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Performance Improvement Project for Management Consultants

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One of the projects you will participate during your work in management consulting is the Performance Improvement Project. You will be hired by the owner or the Board of Directors to improve the business. Those projects are extremely interesting because you will be able to make a real change, create a new reality and improve part of the business or even the whole business. There are also very difficult as you have to not only analyze areas but also find ways to improve the current situation as well as, on some occasions, implement the change. The skills that you will learn during this sort of projects will be also very useful once you move to work for regular businesses or set-up your own firm. In this course I will show you how to deliver such projects fast and efficiently. In the course you will learn the following things:
1. How to conduct performance improvement projects
2. How to estimate in Excel savings and improvements
3. Where to look for performance improvements in FMCG and Retail
4. What frameworks can be used during performance improvement projects

This course is based on my 14 years of experience as a consultant in top consulting firms and as a Board Member responsible for strategy, performance improvement and turn-arounds in biggest firms from Retail, FMCG, SMG, B2B and services sectors that I worked for. I have carried or supervised over 90 different performance improvement projects in different industries that generated in total 2 billion of additional EBITDA. This presentation is a part of my online course: http://bit.ly/PerformanceImprovementProjects

Published in: Business
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Performance Improvement Project for Management Consultants

  1. 1. 1 Performance Improvement Projects for Management Consultants Practical guide how to deliver a great consulting project
  2. 2. 2 During Performance Improvement Projects you not only have to understand fast the business but you also have to find ways to improve it’s profits
  3. 3. 3 This presentation is organized into 4 sections How to conduct Performance Improvement Projects A Case Study in Performance Improvement Performance Improvement Projects in Retail Performance Improvement Projects in FMCG
  4. 4. 4 Thanks to this presentation you will learn how to conduct fast and efficiently a performance improvement project
  5. 5. 5 Performance Improvement Projects for Management Consultants $190 $19 What you will see in this presentation is a part of my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  6. 6. 6 How to conduct Performance Improvement Projects
  7. 7. 7 How to conduct Performance Improvement Projects – Introduction
  8. 8. 8 In this section I will talk about the nature of Performance Improvement Projects and how they should be conducted. We will talk about The aim of Performance Improvement Projects How to deliver Performance Improvement Projects Size of the team needed to do Performance Improvement Duration of Performance Improvement Projects General framework for managing efficiently a consulting project Pricing of Performance Improvement Projects
  9. 9. 9 Aim of the Performance Improvement Projects
  10. 10. 10 To put it simply the aim of Performance improvement projects is to get higher profits from the business we have today
  11. 11. 11 To put it simply the aim of Performance Improvement Projects is to get higher profits from the business we have today 200 50 50 50 50 50 450 EBITDA now Improvement 1 Improvement 2 Improvement 3 Improvement 4 Improvement 5 EBITDA in the future
  12. 12. 12 That’s why you have to do following things during a performance improvement project Find potential improvements Estimate their value and costs Show how those improvements can be delivered Check whether the improvements fit in with the strategy Help implement the improvements Make sure that the improvements are kept
  13. 13. 13 How to deliver Performance Improvement Projects
  14. 14. 14 Time  1-3 months  6-12 months  12-24 months End product  Power Point presentation describing the improvements  Excels with detailed analysis  Additional tools, manuals, procedures etc. that will help with the implementation  Delivered improvements their benefits  Additional tools, manuals, procedures etc. that were created to support the implementation  Sustained benefit from improvements  Additional improvements identified Diagnostic Phase Implementation Phase Supervision Phase Aim  Find potential improvements  Evaluate the benefits and costs  Prepare the implementation plans  Do the implementation or  Support the implementation  Supervise whether the improvement don’t disappear Performance improvement consists of 3 stages. Consulting firm can participate in different form in each and one of them
  15. 15. 15 Find improvements Test improvements Partial implementation Full implementation Sustain improvements  Find potential improvements  Evaluate and measure them  Rank improvements and set priorities for testing  Test potential improvements in controlled environment  Draw conclusions, learn and modify till you reach positive results at least on the assumed level  Implement the improvements in the part of the firm and check what results they produce  Learn and modify  Creating supporting tools, procedures etc.  Implement in the whole firm  Creating supporting tools, procedures etc.  Check results periodically  Build in mechanisms preventing from returning to old habits More and more performance improvement becomes a continuous process
  16. 16. 16 Size of the team and duration of the project
  17. 17. 17 Time  1-3 months  6-12 months  12-24 months End product  Power Point presentation describing the improvements  Excels with detailed analysis  Additional tools, manuals, procedures etc. that will help with the implementation  Delivered improvements their benefits  Additional tools, manuals, procedures etc. that were created to support the implementation  Sustained benefit from improvements  Additional improvements identified Diagnostic Phase Implementation Phase Supervision Phase Aim  Find potential improvements  Evaluate the benefits and costs  Prepare the implementation plans  Do the implementation or  Support the implementation  Supervise whether the improvement don’t disappear Just as a reminder performance improvement consists of 3 stages.
