“The Year of the Monkey hasn’t started well Rob”.
Michael, the Supply Chain Manager, was certainly looking a bit stressed.
Sales were down, which was increasing their cost per case through the Supply Chain and supplier performance issues were causing inventory availability problems.
Indeed the year of the Monkey was not looking great for Michael.
But there are always solutions!
We then spent an hour going through some of his major issues and working out some potential solutions.
Some were longer term process changes but there were others that certainly fitted the ‘quick wins’ label and would help him in the short term.
I thought I might share with you some of the measures I discussed with Michael, just in case the Monkey is on YOUR back.
These aren’t unique to Michael’s business. Few issues are really that unique…..
Overall Inventory availability was a major issue and had been since the company grew rapidly over the last few years. Now the business was owned by Private Equity, the focus was coming down hard on this issue.
There were a few problems. No clear ABC classifications of the fast and slow movers, and lots of obsolete stock clogging up the warehouses.
Longer term, Michael is cleaning up the product master files and via cyclical inventory counting improving the Inventory Record accuracy. As always, getting rid of obsolete stock is a challenge and he’s focussed on selling this through a couple of specific high volume customers at a discount.
Shorter term, we’re helping Michael set up some simple reporting tools so that he can get a better handle on the core inventory issues. And more importantly be able to report the ‘facts’ to the Senior Management Team to justify his recommended actions.
He’s also hiring for a new S&OP position to start formalising what is currently a rather ad hoc and ineffective process.
One of Michael’s big headaches was the shrinking of customer order sizes. You know the issue, right?
They were ordering more frequently, but in smaller quantities. The end result? Much higher cost per case and cost as a percentage of sales.
Thankfully this one can often be easily fixed.
We did a quick whiteboard calculation of his cost to serve from a warehousing and distribution perspective. As I suspected a small increase in minimum order size, encouraged by quantity discounts, would yield some good cost reductions. We sketched out an easy process for one of his analysts to firm up the size of the opportunity, for Michael to then discuss with the Sales Director.
Of course the fact that they had a very loose customer service policy, that was poorly managed, didn’t help the issue. But that’s something he’s working on longer term.
The third ‘quick win’ for Michael was in his freight arrangements. It was down to the ‘rates’ he was paying, which is a common area that is poorly understood by freight company customers.
And No, it wasn’t that the rate was too high. That’s a diminishing area of opportunity frankly. The freight industry is running on fairly competitive rates these days.
No, the real problem was the structure of the rates. Thankfully one of my freight ‘gurus’ John Cole was able to help out there. John quickly identified some technical issues in the rates around cubic conversion and the actual freight services being purchased v the freight services required; in terms of service speed. An easy quick win for Michael there, whilst he gets to work on the longer term issues.
Of course these might not be issues in your organisation, but I’d bet there are some that are causing you headaches, that you’d like to start resolving?
You’ll find plenty of handy tips on this blog. Just look under the various categories on the right. And if you can’t find what you are looking for, shoot me an email and I’ll see what I can find for you. (Or just comment below and I’ll answer as soon as I can)
I hope the Monkey is good to you and that you have a great 2016 for your Supply Chain. And personally of course!
Email or +61 417 417 307