A defined Supply Chain strategy will deliver immense value to your bottom line.
Our professional services division made significant gains last year, we secured three key accounts as seconded Supply Chain and Warehouse Manager roles in Billabong, Smith and Caughey and European Foods; we were engaged with an exciting ERP selection project for Trilogy/Ecoya and we have started holding Supply Chain strategy workshops with existing and potential customers.
Already for 2017 we are engaging with another 7 potential customers for this service.
I’m really excited about this division as I see it leading the future of SCS and I’m convinced our SCP (scp-vs-3pl ) model is the future of logistics.
We proved this last year by producing some brilliant results for our customers that clients simply don’t get through traditional 3pl and domestic/international freight relationships so I wanted to share some thoughts and experiences with our community via this blog in the hope that other SCS clients and prospective customers will benefit.
Our outcomes to date in this division have been spectacular, we have guaranteed and delivered significant savings, materially increased operational capability, helped our clients secure new contracts, improved processes, reduced costs per unit, increased margins, reduced stress and helped companies achieve more sustainable operations that are less reliant on people and more reliant on processes and systems thus avoiding material cost and pain in the future. PaT (pat-brochure) has played a vital part in this as an ERP for managing people it is not only unique it delivers a competitive advantage to our clients which no other company has.
A key learning in helping other companies optimise outcomes (freight and/or warehousing and/or procurement and/or IT platforms etc…) is that optimisation is only achieved with companies that are focussed on developing strategic capability so this is what this blog focuses on – some of the lessons we have learnt and answers we have developed in helping companies achieve higher levels of strategic capability within their Supply Chain.
Firstly it’s important to understand why would a company be interested in developing strategic capability? The irony is that less than 10% of companies do and if you haven’t worked in one you won’t know what you’re missing out on. I was lucky to have worked for a large billion dollar multinational in my mid to late twenties where I had three country level responsibilities and was responsible (and successful) for delivering record growth in each country – I’m clear that my success was largely based on the principles supported here, I have also seen these principles alive and thriving in every successful company I have ever engaged with.
So here is a quick list of the key benefits as I have seen them realised in companies that develop strategic capability.
- Lower cost per unit, higher profit margins
- Scale (grow) with minimal growth pains
- Achieve higher customer service levels, happier customers
- Sustainable growth, processes now stick
- Lessen reliance on people, gain reliance on systems and strategy, less stress
What does Strategic Capability look like?
We recently developed this form to help our customers understand their “Current State” aka “AS IS”. I encourage you to have a look at this before continuing, it’s a quick one pager, it’s interesting, surprising and provides invaluable insights to any company that is looking to improve their bottom line.
(click the image to enlarge it)
Imagining goals, establishing systems, iterating them and auditing them (if you can’t monitor it you can’t manage it) are traits of strategic organisations that dominate their channels. Where we [SCS] frequently come unstuck initially with our SME tactical/sales focussed organisations is the behavioural disconnect between the logical acceptance for systems (yes it’s obvious that better systems training and processes will deliver better results) and the old way of doing things that were simple, fast, known and proven.
Transitioning organisations from a tactical to strategic state invariably creates varying degrees of contention; we’ve identified three key challenges. Know thy enemy!
Problem #1 – You don’t know what you don’t know
The benefits of higher strategy are bound to not have been experienced by the very operators we’re asking to adopt the change (we can support this statement by the logic that if they knew the value of strategic capability they would have established it already, ergo if it does not exist in the organisation already then a conclusion can be drawn that comprehension of the value of strategy or the ability to execute it is obviously limited). Yikes.
Problem # 2 – Humans naturally follow the path of least resistance.
Compounding the efforts to transition through change is the natural inclination for humans to choose the path of least resistance therefore not only are we asking people to adopt new ways of working which is foreign and exists outside of their comfort zone that they have no proven frame of reference for, it is natural for people to defer back to a known baseline that produces known outcomes that validates their effort.
Problem # 3 – most people are naturally short term focussed.
Most people invest effort in short term results. Things they can see and feel not things they can imagine.
Consider a Yale university study that tracked the graduates of 1953 over 20 years, only 3% had written goals (think of goals as defined imagined strategies cause that’s what they are) at the end of 20 years those 3% were worth more than the 97% combined who were tactical in their approach to life.
In supply chain and where organisations seek to achieve strategic capability this is perhaps the biggest issue. The 3% of people who articulate strategies somehow understand causality at a deeper level than other people. They know that decisions today have a profound impact on outcomes in the future and they allow the vision of the imagined future to guide their decisions today – this is very strategic and they will often forego instant gratification for the mid-long term gain. People who are tactical react to the event on the day and are usually oblivious to the causality their wonderfully justified actions create in the future.
