a kick off so TTFN!

Tags: SKU, FMCG, Route to Market, Dave Jordan, KPI, Traditional Trade, S&OP, Logistics Management, Distribution

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

A Practical Guide to FMCG SKU Complexity Reduction 

Posted by Dave Jordan on Tue, Mar 20, 2018

If your business is struggling to cope with day to day sales while managing innovation and range extensions then give your SKU list a thorough review. Not just a cursory glance but a scientific evaluation of what brings in the profit and what eats at the same. Few businesses are lucky to operate with just one or two monster SKUs but an excessive list of items on the price list can severely affect your customer service performance.

In the customer service link above we looked at the cost to have a single SKU on the books and it is not insignificant when you take all elements of supply into account. If SKUs do not pay for themselves and contribute to the bottom line then why do they exist? SKUs plodding along with low margin AND low sales turnover cannot be worth the cost and effort of maintaining them, can they? They are simply getting in the way of potentially more profitable SKUs.

If you could base your business on high margin/high turnover SKUs then of course you would. Life is not that simple and the market place is ever more competitive so you need to constantly review the wisdom of what you are putting in front of consumers. Unless your business is in dire straits a large proportion of your SKUs will be either low margin/high turnover or vice versa. Both situations can provide reasonably healthy growth but wouldn’t it be better if you could edge them towards the high/high green quartile as per the diagram below?SKU ComplexityThe first step is to make a very rough estimate of what your business spends on keeping an SKU on the price list. This is not an accurate science but you need to put a “stake in the ground” and agree a number, say 30,000Eur. If the margin of a particular SKU does not at least break-even then delisting should be considered. Staff who look after those SKUs in the yellow segments need to be challenged on a quarterly basis to get their SKUs away from the red and towards the green, or delist.

If you carry out such an assessment and find that a majority of your SKUs are in the red segment then you might benefit from a professional spring clean of your portfolio. Such an approach will remove any emotion and bias when clinically assessing what you should be placing on shelves.

Image courtesy of Enchange at Enchange.com.

 

Tags: SKU, FMCG, Dave Jordan, Performance Improvement, Pharma, Supply Chain Analytics

FMCG SKU Proliferation: You DON'T need lost sales in Q4

Posted by Dave Jordan on Mon, Nov 13, 2017
Extra SKUs sneak onto price lists when nobody is looking. Sales & Marketing colleagues prefer new launches with lengthy SKU lists different flavours, different sizes, different colours, new packaging etc. How many shelf facings do they want? How do these decisions get through S&OP meetings? (You do run an S&OP process, don't you?)

Do you know this SKU proliferation is likely to affect your customer service? Rather than delighting more and more customers you maybe disappointing them and wasting countless Euros at the same time. Introducing an SKU is a cross business decision, or should be! When considering new SKU introduction at your next Board or S&OP meeting then the supply chain people should ask some testing questions.

Cost per SKU. Have you ever sat down with your Management Accountant and calculated how much it costs to have an SKU on your price list? Sales staff will bemoan the rising listing fees but in reality the cost of an SKU is much, much more. Including, e.g.

  • An employee must spend time buying the different label, dyestuff, cap, box, etc.
  • The new raw material/packaging must be stored in a warehouse.
  • Someone must call it off at the factory.
  • The factory must schedule and make the SKU.
  • The finished product is stored in a warehouse.
  • Someone at the operating company must plan the SKU.
  • Transport into and ex-factory.
  • Transport to Distributor or Retailer etc, etc

All of these activities and many, many more ensure that the cost of having an SKU on the books is significant. In a very rough rule of thumb the cost of having any 1 SKU on the books of a medium-sized company is typically 30,000 Euros per annum.

Factory complexity. Time is money in factories as they try and make their assets sweat and get as much out of the gate as fast and cheaply as possible. Each colour or perfume change or label or pack size adjustment stops the production line and steals valuable time which you cannot recover.

Logistics. Each individual SKU requires a dedicated pallet or rack or bin location. The more SKUs you have the more money you are paying for space. When you have 16 variants of the same shampoo pack size you can understand why picking errors occur, lowering your customer service and causing lost sales.

Interim_Management_FMCG_Dave_Jordan_SKU_Complexity.jpgPlanning. At year-end low value SKUs really drag your business down as resources are applied to plan and deliver SKUs to market which may increase your volume number but not your profit line. Your scarce resource should be focussed on delivering those SKUs that make a real difference to profit rather than spending time on low value/slow moving SKUs which may actually have to be written off in the long term.

SKU rationalisation. Ok, so despite the above you are drowning under SKU complexity. Far too many organisations launch a new SKU and then fail to revisit the data assumptions on which it was first introduced. Firstly, if a new SKU is not even expected to deliver at least 30,000 Euros (or whatever your in-house figure may be) profit then DON'T LAUNCH IT! For all SKUs on your price list you should carry out an SKU Rationalisation exercise preferably quarterly but at least annually. SKUs that do not meet profit/margin/volume/GP criteria should be placed on watch. If they remain below your cut off points then it is time to propose a delisting.