  18. 18. 18 That’s why you have 4 types of project that you may be doing in performance improvement fields Full-blown project Limited in scope project Limited in duration project  All phases: Diagnostics, Implementation, Supervision  All areas  All phases: Diagnostics, Implementation, Supervision  1 area or part of the area  1 phase, usually Diagnostics  All areas Limited in duration & scope project  1 phase, usually Diagnostics  1 area
  19. 19. 19 Size of the project will depend on the type of the project Full-blown project Limited in scope project Limited in duration project  All phases: Diagnostics, Implementation, Supervision  All areas  All phases: Diagnostics, Implementation, Supervision  1 area or part of the area  1 phase, usually Diagnostics  All areas Limited in duration & scope project  1 phase, usually Diagnostics  1 area Description  24-48 months  17-24 months  1-3 months  1-3 monthsDuration  Diagnostics: 5-8 FTE  Implementation: 3-5 FTE  Supervision: 1-2 ½ FTE  Diagnostics: 3-4 FTE  Implementation: 2-3 FTE  Supervision: 1-1 ½ FTE  Diagnostics: 5-8 FTE  Diagnostics: 3-4 FTENumber of consultants
  20. 20. 20 General framework for managing efficiently a consulting project
  21. 21. 21 Most consulting project are done in a bad manner. If you prepare properly you can shorten them, create more value and earn more  Project Start Task 1  Data Gathering  Analysis  Presentation & Discussion  End of the project 2 3 4 5 6 7  Project Start Task 1  Data Gathering  Analysis  Presentation & Discussion  End of the project 2 3 4 5 6 7
  22. 22. 22 There are number of thing that you should prepare ahead of time Issue tree Presentation template Data request for the customer Teams defined Schedule of meetings Market research List of contacts
  23. 23. 23 Pricing of Performance Improvement Projects
  24. 24. 24 Companies use different pricing per position. Stronger brands are obviously more expensive McKinsey, Bain, BCG etc. PwC, EY, Deloitte etc. Local smaller consulting firms 60 30 20 Price per PM per 1 months in thousands of EUR 30 20 10 Price per BA per 1 months in thousands of EUR
  25. 25. 25 Pricing will depend on the type of the project, stage as well as the consulting firm Full-blown project Limited in scope project Limited in duration project  All phases: Diagnostics, Implementation, Supervision  All areas  All phases: Diagnostics, Implementation, Supervision  1 area or part of the area  1 phase, usually Diagnostics  All areas Limited in duration & scope project  1 phase, usually Diagnostics  1 area Description  24-48 months  17-24 months  1-3 months  1-3 monthsDuration  Diagnostics: 5-8 FTE  Implementation: 3-5 FTE  Supervision: 1-2 ½ FTE  Diagnostics: 3-4 FTE  Implementation: 2-3 FTE  Supervision: 1-1 ½ FTE  Diagnostics: 5-8 FTE  Diagnostics: 3-4 FTENumber of consultants  Diagnostics: EUR 100-310 K  Implementation: EUR 65- 200 K  Supervision: EUR 33-103 K  Diagnostics: EUR 55-170 K  Implementation: EUR 45- 140 K  Supervision: EUR 18-53 K  Diagnostics: EUR 100-310 K  Diagnostics: EUR 55-170 KPricing per month
  26. 26. 26 Size of the project will depend on the type of the project Full-blown project Limited in scope project Limited in duration project  All phases: Diagnostics, Implementation, Supervision  All areas  All phases: Diagnostics, Implementation, Supervision  1 area or part of the area  1 phase, usually Diagnostics  All areas Limited in duration & scope project  1 phase, usually Diagnostics  1 area Description  24-48 months  17-24 months  1-3 months  1-3 monthsDuration  Diagnostics: 5-8 FTE  Implementation: 3-5 FTE  Supervision: 1-2 ½ FTE  Diagnostics: 3-4 FTE  Implementation: 2-3 FTE  Supervision: 1-1 ½ FTE  Diagnostics: 5-8 FTE  Diagnostics: 3-4 FTENumber of consultants  McKinsey level - EUR 3 M  PwC level - EUR 1.8 M  Local firm - EUR 1 M  McKinsey level - EUR 1.8 M  PwC level - EUR 1 M  Local firm - EUR 0.6 M  McKinsey level - EUR 0.6 M  PwC level - EUR 0.4 M  Local firm - EUR 0.2 M  McKinsey level - EUR 0.3 M  PwC level - EUR 0.2 M  Local firm - EUR 0.1 M Total price of the project* * Assuming Diagnostics 2 months, Implementation 6 months and Supervision 12 months
  27. 27. 27 Performance Improvement Projects for Management Consultants $190 $19 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  28. 28. 28 Performance Improvement Projects in Retail
  29. 29. 29 Performance Improvement in Retail – Introduction
  30. 30. 30 Retail is very competitive and therefore usually has low margins. During performance improvement projects you can still find a lot of interesting ways to increase the profits
  31. 31. 31 In this section I will show you frameworks and examples how to improve the profits in Retail Proposed project organization Introduction to the Retail Business Model Main Challenges in Retail Modeling Retail in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in Sales and Marketing in Retail Main challenges in Supply Chain in Retail
  32. 32. 32 Performance Improvement in Retail – Proposed project organization
