Master Production Scheduling (MPS): The Heart of Effective Manufacturing Planning

Master Production Schedule (MPS) is often described as the bridge between business strategy and operational execution. While sales forecasts, customer demand, and strategic objectives define what an organization wants to achieve, the MPS translates those goals into a realistic and actionable production plan.

Simply put, the Master Production Schedule specifies what products will be produced, in what quantities, and when. It serves as the primary driver for Material Requirements Planning (MRP) and provides visibility across manufacturing, procurement, inventory management, and customer service functions.

A well-developed MPS helps organizations balance demand and supply while optimizing resources. It enables companies to:

• Meet customer delivery commitments with greater confidence
• Improve inventory management and reduce excess stock
• Enhance production stability and resource utilization
• Identify capacity constraints before they impact operations
• Support cross-functional alignment between sales, operations, and manufacturing

Without a disciplined MPS process, organizations often experience frequent schedule changes, inventory imbalances, expedited orders, and declining customer satisfaction.

Key Inputs to the MPS:

• Demand forecasts
• Customer orders
• Inventory status
• Production capacity
• Business policies and strategic objectives

The scheduler must continuously evaluate these inputs to ensure that production plans remain feasible and responsive to changing market conditions.

An effective Master Production Schedule is:

- Realistic – aligned with available capacity and resources.

- Stable – minimizes unnecessary schedule changes that disrupt operations.

- Responsive – adapts to legitimate shifts in customer demand.

- Visible – provides a clear roadmap for manufacturing, procurement, and distribution teams.

Organizations often use time fences and schedule freezing policies to balance stability with flexibility, protecting near-term production commitments while allowing adjustments further into the planning horizon.

In today's environment of volatile demand, supply chain disruptions, and increasing customer expectations, the Master Production Schedule is more than a planning tool, it is a strategic capability. 

Companies that establish a disciplined MPS process gain better operational control, improved service levels, and stronger financial performance.

Successful production planning is not about creating the perfect forecast; it is about developing a realistic plan that aligns demand, supply, and organizational objectives. The Master Production Schedule remains one of the most powerful tools available to achieve that balance.

 

Master Planning of Resources: The Backbone of Supply Chain Excellence

In modern supply chain management, successful planning depends on aligning business strategy with operational execution. 

The MPR framework helps organizations balance demand, capacity, inventory, and resources while improving customer service and operational efficiency. Each stage builds upon the previous one, creating an integrated planning process that supports better decision-making across the entire supply chain.

1. Business Plan

The process begins with the Business Plan, which defines the organization’s strategic direction. This high-level plan establishes financial objectives, growth targets, market positioning, product strategies, and overall business priorities.

The Business Plan typically covers a long-term horizon of one to five years and serves as the foundation for all operational planning activities. It provides guidance on revenue expectations, investment decisions, expansion opportunities, and resource allocation.

2. Sales & Operations Planning (S&OP)

Sales & Operations Planning translates strategic business objectives into an achievable operational plan. At this stage, cross-functional teams from sales, operations, finance, procurement, and supply chain collaborate to balance market demand with supply capabilities.

S&OP creates alignment between customer expectations and operational capacity. Organizations review forecasts, inventory levels, production constraints, and financial targets to develop a consensus plan that supports both profitability and customer service.

3. Demand Management

Demand Management focuses on understanding, forecasting, and managing customer demand. This step combines forecasting techniques, market intelligence, customer orders, promotional plans, and historical sales data to generate accurate demand projections.

Effective demand management reduces uncertainty and improves responsiveness across the supply chain. Companies that maintain accurate demand visibility are better positioned to optimize inventory, improve service levels, and minimize operational disruptions.

4. Master Production Scheduling (MPS)

The Master Production Schedule converts demand plans into a detailed production timetable. The MPS determines what products will be produced, in what quantities, and when production will occur.

This stage acts as the critical link between customer demand and manufacturing execution. A well-structured MPS ensures production stability while maintaining flexibility to respond to changing customer requirements.

5. Rough-Cut Capacity Planning (RCCP)

Once the Master Production Schedule is developed, Rough-Cut Capacity Planning evaluates whether sufficient capacity exists to support the production plan. RCCP focuses on critical resources such as labor, machinery, production lines, and key work centers.