For example it is common in tactical warehouse situations for sales people to drop in and take stock to satisfy an urgent sales requirement. Sincerely meaning to adjust records they often don’t and this creates stock issues, the stock issues always end up being significant as people then waste time and money looking for phantom stock at a time in the future when it is desperately needed for a customer order that has been promised, this creates stress, contention (the warehouse is usually blamed and rarely has the system smarts to defend itself so they become an easy target which is awesome for inter-departmental relations), a grumpy customer that has to now be damage controlled because stock that shows in the system can’t be fulfilled (which sometimes puts significant earnings at risk i.e. it could be the straw the broke the camels back and lose the whole account which is worth hundreds of thousands) and the investigation cost alone will often have far exceeded the margin on the initial sale a few weeks ago but because the events of the unrecorded stock decrement (taken by the sales person) is impossible to connect to the tsunami of events caused by the unexplained phantom stock loss the root cause remains unidentified therefore the same situations continue unabated ergo the insanity cycle continues. This behaviour is endemic in typical sales focussed, tactical companies.
So highly optimised businesses are strategically focussed – yet most people are tactical and short term focussed. So herein lies yet another disconnect/challenge.
The good news is that people can be managed through change, strong leaders who buy into the value of strategy build epic companies and can manage their employees directly or via a proxy (e.g. SCS – have to put a plug in here) to adopt new processes but it must always be supported from the top. Leading companies don’t have an attitude to deal with the disasters today and hopefully in a few years they will be brilliant, their success is planned, strategised and decisions are managed to the strategy. Think of any top performing company and they are all strategic, systems are the soul of their company and they inspect what they expect. They don’t build greatness by reacting to daily chaos, they imagine outcomes then they document them, they plan to be successful and they constantly check to make sure they are on track and make adjustments based on feedback (metrics – they always have lots of these, meaningful ones). Decisions are always referred back to the overarching strategy, if the strategy in practice proves too restrictive to reality then the strategy is adjusted.
There is nothing wrong with being tactical, my view is that it is even critical that new companies start this way, the need for creativity and agility is paramount for any startup and it is this passion that attracts early adopters, tactical companies can and do grow too but it’s also my experience that the bigger they get the more painful the growth is and the harder they work for their margin. Tactical companies produce more stress as they grow and if that’s your thing (some people thrive on the stress) then fill yer boots you won’t enjoy being strategic and if you own the company or have director like responsibilities where is the fun in doing something you don’t enjoy. Strategy at the higher level is more about thinking (you must imagine, plan, inspect, adjust then repeat) and less doing, some people don’t like auditing (I hate it) and are not comfortable thinking they prefer the doing – they get the satisfaction of seeing the value of a days work, which is fine, play to your strengths. Many highly successful companies are owned by doers who are smart enough to surround themselves with brilliant staff and partners who help manage strategy in part or in full (another plug for SCS here) and let them do the thinking, auditing, planning…under their approval.
The challenge really only arises when/if a company wants to grow. Growing a company with strategic capability is relatively easy, growing a company that is tactical is harder on everyone in the organisation and riskier for the business because everything is so manual and people dependent so if you are looking to grow and you’re not up to speed with these concepts yet (these are all learned skills and we all started somewhere) I strongly encourage you to play with them, you’ll never regret the time taken to do so. Promise.
We believe that by delivering excellence in Supply Chain we empower our customers to focus on the core competencies that are important to them to grow brilliant businesses.
If you’d like to discuss ways to improve your business through supply chain (products don’t compete supply chains do) drop me a line email@example.com we’d love to hear from you and have lots of brilliant ideas to share around Logistics and IT strategies. We specialise in SME (typically 50k to 50m) but we do a few of the larger organisations that want more value than the Big 4 provide. We predominately work with importers/distributors and e/retailers (couple of exceptions within this too).
Established in 2001 SCS is NZ’s largest PurePlay 3pl managing nearly 40,000 pallet positions for hundreds of customers. Our consulting division was launched in 2014 we boast a 100% success rate with a diverse range of customers across a diverse range of supply chain projects. Unlike traditional consultants we are also practitioners we refer to this as the “difference that makes the difference”. Having evolved into a full scale SCM (Supply Chain Company) we offer the most comprehensive suite of logistics and IT solutions in NZ offering both outsourced and optimising insourced solutions for every facet of your supply chain so if you need to develop new competitive advantages to increase sales or optimise parts of your supply chain to improve your bottom line – call us.