  33. 33. 33 For the Diagnostics phase of performance improvement I would propose the following set-up Market Analyses Category Management Store processes Supply Chain Head Office Project Manager  Analyze competition – growth rates, profitability, business models  Analyze consumer behavior and trends  Analyze different business models & formats  Analyze saturation point in sales offline & online by markets / regions / formats Description  Analyze performance of different categories – sales and margin density  Check the criteria for selecting products and allocating space  Check criteria for selecting suppliers  Check the costs with alternative suppliers  Analyze efficiency of category management team  Analyze & optimize main store process (use 80/20 rule)  Check what can be automated or eliminated  Check what are the implication for the supply chain coming from the main strategy, concept, competition analysis etc. (i.e. how responsive or how efficient the supply chain has to be)  Analyze the logistic processes  Check costs of logistics with alternative suppliers  Analyze organizational structure, reporting system and motivation / bonus system in the Head Office  Analyze processes at Head Office  Check what can be automated or eliminated
  34. 34. 34 For the Diagnostics phase of performance improvement I would propose the following number of people Market Analyses Category Management Store processes Supply Chain Head Office Project Manager  2 Business Analysts# of People  1 Associate  1 Business Analyst  1 Business Analyst  1 Associate  1 Business Analyst  1 Business Analyst
  35. 35. 35 Main challenges in Retail
  36. 36. 36 Let’s have a look at the main challenges in Retail Margin Management Stock / Inventory Management Multichannel Strategy Managing price across channels Expansion to new markets Saturation of existing markets New product development Managing customer experience across channels Format evolution (possible death) People rotation and knowledge management Disruption esp. from external forces / business models Automation
  37. 37. 37 Business model of Retailer – main drivers
  38. 38. 38 The retail business model is driven by some basic KPIs # Transactions Average Value Transaction Total store revenue Total store costs x Store EBITDA Average Value Transaction of basic purchase Average Value Transaction of additional purchase # of Visitors % Conversion Rent People # of People Average wages + x x Others + # of sq. m Fee per sq. m x % Gross Margin Gross Margin generated by the store x -
  39. 39. 39 Let’s move to frameworks
  40. 40. 40 Just as a reminder we said we will cover the following issues Proposed project organization Introduction to the Retail Business Model Main Challenges in Retail Modeling Retail in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in Sales and Marketing in Retail Main challenges in Supply Chain in Retail
  41. 41. 41 So far, we have discussed modeling of retail in Excel. Let’s move to frameworks Proposed project organization Introduction to the Retail Business Model Main Challenges in Retail Modeling Retail in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in Sales and Marketing in Retail Main challenges in Supply Chain in Retail
  42. 42. 42 Why you need frameworks
  43. 43. 43 Frameworks help you decide where to dig for potential performance improvements
  44. 44. 44 In the case of performance improvement in retail we will be talking about the following frameworks Issue tree Increasing sales framework Increasing margins framework Cost reduction frameworks
  45. 45. 45 Issue tree – introduction
  46. 46. 46 Issue tree - general Area of analysis Area 1 Problem 1 Problem 2 Possible Reason 1 Possible Reason 2 Possible Reason 3 Possible Reason 4 Possible reasonsSuspected problems Analysis to be performed Analysis 1 Analysis 2 Analysis 3 Analysis 4
  47. 47. 47 Issue tree in Retail – examples
  48. 48. 48 When you are talking about retail you should have a look a the following areas Retail chain development Product Range / Category Range Management Pricing Logistic / Supply Chain Expansion model In-store process HR especially trainings
  49. 49. 49 Below you can see example of issue tree in Retail Chain Development Area of analysis Retail chain development Low growth in sales Decreasing EBITDA of new stores Possible reasonsSuspected problems Analysis to be performed Analysis of rents vs comparable competition Salaries growth vs rotation – comparison with competition Analyze the change in sales after opening new stores / on-line introduction Analysis of number of openings vs availability of new places Low LFL due to cannibalization (on- line, new stores in old locations) Few new openings in locations Increasing rents due not proper usage of purchasing power Growing salaries to keep low rotation High cost of building new stores No support from the shopping malls Not optimized formats, expensive fixtures Analysis of contracts with shopping malls Analysis of cost per 1 sq. m, number of fixtures, cost per fixtures
  50. 50. 50 Issue tree – example – chicken meat producer Area of analysis Product Range Management Low margin on Category A Low margin on Category B Possible reasonsSuspected problems Analysis to be performed Analysis of whom we buy from Category B and the whole value chain Analysis of planning and allocation process Analyze of number of suppliers and their share in sales vs market Analysis of Private Labels potential – benchmarks and potential supplier Too many supplier of Category A that undermines your purchasing power Lack of Private Labels Usage of middlemen instead of direct suppliers Improper planning and allocation by stores High inventory cost Improper planning and allocation by stores Non-responsive supply chain Analysis of planning and allocation process Analysis of lead times, deliverability on- time, level of breakage
