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SMCG for Management Consultants and Business Analysts

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Consulting projects especially when it comes to consumer goods business are very demanding. The two most complicated areas are sales and marketing and supply chain. During consulting projects I have seen business analysts and management consultants struggling with understanding the business fast enough to deliver value to the customer. This course will give you the knowledge and insight into real life case studies that will make your life during a consulting project in a consumer goods business much easier.
This presentation will help you improve your knowledge and skills in analyzing and improving Slow Moving Consumer Goods businesses (SMCG). It is designed for people who want to become management consultants, business analysts or have to run and optimize SMCG businesses on daily bases. In the course you will learn 3 things:
1. How to model SMCG business in Excel
2. How to improve sales and marketing in order to increase margin and profit
3. How to improve supply chain in order to increase margin and profit
For more check my presentation: http://bit.ly/SMCGSlideshare

Published in: Business
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SMCG for Management Consultants and Business Analysts

  1. 1. 1 SMCG for Management Consultants and Business Analysts Practical guide how to analyze in Excel and improve business during consulting projects
  2. 2. 2 In business you have to make a lot of important decisions During your career in consulting you will do projects for consumer good producers. Their business model tend to be pretty complicated
  3. 3. 3 SMCGFMCG We have 2 different business models when it comes to consumer goods
  4. 4. 4 SMCGFMCG In this presentation I will only concentrate on SMCG and I will show you what you have to learn to master this business model
  5. 5. 5 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  6. 6. 6 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  7. 7. 7 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  8. 8. 8 Examples of Sales and Marketing analyses in SMCG Examples of Supply Chain analyses in SMCG Modeling SMCG Business Model in Excel I will discuss 3 main things
  9. 9. 9 SMCG for Management Consultants and Business Analysts $190 $10 What you will see in this presentation is a part of my online course where you can find cases showing analyses along with detailed calculations in Excel Click here to check my course
  10. 10. 10 Thanks to this presentation you will learn how to analyze SMCG business in Excel and how to draw the right conclusions
  11. 11. 11 SMCG Business Model
  12. 12. 12 Modeling SMCG Business Model in Excel – Introduction
  13. 13. 13 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  14. 14. 14 There are 2 ways in which you can model SMCG SMCG – sold as a product SMCG – sold as a service
  15. 15. 15 In this section I will talk about 3 main things Main challanges in SMCG KPIs for SMCG business Business models of SMCG in Excel
  16. 16. 16 Main challenges in SMCG
  17. 17. 17 Below a list of the most important aspect for SMCG business model Brand Awareness & Reach Controling and constantly lowering production costs Your strategy across many channels Managing customer experience across channels Saturation point in consumption and penetration Spreading beyond original target group and leveraging brand Taking care of faulty products Managing older versions of your product Switch from product to service The software part of the product / IoT The value of your customer base
  18. 18. 18 Main KPIs for the SMCG business model
  19. 19. 19 The SMCG 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
  20. 20. 20 SMCG business model – modeling in Excel
  21. 21. 21 There are 2 ways in which you can model SMCG SMCG – sold as a product SMCG – sold as a service
  22. 22. 22 Check the online course to see how to model them in details in Excel Vaccum cleaner producer – modeled as product seller Smartphone firm– modeled as a provider of a service Click here to check my course
  23. 23. 23 SMCG – Examples of business analyses of Sales and Marketing
  24. 24. 24 Introduction to SMCG section
  25. 25. 25 In this section we will discuss 3 things Overview of the sales and marketing in SMCG Main challenges in sales and marketing Cases of business analyses
  26. 26. 26 Overview of Sales in SMCG
  27. 27. 27 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  28. 28. 28 SMCG Sales model is pretty complicated. They use all potential sales channels
  29. 29. 29 Overview of Marketing in SMCG
  30. 30. 30 SMCG 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 Up-sell and cross sell Stay in touch with the customer Sell him newer version of your products when the time comes
  31. 31. 31 Therefore, marketing concentrates on 8 tasks Make people aware of the brand and product Get the product in front of him and teach them how to use it Stay in touch with the customer till the time to change the product will come Create mechanisms that will sell / market on their own Manage price, price perception and discounts Expand the product Expand the brand Find and conquer niches
  32. 32. 32 SMCG is almost as advanced as FMCG when it comes to marketing efforts and uses practically every way to get its message across. Mainly uses paid methods and nowadays their own product 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  Additional software adds-on to the product  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  Organic SEO  Social Following platforms i.e. Quora  Co-branding (Intel inside)  User Generated Content (post by fans, recommendations, photos, reviews etc.)
