FMCG

Over the past few years the Fast Moving Consumer Goods (FMCG) sector has experienced the lowest growth and margins since the early 1980’s, driven by the global recession, allied with sharply rising input prices. The result has been historically low shareholder returns.

The reaction in many organisations has been a focus on cost control. This has been necessary, but it is important to ensure long term strength based on competitive advantage in a more buoyant economy. Crimson & Co has helped a number of FMCG companies to be more competitive in fast changing market conditions. We have identified some particular areas to focus on, as follows:

  1. Strong processes and people capabilities are essential for an organisation to be able to adapt quickly to a changing business environment and competitor activity. Our scprime® toolkit has been the basis of helping companies build in robustness, clarity and sustainable excellence.

  2. S&OP and New Product Development are cross-functional processes critical to success, driving co-ordinated planning and first-to-market advantage. Most FMCGs operate across multiple markets, making these processes world-class is particularly challenging. We can re-design, and re-invigorate these areas to drive real competitive advantage.

  3. Complexity is growing, driven by consumer demands and competitive pressure. In many cases the supply chain has been designed around lower levels of product variety and simpler channels to market. We can help drive competitive advantage by managing complexity effectively, achieving high service levels whilst controlling costs.

Selected FMCG Assignments

Global standardised KPIs and performance review cycle

The client – a global tea company – had grown through acquisitions and the operations structure had developed in each market to serve that local market. The global operations director lacked visibility of performance at global consolidated level, regional level and site level. This complexity was enhanced by different metrics in place in each site and region. Crimson & Co was engaged to lead the development of a standardised set of KPIs with supporting control and review mechanisms.

Results

  • Standard definitions for KPIs globally
  • Data capture and dashboards within same system
  • Performance data available at global, regional and site level
  • Ability to view trends and compare between sites/regions
  • Dashboard used as part of Global Ops review to drive improvement

Global supply visibility and regional S&OP

Our client, a global tea & coffee company, had recently separated its commercial businesses from operations to provide the focus required to deliver an aggressive growth strategy. The Global Operations team lacked visibility of supply plans, constraints and cost reduction opportunities. Supply planning was decentralised with each market managing its needs directly with factories across the world. Crimson & Co supported the definition, design and implementation of the new global operating model required for the new organization to deliver the business objectives.

Results

  • Supply planning hubs represent the single point of contact for the end markets
  • Regional S&OP process ensures alignment between ops and commercial plans
  • Year-end financial projections include all quantified constraints, risks and opportunities
  • Standard metrics reported and reviewed globally for operations
  • Project payback achieved within 6 months by adopting a new inventory model

Distribution network inventory optimisation

The West Africa region of this global FMCG, comprised of five business units, delivered over 40% of the global group profit with track record of 50% annual growth. A significant release in working capital was required to fund future growth plans and customer service levels were insufficient to maintain market share in this highly competitive developing market. A new distribution model was implemented as part of an overall S&OP process to release working capital and improve customer service.

Results

  • 20% reduction in working capital
  • Customer service increased by 9%
  • Record sales achieved in following months after completion
  • Full inventory visibility from daily coverage to fiscal projections
  • New collaborative approach to business planning in place

Supply chain excellence

Global tobacco company player with operations in over 80 countries worldwide. Had used benchmarking & operations improvement techniques for many years to drive standardisation. Wanted a more bespoke benchmarking and improvement methodology to ensure a close fit with their strategy and business model. Crimson & Co was engaged to provide the required solution, based on the Supply Chain Excellence toolkit.

Results

  • A new solution tailored to client’s priorities
  • Self scoring approach to global standards
  • Visible maturity levels enables knowledge sharing and continuous improvement
  • Scorecards annually updated with latest best practice
  • Programme rolled out globally

S&OP – Implementation

This global FMCG client needed a more integrated approach to business planning in a competitive market whilst releasing working capital. An assessment was made of the current process versus FMCG benchmarks to recommend the new approach. Project work streams were established around the S&OP steps, supported by structured and detailed education events.

