FMCG business

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FMCG Business

Problem: Over a period of time, the company's performance in managing its forecasting, ordering, manufacturing and distribution network had deteriorated to the point where both sales, costs and customer service were all suffering. The major concern was that, having a product with a limited shelf life, getting levels of stock in Distribution that were higher than needed by the market resulted in stock write-offs.  If levels were too low, then customers could not get the stock they ordered, and needed to satisfy their own customer demands.

Result: Small variations in the accuracy of Sales forecasts had resulted in a degree of 'second-guessing’ by Marketing. When the second guess proved to be no better, over time, Production Planning started second guessing the Marketing forecast.  When the Production output did not meet Distribution's need to meet customer orders, a complaint went through to Sales about their forecasts.  Discovering the drift in the numbers contained in their forecast, Sales started 'adjusting' their forecasts to compensate for what they thought was simple drift.  This generated a whole new round of second-guessing, which ended up having a life of its own.  Making very explicit what was actually happening drove management action to simplify the whole forecasting / ordering system to eliminate the possibility of second guessing.  Stock losses and backlisted orders both reverted to normal levels.