  33. 33. 33 Main challenges in Sales and Marketing in SMCG
  34. 34. 34 There are number of challenges in the Sales and Marketing of SMCG Picking the right distribution mix Managing price and price perception across channels Customer trends i.e. for Millennials, Generation Z Growing importance of online & marketplaces The value of customer base Saturation point in consumption and penetration Dwindling importance of direct sales force Switch from product to service The software part of the product / IoT Leveraging brand and expanding product range Lifespan of the product and the market for used products Direct-to-consumer distribution
  35. 35. 35 Introduction to cases for SMCG
  36. 36. 36 For examples of sales analyses done in SMCG during consulting project check my online course Introduction of new products within old categories – Domestic Appliances Direct Distribution – smartphones How to motivate 3rd party sales reps – domestic appliances Buying back old products – cars From SMCG to service – smartphones How to shorten the lifespan of a product – Ceramic tiles Value of the customer base Click here to check my course
  37. 37. 37 Direct Distribution – Case Introduction
  38. 38. 38 Imagine that you are working for a smartphone producer that considers direct distribution. Check whether it makes sense He currently gives 30% discount to retailers He considers building his own multichannel retail His target is to sell through new channel 500 K phones
  39. 39. 39 To see whether the direct distribution makes sense we will have to calculate the net margin from selling the same number of units # sold Unit production cost Net Margin from current distribution Average shelf price Unit Net Margin x Unit discount given to the retailer - # sold Average shelf price Unit Net Margin x Net Margin from direct distribution % EBITDA of own retail x
  40. 40. 40 Before we move to calculation for the cases study let’s first see how to model in Excel retail. Check the movie on YouTube Click here to see the movie on YouTube - mode of retail in Excel
  41. 41. 41 Direct Distribution – Case Solution
  42. 42. 42 In the next lectures I will show you slowly the model we have build to check what direct distribution gives us Modeling of Current Net Margin without Direct Distribution Modeling of 1 store if we did Direct Distribution Future Net Margin for Direct Distribution Comparison
  43. 43. 43 Just as a reminder are working for a smartphone producer that considers direct distribution. Check whether it makes sense He currently gives 30% discount to retailers He considers building his own multichannel retail His target is to sell through new channel 500 K phones
  44. 44. 44 Let’s have a look how to show in Power Point the comparison of the direct distribution vs distribution via retailers 1 387 922 465 35 23 27 434 NPV Future Net Margin NPV Current Net Margin NPV of the Difference in Net Margin NPV of Capex NPV of Inventory Increase NPV of Receivables decrease NPV of the whole investment NPV of benefits and investments – 10 year perspective In millions of USD
  45. 45. 45 SMCG for Management Consultants and Business Analysts $190 $10 To see the details for the case study check my online course where you can find all the cases along with detailed calculations in Excel Click here to check my course
  46. 46. 46 How to motivate 3rd party sales reps – Case Introduction
  47. 47. 47 Let’s imagine that you have to decide which method to support sales reps that work for retailers will be the best one Your competitors are using different methods to support sales reps that work for retailers You don’t use any of them Estimate which methods makes sense
  48. 48. 48 Let’s see what methods are using other producers of domestic appliances Your customer LG Electrolux Braun Samsung Bosch Philips Others Loyalty programsContestsTrainings Incentive trips Uses the method Doesn’t use the method
  49. 49. 49 When choosing the right mix of methods you have to take into account 3 things Return on Investment (ROI) Capacity of the method Other limitations
  50. 50. 50 How to motivate 3rd party sales reps – Solution
  51. 51. 51 Just as a reminder you have to decide which method to support sales reps that work for retailers will be the best one Your competitors are using different methods to support sales reps that work for retailers You don’t use any of them Estimate which methods makes sense
  52. 52. 52 Just as reminder there are 4 major things that producers are using to support sales at retailers stores Your customer LG Electrolux Braun Samsung Bosch Philips Others Loyalty programsContestsTrainings Incentive trips Uses the method Doesn’t use the method
