Post Date : May 22, 2021
(Disclaimer: This article was originally published in the May issue of Logistics Insider magazine. All views expressed in this article are of the author’s own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated.)
Recently I was watching “Why some people cannot gain weight?” on Discovery. After investing 1 hour of undivided attention (and unconsciously munching on tortilla chips), I was enlightened with the findings that a. higher BMR and b. body’s natural aversion to over-eating helps the some people stay lean effortlessly. For all others like me, to become lean it would necessarily take strict control on calorie intake and regimental exercising.
Having spent some thoughtful moments in my balcony, I could view our sleepy newspaper vendor and the obese milkman running naturally lean businesses, whereas the neighbourhood grocer fell in the ‘need to work-out’ business category.
In the first part of this Two-part article series, From the Market to under the Carpet, we witnessed the arrival of baby SLOB and how it was well-fed by the ‘caring’ stakeholders. Inadvertently though, in many companies, the proliferating SLOB is swept under the carpet (warehouse).
Warehouses are not a carpet under which Mr. SLOB should be allowed to hide.
Your warehouse could be the magical Flying Carpet, playing the role of lean, agile mini-factories that process sales orders with ever higher degree of customization and speed. And in this part, we will also discuss how the warehouse becomes a Flying magic Carpet.
Assuming that you are in a business that does not stay naturally lean, you would need to exercise some business strategies and tactics. Also, as you need a carpet (symbolic) to do the exercise on…some of these business fitness exercises may be carried out on our flying carpet (the lean warehouse)!
Let us start with first recording what all items, company manufactured or procured from 3rd party, are occupying depot space for a long time. These items should also be marked with their age (time in depot). This report should be shared wider with planners, sales and customer marketing teams to analyse and decipher the cause of such unproductive accumulation. Sufficient past data, analytical tools and AI in current times will be able to pre-empt and allay risks of SLOB.
History will keep repeating until the lesson is learned…we must learn fast and nurture the future.
Visit to depots should be part of the market-visit plan for the CEO and Sales head. In addition to discussing other hero KPIs, an attentive walk around the depot would reveal what is under the carpet. Furthermore, visits from the sales, finance, HR, marketing colleagues will help drive greater appreciation of the work and opportunities our warehouses hold.
Here are few short and mid-term actions that Supply Chain managers may prioritize:
- Transfer Slow movers to another depot, where they have a higher possibility to reach consumption point (Off-take from retail is key!). SC manager must ensure that sufficient balance life is there and that there is a formal (enthusiastic) approval from the receiving depot ASM. Otherwise, it would tantamount to just changing the address for the said stock. Let’s not put good money behind bad money.
- R&D team to review the recipe and packaging design with the focused objective of increasing the product’s shelf life (especially, required for the slow-moving SKUs). This will provide stocks with a longer time window to off-take from the retail shelf.
- POSM, trade promotion freebies may be routed through expert third-party merchandisers who may be given end-to-end responsibility from procurement to deployment at POS (point of sale).
- Slow-movers contribute significantly to the safety stock across the value chain— these are the lines where SC managers risk losing service levels most. General guidance to the SC team is to ensure the availability of all SKUs for every customer. We need to carefully review cost-to-serve and ask ourselves:
Is it ok to have a lower service level for the C, D level items? Is it OK to hold SC and sales accountable to FC number only? (Strategic Inventory deployment would be a topic for another article. Please watch out this space in future editions of Logistics Insider.)
- Align performance metrics. See my article “Bizarre war mars 5star” in Logistics Insider March ’21 edition.
- If your company has a “no questions asked” return policy, it is advisable to bundle it with distributor-wise target investment levels in slow and non-moving stock. Sales managers may ensure that distributor does not hold beyond the threshold quantity (read Rupees) of the B, C and D category SKUs.
- Encourage owner’s mindset across teams. We may learn from our home Kitchen…nothing goes to waste. The homemaker is the finance, operations, marketing, R&D manager all-in-one person. In her mind, she conducts multiple S&OP meetings on an ad hoc basis and unanimous decisions are made with alacrity and put to execution even faster.
