SMCG for Management Consultants and Business Analysts

Consulting projects especially when it comes to consumer goods business are very demanding. The two most complicated areas are sales and marketing and supply chain. During consulting projects I have seen business analysts and management consultants struggling with understanding the business fast enough to deliver value to the customer. This course will give you the knowledge and insight into real life case studies that will make your life during a consulting project in a consumer goods business much easier.
This presentation will help you improve your knowledge and skills in analyzing and improving Slow Moving Consumer Goods businesses (SMCG). It is designed for people who want to become management consultants, business analysts or have to run and optimize SMCG businesses on daily bases. In the course you will learn 3 things:
1. How to model SMCG business in Excel
2. How to improve sales and marketing in order to increase margin and profit
3. How to improve supply chain in order to increase margin and profit
For more check my presentation: http://bit.ly/SMCGSlideshare

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
infrequentlyduring your life. In this category we have
cars, domestic appliances and other similar products

6. 6
SMCG are all branded goods that you consume
infrequentlyduring your life. In this category we have
cars, domestic appliances and other similar products

7. 7
SMCG are all branded goods that you consume
infrequentlyduring 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
andhow to draw the right conclusions

11. 11
SMCG Business Model

12. 12
Modeling SMCG Business Model in
Excel –Introduction

13. 13
SMCG are all branded goods that you consume
infrequentlyduring 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

16. 16
Main challenges in SMCG

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

24. 24
Introduction to SMCG section

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

26. 26
Overview of Sales in SMCG

27. 27
SMCG are all branded goods that you consume
infrequentlyduring 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

29. 29
Overview of Marketing in SMCG

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,
fanpageson Facebook and , YouTube channels
Newsletters, smsand 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

35. 35
Introduction to cases for SMCG

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 3
rd
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
1387
922
465
35 23 27
434
NPV Future Net MarginNPV Current Net MarginNPV of the Difference in
Net Margin
NPV of Capex NPV of Inventory IncreaseNPV 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 3
rd
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 3
rd
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
1275
Current Sales Trainings Impact Contests Impact Loyalty Program Impact Incetive Trips Impact Future Sales
Impact on Sales –different methods to support the 3
rd
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 3
rd
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 3
rd
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 3
rd
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
2000
333
67 5 12
2417
Current Sales Revenue from re-bought carsRevenue from a spilover effectRevenue from insuranceRevenue 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
Revenuesby years
In millions of USD
877
913
949
985
1022
1058
1094
1130
1166
1202
1239
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 serviceIf 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 / contractsRevenues from cross-sellingRevenues 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 serviceIf 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
1217
1775
2015
1775
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

87. 87
Enabling investments –
Introduction

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

99. 99
Introduction to SMCG section

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
infrequentlyduring 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

106. 106
Introduction to cases for
SMCG

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

113. 113
Why production
optimization is replaced
by flow

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

116. 116
Continuous flow
introduction

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 useefficiently 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)
Takttime
Frequency with which the product is demanded
by the customer=
Cycle Time (CT) ≈
Takttime

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

120. 120
Kanban

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

124. 124
Below some examples of 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 vegetablesAssemble sandwichesPack the sandwich
Takttime

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 vegetablesAssemble sandwichesPack the sandwich
Takttime

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 sandwichesPack the sandwichRequired 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 kanbanswe 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
FIFO Lane
Max 2
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
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