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1
SMCG for Management
Consultants and
Business Analysts
Practical guide how to analyze in Excel and
improve business during consulting projects
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
SMCGFMCG
We have 2 different business models when it comes to
consumer goods
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
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
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
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
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
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
Thanks to this presentation you will learn
how to analyze SMCG business in Excel
and how to draw the right conclusions
11
SMCG Business Model
12
Modeling SMCG Business Model in
Excel – Introduction
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
There are 2 ways in which you can model SMCG
SMCG – sold as a product SMCG – sold as a service
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
Main challenges in SMCG
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
Main KPIs for the SMCG
business model
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
SMCG business model –
modeling in Excel
21
There are 2 ways in which you can model SMCG
SMCG – sold as a product SMCG – sold as a service
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
SMCG – Examples of business
analyses of Sales and Marketing
24
Introduction to SMCG section
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
Overview of Sales in SMCG
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
SMCG Sales model is pretty complicated. They use all potential sales
channels
29
Overview of Marketing in SMCG
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
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
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
Main challenges in Sales and
Marketing in SMCG
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
Introduction to cases for SMCG
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
Direct Distribution – Case
Introduction
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
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
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
Direct Distribution – Case
Solution
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
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
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
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
How to motivate 3rd party sales
reps – Case Introduction
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
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
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
How to motivate 3rd party sales
reps – Solution
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
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
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
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
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
How much should you give for the
old product – Case Introduction
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
When it makes sense to pay your
customer for an older version of your
product?
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
How much should you give for the
old product – Solution
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
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
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
From SMCG to service –
Introduction
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
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
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
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
From SMCG to service – Case
Introduction
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
From SMCG to service – Case
Solution
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
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
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
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
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
How to shorten the lifespan of a
product – Case Introduction
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
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
How to shorten the lifespan of a
product – General rules
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
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
How to shorten the lifespan of a
product – Solution
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
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
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
Enabling investments –
Introduction
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
Why should you care about
customer base?
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
What is the value of customer
base?
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
What is the value of customer
base – Case Introduction
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
How to increase the value of your
customer base
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
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
SMCG - Examples of business
analyses of Supply Chain
99
Introduction to SMCG section
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
Overview of Supply Chain in
SMCG
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
SMCG supply chain is extremely complicated on the supplier side
104
Main challenges in Supply Chain
in SMCG
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
Introduction to cases for
SMCG
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
Transportation mode vs value
density – Introduction
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
Car Industry – Planning the flow
of finished goods
111
Let’s have a look at car producer that is wandering which plant should
supply to which country
4 plants
4 countries
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
Why production
optimization is replaced
by flow
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
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
Continuous flow
introduction
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
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
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
Kanban
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
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
Check the movie on YouTube showing details on the Kanban
Click here to see the movie on
YouTube - Kanban
124
Below some examples of Kanban
125
How not to make continuous
flow – sandwich factory
126
Imagine that you have a small factory producing sandwiches
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
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
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
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
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
How to make continuous
flow – sandwich factory
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
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
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
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
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
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
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
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
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
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
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and Business Analysts
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SMCG for Management Consultants and Business Analysts

  • 1. 1 SMCG for Management Consultants and Business Analysts Practical guide how to analyze in Excel and improve business during consulting projects
  • 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 SMCGFMCG We have 2 different business models when it comes to consumer goods
  • 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 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 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 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 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 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 Thanks to this presentation you will learn how to analyze SMCG business in Excel and how to draw the right conclusions
  • 12. 12 Modeling SMCG Business Model in Excel – Introduction
  • 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 There are 2 ways in which you can model SMCG SMCG – sold as a product SMCG – sold as a service
  • 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
  • 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 Main KPIs for the SMCG business model
  • 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 SMCG business model – modeling in Excel
  • 21. 21 There are 2 ways in which you can model SMCG SMCG – sold as a product SMCG – sold as a service
  • 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 SMCG – Examples of business analyses of Sales and Marketing
  • 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
  • 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 SMCG Sales model is pretty complicated. They use all potential sales channels
  • 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 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 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 Main challenges in Sales and Marketing in SMCG
  • 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
  • 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 Direct Distribution – Case Introduction
  • 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 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 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 Direct Distribution – Case Solution
  • 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 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 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 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 How to motivate 3rd party sales reps – Case Introduction
  • 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 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 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 How to motivate 3rd party sales reps – Solution
  • 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 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 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 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 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 How much should you give for the old product – Case Introduction
  • 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 When it makes sense to pay your customer for an older version of your product?
