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Nuggets on Consumer Goods and Retail Supply Chain
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Nuggets on Consumer Goods and Retail Supply Chain

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  • 1. LEVERAGINGTHE POTENTIALVCG employs the Theory of Constraints’ philosophy to bring about quantumjump in performance of organizations in its target industry clusters. Automobile & Consumer Retail Engineering Equipment Auto Components Goods & Construction Manufacturing www.vectorconsulting.in ©2012 Vector Consulting Group. All Rights Reserved.
  • 2. Insights on Consumer Goods and Retail Supply Chain202, Orion Business Park, Kapurbawadi Naka, Phone: +91 22 2589 5896 Email: vcg@vectorconsulting.inGhodbunder Road, Thane (West) – 400607 Fax: +91 22 2589 5897 Web: www.vectorconsulting.in ©2012 Vector Consulting Group. All Rights Reserved. 2
  • 3. The Hindsight Bias Every consumer goods organization tries hard, every month, to get the Right product at the Right place and at the Right time. But in hindsight, they always get one of the entities wrong. Since in hindsight, everything looks obvious they keep trying by improving on the forecasting techniques and keep getting one of the entities Right product at wrong. the Right place and at the Right time The only way out of this hindsight error is to can be determined have ALL the relevant products available at ALL only in hindsight the relevant places, ALL the time. ©2012 Vector Consulting Group. All Rights Reserved. 3
  • 4. Win-Lose? or Lose-Lose? What leads to loss Many consumer goods brand in sales & companies expect the retailer to discounts? provide their requirements much ahead of the time of real demand. This nearly guarantees the problem of stock outs on some SKUs and excess on the others. Resultant is loss sales and discounts – a lose-lose for both partners ©2012 Vector Consulting Group. All Rights Reserved. 4
  • 5. Quantifying the hidden potential To understand the real potential reach of a product, multiply the "retail penetration" (no. of shops your brand is present/total population) with "portfolio penetration" (no. of SKUs held by a shop/total SKUs meant for the shop) Determining product potential ©2012 Vector Consulting Group. All Rights Reserved. 5
  • 6. What not to do in a downturnSome consumer goods companies arenow facing low capacity utilization due todown-turn.The knee jerk reaction to this situation islikely to be cost reduction initiatives,which can kill capacity. Or even a worsereaction would be planning production tomeet original sales targets for asubsequent attempt to sell by hugediscounts.The only way out is to maximize thereach and range in the market. Maximizing market reach ©2012 Vector Consulting Group. All Rights Reserved. 6
  • 7. Do you really understand your customer? A sales managers level of intuition about the end customer demand is negatively correlated to the level of inventory in the supply chain. Relation of intuition and inventory ©2012 Vector Consulting Group. All Rights Reserved. 7
  • 8. Perception determines reality! If a retailer has a poor perception about delivery or service capability of the supplier company, then the impact on potential loss is significant, as he may play an active role in switching customers to competition. How important is retailer’s perception? ©2012 Vector Consulting Group. All Rights Reserved. 8
  • 9. Forecast accuracy ? Fast reaction and not accurate forecasts. What is the key to supply chain? ©2012 Vector Consulting Group. All Rights Reserved. 9
  • 10. Killing a product?Conservative mindset of retailers, who It is important for ahesitate to buy new products, can product to provecome in the way of placing the new itself by being onproducts at retail counter. the shelf firstA product can fail even before it has achance to prove itself.A guarantee given by the firm to takeback unsold items installs confidencein retailers to try more new products,which in turn increases probability ofsuccess of new products. ©2012 Vector Consulting Group. All Rights Reserved. 10
  • 11. Rotations and Margins Distributor margins are positively correlated to supply lead time Industries which provide higher margins to their distributor invariably have higher supply lead time than the ones which provide lower margins. ( Higher lead times means higher inventory and lower rotations . So it has to be compensated with higher margins) ©2012 Vector Consulting Group. All Rights Reserved. 11
  • 12. :) Thank You ©2012 Vector Consulting Group. All Rights Reserved. ©2012 Vector Consulting Group. All Rights Reserved.

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