  51. 51. 51 Increasing sales framework – Retail & B2C Services
  52. 52. 52 Let’s have a look at the general framework we can use to increase sales in Retail and B2C Services Increase sales New stores LFL / same store growth New Brands New Channels Build faster more stores Create new formats within existing brand Enter new markets (regions, countries) Bring more traffic to existing stores Improve % conversion Increases Average Transaction Value (ATV) Create new retail brands for the same segment but within the same product range Create new retail brands for different segments but within the same product range Create totally new retail concept (different product and segment) Own online Marketplaces and other online stores Franchising Wholesaling Increase selling space within existing stores
  53. 53. 53 Increasing margins framework – Retail & B2C Services
  54. 54. 54 Let’s have a look at the general framework we can use to margin in Retail & B2C Services Increase gross margin Improve space productivity Renegotiate contracts Price & Discount Policy Private Labels (PL) Increase the space devoted to more profitable products Change the store layout to have the best sellers in the best places Cross-selling of higher margin products Renegotiate contracts with current suppliers Change the supplier Get additional money / back margin from suppliers Changing price structure Changing discount policy Sell more in 1st price (full prices) Increase the share of the PL In a specific category Introduce PL in new categories Promote PL outside your retail channels
  55. 55. 55 Cost reduction framework
  56. 56. 56 Let’s have a look at the general framework we can use to cut costs Cut costs Reduce usage Automate Optimize process and costs Renegotiate contracts Eliminate fully certain expenses Change specification – use less of certain thing Change specification – use cheaper substitute Standardized the process using the best practice Automate with software Automate with machine Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Renegotiate contracts with current suppliers Change the supplier Change the form of using (i.e. owing something instead of leasing)
  57. 57. 57 Cost reduction framework – Stores
  58. 58. 58 When it comes to offline stores there are 2 major cost groups that you should concentrate on Labor (the people) Rent (the space)
  59. 59. 59 Let’s adjust our general framework accordingly to the stores Cut costs in the store Reduce usage Automate Optimize processes and costs Reduce the space needed Eliminate fully certain expenses Change specification – use less of certain thing Change specification – use cheaper substitute Standardized the process using the best practice Automate with software Automate with machine Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Estimate the full cost of keeping stock in the whole supply chain Have more frequent deliveries and move the stock to regional / central warehouse Change layout / fixtures / space arrangement and zoning Move the process in a different place
  60. 60. 60 Cost reduction framework – Head Office
  61. 61. 61 Headquarters in many cases are significant cost position and you can find a lot of opportunities for potential performance improvements
  62. 62. 62 Let’s adjust our general framework accordingly to the Head-office costs Cut costs in Head-office Reduce usage Automate Optimize process and costs Renegotiate contracts Eliminate fully certain expenses Change specification – use less of certain thing Change specification – use cheaper substitute Standardized the process using the best practice Automate with software Automate with machine Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Renegotiate contracts with current suppliers Change the supplier Change the form of using (i.e. owing something instead of leasing) Org Chart and motivation systems Simplify structure i.e. less directors Change / align motivation systems Change reporting system
  63. 63. 63 Let’s move to case studies
  64. 64. 64 Just as a reminder we said we will discuss the following things Proposed project organization Introduction to the Retail Business Model Main Challenges in Retail Modeling Retail in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in Sales and Marketing in Retail Main challenges in Supply Chain in Retail
  65. 65. 65 So far, we have discussed modeling and frameworks. Let’s move to case studies Proposed project organization Introduction to the Retail Business Model Main Challenges in Retail Modeling Retail in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in Sales and Marketing in Retail Main challenges in Supply Chain in Retail
  66. 66. 66 Overview of analyses and case studies – performance improvement projects
  67. 67. 67 To see the case studies along with analysis in Excel check my online course. Below a link to the course How to increase the profitability of a retail chain Product range analysis Inventory analysis Saturating existing markets Expansion strategy into other countries Convenience stores – Analysis of tariffs Groceries – warehouse optimization DIY – internal logistics optimization Introduction to e– commerce Click here to check my course