  • 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 How much should you give for the old product – Solution
  • 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 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 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 From SMCG to service – Introduction
  • 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 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 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 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 From SMCG to service – Case Introduction
  • 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 From SMCG to service – Case Solution
  • 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 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 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 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 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 How to shorten the lifespan of a product – Case Introduction
  • 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 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 How to shorten the lifespan of a product – General rules
  • 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 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 How to shorten the lifespan of a product – Solution
  • 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 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 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
  • 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 Why should you care about customer base?
  • 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 What is the value of customer base?
  • 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 What is the value of customer base – Case Introduction
  • 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 How to increase the value of your customer base
  • 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 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 SMCG - Examples of business analyses of Supply Chain
  • 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 Overview of Supply Chain in SMCG
  • 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 SMCG supply chain is extremely complicated on the supplier side
  • 104. 104 Main challenges in Supply Chain in SMCG
  • 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
  • 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 Transportation mode vs value density – Introduction
  • 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 Car Industry – Planning the flow of finished goods
  • 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 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
  • 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 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
  • 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 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 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
  • 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 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 Check the movie on YouTube showing details on the Kanban Click here to see the movie on YouTube - Kanban
  • 125. 125 How not to make continuous flow – sandwich factory
  • 126. 126 Imagine that you have a small factory producing sandwiches
  • 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 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 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 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 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 How to make continuous flow – sandwich factory
  • 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 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 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 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 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 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 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 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 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 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 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
  • 144. 144 FMCG for Management Consultants & Business Analysts Practical Guide presentation Check also my other presentations
  • 146. 146 Strategy for Management Consultants & Business Analysts Practical Guide presentation For more information on Strategy check also my other presentation
  • 147. 147 FMCG for Management Consultants & Business Analysts Practical Guide presentation Check also my other presentations
  • 148. 148 Supply Chain for Management Consultants Practical Guide presentation For more information on Supply Chain check also my other presentation
  • 149. 149 Essential Excel for Business Analysts and Consultants A practical guide presentation Check also my other presentations
  • 150. 150 Top 10 courses that every Management Consultant should take My super objective view presentation Check also my other presentations
  • 151. 151 Top 25 books that every Management Consultant should read My super objective view presentation Check also my other presentations
  • 152. 152 Management Consulting Tools, Techniques and Frameworks A practical guide presentation Check also my other presentations
  • 153. 153 How to manage a consulting project? A practical guide presentation Check also my other presentations
  • 154. 154 Business modeling of offline businesses in Excel A practical guide presentation Check also my other presentations
  • 155. 155 Supply Chain for Management Consultants Practical Guide presentation Check also my other presentations
  • 156. 156 Sales Analysis for Business Analysts and Consultants A practical guide presentation Check also my other presentations
  • 157. 157 Retail for Business Analysts and Management Consultants A practical guide presentation Check also my other presentations
  • 158. 158 Management consultant productivity hacks How to be lazy and still get things done presentation Check also my other presentations
  • 159. 159 Market research Practical guide for startups and entrepreneurs presentation Check also my other presentations
  • 160. 160 5 examples of business / financial models in Excel Practical guide how to check whether the business makes sense presentation Check also my other presentations
  • 161. 161 Essential Lean Manufacturing for Management Consultants Practical guide how to cut costs presentation Check also my other presentations
  • 162. 162 What is an issue tree and how to use it? Practical guide with examples presentation Check also my other presentations
  • 163. 163 Excel shortcuts for Management Consultants and Business Analysts Practical guide how to work fast in Excel presentation Check also my other presentations
  • 164. 164 Financial Modeling for Business Analysts and Management Consultants Step by step guide presentation Check also my other presentations
  • 165. 165 Management Consulting Presentations Practical guide how to prepare a great presentation presentation Check also my other presentations
  • 166. 166 How to get into consulting Practical guide how to pass the case part presentation Check also my other presentations
  • 167. 167 How to become world class analyst A practical guide presentation Check also my other presentations
  • 168. 168 Management Consulting Presentations Practical guide how to prepare a great presentation presentation Check also my other presentations
  • 169. 169 Production for Management Consultants Practical guide presentation Check also my other presentations
  • 170. 170 Business models Practical guide for startups and entrepreneurs presentation Check also my other presentations
  • 171. 171 How to create management consulting presentations? A practical guide presentation Check also my other presentations
  • 172. 172 Management consultant productivity hacks How to be lazy and still get things done presentation Check also my other presentations
  • 173. 173 Start and run consulting company A practical guide presentation Check also my other presentations
  • 174. 174 How to open a successful restaurant A practical guide presentation Check also my other presentations
  • 175. 175 On-line Business Models A practical guide presentation Check also my other presentations
  • 176. 176 MVP – how to test your business idea without building the product A practical guide presentation Check also my other presentations