I interviewed Mohamed Ali Eldabaa who discussed Capacity Constraints: Feed Stocks and Production Lines.
It's great to speak with you today, Mohamed. Looking forward to discussing this topic of capacity constraints, in particular, feed stocks and production lines. Can you first provide us with a brief background of yourself?
Hey Dustin, Sure, I'm Mohamed Eldabaa. I am currently working for 5+ years in supply chain management, managing supply chains for FMCG. I've also worked, before this, in the same field of the supply management and the procurement in oil and gas fields. So for today's topic, I believe we could have some good examples from both sectors — oil and gas and FMCG, which is mainly covering mostly the biggest section of the supply chains globally.
Can you first talk a little bit about what is involved with the capacity constraints in these two areas?
For sure. Currently, capacity constraints are the topic of the era, where we're seeing across all the industries globally that everyone has a business challenge in. Which is sometimes drives lots of money to be spent to make sure that this customer's needs are not a challenge to be a market leader.
So, in other words, the capacity constraints are a showstopper for anyone who tries to put his business strategy in action, versus the actual capacity that he can have. Today we will talk specifically on the feedstocks and production lines constraints. So mainly your feedstock suppliers. How can you do good capacity exercise with them and understand what exactly, what are your continuity plans, as well as your production lines. As an example, if you have an order with a hundred X units you are only able to produce 0.75 X Units because you can't. so the best approach would be to make sure that every single case is delivered for customers. Those are the two major points that we'll talk about today.
Can you talk about how it's done effectively?
For feedstocks, first, before we do our capacity to demand model in the beginning, if you are doing a new business, you should have a capacity study with all your suppliers, simpler what are your capacities? How can you feed my production lines? And you compare those Capacities to your demands and see if your demand is higher or lower than this capacity. If it's lower than this capacity, fine. Now you have a sufficient capacity that could cover any business demand increase or fluctuation that you should have. But if your capacity is less than your demand, now is the time to check for an alternative solution.
Some suppliers for feedstocks are having their capacity plans, producing the same feedstock for you from different locations, so you would check your supply chain with those sites/locations to make sure that those supply chains are active. So this is the first model which is if you are building a new supply chain or a new plant.
If you have an existing business already today, and you're having your feedstock capacity exercise to do, you should map all your supply chains and then define exactly what are the current capacities that you have. And you compare those with your business strategy and growth plans, if this plan is in line with your production capacities of the suppliers. If it's in line, you may need to make sure also that you're having a business continuity plan. By having other suppliers qualified in place or having other supply chains active in place. so you make sure whatever fluctuation happening in the business, that you are able to take those into consideration.
On the other side, and if your business is in some of the developing markets — so mainly India, Middle East and Africa regions, Asia Region or the Latin America Region, you need to make sure also that the supply chain itself is active and stable, if you're importing overseas, is stable, So this is for the feeder stocks capacity question.
If you face capacity constraints, it's just coming from feedstock suppliers, you have mainly two options. Either you invest with the supplier to his capacity, so he can give you more, and this could be a cost increase. Or you can go for another alternative solution option, which might be a more expensive option.
You will say that if I can produce a hundred cases of my product, the suppliers can support me with a hundred.Maybe he can support me with a 110. But if I need to produce 150, I will pay an extra X amount of money to make sure that these capacities are provided to me. So this is about the feedstocks and how we can think.
To wrap up, simply if it's a new business, you define your supply base, having the right capacity in place, and a backup plan. For an existing business, you need to make sure that your cross plans are in line with the supplier’s plans.
For the production lines, mainly, to make a very good, strong strategic plan in place, in advance of your production. So as simple as, what is my marketing plan? How the marketing plan is targeting the consumer and the customers, and how this plan is translated into numbers in terms of the produced product, so this produced product, when you are doing this capacity analysis to see what's the demand of the market and how can I support.
Again, it's more or less the same as the feedstock. Your production lines are able to produce a hundred cases of a product X, You need to increase this capacity another hundred. You need to make more. so your plan will be decided by losing market share because I will not invest in more capacity. So as simple as, it’s a choice of enabling the current suppliers to supply you with the right stock and finished goods. If not, because of the capacity constraints, one of the alternative options. For sure, you need to check always what if you cannot pay more for alternative solutions? Are there other same cost or maybe less cost options that are not revealed yet?
This is how you can map supply chain by checking the market studies, through the market intelligence to see how you can drive more value through getting less sourcing options, One of the things you should do is to check the market capability and understand how this capability is applied or support you to grow.
Do you have any success stories or examples you could share?
For sure. Actually, one of the major stories I could share from my previous company a feedstock issue with suppliers. And this feedstock issue actually was not because of the supply, Actually, it was because of the shipping capacity. It was the shipping lines was not able to ship certain quantity to a certain place. So we worked together as a customer and a supplier to work with the shipping line and other shipping lines to enable more capacity for this shipping line with the same cost. By applying the scale of this company — how we can enable this company and make sure that the scale is giving suppliers the scale the customer is giving the suppliers the best cost formula. How can you think of solving the capacity issues, without adding any extra cost on you or on the supplier.
About Mohamed Ali Eldabaa
Mohamed Ali Eldabaa