Supply Chain Blog

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

FMCG S&OP: Who is the stooge in your process?

Posted by Dave Jordan on Mon, Jul 02, 2018

Laurel and Hardy, Morecambe and Wise, Abbott and Costello, Little and Large, Hale and Pace, May and Johnson. These are examples of double acts where one party plays the straight/stooge and apparently serious man while the other plays the fool/jester. I admit I am not too sure who is who in the last example.

Having suffered 2 weeks of UK television recently it was difficult not to see the latest popular double act of Ant and Dec popping up at frequent intervals (mostly Dec in the medium term though!). My jury is out on these two as they appear to be part of a UK TV talent vacuum glibly presided over by a man who looks like a dark-haired Max Headroom – youngsters, Google it. I always thought Simon Cowell was that nice bloke who rescues badgers from drains in Surrey but there are 2 of them!

S&OP Success Through TeamworkAnyway, the point is that these performers work through their contrast in styles and the way each party plays off the other to score points and generate laughs. For some reason the first name in the act title is usually the funny or less serious partner who generates the gags and generally puts down the straight partner. This notation is also consistent with Sales & Operational Planning with OP being the collective remainder of your FMCG, Brewing or Pharma business.

Why do so few Sales people – at any level of seniority – get S&OP? In fact do any Sales people really get S&OP and recognise the process as one for common good in a company? If only there was a way of replacing sales bonuses with cross-discipline, volume/value bonuses. While the straight man of the team endeavours to supply on time in full against the forecast the joker waits until the last few days of the month to sell anything including his granny to make the required number and secure a bonus. And thus, the monthly cycle repeats again, and again, and again.

If you pump too much unwanted inventory (done pretend its sales) into the market sooner or later you will need to destock your distributors and/or International Key Accounts (IKA). Distributors have always been ripe for a bit of extra loading here and there to manipulate the sales figures but do not fool yourself this does not happen with IKA. It does and with the modern power of IKA accounts you might find yourself with a very unwelcome stock return and a difficult to refuse request for compensation and refund.

Frequently, when things go wrong in the market place the Sales people will chirp up with something like “that’s another nice mess you’ve gotten me into” as a prelude to their Teflon blame-storming. S&OP requires a team effort to succeed as a process which will lead to better performance in the market place. No planning or forecasting process is ever perfect but a little more diligence and team playing from the funny man would bring immediate and lasting results.

 

Tags: Dave Jordan, Humour, Supply Chain, CEE, S&OP, Forecasting & Demand Planning, Sales, FMCG

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

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

Posted by Dave Jordan on Mon, Jun 25, 2018

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

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

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

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

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

Integrate NPD with S&OP

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

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

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

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

 

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

FMCG Supply Chain: KPI Scorecards - Don’t look back in anger

Posted by Dave Jordan on Wed, May 30, 2018

UK has been my base for a few days and even in that short time I have started to genuinely think I must now be a different nationality if not from a different planet. When my denim jeans rip at the knees it is time to throw them out.  I do not have a badly drawn and inappropriately placed tattoo. Nothing on me is pierced or decorated with metal, precious or otherwise.

I do not have a preference for Ant or Dec – the “best” UK double act in a sea of tepid TV reality dross? What is Keith Lemon all about? So many TV channels yet so little talent and even less TV shows worth watching. I put litter in waste bins. I still know how to queue. Even my waistline is now considered trim. I own music recordings where the performers wrote the lyrics and play the instruments and don’t get me started on that things like the Kardashians. 

Nevertheless, there is something consistent. Something that has not noticeably changed since I packed my company leaving gift suitcases in 1991 and departed for the Saudi desert. Traffic Wardens.

FMCG_KPI_SCORECARD_SUPPLY_CHAIN.jpgBeing a Traffic Warden is a universally hated career choice and possibly third on the detest list after Tax Inspectors and Bankers these days with Politicians being universally disliked, of course. In the UK wardens patrol the streets looking for vehicles illegally parked even for a short time or even if the front bumper/fender overlaps the authoritative  yellow lines by a few mm.