The objective is to identify potential bottlenecks before detailed planning begins. If capacity constraints are detected, planners can adjust schedules, increase resources, or revise production priorities.

6. Material Requirements Planning (MRP)

Material Requirements Planning calculates the materials, components, and raw materials needed to support the production schedule. MRP systems analyze bills of materials, inventory balances, lead times, and planned production orders to determine procurement and manufacturing requirements.

MRP plays a central role in ensuring materials are available when needed while minimizing excess inventory and carrying costs. It also improves supplier coordination and purchasing efficiency.

7. Capacity Requirements Planning (CRP)

Capacity Requirements Planning expands on RCCP by performing a more detailed analysis of production capacity at the operational level. CRP evaluates workload requirements for specific work centers, machines, and labor resources.

This step helps organizations validate whether production schedules are realistic and achievable. Detailed capacity analysis supports improved scheduling accuracy, resource utilization, and operational efficiency.

8. Production Activity Control (PAC)

Production Activity Control represents the execution phase of planning hierarchy. PAC manages the release, scheduling, monitoring, and control of production orders on the shop floor.

At this stage, organizations track actual production performance against planned schedules, manage work-in-process inventory, resolve operational issues, and ensure timely order completion. Effective PAC improves production visibility, reduces delays, and supports continuous operational improvement.

Bottlenecks Theory vs. Theory of Constraints: Are They the Same Thing?

If you’ve spent any time around operations or supply chain teams, you’ve probably heard someone say, “We need to fix the bottleneck.”

And they’re not wrong.

But here’s where things get interesting: fixing a bottleneck isn’t the same thing as applying the Theory of Constraints (TOC) even though the two ideas are closely related.

We have already spoken about Theory of Constraints in this blog:

- Addressing bottlenecks

- Drum-buffer-rope

- The Goal

But it is worth explaining in detail the differences between Bottlenecks Theory and Theory of Constraints, but first: What’s a Bottleneck?

A bottleneck is simply the slowest step in a process, the part that limits how much your system can produce.

Imagine this:

• Production can make 1,000 units per day

• Packaging can only handle 600 units per day

Packaging is the bottleneck. It doesn’t matter how fast production runs, your total output is capped at 600 units.

Bottleneck theory focuses on identifying that slow step and improving it.

You might add labor, reduce downtime, upgrade equipment etc. The goal is to increase flow by fixing the slowest point.

Now: What Is Theory of Constraints (TOC)?

The Theory of Constraints, developed by Eliyahu M. Goldratt, takes this idea much further.

TOC says: Every system has one constraint that determines its overall performance, and here’s the key that constraint isn’t always a machine, it could be a policy, a forecasting method, a batch size rule etc.

TOC isn’t just about finding the slow step. It’s about managing the entire organization around whatever is currently limiting throughput and profit.

For example, imagine you increase manufacturing capacity, but sales can’t sell more product. The constraint was never production. It was demand.

Optimizing production in that case just creates more inventory.

TOC forces you to look at the whole system before investing time and money.
 
Fixing bottlenecks is good operations management, managing constraints is smart business strategy. One improves a step. The other improves the system, and in today’s volatile supply chain environment, systems thinking wins.

 

Antifragility: The Next Evolution of Supply Chain Design

For decades, supply chains have been optimized around efficiency.

After repeated shocks, from natural disasters to trade wars, to COVID-19, the focus shifted to resilience. Today, organizations are exploring a more radical idea: antifragility.

Coined by Nassim Nicholas Taleb, antifragility describes systems that benefit from disorder. While fragile systems break under stress and resilient systems merely survive it, antifragile systems improve because of volatility. Applied to supply chains, this concept challenges many long-standing assumptions about cost, control, and risk.

A resilient supply chain is designed to absorb shocks and return to its original state. It relies on buffers, backup suppliers, safety stock, and recovery plans. These are necessary and valuable but they still assume that disruption is an exception.

Antifragile supply chains start from different premises: disruption is normal.

Rather than asking, “How do we recover faster?”, antifragile systems ask: “How do we learn faster and become stronger each time disruption occurs?”

