Hi there, apologies if you have received this a couple of times, we recently changed our blog site and have discovered something hadn’t been connected so some users were receiving the article and others weren’t…should be ok now….
Some of you will know that we have been developing our new SCP (Supply Chain Partnership) model for over 4 years. The SCP model delivers far more value to our customers than the traditional 3PL model; you can read more about this model in a our new brochure here SCS About Us
SCS are first to market with the SCP model. In simple terms the SCP model is a partnership based relationship as opposed to a traditional buyer/supplier relationship, where the supplier works for the buyer; in the SCP model, we work with the customer. For many years I had customers and potential customers tell me they wanted to work with us as a partner, but I discovered this was an ambiguous concept that meant they were unlikely to beat us up on price or force a dutch auction or tender process to drive down rates to meet their financial targets, rather they cared that we were making money on their account, held a long term view and were interested in regular meetings where they committed to provide a capable operational contact on their side who understood logistical complexities to work with us through issues, pricing challenges and strategies worked for both sides. Which is great! As a supplier we work best customers like this but even this is not actually a true partnership.
If I use the analogy of an employee/employer relationship, the SCP model is equivalent to the modern approach of ensuring there is a fair and reasonable remuneration process, based on performance where the employer takes an active role in the success of the employee, with regular catch ups to review progress, discuss tactical outcomes and improvements and is interested in providing incentives for the employee to be successful , as opposed to the older 80’s style of “you’re lucky to have a job, sink or swim (tacit message = you’re expendable) and we’ll chat when I feel like it or if I have an issue with your performance”, and we all know how well the older style inspires people to go the extra mile, especially millennial’s!
We are proving that true partnerships are very different to supplier/buyer relationships. Actual partnerships open up new horizons of opportunity for both parties.
Business partnerships share risk and reward, intimate financial and strategic positioning information, and they develop strategies together. As a supplier we rarely share any reward, we’re usually kept at arms length about commercially sensitive financial information and we’re told “some” strategic information that customers feel comfortable with sharing based on their “need to know” position.
The arrival of the SCP model has pushed the boundaries of how a logistics provider can work with a customer. The approach we have developed that seems to work best, follows a process of an initial consult to see if we are a good fit (this ‘tick’ has become more important to us as the years go by). If we pass this acid test, we lead into a Supply Chain Strategy workshop; here we act as and charge like a consultant (strategy meetings cost money to run that the 3PL earnings don’t support), based on the intention of the initial consult we bring key members of our team to address Finance, Operations, IT and Digital needs. We then conduct a discovery process that has taken us years to perfect which seeks to understand current state: business strategy, financial performance, culture and structure, operational capability, competitive advantage and IT platforms. Then we focus on future state: future objectives and plans around facilities, procurement and fulfillment strategies, business channels (especially digital strategies) product mix and new sales opportunities.
At the end of a workshop, we complete a review of our findings. Depending on the result of the workshop session and our review, we typically ask for commercially sensitive operational and financial data sets which we combine with our Supply Chain IP, knowhow and knowledge we have built and developed since 2001 dealing with hundreds of customers across many industries, then we prepare between 1-3 different supply chain road-maps that we believe will deliver significant value back to your business, and present these findings to you as a board level summary report/white paper.
The report is key. It details the probable business cases in terms of financial outcome for each of the suggested road-maps.
It’s important to note that we offer a subjective guarantee (your opinion) to deliver material value over and above the cost of the SC Strategy workshop (4-6k), meaning, if you feel we didn’t deliver sufficient value then you don’t have to pay for the workshop and you can keep the report, it’s on me. Conversely, if we can’t extract what we feel is significant value, we wont charge you for the workshop. In other words we back ourselves to deliver and this d-risks the process for you.
It is the combination of, 1) a customer sharing highly confidential information, that they would not typically share with a logistics provider, and 2) allowing us to apply our knowledge at this level across many elements of the Supply Chain outside of logistics (3pl and freight), that we are able to demonstrate the financial value of a partnership based approach vs traditional supplier based relationships.
Within the resulting report we explore options around shared risk and reward as well as guarantees. As a simple example we might discover $100k of savings across your supply chain being a mix of freight, fulfillment, IT/digital and procurement strategies.We may propose that if you adopt our solution with our providers, in return we will guarantee and underwrite this new baseline on the proviso that if we are able to discover more value, we share it 50/50 moving forward.
The key win-win in this scenario is that we de-risk your position by guaranteeing the financial result of any solutions we propose, which we can afford to do because you have provided full disclosure (so there are no Kinder Surprises), and the scope of opportunity has broadened from e.g. a narrow 3PL offering to encompass your entire Supply Chain, as your Supply Chain partner, so we have a lot more to play with to create value for both of us and we now have an incentive to deliver even greater value as we now share in a positive outcome beyond the baseline. Which is an opportunity you can bet we take seriously.
Smith and Caughey was an early adopter of this new model, and back then we didn’t conduct SC strategy workshops. Rather, one of our team worked in their business for a matter of months, which gave us level of knowledge we needed to develop 3 proposals. Some key outcomes of this relationship, are; we guaranteed to deliver hundreds of thousands of dollars of new value back to their business annually, we recommended different ways to employ staff and processes which included things like restructuring key processes, and strategies to improve supplier conformance and building new IT systems that better served the business cognisant of their tier two ERP, their buying team, inventory team, fulfillment team and SCS as their new 3PL.
The financial and process improvement results have been extraordinary for S&C. They are a wonderful partner that we feel very proud to work with.
One key element to the success of the S&C partnership is the development of a $50k bespoke supply chain IT solution we built, at our cost for S&C called, POM (Purchase Order Management). This system manages their PO’s from the NPD phase through to freighting, receipting, supplier management, case management and invoicing stages. POM took us months to build. We were able absorb the costs for two reasons. 1) we had sufficient tenure in the contract term and 2) we had an incentive to enjoy additional value if we overperformed – which intelligent IT solutions can help deliver. The solution is fully integrated with all parts of the business and delivers unparalleled transparency, workflow and reporting – the level of investment we put into building this solution was only made possible because of the nature of the relationship, as a partnership, where we had a vested interest in the outcome to be rewarded financially if we could demonstrate our solution delivered new value, coupled with a deep understanding of the inner workings of their business these factors enabled us to build this epic solution – you can view a video presentation on this solution here. https://vimeo.com/262918432
Whilst the relationship and the deliverable’s are world class now, I think it is important to mention that things didn’t start off brilliantly; a misunderstanding on a key receipting process at the time of go live at our 3PL division caused considerable grief and cost to both SCS and S&C. However, S&C were impressed that SCS delivered fully on the financial guarantee and our attitude and commitment to throw considerable resource at the issue (that our size and scale afforded at our cost, as their partner), relentlessly – until we achieved the new steady state. I think more than anything the value of a partner is realised when things don’t go according to plan and how they perform to rectify issues.
From this experience we achieved one of the testimonials we are very proud of. TradeReferenceforSupplyChainSolutions
S&C is one of our larger SCP customers. We do lots of smaller ones too, so if you’d like to understand more about what an SCP could do for your business drop me a line at firstname.lastname@example.org, I’d love to hear from you.