Category Archives: lean manufacturing

Lean (Super) Marketing – Price & Promotion

Quiz question : Can (beer) you (nappies) think of (coffee) products (biscuits) that are (cereals) always (cordial squash) on price promotion in one (pet food) supermarket (toothpaste) chain or (deodorant) another?

Today it’s being touted in the Telegraph today that Tesco will start a price war by reducing prices.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8780284/Tesco-to-start-supermarket-price-war.html

The article also takes the view “Unlike most “price war” announcements, analysts expect this to materially alter the profits that Tesco makes in Britain”.

How could it be?  how will it affect profits?

Well the article talks about fewer buy-one-get-one free promotions and more low, round prices.

 Imagine you’re a supplier and a supermarket offers you the chance to take part in a “bogof” promotion.  Let’s look at the simple mechanics of these promotions;

You are selling at a rate of “packs of product per day”, [SKU’s to use the jargon] suddenly this rate can start to rise to 4, 6, 8 times that amount. (remember you are on bogof, so doubling of sales rate is a minimum!)

So where do you get all the spare stock from? you make it in advance of course on overtime.

You store the finished goods in additional warehouses ready to go out but remember you need bigger warehouses. You’re going to sell 4,6 times what you normally sell.

Oh and you’ll need to store the increased amount of raw materials as well.

You’ll have to try to forecast  the demand across your different flavours and pack ranges e.g. if you only offer the 500 gram pack on bogof what happens to the 1kg pack sales? 

As the promotion runs, you may well need to run production for longer hours and incur overtime costs.

And the supermarket, well they need more space to put your products out there, they need more transport to get the products out, so you see this “free” promotion seems to be increasing the costs to every one but us, right?

The consumer in the meantime is building a nice little stock of “free” goods at their end of your product, which leads to two behaviours. 

  1. they don’t buy your (or your competitors) product for a while, they’ve got a stock at home.
  2. they end up throwing it out and they didn’t need that extra pack but hey it was free.

So what happens to your business at the end of the promotion?

Demand drops back and probably to less than before, the customers have got spare stock in their cupboards right?

Another competitor starts a promotion in the supermarket, be it another brand or the supermarket own label.

So now you have production lines with not enough to do, so what do you do? you go to another supermarket and offer a price promotion, yeah!

Here’s the quiz question again : Can (beer) you (nappies) think of (coffee) products (biscuits) that are (cereals) always (cordial squash) on price promotion in one (pet food) supermarket (toothpaste) chain or (deodorant) another?

I’m sure you can think of the brands.

So what might your accounting team say about this?

Well you’ve given products away for “free” and incurred additional overtime and storage costs, never mind the raw material you started with. So will they drive up the normal cost of the product to cover these costs and to make the “free products” less of an effect on your business? You can decide that.

The benefit of going to Every Day Low Prices is two-fold, in our opinion, based on Lean Management;

  1. The consumer only buys what they need and not any thing extra because it’s “free” – this is better for our food waste figures and our waist figures.
  2. The suppliers stop having to manage major swings in purchasing patterns, when in fact consumption is relatively stable. Do you really buy use toothpaste twice as fast because it was on BOGOF? So they get on with managing the costs in their business and can focus on reducing these.

So moving away from free products can have a major impact on the whole supply chain. It can reduce the costs and complexity of managing the chain and affects all of our waste [waists]. The reduction in costs can be passed onto the consumers but if you don’t pass all of it on, then your revenues may drop but your profit & margins can increase.

Getting the Order out

In the last year UK Manufacturing grew productivity by 5.7% (source EEF),this means that many manufacturing companies will be

  1. better at getting products and orders out on time – that end of day or Friday afternoon last minute chasing of jobs is reduced,
  2. increasing the margins and profitability of their business,
  3. improving the quality of what they send out,
  4. starting to sleep better at night knowing that they can pay bills when they come due. 

So just a couple of thoughts?

  • Have your team (managers and staff) delivered similar improvements? more products and orders out on time, increased profits, better quality,  and confidence that the business current account can pay the bills!
  • Are you getting better returns, every year, from the same levels of investment in people, machinery, raw materials?

If not, how could that be? remember 5.7% is an average, so some companies will have gained much more than this and the cash that goes along with it*

If you haven’t had such gains,

  • Do you and your teams have the time to look for productivity improvements or does the day to day get in the way?
  • Do you think your teams know where to look for productivity improvements?
  • Are they too close to the work to give you an objective assessment of what could be improved?
  • Would you like to get to the answers (& the cash, the improved performance it brings) quickly?

If you’re a manufacturing business owner or a manager who’d like to find out whether you could be getting better returns for your investment and improve your productivity there is a FREE scheme that can help you find out.

A FREE scheme? well it’s the Manufacturing Advisory Service which is one of the few business schemes which has survived the Government cuts.

What do you get for FREE then? you get to meet with an experienced manufacturing professional, normally at your own premises, so no travel involved, who will

  • listen to what you want to achieve, what you need to achieve to keep customers onside
  • understand the challenges you face (cash flow, quality, skills, etc)
  • appreciate how the experience, expertise and skills you already have can be built upon

from that they will be able to decide whether they can help and IF they can they will provide the names of accredited companies, with the relevant skills in Lean Manufacturing, ISO 9001, ERP, Product Design etc who can help you to improve your productivity.