This subtle shift has profound implications.

Antifragility does not mean chaos, nor does it mean abandoning efficiency altogether. Instead, it involves intentional design choices that allow learning, adaptation, and optionality.

Key characteristics include:

1. Redundancy with purpose

Traditional supply chains view redundancy as waste. Antifragile networks treat redundancy as a strategic asset, multiple suppliers, routes, and production options that can be tested under stress to reveal which perform best.

2. Small, frequent stressors

Rather than avoiding failure at all costs, antifragile organizations allow small failures, missed forecasts, supplier switches, pilot disruptions, to surface weaknesses early, before catastrophic breakdowns occur.

3. Optionality over optimization

Instead of committing fully to the lowest-cost supplier or single global network, companies maintain options: regional sourcing, flexible contracts, modular production, and postponement strategies.

Despite its appeal, antifragility remains uncommon in supply chain design.

One reason is measurement. Traditional KPIs; cost, service level, asset utilization etc reward stability and penalize redundancy. Antifragility delivers value over time, often invisibly, until a major shock reveals its advantage.

Another barrier is culture. Antifragility requires leaders to tolerate controlled inefficiency, empower local decision-making, and accept that not all failures should be eliminated only the catastrophic ones.

Finally, antifragility challenges the legacy of lean thinking. While lean principles remain powerful, applying them without regard for volatility can unintentionally increase fragility at the network level.

Global supply chains are unlikely to become calmer. Climate risk, geopolitical fragmentation, regulatory divergence, and technological disruption are increasing variability, not reducing it.

In this environment, the question is no longer whether supply chains should be resilient but whether they should be designed to evolve through stress.

The most competitive supply chains of the future may not be the most efficient ones but the ones that grow stronger every time the world changes.

The New Geography of Supply Chains: Nearshoring, Friendshoring & Resilience

For decades, global supply chains were optimized for one primary goal: cost efficiency.

Companies chased low-cost labor, consolidated suppliers, and stretched production networks across continents. That model delivered scale and savings but it also created fragility.

Recent years have fundamentally changed how organizations think about supply chain geography. Trade tensions, geopolitical conflicts, climate disruptions, pandemics, and transportation bottlenecks have exposed the risks of overly long and concentrated supply chains. As a result, businesses are rewriting the global supply chain map, prioritizing nearshoring, friendshoring, and resilience over pure cost optimization.

From Globalization to Regionalization

The shift we are witnessing is not the end of globalization, but a move toward regionalized supply chains. Instead of relying on a single distant manufacturing hub, companies are spreading operations across multiple regions closer to end markets.

This new approach reduces dependency on any one country or trade lane and allows companies to respond faster to demand changes. Shorter supply lines mean lower transportation risk, reduced lead times, and greater flexibility critical advantages in an era of constant disruption.

Nearshoring: Bringing Production Closer to Home

Nearshoring involves relocating manufacturing or sourcing closer to a company’s primary markets. For North American firms, this often means moving production from Asia to Mexico or other parts of Latin America. In Europe, nearshoring may involve Eastern Europe, Turkey, or North Africa.

The appeal of nearshoring goes beyond geography. Companies benefit from:

• Faster replenishment cycles

• Reduced transportation costs and emissions

• Improved collaboration and quality control

• Lower exposure to port congestion and global shipping volatility

While labor costs may be higher than offshore alternatives, many organizations find that the total cost of ownership including risk, inventory, and responsiveness favors nearshoring in the long run.

Friendshoring: Trust as a Strategic Asset

Friendshoring takes the idea a step further by prioritizing sourcing from countries with strong political, economic, and regulatory alignment. The goal is not just proximity, but trust.

In a world of export controls, sanctions, and sudden policy shifts, companies want suppliers located in jurisdictions where trade relationships are stable and predictable. Friendshoring reduces the risk of supply disruptions caused by geopolitical tensions and helps organizations stay compliant with evolving regulations.

This approach is especially relevant for critical industries such as semiconductors, pharmaceuticals, energy, and defense, where supply continuity and security are essential.