  68. 68. 68 Performance Improvement Projects for Management Consultants $190 $19 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  69. 69. 69 Overview of Sales in Retail
  70. 70. 70 Retail is the sales channel for many products, including its own private label. More and more they also join marketplaces and act as a multichannel
  71. 71. 71 Retail supply chain is not only long and involves many parties but also is fluctuating a lot
  72. 72. 72 Overview of Marketing in Retail
  73. 73. 73 In Retail a lot of the marketing activities are around building the right concept and supporting it via bought media. Customer base is also crucial Create retail concept that is a good fit with your target group Put it in front of the customer Build online presence and act as a multichannel Increase brand awareness via bought media Build loyalty program and customer base Increase customer purchase frequency via bought media Use the customer base to up-sell and cross-sell
  74. 74. 74 For a typical Retailer owned media, especially his stores and products are the most important marketing channel. Nevertheless, he spends a lot of money on bought media Bought MediaOwned Media Earned Media  TV, radio, newspaper ads  Paid digital reach: Adwords, Facebook, Pinterest, Instagram, YouTube, paid digital banners etc.  SEM  Leaflets, inserts etc.  Outdoor advertisement  Affiliate programs  Catalogues  Advertisement at your partner’s media i.e. Retailer  Sponsored content  Product placement  Influencers (Youtubers, bloggers, celebrities)  Brand Ambassadors  Participation in wider loyalty program  Stores, especially fascia  If you have private label then your product and the package  Your people, including uniforms  Your web presence especially your website, fanpages on Facebook and , YouTube channels  Newsletters, sms and customer base  Mobile apps and the underlying customer (contact) base  Own content and content marketing  Referral Program  Your own loyalty program  Free users (in Freemium and Free trial)  Partners’ owned media when you do not have to pay to get in touch with end-consumers  Partner’s sales force and customer support  Guest blogging, guest presence in YouTube channels etc.  Word Of Mouth especially Virality  Presence in aggregators of reviews (i.e. Yelp)  Organic SEO  Co-branding with FMCG especially in advertisement  User Generated Content (post by fans, recommendations, photos, reviews etc.)
  75. 75. 75 Main challenges in Sales and Marketing for Retail
  76. 76. 76 There are number of challenges in the Sales and Marketing in Retail Multichannel Price transparency Price comparison sites and aggregators Increasing importance of marketplaces Saturation point in penetration LFL growth Expansion modelPrivate Labels Big data Self service in offline on the level of online Changing value proposition Changing formats and concepts
  77. 77. 77 Overview of Supply Chain in Retail
  78. 78. 78 Retail has become extremely competitive. Retail supply chain has become extremely complicated due to having some of the supplier far away, multichannel, increased importance of private labels and bigger changes in external conditions
  79. 79. 79 Retail supply chain is not only long and involves many parties but also is fluctuating a lot
  80. 80. 80 Main challenges in Supply Chain in Retail
  81. 81. 81 There are number of challenges in the Supply Chain in Retail Managing suppliers in Far East Managing your own brand Long Supply Chain and Long Lead Time Local differences on markets where it operates Automation Increasing cost of labor at your country and China Supply chain activities in the stores More extreme weather conditions Multichannel New retail concept including manufacturing Big Data for Planning and Allocation
  82. 82. 82 Performance Improvement in Retail – techniques that you should master
  83. 83. 83 Below just the main techniques areas it’s worth mastering to make your life easier. You will find attached some additional suggested readings Lean Manufacturing Theory of Constraints Queueing Problems Modeling in Excel Main rules on the behavior of customers in the stores E-commerce & marketplaces Econometrics & Scoring Models Category Management in Retail
  84. 84. 84 Performance Improvement Projects for Management Consultants $190 $19 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  85. 85. 85 Retail for Business Analysts and Management Consultants A practical guide presentation Check also my presentations with more details on retail
  86. 86. 86 Performance Improvement Projects in FMCG
  87. 87. 87 Performance Improvement in FMCG – Introduction
  88. 88. 88 FMCG are all branded goods that you consume frequently during the year. In this category we have food, cosmetics etc. Its complicated business model provides plenty of opportunities for performance improvement
  89. 89. 89 In this section I will show you frameworks and examples how to improve the profits in FMCG Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  90. 90. 90 Performance Improvement in FMCG – Proposed project organization
