Inside FMCG January 2022 | Page 55

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IT ’ S A CASE OF TAIL WAGGING THE DOG

Traditional supply chain costs make up 5-10 % of Profit and Loss , where true operating costs ( including materials ) make up 60-70 %, yet so many businesses talk about how they optimised their supply chain in isolation to the true operating costs ; very few connect the two . Doing so can unlock much more in delivering a business strategy .
End to End optimisation starts from Raw Material manufacturing and ends at the customer ; by considering this in an operating model design , the opportunity to realise significantly greater opportunities than just supply chain emerges . Not forgetting that operations are the backbone of an entire business model and the key linkage to allow true end to end optimisation .
START FROM PERFECT BUT RECOGNISE WHAT IS ‘ GOOD ENOUGH ’ FOR NOW 1 . The word ‘ chain ’ is incredibly important , every element is connected , and you cannot consider a section without considering the whole .
2 . Don ’ t be afraid to put costs in to take costs out that are greater ; hence why it ’ s important to realise you are working with a chain .
3 . Consider the costs of others ; suppliers , customers etc . and how you could put cost into your business that reduce costs or vice versa .
4 . Start with perfect and work backwards . If you had a blank canvas and your volume tomorrow , what would you do ? Once this is established , map the art of the possible in moving towards this .
5 . If there is a big move you can make in 2-3 years , allow your current model the flexibility to make that possible and don ’ t take the last 1 % for a 10- year deal .
HYPOTHESIS AND FUTURE STATE SCENARIOS HAVE BEEN IDENTIFIED , WHAT NEXT ? Use science , brains , and logic . What you change now will be the solution for the future , so consider the implications and risks on the changing world . Will your solutions be flexible to respond whilst being lean and a competitive advantage ? Automation is the future , but is it your tomorrow ?
If you are going to buy a fully automated solution , specification is critical . Under-spec it and you risk buying a “ dud ”. Over-spec it and the business case might not stack up . Most importantly , you might have over-capitalised . Most businesses therefore play too safe and over-spend .
Be flexible in design . Consider blending solutions and most importantly , model your design using real numbers and proper maths . Using a digital twin and simulating the real-world volume and constraints will give you confidence before you sink $ 40m when $ 25m would do .
BIG TRENDS TO CONSIDER Digital supply chains have really been driven by the B2C fulfilment , but these smarts can easily be applied to B2C . Creating visibility in data and information through the supply chain can identify bottlenecks , reduce inventory , optimise freight and logistics and reduce warehouse costs . There are some businesses who think the solution to the current market is to hold more stock and are investing in more footprint : this is an excessive fixed cost . There are others that are smarter , and optimising technology to review the supply chain outside of their own .
The final trend we see is Campus manufacturing , when manufacturing was offshored , the trend became warehouses ; some manufacturers jumped on this and disconnected manufacturing from warehousing even locally .
That will reverse ; warehousing and manufacturing will be co-located , and this will grow with the onshoring of manufacturing . Nibble on-site high bays could start to drop at the back and front of manufacturing sites around the country - done right it ’ s a lower cost , more efficient , solution .
Paul Eastwood : Founder & Partner ; Pollen Consulting Group
POLLENCONSULTINGGROUP . COM