  53. 53. 53 From the calculations we did in the Excel we can see that the best return is on Trainings, followed by Incentive Trips 512% 275% 67% 400% Trainings Contests Loyalty Program Incetive Trips
  54. 54. 54 Let’s have a look how to show in Power Point the impact on the sales 900 135 45 135 60 1 275 Current Sales Trainings Impact Contests Impact Loyalty Program Impact Incetive Trips Impact Future Sales Impact on Sales – different methods to support the 3rd party sales force In millions of USD
  55. 55. 55 Let’s have a look how to show in Power Point the impact on the net margin 180 23 7 11 10 230 Current Sales Trainings Impact Contests Impact Loyalty Program Impact Incetive Trips Impact Future Sales Impact on Net Margin – different methods to support the 3rd party sales force In millions of USD
  56. 56. 56 How much should you give for the old product – Case Introduction
  57. 57. 57 He wants to give a fixed fee per car He can sell the used cars to a 3rd party The campaign will be limited only to his brand Imagine that you work for a car producer that wants to give certain discount for those who exchange their old car for a new one
  58. 58. 58 When it makes sense to pay your customer for an older version of your product?
  59. 59. 59 In some cases it makes sense to pay the customer for the older version of the product The product has certain residual value You have a partner that can put the older products to use Customer would otherwise use the older product much longer Customer acquisition is hard and expensive You can get money for the buying the product from the government The old product is still relatively expensive The old product ‘s value is close to zero You get additional money from other firms that want the products to be withdrawn
  60. 60. 60 How much should you give for the old product – Solution
  61. 61. 61 He wants to give a fixed fee per car He can sell the used cars to a 3rd party The campaign will be limited only to his brand Imagine that you work for a car producer that wants to give certain discount for those who exchange their old car for a new one
  62. 62. 62 Let’s have a look how to show in Power Point the impact on the sales 2 000 333 67 5 12 2 417 Current Sales Revenue from re-bought cars Revenue from a spilover effect Revenue from insurance Revenue from financing Total sales Impact on Sales – re-buying of used cars In millions of USD
  63. 63. 63 Let’s have a look how to show in Power Point the impact on the net margin 400 67 13 4 12 496 Current Net Margin Re-bought cars Spillover effect Insurance Financing Total Net Margin Impact on Net Margin – re-buying of used cars In millions of USD
  64. 64. 64 From SMCG to service – Introduction
  65. 65. 65 Imagine that you work for a car producer that wants to give certain discount for those who exchange their old car for a new one
  66. 66. 66 Imagine that you work for a car producer that wants to give certain discount for those who exchange their old car for a new one
  67. 67. 67 There are plenty of reasons for that on the customer side Restriction imposed by the cities Higher awareness of the low asset / SMCG utilization On-demand mentality Convenience becomes the most important value proposition Too specialized maintenance Fast change in the product – the customer wants the new one Lack of stable job / cash flow Preference not to burden yourself with contracts, especially long-term
  68. 68. 68 However, there are plenty of reasons for the producers of SMCG to play along You can bundle the product with services with higher margin You can align your goals with the customers' goals The revenues become more predictable You build a customer base with which you don’t loose contact You can use the customer base to up-sell and cross-sell It’s easier to plan and develop the business You can optimize other elements of the value chain i.e. maintenance You remove certain risks i.e. price wars become less frequent during the contract duration
  69. 69. 69 From SMCG to service – Case Introduction
  70. 70. 70 He currently sells around 600 K smartphones and has a bas of around 1 M customers He has to acquire new customers to cover for the lost ones and grow He considers switching to offering annual subsription model Imagine that you are working for a smartphone producer that considers instead of selling smartphones to offer contracts with different duration
  71. 71. 71 From SMCG to service – Case Solution
