Competitive advantages

Small business suppliers can be like a house of cards

house-of-cards

Does it ever feel like your supplier network is held together like a house of cards? Would your business survive if one or more of your key suppliers went out of business overnight? If your small business is dependent on your suppliers then you need to take the time to understand the risks of doing business with them.

Small businesses are extremely susceptible to supplier risk due to their size and financial strength.  One failed risk of your suppliers can be the difference between success and failure.  Take for example a local restaurant, partnering with a local farm to supply the organic produce.  What happens if that local farm goes out of business?  How quickly can you get them replaced and at what costs? Your whole menu many need to change as well as the pricing.  A new supplier could add tremendous costs due to transportation, less negotiation power and less capacity. The financial impact could be devastating to a small restaurant.

Supplier risk is an area that is often talked about at large companies, but difficult to implement at small businesses due to the complexity and lack of expertise.  Most small businesses don’t have all the resources available to comprehend all the issues that can interrupt your supplier deliveries. Here are three areas small businesses should be address when considering partnering with suppliers:

  1. Financial strength – just how viable is your supplier financially? Partnering with suppliers that are financial unstable is equivalent of adding another bottleneck in your company. These suppliers are unable to fill your requests timely and can cause lost sales due to their inability to fill your demands.  This can be a huge constraint to growth if you allow it.  Due diligence is key here.
  2. Quality – small businesses are often at an extreme risk due to supplier performance. Lacking key resources likely results in completely being dependent on the quality performance from their suppliers. But how often are they able to investigate these suppliers? How confident are you that your suppliers can maintain a high level of performance over time? Watch closely for the warning signs such as quality failures or late deliveries.
  3. Location, location, location – just like real estate, the closer your suppliers are to your small business the better. Transportation costs and times are shortened when partnering with local suppliers. Political issues, weather delays and fluctuations in fuel help to minimize the risk impact due to local suppliers. Shorter delivery times also allow for decreased inventory further minimizing your risk. There are very few downsides to being able to work with local suppliers.

These are just a few of the areas small businesses can use to lower risk in their suppliers.  Of course, there are many other factors that can affect small businesses such as natural disasters, economics, labor strikes, political issues, currency values, technology and social media to name a few. While it is impossible for small business owners to investigate every factor that can create risks, it is best if you invest your efforts into the areas you can control.

If you know of any small business owners that could benefit from a risk assessment of their supply chain please email info@atssoutherncal.com for more information.

Question: have you ever had any suppliers negatively affect your sales?

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How small business can challenge their indirect costs

Profit-risk

No risk no reward it is often said. Small business ownership is definitely not for the faint at heart.  Owning your own business has incredible rewards and can represent everything about yourself professionally.  The old saying of “you’ll never work a day in your life if you love what you do” certainly applies to many small business owners.

However, the same passion small business owners have for their core business does not necessarily translate well to other areas outside their core competency. Welcome to the world of indirect costs.  It does not matter if you are restaurant, medical office, manufacturer or a retail store, indirect costs can eat right through your profits in no time.  Indirect costs include many areas that are not a deliverable to your customer such as transportation, merchant services, electricity, gas, fuel, insurance and office equipment or supplies.

Small business owners struggle in these areas because of a lack of expertise, leverage and most importantly the lack of time. The indirect cost providers have no such lack of expertise or time compared to the small business owner.  This usually leaves the small business owner with the least amount of leverage.  Kind of like a nail to hammer relationship!  Not much leverage for the old nail.

However, small business owners do have options to increase their leverage if they choose.  Here are three ways they can increase their leverage with indirect costs:

  1. Open up negotiations – there a lot of indirect expenses in which there are no restrictions to competition so rebidding the service is a very viable option. This even includes using your current provider. There is nothing wrong with checking the marketplace for updated pricing and service plans. Service levels, service providers, technology and your own needs change over time. You just might be surprised to find key savings right in front of you.
  2. Buying groups – buying groups add value to their members through essentially group discounting. These groups are often associated by industry and can be a very effective way to increase leverage with providers to the industry.  There can be costs associated with joining these groups, but the cost of membership can easily payoff in the savings associated.
  3. Strategic partnerships – there are strategic partners that specialize in indirect costing solutions that give small business access to negotiation leverage they just can’t get on their own. These partners add leverage to the small business owner through their expertise and their relationships with these types of providers. They can provide preferential pricing to the small business owner because of their track record and relationship with these providers and pass these savings onto the small business owner. These partnerships not only pass along savings to their clients, but they also allow small business owners to leverage time because they act on the behalf of the small business owner allowing them to focus on their core business. Some of these partners specialize in one are while others can provide a one stop shop for all indirect costs.