The Cost vs. Resilience Trade-Off

One of the biggest misconceptions is that resilience and cost efficiency are mutually exclusive. In reality, disruptions are expensive. Factory shutdowns, stockouts, expedited freight, and lost customers often cost far more than incremental increases in production expenses.

By redesigning supply networks with resilience in mind, companies can stabilize operations, protect revenue, and improve customer trust even if unit costs rise slightly. Over time, many organizations find that resilience delivers a strong return on investment.

Modern supply chain technology is a key enabler of this shift. Digital twins, scenario modeling, AI-driven risk analytics, and real-time visibility platforms allow companies to test different geographic configurations before making large investments.

These tools help leaders answer questions such as:

• What happens if a key supplier goes offline?

• Which regions offer the best balance of cost, risk, and speed?

• How should inventory be positioned across a multi-regional network?

Data-driven insights make it possible to design smarter, more adaptive supply chains without relying on guesswork.

Looking Ahead, the geography of supply chains is being permanently reshaped. Nearshoring and friendshoring are not short-term reactions they are long-term strategic responses to a more volatile world.

Companies that embrace this shift will be better positioned to navigate uncertainty, meet customer expectations, and compete in the years ahead. Those that cling to overly centralized, cost-only models may find themselves increasingly exposed to disruption.

Digital twin: Conecting the digital and real world

The term “digital twin” might sound futuristic, but it’s quickly becoming a practical tool reshaping how operations and supply chains work today.

In simple terms, a digital twin is a virtual replica of a real-world object, system, or process; anything from a single machine to an entire manufacturing network.

Imagine your factory, warehouse, or supply chain recreated in a digital space. This virtual version mirrors what’s happening in real time, thanks to data flowing in from sensors, IoT devices, and business systems. Every movement, transaction, and temperature change can be captured and reflected in the digital twin.

So, what’s the point? The value lies in simulation and insight. A digital twin allows you to experiment and test scenarios without affecting actual operations. You can explore what might happen if a supplier goes offline, if demand spikes unexpectedly, or if a new route could shorten delivery times. Instead of reacting to problems after they occur, you can anticipate and plan for them.

This technology helps organizations make smarter, faster decisions. Maintenance can become predictive instead of reactive. Inventory planning can adjust automatically to real-time demand. Logistics teams can visualize the entire flow of goods and identify inefficiencies before they cause delays.

Ultimately, a digital twin acts as your operation’s virtual brain, continuously learning, adapting, and optimizing. It bridges the gap between the physical and digital worlds, giving supply chain leaders greater visibility, control, and confidence in every decision.

The future of operations isn’t just physical anymore. It’s mirrored, modeled, and improved through digital twins.

 

Balancing OEE with Other Supply Chain KPIs: Navigating the Tradeoffs

In the world of operations, few metrics get as much attention as Overall Equipment Effectiveness (OEE). OEE measures how effectively a manufacturing asset is utilized by combining three factors: availability (uptime), performance (speed vs. ideal cycle time), and quality (good units produced vs. total units).

In simple terms, it’s a snapshot of how close a machine or line is to running at its theoretical maximum potential. Improving OEE is often seen as a direct path to better productivity and lower costs, but like many metrics, focusing on it in isolation can create conflicts with other critical supply chain goals.

For instance, pushing OEE higher often means striving for longer production runs and fewer changeovers. That’s good for machine efficiency, but it can hurt inventory turns and customer responsiveness. A plant that maximizes OEE by producing large batches of a single SKU may end up tying up working capital in excess stock and reducing the ability to adapt to shifting demand. Similarly, prioritizing OEE can clash with on-time delivery if equipment schedules are optimized for efficiency rather than customer requirements.

Another tradeoff emerges with flexibility and innovation. To keep OEE high, operations teams may resist frequent product launches or engineering changes, both of which introduce downtime, lower yields, and slower cycle times. Yet in today’s market, agility and product variety often matter just as much as asset utilization.

So how do you balance these competing priorities? The key is to treat OEE not as an end in itself, but as one piece of a broader performance puzzle. A mature operations strategy aligns OEE with business objectives by:

• Defining the right horizon: Short-term dips in OEE may be acceptable if they support long-term goals like faster customer response or product diversification.
• Using tiered KPIs: Pair OEE with customer-facing measures such as fill rate, lead time, and service level, ensuring that equipment efficiency doesn’t come at the expense of market performance.
• Driving continuous improvement, not perfection: The pursuit of 100% OEE is unrealistic. Instead, focus on targeted improvements that also strengthen supply chain resilience.