  72. 72. 72 Just as a reminder you are working for a smartphone producer that considers instead of selling smartphones to offer contracts He currently sells around 600 K smartphones and has a bas of around 1 M customers He has to acquire new customers to cover for the lost ones and grow He considers switching to offering annual subsription model
  73. 73. 73 As you can see if we switch to the smartphone as a service we can drastically increase our revenues Revenues by years In millions of USD 877 913 949 985 1 022 1 058 1 094 1 130 1 166 1 202 1 239 648 675 702 729 756 783 810 837 864 891 918 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 If sold as a service If sold as a product
  74. 74. 74 The structure of the revenues will be different as well for both situations Revenues 2020 In millions of USD 600 440 48 158 280 If sold as a product If sold as a service Revenues from selling phones / contracts Revenues from cross-selling Revenues from reselling phones
  75. 75. 75 As you can see if we swith to the smartphone as a service we can drastically increase our Net Margin Net Margin In millions of USD 405 416 426 436 444 452 459 465 470 473 476 289 297 305 313 320 326 332 337 341 345 347 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 If sold as a service If sold as a product
  76. 76. 76 SMCG for Management Consultants and Business Analysts $190 $10 To see the details for the case study check my online course where you can find all the cases along with detailed calculations in Excel Click here to check my course
  77. 77. 77 How to shorten the lifespan of a product – Case Introduction
  78. 78. 78 Ceramic tiles in Easter Europe are exchanged every 12 years Ceramic tiles in Western Europe are exchanged every 3-5 years The ceramic tiles producers wants to get closer to Wester Europe Imagine that you are working for a ceramic tiles producer that wants to change the frequency at which customers are remodeling its houses
  79. 79. 79 Before we move on a short example why it is so important to consider the lifespan of the product 100 houses ÷ 10 years between renovations = 10 house to be renovated every year 100 houses ÷ 5 years between renovations = 20 house to be renovated every year
  80. 80. 80 How to shorten the lifespan of a product – General rules
  81. 81. 81 There are some standard ways to make people shorten the lifespan Fad / Fashion Standards required by law Lower the cost connected with the exchange Solve problems connected with the exchange Give discounts for exchange Shorten the technical lifespan of the product / make it less durable Create second market for the exchanged products Recycle the exchanged products
  82. 82. 82 In our case we will look at 3 ways Fad / Fashion Standards required by law Lower the cost connected with the exchange Solve problems connected with the exchange Give discounts for the old product Shorten the technical lifespan of the product / make it less durable Create second market for the old products Recycle the old products
  83. 83. 83 How to shorten the lifespan of a product – Solution
  84. 84. 84 Ceramic tiles in Easter Europe are exchanged every 12 years Ceramic tiles in Western Europe are exchanged every 3-5 years The ceramic tiles producers wants to get closer to Wester Europe Imagine that you are working for a ceramic tiles producer that wants to change the frequency at which customers are remodeling its houses
  85. 85. 85 Both the Revenue and the Net Margin level suggest that we should reduce the lifespan by mainly lowering the cost of exchange of the ceramic tiles 304 355 403 391 Curent Fad / Fashion Lower cost of exchange Simplify the exchange Total Revenues 2020-2030 In millions of USD 1 217 1 775 2 015 1 775 Curent Fad / Fashion Lower cost of exchange Simplify the exchange Net Margin 2020-2030 In millions of USD
  86. 86. 86 SMCG for Management Consultants and Business Analysts $190 $10 To see the details for the case study check my online course where you can find all the cases along with detailed calculations in Excel Click here to check my course
  87. 87. 87 Enabling investments – Introduction
  88. 88. 88 Enabling investment are important for SMCG for number of reasons Increase the demand for your products from current customer base Increase the demand for your old products Grow the customer base Increase usage Can lower barriers of entering onto new markets Can shorten the usage time of your product / lifespan of the product Can create the supply of complementary products
  89. 89. 89 Why should you care about customer base?