  91. 91. 91 For the Diagnostics phase of performance improvement I would propose the following set-up Market Analyses Sales & Marketing Production Supply Chain Head Office Project Manager  Analyze competition – growth rates, profitability, business models, technology  Analyze consumer behavior and trends  Analyze different business models  Analyze saturation point  Analyze different segments including non-users  Analyze other markets Description  Analyze channel performance  Analyze sales performance  Analyze group of product performance  Analyze marketing efficiency  Analyze Product Development  Analyze production costs  Analyze production batch size vs demand and costs  Analyze bottlenecks  Analyze capacity management  Check what are the implication for the supply chain coming from the main strategy, concept, competition analysis etc.. Analyze the logistic processes  Check costs of logistics with alternative suppliers  Analyze all planning processes: sales forecast, production and procurement planning,  Analyze organizational structure, reporting system and motivation / bonus system in the Head Office  Analyze processes at Head Office  Check what can be automated or eliminated
  92. 92. 92 For the Diagnostics phase of performance improvement I would propose the following number of people Market Analyses Sales & Marketing Production Supply Chain Head Office Project Manager  1 Business Analysts# of People  1 Business Analyst  1 Business Analyst  1 Associate  1 Business Analyst
  93. 93. 93 Introduction to FMCG Business Model
  94. 94. 94 We can be talking about 2 different models here Branded FMCG with strong brand awareness Private labels Private label
  95. 95. 95 Main challenges in FMCG
  96. 96. 96 For branded FMCG product I propose to have a look at the following aspects Brand Awareness Reach (Weighted and numeric distribution) Your strategy across many channels Managing price across channels Leveraging the brand Spreading beyond original target group Product lifecycle Managing customer experience across channels Efficiency of marketing activities Lifecycle of your target groups Seasonality
  97. 97. 97 Drivers of FMCG Model
  98. 98. 98 The FMCG business model is driven by some basic KPIs # sold Unit production cost Gross Margin Head office Operational profit Fixed Cost / Quantity produced Unit variable cost + Cost of sales & marketing Net Margin - - Average price Unit Gross Margin - x Market share Market size
  99. 99. 99 Let’s move to frameworks
  100. 100. 100 Just as a reminder we said we will cover the following things in this section Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  101. 101. 101 So far, we have covered project organization, modeling. We will move now to frameworks Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  102. 102. 102 Why you need frameworks
  103. 103. 103 Frameworks help you decide where to dig for potential performance improvements
  104. 104. 104 In the case of performance improvement in FMCG we will be talking about the following frameworks Issue tree Increasing sales framework Cost reduction frameworks
  105. 105. 105 Issue tree – introduction
  106. 106. 106 Issue tree - general Area of analysis Area 1 Problem 1 Problem 2 Possible Reason 1 Possible Reason 2 Possible Reason 3 Possible Reason 4 Possible reasonsSuspected problems Analysis to be performed Analysis 1 Analysis 2 Analysis 3 Analysis 4
  107. 107. 107 Issue tree example for a FMCG firm
  108. 108. 108 When you are talking about FMCG you should have a look a the following areas Marketing Product Development Managing Sales Force Production Supply Chain including Planning & Sourcing Customer Data Analysis Competition Analysis Expansion Model
  109. 109. 109 Below you can see example of issue tree in FMCG – Sales Force Management Area of analysis Sales Force Management High sales at the end of the month Different market shares in regions Possible reasonsSuspected problems Analysis to be performed Analyze the motivation system Analyze channels per region Analyze the motivation system Analyze sales forecasting, planning of production and return rate Bonus system with a high threshold that incentives pushing the product The firm is not producing what the customer wants We have set-up too low targets for some regions Some regions have different channels High cost of sales force in relation to sales We have inefficient sales team We have too many overlapping sales representatives Drive with sales force team members, analyze processes, tools, efficiency Analyze sales per sales representative and compare with competition
  110. 110. 110 Below you can see example of issue tree in FMCG – Production Area of analysis Production We have high production costs related to labor Inventory level are extremely high Possible reasonsSuspected problems Analysis to be performed Analyze production planning and procurement, sales forecasting Analyze how work is controlled on the production floor Analyze solution used by other firms, especially automatization Check the Overall Labor Efficiency (OLE) and look for bottlenecks A lot of people are required for some of the processes We use the people inefficiently We are very bad at planning and there is no sales forecasting The machines / part of production are not linked properly We have high waste cost We are using wrong technology or machines We are using wrong materials Analyze waste by technology and machines. Check planned vs actual Analyze cost of production by different typ of materials
  111. 111. 111 Increasing sales framework – Consumer Goods