Small business ownership requires maintaining cost to keep you competitive in the marketplace. While you can’t save your way to higher sales, you can price yourself out of the market.  Indirect costs are just part of doing business so make sure to review those costs for opportunities that just might give you an edge. If it has been a while since you reviewed those contracts the investment of time could payoff exponentially.

If you know of anyone that would like more information on how to reduce their indirect costing solutions in transportation, utilities, insurance, merchant services or many other areas please email info@atssoutherncal.com.

Question:  what’s the longest you have gone without reviewing a service contract with your indirect provider such as small package delivery, insurance or merchant services?

Leveling the playing field

This week’s supply chain article is presented by guest blogger Michael Rogers of 4 Way Logistics.  Michael and 4 Way Logistics provide industry leading transportation solutions for small companies to large businesses.

Arm wrestle

Businesses are competing against each other regardless of their size, potential and capacity. Often the small sized businesses are at a disadvantage when facing a larger competitor. This edge allows large scale companies to offer more services at a lesser cost while maintaining their desired profitability. So how can a level playing field be established as far as business competition is concerned?

Large logistics firms make news as they work with huge shippers. Meanwhile, other logistics firms are serving small and mid-size clients with results that can be even more profound. The reason this is possible is a 3rd Party provider can use their technology and leverage in the marketplace to level the playing field. It can give smaller companies the same transportation advantages as their large competitors.

These transportation advantages effectively include freight management, warehousing, carrier selection, pricing analysis and negotiation, technology, market expertise and risk management. These functions are vital to all manufacturing concerns in order to make their products readily available for their customers. If handled by a third party supply chain management company, the services are not only bundled intelligently and take advantage of the provider’s expertise in all areas of the transportation process (as it is their core competency and most likely not that of the company utilizing their services).

On top of this, the transportation advantages from third party supply chain management companies not only reduce costs, but streamline processes and optimize procedures. This cost effectiveness eventually translates into higher profitability for the company. In other words, the small business concerns get a chance to compete with the large scaled businesses on more equitable grounds with similar services provision involved.

By turning over their logistics details to someone who specializes in this field, business owners eliminate time-consuming responsibilities. They don’t have to worry about keeping track of the effectiveness of carriers. They need not invest in transport software, which now has an expected life cycle of about 18 months before something more robust is available. They don’t have to keep constantly on top of regulations and trends. They can keep their eye on what’s most important – their business.

There is a saying applicable to this type of strategic alliance – “Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it is the only thing that ever has.” Small businesses have the power to alter the playing field in their favor. It is not size that puts them at a disadvantage but rather the resources available. By outsourcing the logistics concerns to supply chain management companies, they are able to devote more time and effort towards the core business functions and thereby focus on things that are central to their profitability.

Outsourcing logistics functions can also help in expanding business realms beyond the conventional borders. By partnering with the right logistics provider, a small/medium size business can work through an intricate distribution strategy. This allows the company to grow and compete against the large scaled enterprises effectively and efficiently. This gives all businesses the level playing field to showcase their true potential across all ventures.

Why small businesses need strategic partnerships

Me against the world

The business world can be an intimidating place for small business. But there is no reason to think it is you against the world.  Strategic partnership can be extremely powerful and effective for small businesses to level the playing field.  Strategic partners can be used in areas such as marketing and sales, distribution or even throughout the supplier network. These alliances can be the difference between surviving or thriving.

One of the great benefits of strategic partnerships is they create the ability to leverage your resources.  Every small business has limited resources internally from capital, manpower, knowledge and or even buying power.  Strategic partners allow you to leverage areas that you may need additional strength to get a competitive edge.

Not every business relationship is suitable for a strategic partnership, so determining the proper fit is very important.  There is a process to determine who is suitable and can pay big dividends.  Kate Vitasek is a world renowned supply chain author and she calls these 3 ideas the foundation of the relationship.  Follow these ideas and you will be on your way.