  90. 90. 90 Customer base is important for a number of reasons They can buy new generations of your products They can promote you among other customers You can cross-sell other products to them You can up-sell them to better version of your product You get data from them to improve products and create new ones You get data you can sell / Data can become a new product Network effect Ecosystem effect
  91. 91. 91 What is the value of customer base?
  92. 92. 92 Let’s try to see how we could estimate the value of the customer base # Customers in the base Average gross margin per 1 customer per year Transactional Value of the customer base Promotional Value of the customer base x Total Value of the customer base + Average revenue per 1 customer per year % Gross Margin Customers acquired Customer Lost x -
  93. 93. 93 What is the value of customer base – Case Introduction
  94. 94. 94 Imagine that you are working for a producer of smartphones, laptops and smartwatches. Try to calculate the value of his customer base He has 200 K of customers He has 3 products: laptop, smartwatch and smartphone On average his product are exchanged every 3 years
  95. 95. 95 How to increase the value of your customer base
  96. 96. 96 There are some ways in which you can increase the value of your customer Increase the size of the customer base Increase the cross-sell ratio Add more products Decrease the churn rate Decrease the cost of acquiring the customer Increase the time during which your customer can use your products Increase margins per products (increase average prices or decrease costs) Increase the marketing value of the customer base
  97. 97. 97 SMCG for Management Consultants and Business Analysts $190 $10 To see the details for the case study check my online course where you can find all the cases along with detailed calculations in Excel Click here to check my course
  98. 98. 98 SMCG - Examples of business analyses of Supply Chain
  99. 99. 99 Introduction to SMCG section
  100. 100. 100 In this section you will learn 3 things Overview of the SMCG supply Chain Main Challenges in Supply Chain in SMCG Cases of Business Analyses
  101. 101. 101 Overview of Supply Chain in SMCG
  102. 102. 102 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  103. 103. 103 SMCG supply chain is extremely complicated on the supplier side
  104. 104. 104 Main challenges in Supply Chain in SMCG
  105. 105. 105 SMCG supply chains have to face many challanges Many suppliers and sub-contractors Short lead times Focus on minimizing Inventory Flow of information between partners Multichannel Lean manufacturing principles applied to Supply Chain Automation Modularization and Standardization Customization Non-standard transportation modes Supply Chain of added services and products
  106. 106. 106 Introduction to cases for SMCG
  107. 107. 107 In this section I will show you examples of analyses that you will be doing in SMCG for supply chain Transportation mode vs value density Car Industry – Planning the flow of finished goods Kanban Continuous flow in production
  108. 108. 108 Transportation mode vs value density – Introduction
  109. 109. 109 Let’s have a look at car producer that is wandering how to get a specific part to his factories in Europe 4 transportation to chose from Unit value 500 USD 300 units per pallet
  110. 110. 110 Car Industry – Planning the flow of finished goods
  111. 111. 111 Let’s have a look at car producer that is wandering which plant should supply to which country 4 plants 4 countries
  112. 112. 112 To see the solution to the case study check the movie on YouTube Click here to see the movie on YouTube - how to use Solver in Excel
  113. 113. 113 Why production optimization is replaced by flow
  114. 114. 114 You may have the urge to plan all the operations on the production floor. Yet in SMCG due to the number of components and process it is much better to find ways for the process to speak to each other