In the end, OEE is a powerful tool for uncovering hidden losses and improving operations, but it should never overshadow the broader mission: delivering the right product, at the right time, at the right cost.

Balancing OEE with other KPIs ensures that efficiency gains translate into true supply chain value.

Understanding the 7 Types of Logistics

In today’s fast-paced and interconnected world, logistics is the backbone of successful supply chain management. But logistics is far more than just trucks and warehouses, it’s a complex network of movements that support everything from manufacturing and retail to military operations and live events.

Let’s break down the 7 main types of logistics, each with its own purpose and value in the supply chain:

1. Inbound Logistics: This refers to the movement of raw materials and components from suppliers to a business. It plays a crucial role in manufacturing. For example, a car manufacturer receiving engines, tires, and electronics depends heavily on a well-organized inbound logistics system.

2. Outbound Logistics: Once products are finished, outbound logistics ensures they reach the customer. It includes warehousing, packaging, and transportation. Think of Amazon shipping products from its fulfillment centers to your doorstep.

3. Reverse Logistics: This process moves goods back from customers to the business. It includes returns, recycling, repairs, or disposal. E-commerce companies rely on reverse logistics to handle product returns efficiently.

4. Third-Party Logistics (3PL): Many companies outsource logistics operations like transportation, warehousing, and distribution to service providers. DHL or FedEx, for instance, manage end-to-end supply chains for other businesses, allowing them to focus on their core operations.

5. Fourth-Party Logistics (4PL): This is a step above 3PL. A 4PL provider acts as a strategic partner, overseeing and integrating multiple 3PL services for a manufacturer. It offers a big-picture approach to managing the entire logistics ecosystem.

6. Military Logistics: Beyond commercial use, logistics is critical in military operations. It involves planning, movement, and supply of troops, equipment, and ammunition. Effective military logistics can mean the difference between mission success and failure.

7. Event Logistics: Ever wondered how entire music festivals or sports events come together? Event logistics handles the planning and transportation of staging, lighting, and equipment. It ensures everything is in the right place at the right time, from concerts to exhibitions.

Logistics isn’t one-size-fits-all. Each type serves a unique function in supporting business, operations, or events. Understanding these logistics types helps supply chain professionals optimize efficiency, reduce costs, and improve customer satisfaction.

Understanding the 7 Main Types of Shipping Containers in Global Supply Chains

In today’s interconnected world, shipping containers are the unsung heroes of global trade.

From electronics to fresh produce, nearly every product we use has spent time inside one of these versatile metal boxes. But not all containers are created equal, each type is designed for a specific set of cargo requirements.

Here are the seven most commonly used shipment containers and how they serve the diverse needs of modern supply chains.

1. Standard Dry Container (20ft or 40ft):

This is the most widely used container in the world. It’s fully enclosed, weatherproof, and suitable for general cargo.

Think furniture, textiles, machinery, and consumer goods. Most dry containers come in 20-foot and 40-foot lengths and can be stacked and transported easily by ship, truck, or rail.

2. High Cube Container:

Similar to standard containers but with an extra foot of vertical space (usually 9'6" high instead of 8'6"), high cube containers are ideal for lightweight, high-volume goods. They're often used for bulkier cargo like automotive parts, paper products, or large electronics that benefit from the additional headroom.

3. Open Top Container:

Designed for cargo that can’t be loaded through standard doors—like large machinery, construction equipment, or oddly shaped materials, open top containers have a removable roof. They allow for crane loading from above, making them practical for oversized freight.

4. Flat Rack Container:

With collapsible sides and no roof, flat racks are engineered for heavy loads and oversized items such as steel coils, industrial pipes, or vehicles. These containers allow cargo to extend beyond the sides, making them a flexible choice for large or awkward shipments.

5. Refrigerated Container (Reefer):

When it comes to perishable goods like food, pharmaceuticals, or flowers, reefers are essential. These containers are equipped with active temperature control systems that keep cargo at a specific temperature throughout the journey, ensuring quality and compliance with safety standards.