  1. Trust – this can be difficult to develop and may take some time but it is critical to any relationship. It will take effort, but everything worthwhile requires work.  Trust must be developed over time through a series of actions, words and follow through.  Trust is a two way street and each party plays a vital role in matching the choices of trust along the way.  Trust is a simple concept that helps to provide a foundation for the rest of the relationship. But lack of trust destroys.  Choose wisely.
  2. Transparency – once trust is established the best way to keep it is through the use of transparency in everything. Nothing erodes trust like a lack of transparency.  Transparency helps to keep trust and can be achieved through simple agreements.  Whether it is through reporting, discussions or shared resources being transparent in your business relationship fuels the trust.  Don’t you think the current FIFA World Cup Soccer scandal could have been avoided with a little transparency?
  3. Compatibility – while trust and transparency are vital to the foundation, compatibility is like the glue that keeps it all together. Two partners that are not in proper alignment just don’t seem to fit.  It is very important to find a balance for the partnership that is beneficial for both parties and is a good fit. Proper compatibility comes from the proper alignment of values, culture or size.  For example, would it make sense for a small local organic restaurant to partner with Monsanto?  Not a chance!

Strategic partnerships have proven to change the course of history from Ford and Firestone, to Steve Jobs and Steve Wozniak or even Ben and Jerry. Partnerships can have a dramatic effect on your business from sales development to cost reduction in your supplier base. If you are ready to dominate vs. participate let strategic partnerships help you get there.

If you know anyone that would like help understanding how to develop strategic partnerships for their business, please email info@atssoutherncal.com for more information.

Question: what are some of your favorite business partnerships?

What can business learn from Moneyball?

Money ball

Brad Pitt once brought to life the importance and value of metrics when he portrayed Billy Beane in the movie Moneyball.  “Sabermetrics” as it is widely known today has really changed the way scouting in baseball was performed.  It elevated the process from tribal knowledge that had been in place for over 100 years to analytics that could measure performance creating a contender out of a small market team.  Just like Sabermetrics, almost all companies today use some sort of data analytics to measure performance.   But just how effective are those measurements and where did they come from?

When used properly, metrics work to support strategic initiatives and provide feedback to all stakeholders regarding the performance of the group quickly and effectively.  However, when they don’t they just become another number.  They quickly become irrelevant and people will just tune out.

Here are 5 ways to make sure your metrics are relevant and adding value to your organization:

  1. The metric fits into higher strategic goals

All metrics must align with your strategic focus.  Every metric created must support the higher goals of the organization.  No metric should be created without it fitting into the bigger picture.  Any metric not in proper alignment quickly losses value and can becomes irrelevant.

  1. Ownership

Metrics must have the proper ownership within the organization so that the individual/group responsible can have as much control over the process as possible.  It is unrealistic to hold anyone accountable for areas outside of their control.  Positive changes cannot be expected by individuals without the ability to change the dynamics of the input.

  1. Simple data

Making the metric as user friendly as possible is the best method.  The most useful data is when everyone can easily understand it and interpret the data instantly.  A great example of a simple metric is in the airline industry and on-time departures.   This is simple, to the point and everyone can easily relate to it.

  1. Publish regularly

However you designate the publication time, make it relevant. Whether it is weekly, monthly or quarterly, the measurement should be on time and relevant.  Data ceases to become relevant if it is outdated.  There is not much relevance to reading old news.

  1. Don’t be afraid to adjust

Keep in mind that not every metric is set in stone. I recently was asked the best way to measure fill rate for a distribution company.  The simple answer is that how you measure is irrelevant if your customer base disagrees with you.  Never forget to check with your customers. They will certainly have an opinion of your performance and how you should measure it.  Ultimately, keeping your customers happy is the goal. Don’t be afraid to get their input.  If your customers disagree with your metrics then you end up looking like you are out of touch.

While there is no denying that effective metrics help guide companies to higher performance, the development of the metric itself can be more about trial and error than pure science.   Constant improvement is the goal in any organization and metrics are no different.  Keeping your metrics, strategy and customer satisfactions in alignment takes constant adjustment.  Relevant metrics are often a work of art in the end.

If you or anyone you know would like more information regarding the use of metrics in their organization please email info@atssoutherncal.com.

Question:  What are some of the most useful metrics you have used?