The ideal time to carry out that rationalisation exercise is before you submit Annual Plan 2018 and certainly before the end of 2017. Your staff will be concentrating on the day to day operation so recruitment of an external resource to carry out the segmentation is advisable. The temporary recruit will be dispassionate and unbiased and will deliver a proposal which is right for the business and not just right for some. 

Of course, there will always be special cases like SKUs that constitute a range or a niche local jewel but as long as these are the exceptions then you have a chance of a fast flowing, efficient and reliable supply chain ready for 2018. 

Need more expert advise from readily available talent to address SKU Complexity? Please click here. 

Image courtesy of Supertrooper freedigitalphotos.net

Tags: Customer service, SKU, FMCG, Dave Jordan, S&OP, Interim Management, Sales

Supply Chains – A second look: What do all those initials really mean?

Posted by Dave Jordan on Wed, Feb 08, 2017

In common with many business functions Supply Chains adopt multiple initials and/or acronyms to describe various tasks and processes they manage on a daily basis. Those not familiar with SC-speak will often sit bemused as various initials are quoted and debated and then usually blamed for some tenuous lost sales claimed by Sales and Marketing.

Here I take a fresh look at just a small selection of those Supply Chain initials and acronyms.

SC – Super Colleagues. Well, I may be biased but that is what you usually find. Supply Chain people must react to wildly varying demands and impossible timings but more often than not they succeed to get stock to the right place at the right time.

SOP - Supports Outstanding Performance. If you do not follow an S&OP process and your business is doing well and is robust then a pat on the back is deserved. However, if your business is struggling then you might consider the benefits of S&OP which can make all the difference.

IBP – Irritating But Productive. Often considered to be a more mature version of S&OP, Integrated Business Planning can be similarly difficult to get started but when everything clicks, business benefits.

Supply_Chain_FMCG_Initials.jpgSAP - Spreadsheets Are Preferred. The use of spreadsheets is prevalent in many businesses and equally common is the number of CEO’s who believe spreadsheets are NOT being used in their workplace! They almost certainly are but what can you do about this?

IKA- Irritating, Keep Away. In mature Western European markets, big name International Key Accounts are firmly established but in many other parts of the world the reality is quite the reverse. Traditional Trade is a very important part of many developing businesses yet most fail to pay sufficient attention to the continued growth potential of the TT channel.

SKU - Sales Keep “Upping”. Introducing new SKUs really should be a cross business decision taken within the context of S&OP and with sound financial analysis. Sadly, this does not happen very often as businesses rack up lengthy SKU lists where the tail items do not even pay for themselves in turnover, margin or profit.

KPI - Keeping People Interested. The adage of “if you don’t measure then you cannot improve” is certainly true here. Take care to manage your KPI’s closely and frequently but make sure you have a set which ensures everyone knows how they impact collective team performance and results. Visibly reward against the relevant KPIs and your staff will keenly follow them.

ERP – Everyone Requires Products. The whole purpose of your Enterprise Resource Planning is to get your products to the right place at the right time and at optimum cost. Occasionally, priorities must be made between demanding customers and a good ERP will guide your decisions.

PLP -  People Loading Products. Think long and had before outsourcing your outbound logistics operations to a 3rd party as they may not be ready to take on your business, seamlessly.  Prepare thoroughly and ensure you know exactly what you want from them and the relationship. A big step that is difficult to reverse without pain so be careful!

WMS - Where’s My Stock? Your 3PLP partner should be left to run their own business as that is why you pay them. However, you need to be involved in the stock counting process or you will lose sales and experience costly year-end write offs.

4PLP - 4 People Loading Products. If you have successfully used 3PLPs for some time you might wish to take a look at what a 4PLP can offer to the business. This is certainly not for everyone but can be very cost effective.

RTM - Retail Takes Money. Whether your focus is on IKA or TT how you manage your distribution network will be a key driver of your success in the market place. It is a fact that companies spending time and effort getting their developing market TT distributor networks in good order are more successful.

FIFO – Find It, Fuss Over. When you (or your 3PLP) operate a tight warehousing operation you will know where your stock sits, how old it is and what needs to move out to avoid write off costs and the inevitable poor customer service.

OTIF - Often The Invoice Fails. If you fail to deliver orders on time and in full you invite the customer to challenge the invoice and delay payment until you have made financial adjustments.

There are many, many more examples of SC-speak but this set will do for a KO so TTFN!

Image courtesy of boulemonademoon at freedigitalphotos.net

 

Tags: SKU, FMCG, Route to Market, Dave Jordan, KPI, Traditional Trade, S&OP, Logistics Management, Distribution, Inventory Management & Stock Control