6. Open Side Container:

These containers have side doors that open fully, offering greater accessibility for loading wide or irregularly shaped cargo. They’re often used in retail and manufacturing sectors where easy access to specific items within the container is essential.

7. Tank Container:

Built for transporting liquids, gases, and chemicals, tank containers are cylindrical tanks housed within a steel frame. They are heavily regulated and ideal for food-grade liquids like wine or milk, as well as hazardous materials, ensuring safe and efficient transit.

Choosing the right container isn't just about space, it’s about efficiency, compliance, and cost control. Understanding the functions of each container type can help make better decisions, reduce damage risk, and optimize the flow of goods across borders.

Whether you're moving basic goods or specialized cargo, the right container can be the difference between a smooth shipment and costly delays.

 

Logistionary: Genchi Genbutsu

Genchi Genbutsu is a core principle of the Toyota Production System that translates to "go and see for yourself."

It emphasizes firsthand observation to understand situations deeply, solve problems accurately, and make informed decisions.

Instead of relying on second hand reports or data alone, leaders and team members are encouraged to go to the actual place where value is created, such as the factory floor, the customer site, or the development environment.

The Genchi Genbutsu approach involves:

• Visiting the gemba: Physically going to the site of the issue or process.

• Observing without assumptions: Understanding the facts directly through observation.

• Engaging with people: Talking to employees, operators, or customers involved.

• Asking “Why?” and using the “5 Whys” technique to get to the root cause.

 
Genchi Genbutsu promotes situational awareness, empathy, and fact-based leadership. It bridges the gap between strategy and execution, ensuring leaders stay grounded in operational realities.

Finally, a word to clarify the difference between Genchi Genbutsu and Gemba; Gemba means "the real place" where work happens and value is created (like a factory floor) Genchi Genbutsu means "go and see for yourself" and emphasizes firsthand observation to understand problems deeply.

Gemba is the location, Genchi Genbutsu is the mindset and method of investigation.

The Hidden Factory: The Silent Killer of Supply Chain Efficiency

In supply chain operations, we pride ourselves on precision, efficiency, and continuous improvement.

But what if I told you there’s an entire shadow process operating inside your workflows quietly consuming time, resources, and money and it’s not even on your radar?

Welcome to the world of the Hidden Factory.

What is a Hidden Factory?

A Hidden Factory is the collection of all the rework, corrections, and unofficial fixes that happen behind the scenes to make a process appear like it's working smoothly. These aren’t logged as defects. They don’t show up in your dashboards. But they exist.

These might look like:

• Warehouse staff quietly relabeling mis-picked items before shipping.
• Customer service reps manually adjusting inventory levels in the system to correct errors.
• Planners double-checking forecasts with spreadsheets because they don’t trust the MRP output.

Individually, these “workarounds” seem harmless even helpful. But collectively, they signal process gaps that are eating into your margins and scalability.

Hidden factories are dangerous because they create the illusion of control. Everything looks good on paper, but under the surface, people are compensating for broken processes.

The good news is, Hidden factories can be found and fixed. Here are some ways to shine a light on them:

1. Listen to the “Off-the-Record” Conversations; pay attention when someone says:

“Oh, I always fix that before it causes a problem.” “It’s faster if I just do it this way.”

2. Map the Actual Process (Not the SOP)

Use value stream mapping to compare how the process is supposed to work versus how it actually works. You'll often find extra steps that aren't documented anywhere, that's your hidden factory.

3. Look at Cycle Time Variance

If your standard cycle time says an order takes 3 hours, but in practice it’s closer to 5, that discrepancy is usually where the rework is hiding.

4. Involve the Front Lines

Your team knows. Engage operators, planners, and support staff early and often, they live the day-to-day realities that KPIs can’t always capture.

How tariffs impact Supply Chains?

In today's globalized economy, supply chains are increasingly complex and interconnected, stretching across countries and continents. As businesses source materials and goods from around the world, they must also navigate a constantly shifting landscape of regulations, trade policies, and tariffs. These trade barriers can have a profound impact on the flow of goods, production timelines, and overall costs.