5 Benefits of Procurement Outsourcing

square-peg-round-hole

Have you ever felt stuck to move forward on a project because the skills required was not a good fit for your resources?  Kind of like the square peg in round hole scenario.  Yet you knew that making it happen would be in the best interest of your organization?  Think about it for a second. How would you handle this at home if you had an electrical issue and you were not an electrician?  The possibility for electrocution is severe enough to call in experts for most people.

Negotiating goods and services outside of your area of expertise can be just as paralyzing.  Many organizations end up spending too much money due to outdated contracts because they are afraid of losing at the negotiation table or they just simply don’t have the resources to engage.  Markets, technology and your needs change constantly. But existing contracts seem to remain the same.  If companies really understood how much money they could save it would be impossible for them to ignore.

But how do you access the savings with limited internal resources. Fortunately, there’s procurement outsourcing.  Here are 5 key benefits of procurement outsourcing that can help any size organization:

  1. Expert talent

Major league baseball allows for the designated hitter (DH) who bats for the worst batter in the lineup. The result provided dramatic increases in home runs, RBI’s and created hall of fame credentials for some players.  Procurement outsourcing allows you similar opportunities to shine.  How many companies have the talent in house that can negotiate freight, utilities, financial services or maintenance contracts? Not many.  But like a DH, procurement outsourcing is there to give you access to the best expertise at your weakest position.

  1. Reduce risk

Procurement outsourcing can reduce your risk because it is only used on demand.  There is no need to keep full time staff. Use it as you need it.  By the project, short periods or if you just need expert help in negotiating a specific category in which you have little to no experience.  For example, transportation companies have full time staffs that do nothing but specialize in negotiation of transportation.  These negotiations come down frequently to highly experienced specialist on one side of the table vs little to no experience on the other side.  Who do you think wins that game?

  1. Reduction in overhead

The focus of procurement outsourcing is to provide added value through better contracts. But one additional benefit is that it reduces overhead costing too.  No need for training, insurance, office space, medical benefits and all the other employee related expenses.

  1. Increased opportunities for procurement solutions

Using in house procurement limits your solutions to only the skillsets and opportunities within your organization.  Procurement outsourcing has the advantage of having a greater vision to procurement solutions that go well beyond your organization.  Through strategic partnerships, ability to pool expert talent and the overall experience allows for the perfect environment for creative solutions that are not accessible through in house procurement.

  1. Core focus

Using procurement outsourcing allows your organization to focus on your core competency. It doesn’t matter if you are a restaurant, manufacturer or a law office.  Keeping your limited resources focused on your core business is crucial to your success.  Asking your procurement team to negotiate contracts outside of their expertise is just not a good fit.  Let them do their job and let experts handle the rest for you.

Just about every organization uses outsourcing services of some kind whether it is legal, payroll, IT or human resources.  Procurement outsourcing is just the next service frontier.  Competition is forcing companies to get leaner and more effective.  How can you ask more from your team that is already stretched thin?  Procurement outsourcing just might be your answer.

If you know of anyone that would like more information on how procurement outsourcing can be a fit for their organization please email info@atssoutherncal.com

Question:  Have you ever felt over matched at the negotiation table?

4 keys why procurement’s like an ace up your sleeve

Ace up sleeve

It sure would be nice having an ace up your sleeve as part of your “go to market” strategy. Look no farther than you own procurement team.  Procurement has been working to establish itself as a worthy member of the executive team in every industry for years.  Procurement has long lived in the shadows behind sales, operations, finance and IT. Sales teams tend to get a lot of recognition for bringing in the business and it is well deserved.  Operations, finance and IT all seem to have their moments to shine too.  But procurement in general seems to get lost in the shuffle behind those other disciplines.

However, that in no way diminishes their ability to add value to the organization.  Maybe they just need a new marketing campaign.  Years ago procurement was viewed only as a necessary support function to fulfill internal requirements.  It’s continuing to evolve as more companies are seeing greater value being added than just filling a material requirement at the lowest cost.

Procurement’s strategic effect touches just about all areas of the organization.  Here are 4 key areas that procurement can effectively provide a competitive advantage for your organization:

  1. Product design

Developing products is a creative process that can consume lots of time and resources in order to maintain relevance in the marketplace.  Sales and operations typically drive the process, but don’t forget that procurement has direct communications to the supplier network.  That is an incredible resource that is easily tapped into for support to the latest technology and market solutions that extend well beyond your internal capabilities. Go ahead and invite your suppliers to be part of the process, you might be surprised what they bring to the table.