  112. 112. 112 Let’s have a look at the general framework we can use to increase sales in consumer goods Increase sales Increase distribution Increase Product Range Price & Discount Policy Increase demand for your product Bigger share on the shelves in the current distribution Better penetration of existing channels Enter new channels Enter new markets (regions, countries) New products within existing categories New categories within existing brands New brands Changing price structure Changing discount policy Changing prices formula Increase consumption per capita Shorten the lifespan of the product Find new customers
  113. 113. 113 Cost reduction framework
  114. 114. 114 Let’s have a look at the general framework we can use to cut costs Cut costs Reduce usage Automate Optimize process and costs Renegotiate contracts Eliminate fully certain expenses Change specification – use less of certain thing Change specification – use cheaper substitute Standardized the process using the best practice Automate with software Automate with machine Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Renegotiate contracts with current suppliers Change the supplier Change the form of using (i.e. owing something instead of leasing)
  115. 115. 115 Cost reduction framework – Sales & Marketing in FMCG
  116. 116. 116 Let’s have a look at the general framework we can use to cut costs Cut costs & improve efficiency Sales Force Costs Optimize allocation of money on marketing Optimize other processes and costs Renegotiate contracts Standardized the process using the best practice Improve efficiency of their actions Optimize process and costs Calculate efficiency and capacity of each channel /method Allocate money according to strategy, efficiency and capacity Improve the efficiency of main channels Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Renegotiate contracts with current suppliers Change the supplier Change the form of using (i.e. owing something instead of leasing) Automate with machine or machine
  117. 117. 117 Cost reduction framework – Head Office
  118. 118. 118 Headquarters in many cases are significant cost position and you can find a lot of opportunities for potential performance improvements
  119. 119. 119 Let’s adjust our general framework accordingly to the head-office costs Cut costs Reduce usage Automate Optimize process and costs Renegotiate contracts Eliminate fully certain expenses Change specification – use less of certain thing Change specification – use cheaper substitute Standardized the process using the best practice Automate with software Automate with machine Simplify and optimize processes Replace Opex with capex (analyze Opex vs capex tradeoff) Make it or buy it analyses and if needed outsource or buy outside Renegotiate contracts with current suppliers Change the supplier Change the form of using (i.e. owing something instead of leasing) Org Chart and motivation systems Simplify structure i.e. less directors Change / align motivation systems Change reporting system
  120. 120. 120 Let’s move to case studies
  121. 121. 121 Just as a reminder we said we will cover the following things in this section Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  122. 122. 122 So far, we have covered project organization, modeling, frameworks. We will move now to case studies Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  123. 123. 123 Overview of analyses and case studies – performance improvement projects in FMCG
  124. 124. 124 To see the case studies pleas check my online courses. You will find there also detailed analyses in Excel Sales force efficiency analysis Finding the white spaces How to expand the brand Chicken Producer – Fuel usage Juice Producer – Simulation Optimal production batch analysis – FMCG 2–stage production planning Click here to check my course
  125. 125. 125 Performance Improvement Projects for Management Consultants $190 $19 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  126. 126. 126 Let’s move to main challenges
  127. 127. 127 Just as a reminder we said we will cover the following things in this section Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  128. 128. 128 So far, we have covered project organization, modeling, frameworks, case studies. It’s time to discuss main challenges Proposed project organization Introduction to the FMCG Business Model Main Challenges in FMCG Modeling FMCG in Excel Useful frameworks Examples of analyses and case studies from performance improvement projects Main challenges in sales and marketing in FMCG Main challenges in Supply Chain in FMCG
  129. 129. 129 Overview of Sales in FMCG
  130. 130. 130 FMCG are all branded goods that you consume frequently during the year. In this category we have food, cosmetics and other similar products
  131. 131. 131 FMCG sells mainly through retailers. Some go into independent distribution via own website and own stores
  132. 132. 132 Overview of Marketing in FMCG
  133. 133. 133 FMCG is pushing the customer through phases that make him at the end loyal customer Create brand awareness Teach people how to use your products Get the product in front of the potential customers Convert the brand aware people into customers Retain the customer Up-sell and cross sell
  134. 134. 134 Therefore, marketing concentrates on 7 tasks Make people aware of the brand and product Get the product in front of him Find and conquer niches Expand the product Expand the brand Manage price, price perception and discounts Create mechanisms that will sell / market on their own
