SUPPLY CHAIN STANDARD OCTOBER 2008
www.supplychainstandard.com
FMCG
Shelf assessment
If you’re in FMCG manufacturing, then I’m sure you have experienced the problems
that occur all too often in fulfilling ‘special promotion’ campaigns. Poor
communication of shelf-level sales performance data and fuzzy visibility of shopper
insights are the norm, and that leads to failings in execution and availability. But
getting special promotion activity right is becoming increasingly important as
consumers’ purse strings tighten. Under aggressive trading conditions the
performance of the brand is now heavily dependent on special promotions.
According to findings of a recent Aberdeen Group report on Responsive Trade
Promotion Management, ‘best in class’ respondents (top 20 per cent) achieved an
average forecast accuracy of 75 per cent, an annual trade overspend of eight per
cent and an average gross margin uplift of 17 per cent.
Collaborative planning plays a big part in achieving success, as demonstrated
by 43 per cent of best in class companies. 35 per cent of best in class companies
also manage trade promotion funds at the sku/unit and store level, with 33 per
cent using performance management criteria for capturing effectiveness in trade
promotion execution.
The problem seems to be that most companies are lacking the necessary
collaborative tools and systems that would enable them to get the sort of visibility
of trade marketing data and shopper behaviour required. Too many are using
assumption-based forecasts and just repeating old practices. Linking forecast
accuracy, promotion costs at the unit level and gross margin uplift would enable a
far better understanding of the financial performance of the promotion.
The trick is to get working with the retailer on delivering data on a granular
level and to ensure that the right metrics are in place to measure trade
promotion cost effectiveness.
Some solid groundwork on closer collaboration may well pay dividends and,
perhaps, take the headache out of special promotion activity.
AGILITY
Risk awareness
Managing a supply chain is a risky business and the longer the supply chain the
riskier it gets. According to a new report from analysts Aberdeen Group entitled
‘Supply Chain Risk Management – building a resilient global supply chain’, over
the past year, 58 per cent of companies have suffered financial losses as a result
of supply chain disruptions.
Some of the key areas of concern are logistics congestion and capacity, risk
profile of suppliers, fuel prices and the risk profile of a country. A very high
percentage of companies (99 per cent) in the study group reported supply chain
disruption in the last twelve months, but not all companies suffer to the same
extent and it really comes down to how a company prepares and responds to
disruption – being pro-active, rather than reactive is essential.
Agility in responding to a disruption to supply can only be achieved if the
right processes are already in place. A company that can quickly identify when a
problem occurs and has planned for an appropriate response is more likely to
limit the damage caused by the disruption.
So, working closely with supply chain partners could be the difference
between success and financial disaster.
CORRECTION
Volvo currently has ten local delivery centres (LDCs) in the UK and not as
reported in Supply Chain Standard, September 2008, page 62. There are five in the
South operated by DHL and five in the North operated by CAT Logistics.
Inventory levels at the dealerships are actually lower than pre-LDC as they
now carry a minimum stock of around 250 lines compared to pre-LDC levels of
5,000-7,000 lines.
SUSTAINABILITY
Running circles around
environmental savings
As just about everyone has come to realise, sustainability is a big issue and one
that has got the corporate world falling over itself to issue environmental policies
and green initiatives that outshine the rest. Of course, this is most commendable.
But just how well are these companies doing against their set goals?
According to the 2007 UPS Corporate Sustainability Report published in
August this year, the company’s total energy consumption increased by 1.3 per
cent in 2007. Now with a growing business centred round transport this may be
hardly surprising. However, it transpires that energy consumption per package
also increased by 1.2 per cent. So what’s happening here?
The report cites the reason for this rise in energy consumption per package as
‘transit-time improvements and increased residential deliveries’. And it seems the
operational measures they are using to reduce energy range from the latest
technical innovations to rerouteing to avoid left turns. Well, having a predilection
for right turns is certainly running rings around my understanding of why energy
consumption per package increased in 2007.
Apparently, using package flow technology nearly 30 million miles were
shaved off delivery routes in the United States – saving three million gallons of
fuel and reducing carbon dioxide emissions by 32,000 tonnes. Taking all this into
consideration, along with the fact that UPS has the largest ‘green fleet’in the
entire transport industry, surely these energy savings should be reflected in the
consumption per package shipped?
I suspect that the problem lies with customer demand for faster deliveries and
the rise of internet-based retail sales feeding through to more home deliveries. So,
whereas UPS may be moving towards a greener future, consumer demand is
working in the opposite direction.
SCS/IBM SEMINAR
Is green the new gold?
Supply Chain Standard, in association with IBM, has organised an exclusive
event for a specially invited audience of senior supply chain professionals in
London’s Mayfair on 16th October between 4pm and 7pm. On the night, two
key themes affecting supply chains across the world will be discussed: ‘Is Green
the new Gold?’ and ‘Supply Chain Visibility: Evolution to Revolution?’
‘Sustainability’ and ‘Green’ have been the buzzwords of 2008, but what in
reality do they mean for supply chains? They may sound like a threat to
productivity, but increasingly they are being viewed as a timely
opportunity. Leaders are already reaping bottom line benefits from
adopting sustainable practices – but how are they achieving this, and what
does this tell us about how different supply chains will look like in the
future? The second issue of the night is visibility, a major driver towards
improved customer service and cost reduction.
Spaces for this exclusive roundtable event are limited, but if you are interested in
joining the debate please contact Johanna Parsons on +44 (0) 20 7970 4139 or
email johanna.parsons@centaur.co.uk.
SCS:NEWS ANALYSIS 05
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