Nearly forgot to mention the £6,000 FREE investment for productivity work. If you decide to invest in productivity projects, with an accredited supplier, then you could get up to £6,000 towards the costs.

Lots of paperwork? hoops to jump through? not normally, your advisors can help you with the small amount of paperwork to be filled in.

Do you qualify? Do you employ less than 250 employees? have a turnover less than 50M euros? see most companies will qualify.

ResQ currently complete work for MAS in Lean Manufacturing across Lincolnshire, Nottinghamshire, Leicestershire, Derbyshire, Humberside, Yorkshire ( East, West, North and South ).

If you’re in these areas and you’d like to know more about MAS then give us a call (01904 277 007 or 0115 711 7007) and we can see if we can help.

Outside of the areas above then go to the MAS website and give them a call.

Two companies that achieved much more than 5.7% are detailed below.

Case Study 1 – Lean Manufacturing FMCG, Warehousing & Distribution Company gains 14% Productivity increase.

Case Study 2 – Lean Manufacturing Printing Company gains 40% more capacity.

* the two companies in the case studies above gained 14% & 40% improvement by using Lean Manufacturing and Thinking techniques, we completed the work for them via the MAS scheme. 

This time next year you could be confident that customer orders are being

  • delivered on time,
  • delivering increasing profits,
  • safe in the knowledge that your business can pay its own way!

Oh and you may find you’ll be making 5%,10%,15% even 40% more this time next year!

Free Lean Management Training Course

From time to time, we offer free training via other organisations.  One such organisation we work with is Leeds, York & North Yorkshire Chamber of Commerce.

On the 25th March 2011, in Leeds, we’re offering a free 2 hour insight into Lean Management techniques. This is about how Lean can be applied across all departments in any organisation, so it isn’t limited to just manufacturing or profit facing bsuinesses.

So

  • if you work in IT, Finance, NHS, Public Sector, Service, Marketing or Manufacturing companies or
  • if your career means you are responsible for continuous improvement, process improvement, or training or
  • if you are faced with getting more out with the same or fewer resources

then this course will give you something to take away to use in improvement.

You can find all the details here LEAN MANAGEMENT TRAINING  COURSE

This session will show you how you can improve your business efficiency, by using tools and techniques developed in manufacturing and now proven within organisations, ranging from Tesco, Toyota, Zara, GE, NHS, Intel, Johnson & Johnson, Seyfarth Shaw (Law firm) through to Starbucks.

Lean manufacturing businesses found that more than 70% of their improvement projects lay not on the shop floor but in the offices and service based departments and so it has spread to these sectors. It will help to improve your business speed, capacity, cost control and quality whatever your sector or department.

If you’ve got any questions on this training then drop us a line.

Thanks

ResQ

50% More – are you getting it too?

In the last year UK Manufacturing grew productivity by 5.7% (source EEF), in the years since 1997 productivity growth has been 50%!! The two companies below achieved much more than that though.

Case Study 1 – Lean Manufacturing FMCG, Warehousing & Distribution Company gains 14% Productivity increase.

Case Study 2 – Lean Manufacturing Printing Company gains 40% more capacity.

What does this mean for manufacturing? simply (and on average) a manufacturing employee was completing 5.7% more work at the end of 2010 than they were at the end of 2009 + every employee involved in manufacturing in 2010 is capable of making 50% more products than in 1997.

So just a couple of thoughts?

  • Have your team (managers and staff) delivered similar improvements? a 5.7% improvement in productivity in the last 12 months or 50% since 1997?
  • Are you getting better returns, every year, from the same levels of investment in people, machinery, raw materials?

If not, how could that be? remember 5.7% is an average, so some companies will have gained much more than this*

If you haven’t had such gains,

  • Do your teams have the time to look for productivity improvements?
  • Do you think your teams know where to look for productivity improvements?

* the two companies in the case studies above gained 14% & 40% improvement by using Lean Manufacturing and Thinking techniques, we completed the work for them via the MAS scheme. 

If you’re a manufacturing business owner or a manager who’d like to find out whether you could be getting better returns for your investment and improve your productivity there is a FREE scheme that can help you find out.

A FREE scheme? well it’s the Manufacturing Advisory Service and in case you’re thinking “didn’t the Government pull all the funding for RDA’s, Business Link etc?” well for this particular scheme it’s full steam ahead. Just before Christmas the Coalition announced plans to extend the scheme and provide further funding.

What do you get for FREE then? you get to meet with an experienced manufacturing professional, normally at your own premises, so no travel involved, who will assess your needs and provide the names of accredited companies who can help you with improving your productivity.

Nearly forgot to mention the £3,000 FREE investment for productivity work. If you decide to invest in productivity projects, with an accredited supplier, then you could get up to £3,000 towards the costs.

Lots of paperwork? hoops to jump through? not normally, your advisors can help you with the small amount of paperwork to be filled in.

Do you qualify? Do you employ less than 250 employees? have a turnover less than 50M euros? see most companies will qualify.

ResQ currently complete work for MAS in Lean Thinking across Lincolnshire, Nottinghamshire, Leicestershire, Derbyshire, Humberside, Yorkshire (East, West, North and South).

If you’re in these areas, give us a call (01904 277 007 or 0115 711 7007) and we can see if we can help.

Outside of these then go to the MAS website and give them a call.

Who knows you could be making 5%,10%,15% even 40% more this time next year!