But what exactly are tariffs, and how do they affect supply chains?

Tariffs are taxes or duties imposed by a government on imports and exports. Governments use tariffs to regulate trade, protect domestic industries, or retaliate against trade imbalances or unfair trade practices. While tariffs serve as a source of revenue for governments, they also increase the cost of goods that cross borders. These added costs are typically passed along the supply chain, ultimately impacting consumers.

One of the most direct impacts of tariffs is the increase in the cost of goods. When a government imposes tariffs on imported goods, it raises the price of those goods for businesses importing them. For supply chains that rely on foreign suppliers for raw materials, components, or finished products, this results in higher production costs.

In response to tariffs, many businesses reevaluate their sourcing strategies to mitigate increased costs. This often means shifting production or sourcing to countries with lower or no tariffs. However, moving production or sourcing to a new country isn't always a simple solution. The decision to relocate production can involve significant capital investment, operational changes, and the development of new supplier relationships all of which can take time to implement.

Tariffs can also affect consumer behavior. Higher prices on imported goods due to tariffs may lead consumers to reconsider their purchasing decisions. If goods become more expensive, they may seek alternatives or reduce their spending altogether.

All in all, tariffs are more than just a political or economic issue they have tangible impacts on global supply chains. Increased costs, disruptions, and the need for strategic adaptation are just a few of the challenges businesses face in navigating tariff-related obstacles.

FMCG growth VS shareholder returns

 
The highest ranking of consumer goods companies based on 2023 revenue have been recently announced.

Top 100 consumer goods companies 2024
 
Over the past year, the companies on this list have balanced cost-saving measures with bold investments in technology, AI, and consumer engagement to improve efficiency and stay competitive amid challenges like inflation, supply chain issues, and shifting consumer priorities. 
The largest FMCG companies in the world have invested in OpenAI’s GPT-4, Instacart etc, piloted VR for R&D, used 3D tech for better retail shelving, launched new digital platforms or acquired new enterprises to name a few initiatives that have contributed to its growth.
 
However, this has not translated in the performance of its shares and the trajectory of most of this companies have been spiraling down leading to negative returns to shareholders over the last 365 days.
 
It can be surprising that the size and growth of these companies does not match their performance in the stocks market, and it would be an interesting debate to understand why.
 
Trust? Expectations? Overall macro-economic performance? ….
 

The Largest Courier Companies in the World

Interesting infographic showing by market capitalization the largest courier companies in the world.

It´s no surpirse that the “big three” global couriers, United Parcel Service (UPS), FedEx, and DHL continue to dominate transport services with closer to 70% of market cap.

Having said that, other carriers that operate more regionally have still attained a lot of value, including Japan Post Holdings and China’s S.F. Express and ZTO Express.

Lean 8 wastes

  

Before we dive into the eight types of wastes, it is important to understand what waste is.

Waste is any action or step in a process that does not add value to the customer.

Originally seven wastes (Muda) were identified, and a methodology was developed by Toyota, as part of the Toyota Production System (TPS).

The seven wastes were; Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing and Defects. They are often referred to by the acronym ‘TIMWOOD’.

The 8th waste of non-utilized talent or ‘Skills’ of workers was later introduced in the 1990s when the Toyota Production System was adopted in the Western world. As a result, the 8 wastes are commonly referred to as ‘TIMWOODS’.

We can now deep dive into each of these eight wastes and understand how we can reduce or eliminate them as part of a leaner and more efficient operations.

The Insane Logistics of Formula 1

If you think Formula 1 races are amazing and the pinnacle of technology applied to sport, you are probably right.

There is no other sport where machinery and components are as crucial to the team success as in Formula 1.

But with twenty-one races across five continents every year, the ten teams that take part on the competition face an astronomical challenge to ensure all what they need to be competitive during the weekend is ready.

Hundreds of pellets and containers travelling around the globe moving enough equipment to ensure the comfort of thousands of workers and the capabilities to assemble and disassemble a racing car every weekend.

We already talked about what happens behind the scenes in the Red Bull air racing competition here, now is time to go even further and watch the logistics miracle that happens in Formula 1!

Enjoy!