  115. 115. 115 There are plenty of reasons why this approach is much better The complexity is too big to do planning per specific machine Plans are fast outdated due to changes on the production floor Too much time is needed to communicate the plan No way to track the execution of the plan Attempts to capture the knowledge cause waste Traditional planning creates a lot of inventory Too many partner use Kanban and continuous flow
  116. 116. 116 Continuous flow introduction
  117. 117. 117 Ideally you would like to have a continuous flow of goods  Each process “speaks” to each other and it is enough to say to the last one what you want. The rest will follow  Pull process not a push process  We produce only what the customer needs and exactly as much as he wants  Hardly any inventory  We use efficiently resources especially people
  118. 118. 118 In order to implement it in real life we have to define some terms Hourly capacity  Number of semi-products / parts that can be produced by a specific worker Cycle Time (CT)  Time in minutes needed to produce 1 semi product /part by a specific worker = = Hourly Capacity = 60 Cycle Time (CT) Takt time  Frequency with which the product is demanded by the customer= Cycle Time (CT) ≈ Takt time
  119. 119. 119 Continuous flow gives you a lot of advantages Short cycle time Less inventory Higher quality Fewer inefficiency Better usage of people Less space Faster servicing of the customer Lower need for transportation Lower costs
  120. 120. 120 Kanban
  121. 121. 121 Since each person is not talking to each other you are creating a lot of work in progress (WIP) that you have to throw away Cut the bread Cut cheese Cut the meat Assemble the sandwich 20 15 10 6 10 X Hourly Capacity in pieces Inventory in pieces 14 9 4
  122. 122. 122 By introducing Kanban you limit the work in progress / inventory Cut the bread Cut cheese Cut the meat Assemble the sandwich 20 15 10 6 10 X Hourly Capacity in pieces Inventory in pieces Kanban
  123. 123. 123 Check the movie on YouTube showing details on the Kanban Click here to see the movie on YouTube - Kanban
  124. 124. 124 Below some examples of Kanban
  125. 125. 125 How not to make continuous flow – sandwich factory
  126. 126. 126 Imagine that you have a small factory producing sandwiches
  127. 127. 127 You have 4 people. Each of them does the sandwich from beginning till the end Cut the bread Cut vegetables Fry vegetables Cut the cheese Assemble the sandwich Pack the sandwich 4 5 3 6 7 11 36 x CT in minutes
  128. 128. 128 You have 4 people. Each of them does the sandwich from beginning till the end Cut the bread Cut vegetables Fry vegetables Cut the cheese Assemble the sandwich Pack the sandwich 4 5 3 6 7 11 36 36 x CT in minutes
  129. 129. 129 If you divide the activities and give 1 activity per person you can lower the waiting time of the customer Cut the bread Cut vegetables Fry vegetables Cut the cheese Assemble the sandwich Pack the sandwich 4 5 3 6 7 11 36 Cut the bread Cut vegetables Fry vegetables Cut the cheese Assemble the sandwich Pack the sandwich 3 4 2 4 6 10 29 All operations done by 1 person Division of work and specialization 10 x CT in minutes
  130. 130. 130 Yet since each person is not talking to each other you are creating a lot of work in progress (WIP) that you have to throw away Cut the bread Cut vegetables Fry vegetables Cut the cheese Assemble the sandwich Pack the sandwich 15 30 20 15 10 6 10 3 2 4 4 6 10 10 80 X Hourly Capacity in pieces CT in minutes Inventory in pieces 120 40 32 40
  131. 131. 131 When we compare the 2 options we can see that there are some strong advantages of the division of work yet is causing lot of waste All operations done by 1 person Division of work and specialization  4# of people  6  36 minutesTotal cycle time needed to produce the sandwich  29 minutes  We are not using the people – no customer cannot do anything Type of waste  We are wasting food that we have to throw out at the end of the shift  36 minutesTime the customer awaits for the product  10 minutes  None; just raw materialsInventory of Work in Progress  A lot . The biggest in vegetables – for 120 sandwiches