(For some interesting S&OP bits, please read “Tailor-made Serendipity” on my LinkedIn handle)
- To make reasonable profits, the stock market trader must Square-off positions…cut losses, sell at a discount. Cutting losses is an important part of making profits. Organized fashion Retailers (Modern trade and e-com retailers) do this very well. I urge you to define a markdown calendar in advance. Do not give in to the false hope/ego of carrying a seasonal inventory of this season till the next season.
- Old (but useable) stock may be given to NGO’s or other needy organizations. This may be aligned with other CSR initiatives of your company.
NPI (New Product Introduction)/Promotion plan
Meetings are necessarily filled with optimism and the go-getter’s high-octane energy. There is nothing wrong about it. In addition, we must encourage a short ‘HYC: Have you considered’ session to discuss facets that could have been inadvertently missed. Here are some ideas to include in your NPI discussions:
- Cull old slow-mover or dead sku’s in equal numbers when introducing new SKUs
- NPIs should have definite investment and growth plans. During early design phase, the success measures may be defined and agreed cross-functionally. Following actions would be key enablers:
- Put the NPI project charter on the carpet
- Cut the emotions and ego in S&OP review of recent NPI/promotion launches
- Allow accepting mistakes, and a moving-on culture
- Fail fast, learn fast and move fast
- In promotion/ NPI design stage itself, ring-fence the desired output. Consider the needs and expectations from the last mile person (depot-staff and salesperson in market).
- Communicate. Collect feedback (and act on the same) for the previous NPIs. This will surely induce accountability and enthusiasm across the value chain.
The Flying Carpet
Next, we discuss the commendable work of the warehouses in helping our sales teams win in the market. We will glimpse how warehouses can process & control Mr. SLOB, and some exigent situations where the depot plays a saviour hero.
Our depots ought to be lean machines, akin to manufacturing plants. Market returned stocks processing requires a warehouse set-up very different from the default productive arrangement for sales (onward movement). If done with the same resources, processing market returns reduces the regular operations speed. It is more time consuming as the same resources (people and space) are distracted to do broken carton handling and refurbishing. Walmart appreciates this need and has a separate warehouse chain for handling returns.
Depot carpet is no ordinary carpet. It is the flying carpet. There is a packet of unbridled opportunities. You would be curious to know what are these. Here, I enumerate a select few:
- Refurbish old/ market-return stock in new packaging. This infuses the inherent ‘sale-ability’ back into such stock.
- Postponement: MT, e-com retailers, cinema multiplexes, airline customers et al demand customized versions of the regular packs. Due to minimum batch-size requirement factories are not able to support many a customization request. When depots are able to customize a pack closer to sales event, it brings an indomitable capability to the value chain.
Assortment packs (Kitting/ bundling), MT Shelf-ready packs may be assembled by the depot on short-notice for a small quantity in a select market for a ‘surgical strike’ on competition.
Without adding any customized pack inventory (thus risk of ageing) labelling/stickering at depot adds wings to sales reach and customer delight.
- Warehouse as a Quality Champion: Our depots have met the safety and Quality standards for many years. Trained managers from the depot may be given the responsibility of Quality process deployment and monitoring at distributor level. This will help ensure good stock keeping and delivering factory gate quality till retail points.
- Demand sensing depots: our warehouses are nerve endings of the value chain. Depots can feed back to us with real-time demand sensing, recording area-level events/milestones related to NPIs/ promotions and otherwise. This timely micro-information would be of immense importance to area sales and supply chain managers for taking agile tactical decisions.
- Product Recall: Like the Fire department, this requires readiness for speedy action in an unwished-for event of product recall. When the siren-call goes for a recall, SC manager drops everything and devotes maximum focus time/effort to the recall activity. This is not in the interest of the regular business. Warehouse service providers can provide with the ability to manage a recall with complete coordination, communication, documentation.
- Value adding depot-factory: Warehouses can provide grading, sorting, processing, especially in fresh produce sector and their food chain nodes.
For the Automobile sector, many warehouses are making sub-assemblies with parts procured from multiple suppliers. These sub-assemblies are then fed to the main assembly line in a well-orchestrated manner. In this tightly knit arrangement, there exists no SLOB.
We must proactively & progressively collaborate internally and with vendor partners, harnessing newer opportunities to magnify value and minify inefficiency across the value chain.
Note: The author is the Lead -Supply Chain CSL at Unilever. He can be contacted at [email protected]