Why do they exist; the role that is, not the people? What good are they doing for the general public and the fuel duty/road tax cash-cow motorist? Are they here to keep the Queen’s highways, byways and pavements clear of transportation obstacles to allow free flow of vehicles, people and prams? Or, are they here to generate as much revenue as possible for councils and police authorities?

Is their role to gently correct errors, show understanding and guide people on their future behaviour or are they here to discipline, penalise, visually allocate blame with a sticky yellow ticket and generally strike fear and hate into drivers? Should people hide and shy away from traffic wardens and treat them with mistrust or should they be seen as a welcome, integral part of day to day UK living.

Friend or foe? Beauty or beast? Pariah or paragon? 

So what does your Supply Chain team think about your monthly KPI Scorecard discussions within your IBP/S&OP process? Is it a meeting all about blame and backwards looking fault finding and discipline? Or is it what it should be, an open discussion about what needs to be done better by everyone in the current and coming periods?

You certainly must learn the lessons of past shortcomings but applying the learnings to the future is a far more positive and healthy experience for everyone. Supply Chain Analytics can assist you in reaching a much more mature approach to running your business effectively and without people being at each others throats.

Applying a “…don’t look back in anger” approach will lead you and the business to a much more profitable oasis within the market place.

Image courtesy of iosphere at freedigitalphotos.net

 

Tags: FMCG, Performance Improvement, KPI, S&OP, IBP, Dave Jordan, Supply Chain Analytics

Balanced Scorecard KPIs: Keeping Track of Business Performance 

Posted by Dave Jordan on Thu, Mar 29, 2018

How do you keep track of Supply Chain performance within your FMCG, Brewing or Pharmaceutical business? You do, don’t you? If you are not measuring any KPIs then perhaps you should stop here, read this KPI piece and then pop back and carry on.

You can measure and report in many formats as long as you measure appropriate KPIs for your business. One of the most pointless tasks is calculating and reporting a “KPI” which is in fact worthless and of no beneficial interest. Colleagues in Sales & Marketing usually assume they are immune from KPIs as they gleefully sit back and let the Supply Chain guy take the flak at Board meetings. In reality however, the actions of everyone in the company must be reflected in one or more KPIs. If there is anyone in your business who is not impacting a KPI in some way then perhaps you might consider a round of head-count reduction!

The following is a demonstration example of a Balanced Scorecard of business KPIs. While many are indeed Supply Chain related you need only look at Sales Forecast Accuracy to see how other departments can influence that measurement to a far greater extent. KPIs are designed (usually 2 or 3 per discipline) and presented within the company Scorecard.  Target performance threshold levels are agreed (RAG – Red, Amber, Green) and presented monthly within the S&OP process to measure success and target further improvement.

Supply Chain KPIs

There will undoubtedly be more PIs calculated around the business but those in the scorecard really must be the priorities; those that provide actionable information.

The use of simple colour notation allows business managers to see exactly where problems exist allowing them to focus resources. Conversely, you quickly see what is going well and where you might have to raise the bar to maintain and improve further.  (If you are measuring your KPIs at the same level as 5 years ago then that may reflect a business which is stagnating.)

Whatever design you use it does not really matter but:

1. You must measure KPIs relevant to your overall business strategy and performance.

2. You must report them promptly and widely.

3. They must be discussed at the top table, routinely.

4. You must review and delete/insert new KPIs as the business need develops.

5. You must ensure the targets are stretching but achievable as a constant red display is demotivating.

While KPI stands for Key Performance Indicator it could easily be considered as Keep People Interested!

Image courtesy of Enchange.

 

Tags: FMCG, Dave Jordan, Performance Improvement, Pharma, KPI, S&OP, Brewing & Beverages, Supply Chain

FMCG Supply Chain dates to remember: Advanced Planning

Posted by Dave Jordan on Wed, Jan 31, 2018

February is here but blink and you will miss it as it is not a leap year. You cannot change January performance and February should be quite firm by now, so you need to be looking further ahead in your S&OP. Much further ahead.

What is coming soon in the wonderful world of FMCG and others?