  135. 135. 135 FMCG is probably the most advanced when it comes to marketing efforts and uses practically every way to get its message across. Mainly uses paid methods Bought Media Owned Media Earned Media  TV, radio, newspaper ads  Paid digital reach: Adwords, Facebook, Pinterest, Instagram, YouTube, paid digital banners etc.  SEM  Leaflets, inserts etc.  Outdoor advertisement  Affiliate programs  Catalogues  Advertisement at your partner’s media i.e. Retailer  Sponsored content  Product placement  Influencers (Youtubers, bloggers, celebrities)  Motivation schemes for the sales force of your Partner  Brand Ambassadors  Store-in-Stores (offline and online)  Participation in wider loyalty program  Your product and the package  Your site - your factory, office, stores  Your people  Your web presence especially your website, fanpages on Facebook and , YouTube channels  Newsletters, sms and customer base  Mobile apps and the underlying customer (contact) base  Own content and content marketing  Referral Program  Your own loyalty program  Free users (in Freemium and Free trial)  The products of your partners (powered by)  Partners’ owned media when you do not have to pay to get in touch with end-consumers  Partner’s sales force and customer support  Guest blogging, guest presence in YouTube channels etc.  Word Of Mouth especially Virality  Presence in aggregators of reviews (i.e. Yelp)  Evangelists and  Organic SEO  Social Following platforms i.e. Quora  Co-branding (Intel inside)  User Generated Content (post by fans, recommendations, photos, reviews etc.)
  136. 136. 136 Overview of Supply Chain in FMCG
  137. 137. 137 FMCG are all branded goods that you consume frequently during the year. In this category we have food, cosmetics and other similar products
  138. 138. 138 FMCG supply chain is pretty complicated on the outbound side – the distribution to end-customers
  139. 139. 139 Main challenges in Supply Chain in FMCG
  140. 140. 140 There are number of challenges in the Supply Chain in FMCG Many suppliers Dedicated transportation modes Many Channels of sales Minimum Order Quantity Direct DistributionMultichannel Local version of the product Shelf Life Added value services and products Distribution through Marketplaces Customization
  141. 141. 141 Overview of Production in FMCG
  142. 142. 142 Let’s see what kind of production you can have in FMCG Types of production Tubes 1 main materials many products Highly automated multi stage Semi-automated Juice / Milk / Jam Vodka / Beer Salt Meat Fish Automate with machine Cookies Prepared food Pharmaceuticals Toys Labor intensive Fashion
  143. 143. 143 Main challenges in Production in FMCG
  144. 144. 144 There are number of challenges in Production in FMCG Automation Small Batches Customization & Personalization Sourcing of needed materials Changes in demand due to consumer trends Capacity Management Issues related with Environmental Impact Change in technology due to customer trends (i.e. gluten) Peak management Production for 3rd parties
  145. 145. 145 Performance Improvement in FMCG – techniques you should master
  146. 146. 146 Below just the main techniques areas it’s worth mastering to make your life easier. You will find attached some additional suggested readings Lean Manufacturing Theory of Constraints Product Development Modeling in Excel Marketing especially Digital Marketing Critical Chain Method Category Management in FMCG Strategy – especially used by Retailers and marketplaces Product Digitalization
  147. 147. 147 Performance Improvement Projects for Management Consultants $190 $19 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Click here to check my course
  148. 148. 148 Case study in Performance Improvement
  149. 149. 149 Case study in Performance Improvement – Introduction
  150. 150. 150 To get the most out of this section please first solve the case on your own and only after that proceed with next lectures. Read problem set / Case study Pause the course and solve the problem on your own Go to next lectures where you will find the step by step solution 1-2 hours to find the problems 2-3 hours to estimate in Excel improvements
  151. 151. 151 Case study in Performance Improvement – General Information
  152. 152. 152 You were hired to support the new CEO of Canned Foods Incorporated in performance improvement project Their profitability is below competitors They have problems with liquidity They sell 4 groups of products: peas, corn, mushrooms and tomato They have 1 factory in Poland with 782 people Almost everything is sold on the domestic market
  153. 153. 153 You have 2 goals to achieve Find ways to increase profit Find ways to improve liquidity
  154. 154. 154 Go to the online course for more details. You will find attached to the course important resources with data describing the case Description of the case in pdf. Data in Excel Click here to check my course
  155. 155. 155 Performance Improvement Projects for Management Consultants $190 $19 Go to the online course for more details. You will find attached to the course important resources with data describing the case Click here to check my course
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