1. LEVERAGING
THE POTENTIAL
VCG employs the 'Theory of Constraints’ philosophy to bring about quantum
jump in performance of organizations in its target industry clusters.
Automobile & Consumer Retail Engineering Equipment
Auto Components Goods & Construction Manufacturing
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2. Insights on Consumer Goods and
Retail Supply Chain
202, Orion Business Park, Kapurbawadi Naka, Phone: +91 22 2589 5896 Email: vcg@vectorconsulting.in
Ghodbunder Road, Thane (West) – 400607 Fax: +91 22 2589 5897 Web: www.vectorconsulting.in
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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.
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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
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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
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6. What not to do in a downturn
Some consumer goods companies are
now facing low capacity utilization due to
down-turn.
The knee jerk reaction to this situation is
likely to be cost reduction initiatives,
which can kill capacity. Or even a worse
reaction would be planning production to
meet original sales targets for a
subsequent attempt to sell by huge
discounts.
The only way out is to maximize the
reach and range in the market.
Maximizing
market reach
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7. Do you really understand your customer?
A sales manager's 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
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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?
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9. Forecast accuracy ?
Fast reaction and not accurate forecasts.
What is the key
to supply chain?
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10. Killing a product?
Conservative mindset of retailers, who It is important for a
hesitate to buy new products, can product to prove
come in the way of placing the new itself by being on
products at retail counter. the shelf first
A product can fail even before it has a
chance to prove itself.
A guarantee given by the firm to take
back unsold items installs confidence
in retailers to try more new products,
which in turn increases probability of
success of new products.
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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.