Valentine’s Day 14th February. Yes, I know it is cheesy, but it is a prime time for chocolates and greetings cards and if your stock is not in place already, don’t bother. I can still see discounted Christmas chocolate on the shelves and I am sure the same will be true after the big red heart day.

Spring. An important period particularly in eastern Europe where a thorough house cleaning is the order of the day. Surfaces and fabrics are thoroughly cleaned and presents an opportunity for homecare producers to get an early boost in sales.

Easter April 1st. A huge confectionery event and fairy early in the year so you get to nibble nice, crisp chocolate rather than warmish stuff – ugh! Take care though because as mentioned above, you will probably be discounting your stock for several weeks after the event. Perfect for chocolate lovers but not great for retailers, your profit or core SKU brand planning.

Orthodox Easter 8th April. Usually a more religious and less chocolatey event but increasingly becoming like the earlier Easter. The dates are very close to each other this year, so this should not cause any significant planning and distribution challenges for global and regional producers. If you are slick enough you could transfer any obvious excess from the April 1st event into Orthodox markets, labelling permitted of course.

Eid al-Fitr. Mid-June. The holiday marking the end of the fasting month of Ramadan. A huge, huge surge in the demand for food and drink across several work-free days. If food and drink producers in Middle East and North Africa get their planning wrong during Ramadan and the following Eid, then the annual results are immediately in danger.

FMCG_PLANNING_ADVANCED_S&OP_DAVE_JORDAN.jpgSummer. While some events are fixed and in the diary years in advance, the appearance of the sun in the northern hemisphere remains unpredictable. This is an annual nightmare for drinks and ice cream producers as despite all the algorithms and predictive tools demand is difficult to guage, in Europe at least. In the hotter months the key aim must be for your key SKUs to be available 100% of the time. This may lead to future write-offs but if the sun pops out and your products don’t…….. 

Eid al-Adha late August. Another Islamic celebration which is perhaps not as grand as Ramadan Eid but as it is in August this year you can be sure chilled liquids will be in high demand. Unike in Europe, the sun is not shy in shining brightly in the ME and NA regions.

Back to school September. Paper, pens, pencils and Peppa Pig lunch boxes will fly off the shelves in preparation for the new school year. Look at the major retailers and you will see a very wide choice and surely not everything is sold. In fact, I remember seeing a huge stock of Bob the Builder merchandise on sale in rural markets in Uganda one Christmas. You have to get rid of it somewhere!

Thanksgiving 22nd November. A mainly North American food fest but with similar celebrations in Netherlands, surprisingly. Large family feasts and open-house entertaining ensure a peak for foods and drink manufacturers.

Christmas. Not much to say here except sales of everything in FMCG-land and many others reach a crescendo of demand as December progresses.

There are many other important peak seasons which may be global, continent-wide, regional or very local but all of them must be considered in your forward planning. If you don’t get it right someone else will push their products in front of consumer's faces.

If you want to be successful, then all these events and more should already be in your 2019 planning process. No typo there, yes 2019! Rather like driving a car on a long motorway, the further you are able to look ahead the easier it is to deal with unexpected hazards.

Image courtesy of Supertrooper at freedigitalphotos.net

Tags: FMCG, Forecasting & Demand Planning, Integrated Business Planning, S&OP, Dave Jordan

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, Sales, Forecasting & Demand Planning, Inventory Management & Stock Control, S&OP, Dave Jordan

FMCG Supply Chain: What is your 2018 Planning Priority?

Posted by Dave Jordan on Wed, Jan 17, 2018

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

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

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

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

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

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

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

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

Image courtesy of recyclethis.co.uk

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

Your FMCG Supply Chain in 2018: 5 Problematic Predictions

Posted by Dave Jordan on Wed, Jan 10, 2018

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

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

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

SKU Complexity

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

Inventory

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

Spring/Easter/Ramadan Campaigns

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

Sales Peaking

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

S&OP

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

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

A happy new year to you and your supply chain!

Image courtesy of Aimee Jordan at AimeeJordan.co.uk

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