The same way it is described in a famous fable by Ivan Krylov called “The Swan, the Pike, and the Crawfish” where, according to the plot, animals decided to team up and pull a wagon together to achieve better outcome but failed because each pulled it in a different direction, FMCG companies often witness the same situation happening between different departments. Striving to achieve their goals while neglecting what other departments do, they lack good planning and unfortunately lose in profits.
So how to fix this issue? To answer this question, we talked to the SAP Product Planning Consultant at LeverX — an official SAP partner with vast experience in the development and implementation of enterprise-scale products for companies from all around the world.
Key FMCG Challenges
To start with, let’s see what are the main challenges FMCG companies are facing, so latter we can proceed with the ways to address them.
One of the common issues FMCG commercial directors are facing is when a supplier doesn’t have enough products to meet their needs. And here is where the problem lies: based on personal considerations, the supplier starts to prioritize some companies while neglecting the needs of others, and that definitely leads to a problem.
Another issue connected to cooperation is supply chain disruptions that negatively affect both the company and the end buyer.
Issues in purchase calculation and planning
Manual calculations and planning are always associated with longer and unprioritized processes that in FMCG commonly result in such unwanted issues as rebalancing inventory, decrease and losses in sales processes, mistakes that lead to unnecessary purchases, or unneeded quantities, and so on.
Issues with equipment
Whether it’s due to mistakes made by service department workers or a lack of proper equipment maintenance procedures, issues that arise often result in a decreased level of customer service because of the missed or delayed orders, as well as in the missed clients and profits.
Manual labor and the resulting errors
There are many undesired outcomes of manual labor. For example, in procurement planning, mistakes due to human factors can result in the lack of the needed materials in the production shops. Also, this can lead to non-compliance issues that can cost the company a bunch of money and become a reason for a lost client’s trust.
A lack of a unified infrastructure
When a company uses different systems that are not unified and sometimes are even not integrated one with another, there is a high risk of miscommunication between different departments that can lead to poor decisions and decreased productivity.
Addressing the Issues with SAP: Integrated Business Planning (SAP IBP) for Automation of Processes and Enhanced Profitability
All the above-mentioned issues are covered by a single product – SAP IBP. The solution is designed to make planning processes easy, efficient, and consistent. Taking advantage of the in-memory technology, SAP IBP opens up space for sound forecasting and demand management, allows optimizing inventory, and overcoming the supply chain control challenges.
So what are the benefits of implementing SAP IBP into FMCG processes? To name just a few, they are:
- Increase in revenue (by 2-3%);
- Reduction of inventory (by 5-20%);
- Storage, transportation, and distribution cost-reduction (by 5-15%);
- Cost reduction of dispatched products (by 2-3%).
But to provide you with a clearer picture of what benefits SAP IBP can bring, let’s take a look at some of the real-life examples of its implementation.
Arla Foods: improved accuracy of forecasts and automation of repetitive and manual tasks
A global dairy company needed to come up with a solution that would increase the accuracy of forecasts, allow optimizing the supply chain, and ensure quick response to the changing demand to enhance customer satisfaction. With SAP IBP, the company managed to reduce the time needed for forecasting by 10%, increase the accuracy of forecasts in different regions (by 2,5 – 5%), automate close to 70% of manual and repetitive tasks, and enhance the overall planning.
Arla Foods Amba: unified environment and transparency into the processes
One more case included the implementation of SAP IBP for automation and standardization of workflows, logistics processes, order processing, data management, and some other issues. So, after the company started to use SAP IBP, it became possible to enjoy the convenience of having a unified system landscape with a high level of transparency and connectivity. The solution opened up space for greater product sales visibility, optimized inventory management, and streamlined procurement and production planning.
CIAL: demand planning and enhanced level of service provision
CIAL is one of the largest food companies in Chile. The SAP IBP solution enabled improvement in demand forecasting and a decrease in product loss by 10%, automation of raw materials orders, and the overall increase in the quality of customer services.
And these are just some of the examples of how SAP IBP can help your business achieve its strategic goals. Other benefits include increased machinery capacity, elimination of liquid stocks, reduced time of order completion, etc.