Tag 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.

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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!

Help for UK Manufacturers!

In manufacturing, ever heard of BERR? Well what about MAS? No? okay Solutions for Business?

Well if you’re a manufacturer then MAS is the one you want, the Manufacturing Advisory Service. This is the national scheme, administered on a regional basis, which can help your business to develop and grow.

MAS can offer you free advice and even substantial grants towards improving efficiency, quality, delivery times, reducing costs, reducing carbon footprint etc.

Visit the national MAS website and you’ll find a ton of case studies, events & news all related to the manufacturing sector.

ResQ are business improvement suppliers to MAS in both the Yorkshire & Humberside and East Midlands regions and you can get support for improvement projects, where 50% of our costs can be met by the MAS funding.

Does it apply to you? well there are rules; normally a manufacturer has to have less than 250 employees and turnover less than 50m euros, but these are only guidelines. In some regions even if you outsource all the production you can still qualify.

The best advice, if you’re in the East Midlands or Yorkshire & Humberside is to give us a call, 07712 669396, or drop us a line info@resqmr.co.uk and we’ll see if we can help you.

If you’re elsewhere find the number of your local MAS office and call them, they’ll tell you what is available and put you in touch with the right people to get 2010 off to a flying start!

How do you find your local MAS number?

Go to the MAS website and click on your region on the map of the British Isles and go to your regional homepage and have look there as to how your region are operating and get the number and give them a call.

Remember many MAS advisors are like ourselves, people with experience of improvement techniques in manufacturing and other sectors who now spend their time helping other businesses to improve.

Mark

www.resqmr.co.uk

www.twitter.com/theleanmanager

BOGOF – it’s just not lean marketing

According to this story in The Times Tesco the UK grocery retailer is to drop Buy One Get One Free offers on food. Following Asda, who dropped these offers a while back and Sainsburys who have also announced they will reduce the number of offers.

Food waste in the UK costs the average household £420 and the average Britain throws away 3* their body weight each year in food.

So what does this have to do with Lean Marketing?

well the insights are in the pdf booklet on the 7 Hidden Wastes of Marketing, to find it, go to this page on Lean Marketing.   You’ll need to register on the site to get access to the papers, that’s just so we can see how popular it is, if you have any problems then please e-mail us and we’ll send you a copy of the paper. (info@resqmr.co.uk)

As a taster though (no pun intended) as to why BOGOF isn’t lean.

When you run BOGOF, you anticipate extra demand, sometimes 16* as much as your normal volume.

So how do you cope with this? you convert more of your cash to raw materials, to build the extra demand, next you might run production lines for longer or bring in casual staff, incurring overtime or additional labour costs, then you might build up a buffer of inventory stock for the start of the promotion, incurring extra storage costs becasue you can’t be sure where demand will go up first and by how much.

and for the pleasure of all this you have received half the normal revenue per unit sold, you didn’t assume that the supermarkets pay, did you?

All in all your costs have gone up and revenue per unit down, never mind you can console yourself that the consumer got Value (they paid less) only if the figures above for waste are to be believed did the consumer derive value or just guilt from throwing good products away?

and what happens when the promotion ends? yep you’ve guessed it your demand drops normally well below your normal volume, so now you have staff with nothing to do – except you have accountants who want the machines run, the people kept busy and the overheads absorbed, so you make to stock………..

and to clear the stock your sales and marketing team might decide to run a BOGOF with another outlet………..

and then your brand looks as though it is permanently discounted and the marketing team may decide they need to spend money on campaigns to address this in the marketplace and to re-establish the brand…….

How many brands do you recognise as always being on promotion somewhere??

Thanks for reading

Mark    http://www.resqmr.co.uk

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Transferable Skills – from the car to the office, shop, lab……

Lean Service

Lean Manufacturing which started in the automotive industry, with principle of removing the 7 wastes and it’s raft of associated process improvement tools including 5S, OEE, KANBANs, JIT, Line Balancing, Demand Management, Six Sigma, Poke Yoke, and Voice of the Customer (market research) has slowly been making its way across sectors and functions of manufacturing and non-manufacturing  (Services including professional) organisations as a business improvement strategy in recent years.

Is it any surprise when examples such as Lockheed Martin found that 75% of the improvement projects in one 4,000 employee plant, actually took place outside of manufacturing and generated $5m of savings in the second year alone – including reducing purchasing costs by over 50% and purchase order processing by 40%.  (Michael L. George “Lean Six Sigma for Service” 2003 p5)

And GE CEO Jeff Immelt reckoned that by applying the principles to their sales process they could save $50 billion by applying lean to their sales functions alone! (“Growth as a Process” an interview with Jeff Immelt, Harvard Business Review June 2006, pp 60-70)

Lean with…….

So now we are finding more and more examples of Lean Service, Lean Office, Lean Call Centres right through to Lean Laboratories, Lean Accounts and Lean Retail. You name it and you can find examples of lean thinking beginning to invade and succeed in all functions and sectors of business.

If you’d rather sit back and listen to an excellent insight into lean service then we can recommend this episode of Radio 4s “In Business” on LEAN SERVICE, hosted by PETER DAY, it focuses on lean in the Service sector (actually it’s the retail (Amazon), call centre (GEM) and financial sectors (GE Money)). 

When you get to the website click on the “listen to this programme in full” button 

All of the examples we have found about the above show, to one degree or another that lean will deliver;

  • lower costs,
  • higher profits,
  • faster customer response times,
  • higher quality,
  • a better customer experience,
  • and a more motivated workforce.

Lean does this by inviting ALL staff to confront the wastes in their jobs, whether it be

  • excess stock,
  • excess raw materials (work in progress, paperwork to be signed, e-mails unactioned),
  • excessive transportation (work/documents between sites, individuals, departments),
  • excessive moving (to complete work i.e. to photocopiers, post rooms etc),
  • wasting time (waiting for materials, decisions, meetings, approvals),
  • product or service features that the customer doesn’t value,
  • and producing poor quality solutions.

This approach, to include all staff isn’t surprising when you consider that at the heart of the principles of lean are;

  • to do only what your customers value, by default staff stop having to do all the things that they know (they get the feedback from customers) don’t add value!
  • and to continuously improve what you do, something you can surely only do by ensuring all the staff experiences are utilised to identify improvements.

The next blog that we issue will be on Lean in the NHS (Lean Healthcare), we’ve come across a video and a audio file and some practices on the benefits of implementing Lean in this sector, including information on the real GOLDEN HOUR, which is nothing to do with Simon Bates (for those old enough) or even Chris Moyles.

Be aware! moving lean from manufacturing into another function or sector isn’t about just taking the tools of Lean and applying them. So ending up with a desk looking like this one below really ISN’T the only answer.

 (This picture was published in a North East Paper and if you type “HMRC + lean” into a search engine you’ll get a plethora of stories about a lean office implementation in HMRC, which appeared  to follow the path of taking manufacturing tools and just transferring them). 

The taped lines on the desk show where office equipment should be placed

If you would like to investigate how lean could be applied to your organisation or function then feel free to contact us at www.resqmr.co.uk or info@resqmr.co.uk and we’d be happy to talk to you.

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