The Surprisingly Complex Logistics of Product Returns

Reverse logistics is the movement of goods “upstream” through a supply chain, to return them from the end customer back to a retailer or manufacturer.

Reverse logistics also covers the recycling, repurposing, repairing and resale of products.

There are several types of reverse logistics, for different reasons:

Returns management: This is the most common reverse logistics process: when a customer returns an item to a seller because it is damaged, not as expected, doesn’t fit etc.

Remanufacturing or refurbishment: This involves the repairing and rebuilding of products. Retailers and manufacturers may also recover some parts from a defective product to be used elsewhere.

Unsold goods: When a retailer returns unsold goods to the manufacturer.

Delivery failure: In the instance of a failed delivery (for example, the customer was not in to receive the package), products may be shipped back to the retailer.

Rental equipment: This is when rented or leased products are returned to the manufacturer at the end of a defined term.

Repairs and maintenance: The customer will send the product back to the business to be repaired. 

End of life: These are products that can no longer serve any purpose, so will need to be recycled or disposed of.

The next video shows how reverse logistics works in real life and how complex. When the customer returns the product, a new intricate adventure starts until it reaches its final destination and potentially a new life!

Good Distribution Practices (GDP) & Good Manufacturing Practices (GMP)

 

Good distribution practices (GDP) and good manufacturing practices (GMP) are quality standards and guidelines that have the same objective, to ensure medical device and pharmaceutical products are safe, meet their intended use, and comply with regulations.

GMP focuses on manufacturing processes, while GDP covers distribution activities.

Good manufacturing practices involve consistently producing products that meet quality standards. This requires the implementation of a system where the aim is to minimize risks, from incorrect labelling of products to contamination to incorrect ingredients and everything in between. GMP cover all parts of the production process, from raw materials through to the production of the finished product.

Good distribution practices involve maintaining the quality and integrity of products through all stages of the supply chain. GDP applies to warehousing, storage, and transportation, and it covers everything from storing and transporting products under the right conditions and ensuring product integrity at the correct destination on time.

There are parts of GDP that are unique, so they don’t apply to GMP. Those unique parts of GDP include guidance on transportation covering aspects such as temperature control, vehicle controls, and conducting risk assessments on transport routes.

Does a change in price has always the same effect in customer demand?

 

Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price, in other words, how sensitive the quantity demanded is to its price. 

Economists use price elasticity to understand how supply and demand for a product change when its price changes.

Depending on its elasticity, a good is said to have elastic demand, inelastic demand, or unitary elastic demand.

If demand is elastic, the quantity demanded is very sensitive to price.

If demand is inelastic, the good's demand is relatively insensitive to price, with quantity changing less than price.

If demand is unitary elastic, the quantity falls by exactly the percentage that the price rises.

Two important special cases are perfectly elastic demand, where even a small rise in price reduces the quantity demanded to zero; and perfectly inelastic demand, where a rise in price leaves the quantity unchanged. 

Factors That Affect Price Elasticity of Demand

Availability of substitute goods: The more and closer the substitutes available, the more elastic is that good likely to be, as people can easily switch from one good to another if an even minor price change is made. If no close substitutes are available, the demand inelastic.

Breadth of definition of a good: The broader the definition of a good or service, the lower the elasticity.

Percentage of income: The higher the percentage of the consumer's income that the product's price represents, the higher the elasticity (more elastic) tends to be, as people will pay more attention when purchasing the good because of its cost.

When the goods represent only a negligible portion of the budget the income effect will be insignificant and demand inelastic,

Necessity: The more necessary a good is, the lower the elasticity (more inelastic), as people will attempt to buy it no matter the price.

Duration: For most goods, the longer a price change holds, the higher the elasticity is likely to be, as more and more consumers find they have the time and inclination to search for substitutes. 

Brand loyalty: An attachment to a certain brand can override sensitivity to price changes, resulting in more inelastic demand.

Addictiveness: Goods that are more addictive in nature tend to be more inelastic. This is because consumers treat such goods as necessities and hence are forced to purchase them, despite even significant price changes.

Based on all of the above, it is important that the demand forecaster is familiar with pricing actions taken by the company and anticipate their impact on demand.