‘Pre-build’ to build credibility
What's the biggest fear for any FMCG company?
FMCG products have a very wide market coverage and so is the case with their competitors. This makes them too prone to substitution. Unmet demand thus remains the biggest fear for any FMCG company.
Pre-build empowers the organization to reduce the unmet demand. This gives them an opportunity to utilize the lines to their capacity. Pre-build decisions combined with the performance improvement initiatives can do wonders. But, the question still remains, When to Pre-build?
Pre-build is a much important weapon to tackle the unmet demand in the armory of the operations department. Other than pre-build the options to consider are viz.
- Line Performance improvement
Pre-build decisions are widely influenced by three factors viz.
- Power of Brand
- Shelf Life of product
- Storage cost
If these three factors bring forth a positive feedback then the companies look forward to pre-build. Now there comes the second challenge
- How to Prebuild?
- What to Pre-build?
The Capacity Planning provides a very adequate reflection the situation on ground. And this helps in triggering the pre-build discussions.
How to Pre-build?
Its a very delicately timed decision which looks out on various aspects viz. Spare Production Capacity, Financials, Capex Vs Outsourcing decisions, Stocking availability and the cost of storage being a few.
This helps in deciding the mix of In-house production Vs Out Sourcing and Normal Production Vs Over Time. Similarly it also helps in deciding the stocking location for the items, whether we are putting them at n-1 node or further up in the chain.
What to Pre-build?
This decision rests totally on the product mix, forecasting accuracy and the margins involved. Its painful to lose on the sales of the high margin items or high demand items. Alongside its always preferable to choose the items with low forecast variability over the ones with high forecast variability
Thus Capacity Planning and Pre-build decisions go hand in hand. Any thing carried out in isolation will leave the planning in an open universe with loosely tied ends, ready for toss at any moment.
The Capacity Planning takes pre-build discussions into account and the pre-build discussion take Capacity Planning outputs into consideration.