Results

  • 28% revenue increase
  • Customer service level raised to 98%
  • 23% reduction in working capital
  • NPD launch success up 400%
  • Integrated approach embedded

Planning & control – Blueprint

This European cosmetics company planning processes were undefined and poorly supported by the new IT systems. Inconsistent planning practices applied between sites. High levels of excess stock and annual stock obsolescence of $80m. Stock levels unpredictable across European sites. Crimson & Co was engaged to define supply chain planning processes for EMEA business, from new product development through to deployment and inventory management.

Results

  • Blueprint for effective planning processes and systems
  • Key drivers of service & inventory identified
  • KPIs that reflect the true drivers of inventory & service
  • Reduced levels of excess stock
  • Global roll out of Blueprint design

Planning & control – Materials management

The client had significant raw material supply problems into the Polish factory which was producing 500m units pa. Material availability and “on time in full” (OTIF) supplier delivery KPI not consistently measured but believed to be around 85% and 45% respectively. Crimson & Co was engaged to design, setup and manage a project to improve materials availability.

Results

  • Improved material availability from c85% to >99%
  • Internal lead-times now aligned to supply method
  • Improved understanding of inventory drivers
  • Improved OTIF & lead-time reduction improved margin by $1.3m
  • Inventory reduction of $4.6m

Procurement – Plastics sourcing

A leading European cosmetics company was unable to achieve plastic component savings identified through a previous e-auction exercise. KPIs were difficult to extract from systems so rarely used to drive improvements. In addition to this, procurement strategies were fragmented and out of date, and not shared outside the purchasing function.

Results

  • Delivered $2.5m savings
  • Clarified why original savings could not be realised
  • Made KPIs simple to communicate to suppliers
  • New category strategies which can be shared outside function
  • Updated spend analysis and approaches to strategic saving

Manufacturing – Plant layout

A leading alcoholic drinks company needed to increase their capability to supply and unload from new production lines to match the maximum output rates of the new production lines. Existing storage capacity would have been exceeded in the following year if the levels of frozen / obsolete and excess stock were not addressed. Crimson & Co developed a five year logistics strategy to improve material flow with a supporting business case and implementation plan.

Results

  • Cash release of £10.8m
  • Reduction of annual inventory financing of £295k pa
  • Transport costs reduced by £2m
  • Storage space reduction of 8,100 pallet spaces
  • 50% increase in throughput capability of logistics infrastructure

Manufacturing – Operations improvement

At this leading FMCG, capacity required was more than double the designed capacity and forecast to increase from 500m to 750m units pa. High capacity lines were choking the factory due to logistics infrastructure. There were also high levels of complexity; 21k SKUs, 90% of products on promotion, 13% new SKUs per campaign. Service levels to its 34 markets had declined. Crimson & Co was engaged to develop and implement operational improvement initiatives.

Results

  • Plant turnaround completed in 12 months
  • Site capacity increased by 20% whilst operating costs reduced by 14%
  • Service from the plant raised from 97.2% to 99.5%
  • More agile planning and production environment
  • Supply chain improvements rolled out to German and Russian plants

Distribution network strategy

A Russian cosmetics company had an existing network of two hubs and seven local distribution centres. Two supply chains: Far East produced goods coming west and goods produced from Western factories moving east. The network had limited capacity and used extensive external warehousing. Rapidly developing market with 100% projected sales growth over five years. Shift towards local manufacture. Crimson & Co was engaged to provide clear strategic direction to increase capacity either through investment in new facilities or third party partnerships.

Results

  • Client invested $35m in recommended solution
  • Identified operational savings of approx $2m
  • Reduced the logistics cost per packer by 40%
  • Enabled service level improvement from 93% to 98%, 50% increase in throughput capability of logistics infrastructure
  • Minimal operational and investment risk

Related Articles