  132. 132. 132 How to make continuous flow – sandwich factory
  133. 133. 133 If we want to limit the waste we will have to look at the cycle time of each and every operation. As you can see this is due to the fact that some process are much faster than the things that follow after them. You have to get even cycles 3 2 4 4 6 10 Cutting Bread Cut Vegetables Cut Cheese Fry vegetables Assemble sandwiches Pack the sandwich Takt time
  134. 134. 134 The are number of ways in which you can try and get the even cycle times  Combine two operations  Divide 1 operation into many  Speed up the operation  Put Kanban between the 2 process or FIFO lane and limit the time of specific worker spend on the working station
  135. 135. 135 We know that customers want to eat 6 sandwiches during the hour. It means that we need cycle time of 10 for every process 106
  136. 136. 136 Let’s see what we can do with our cycle times 3 2 4 4 6 10 Cutting Bread Cut Vegetables Cut Cheese Fry vegetables Assemble sandwiches Pack the sandwich Takt time
  137. 137. 137 We can combine some of the processes to get to the pace required by the customer for every processes 7 6 6 10 10 Cutting Bread & Cut Cheese Cut Vegetables & Fry vegetables Assemble sandwiches Pack the sandwich Required by customer demand
  138. 138. 138 In this we lower down the inventory drastically and have fewer people Cutting bread & Cut Cheese Cut & fry vegetables Assemble the sandwich Pack the sandwich 10 8,6 10 6 10 7 6 6 10 10 0 X Hourly Capacity in pieces CT in minutes Inventory in pieces 11 21
  139. 139. 139 Let’s see how the 3 options compare with each other All operations done by 1 person Division of work and specialization  4# of people  6  36 minutesTotal cycle time needed to produce the sandwich  29 minutes  We are not using the people – no customer cannot do anything Type of waste  We are wasting food that we have to throw out at the end of the shift  36 minutesTime the customer awaits for the product  6 minutes  None; just raw materialsInventory of Work in Progress  A lot . The biggest in vegetables – for 120 sandwiches Continuous Flow CT 10; no limiting lanes or kanban  4  29 minutes  6 minutes  21 sandwiches are thrown and 11 sets of vegetables for sandwiches
  140. 140. 140 In this we lower down the inventory drastically and have fewer people Cutting bread & Cut Cheese Cut & fry vegetables Assemble the sandwich Pack the sandwich 10 8,6 10 6 10 7 6 6 10 10 0 X Hourly Capacity in pieces CT in minutes Inventory in pieces 11 21
  141. 141. 141 If we put FIFO lanes and kanbans we can further improve the customer experience and lower Cutting bread & Cut Cheese Cut & fry vegetables Assemble the sandwich Pack the sandwich 10 8,6 10 6 10 7 6 6 10 10 Hourly Capacity in pieces CT in minutes Lane limiting the inventory FIFO Lane Max 1 FIFOLane Max2 FIFO Lane Max 2 FIFO Lane 2 Kanban
  142. 142. 142 Let’s see how the options compare with each other All operations done by 1 person Division of work and specialization  4# of people  6  36 minutesTotal cycle time needed to produce the sandwich  29 minutes  We are not using the people – no customer cannot do anything Type of waste  We are wasting food that we have to throw out at the end of the shift  36 minutesTime the customer awaits for the product  6 minutes  None; just raw materialsInventory of Work in Progress  A lot . The biggest in vegetables – for 120 sandwiches Continuous Flow CT 10; no limiting lanes or kanban  4  29 minutes  6 minutes  21 sandwiches are thrown and 11 sets of vegetables for sandwiches Continuous Flow CT 10; lanes and Kanban  4  29 minutes  0 minutes  2 packed sandwiches  2 almost ready sandwiches  2 sets for sandwiches
  143. 143. 143 SMCG for Management Consultants and Business Analysts $190 $10 To see the details for the case study check my online course where you can find all the cases along with detailed calculations in Excel Click here to check my course
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