Lessons from the world's best supply chains
What can be learnt from the best in the business to improve your supply chain and gain a competitive advantage?
Apple, McDonald's, Amazon – what do they have in common? They all understand how to organise an adaptable and efficient supply chain to gain competitive advantage. But it’s not just multinationals that should be doing this. It’s at the heart of every business, from start-up to corporate. So what can businesses learn from the best-in-class, and what are the stand-out traits they share?
Put the customer first
All of the companies mentioned above share one primary characteristic: they all take their customers' behaviour and needs as their starting point, placing consumer experience above all else. Each company presents simple, elegant solutions to their customers, understands them in a deep way and blends their products and services seamlessly into their customers' daily routines - capturing more revenue and improving operational effectiveness along the way.
Mike Rigby, Head of Manufacturing, Transport and Logistics at Barclays, says that what most large successful companies have are clearly defined departments dealing with procurement, product origination and sourcing, warehousing and logistics. Each is large, bespoke and well structured.
“What they share,” Rigby says, “is a really strong interconnection between all of those areas, with one binding aim in mind - continuity of supply to the customer. They are placing the customer at the heart of the whole operation. That’s the strategy you’ll hear time and time again from these businesses. But it’s not for the faint hearted. It’s a real commitment to put in place a robust supply chain to deliver seamless customer service.”
Start small, think big
Of course, that is easy to understand if you happen to be a business as large as Google, but what about smaller companies?
“What I see with our clients is a very realistic understanding of the supply chain,” Rigby says. “They might not have the most efficient warehousing hub or logistics programme, and they may only have one factory. What they can do is evaluate every step of the supply chain to think about what could impact the customer experience.”
The lesson from the best businesses is not so much “the customer is always right”, but that being mindful of the customer’s needs is always right - every single step of the way.
The most successful companies are not afraid to change their supply chain networks if it helps them to obtain competitive advantage. How can your business think in the same way on a smaller scale? One approach is to simply apply the same logic, and think about continuity of delivery and quality instead of just cost.
“There’s a dynamic between the cost of the product and the continuity of its supply,” Rigby says. “Do you transact with a Far East supplier of a core product and risk quality and logistics problems, or do you choose a higher-cost local manufacturer?”
“These are not easy decisions to make but I’ve started to see more clients reach a tipping point whereby quality and surety of the supply chain are becoming more important than the cost of the product. Another example of the challenge faced by smaller companies is the debate between buying from a larger supplier of goods where they have less buyer-power but greater surety of supply.”
The lesson here is that the big challenge for businesses thinking about their supply chain is cost versus continuity, and the latter may well be more important if you want to emulate the world-leaders.
Cash is king
As the saying has it: “sales are vanity, profit is sanity and cash is reality”. A supply chain can’t exist without finance, and the value of overdue invoices to small businesses has grown by £10 billion over the past year to £40 billion, according to Bacs, the payments provider. And if you don’t get paid, ultimately you will struggle to fund purchases of stock or services, deliver salaries or expand.
“Cashflow transparency is critical,” says Simon Enticknap, Head of Product Execution, Trade and Working Capital, Barclays. “If you’re a supplier, your number one issue will be certainty of payment and confirmation of receipt of goods. You’ll want a clear vision of when you’re going to get paid and what you’re going to get paid.”
“Make sure you’re clear about who you buy from, how long it takes to process that purchase order, and, when you get the goods in, how effective are you at monitoring delivery and receipt, and turning around your invoice.”
Innovation is key
Innovative options are being championed by the government in this area, such as supply chain finance (SCF), which allows large companies to help their supply chain access credit and improve cash-flow.
“Without a supplier finance programme in place, the supplier gets a purchase order, delivers the goods and sends an invoice. From then on, it can be very difficult to track,” Enticknap says.
Under SCF, a bank is notified by a large company that an invoice has been approved for payment and the bank is then able to offer an immediate advance to the supplier at lower interest rates. This can transform cash-flow transparency and allow large companies and SMEs to access credit at much more competitive rates.
Online advances allow for analysis of manufacturing and logistics data as well as remote management of aftermarket services, which are all key aspects of the success of the best supply models. How can your business emulate this strategy (which can mean simultaneously keeping customers happy and achieving cost savings)?
It could be financially beneficial to emulate the world-leaders and invest in stock-tracking and logistics technology because consumer expectations are changing. According to new research from Barclays, products ordered online last year generated just over one billion deliveries - and by 2018 this number is expected to grow by 28.8 per cent to over 1.35 billion.
It also found that purchasing and browsing activity peaks between 10pm and midnight, and that consumers are now shopping on their mobiles or tablets around the clock. These evening sprees are driving consumer expectations for longer delivery windows, so next or same-day delivery options should be made a priority; it will keep your customers happy.
Investing in logistics that enable the customer to choose the service they require easily and conveniently and then track the progress of their order can pay dividends. A digital invoicing system could also have a real benefit to your cash-flow. Developing things further than this may be difficult for a smaller company at present, however, as off-the-shelf technological systems are not yet widely available.
Enticknap says: “The digitisation of the invoice process - using electronic data interfaces to submit the invoice directly - gives you certainty of delivery of the invoice,” he says. “An area where we could next see development is in linking the submitted invoice information directly into to the buyer’s own internal network and payment systems. That’s something we haven’t seen yet but would help further streamline the whole process.”
Learn from the best
Even if you don’t have the capital to invest in bespoke technological systems for your company, you can still transform your supply chain. If you follow the “lessons from the best”, understand how your business can learn from them and apply the formula to itself, you will be well on the way to keeping your customers happy and gaining a strong advantage over your competitors. Which isn’t a bad step towards one day joining the supply-chain kings at the top table yourself.