  1. Inventory strategies that increase cash flow

Investing into inventory is one of the biggest expenses for just about any company.  Unless you can turn around and sell the material without further touches, expenses quickly add up like space requirements, tracking inventory, audits, compliance, theft, packaging and support management.  Then there’s the risk of the inventory moving slowly or not at all.  Why not work with the suppliers to find solutions that minimize that risk and inventory investment?  Increasing cash flow, reducing lead time and logistics costs, what’s not to love about those benefits!

  1. Corporate social responsibility

Unfortunately as global commerce continues to expand into developing countries, corruption still exists but the good news is that information has never been more accessible.  There is so much injustice across the world, but organizations have never had as much information as they do today to make informed decisions on where they award their business.  There are major concerns when working internationally such as human rights, environmental issues or intellectual properties. How about turning those concerns around and sourcing responsible suppliers as an example of the right way to do business?  Now that’s an advantage that benefits everyone.

  1. Exclusivity

We all want to standout in the marketplace and having exclusivity in your supply chain is a very real possibility that allows you to be distinctive.  Procurement can drive this exclusivity advantage through strong relationships in the supply chain.  Keeping competitors out of your supply chain is a huge advantage that is best established right from the procurement team.

If you are tired of just being another supplier in the market place and distinction is what you want, look to your procurement solutions as a real advantage.   Advantages like this can be achieved through internal teams or through procurement outsourcing providers.  They have the experts on demand with proven concepts, experience and partnerships available to make ideas like this part of your competitive advantage.

If you know of any companies that are looking for a distinct competitive advantage through their procurement solutions, please email info@atssoutherncal.com for more information.

Question:  What creative procurement solutions have you used to develop a distinct competitive advantage in your marketplace?

The “people bottleneck” in the supply chain

What is a “people bottleneck”?

Where is all the supply chain talent going?  As we end the first quarter of the 2015, baby boomers across the US are focusing on retirement and taking with them decades of experience creating a “people bottleneck” in the world of supply chain.  Study after study tells us that there is a large gap in supply chain talent coming with no easy answer on how to fix it quick enough to backfill all those people retiring.  So how did we get here?

Obviously, baby boomers have an effect on every industry and supply chain is no different.  The industry can be very challenging with the international demands, technology applications, shifting demand flows and limited resources to make it all come together. Business today demands supply chains to be agile enough to handle all of these issues whether it is a multi-billion dollar corporation or just a mom and pop. Education at universities and through continuing education programs will have to increase their graduates to fill the growing demand.

However, one of the biggest challenges within the supply chain industry has been a lack of incoming talent.  I network with hundreds of people and I consistently find that most people don’t even know what supply chain is.  We need a social media star to create awareness across the board. Think about it for a second, for those people under 25, they don’t know a world that is not social media driven.  Stars have been born from social media yet how many people can name a supply chain star?  Unfortunately the supply chain world does not carry a lot of social media credibility with the under 25 crowd.  Stars transcend their industry and create awareness. People like Bill Gates helped make Silicon Valley cool for the Mark Zuckerberg’s of the world.

Effects:

Despite our ability to foresee the problem, we can’t avoid it. So what’s the effect?  Just like life, those with the greatest resources will have advantages over those without.  Due to the limited talent, the Fortune 500 companies will be able to pull the best talent from the smaller companies causing serious issues in the small to medium size companies.  As baseball season is about to start, this is just  like the NY Yankees taking the best talent from the small market teams after they have developed the talent for years.  This lack of talent at the small to medium size company will create a large lack of efficiency in the supply chain causing increases in costs and delays.  Lacking the in house talent, companies will likely have to restrict their offerings based on the limited resources.

Options:

Awareness must be at the fore front.  Who is the Mark Cuban of Supply Chain that transcends the industry and draws people to it?  Someone needs to step up and create the sizzle that sells the idea it is cool to be in supply chain.  We have technology, globalization and the ability to change in the world due to the business we transact. The education system can help train those interested people through universities and continuing education organizations.  Continuing education is a great place to learn the relevant concepts and potentially find a mentor in the process.  Corporations also have a responsibility in helping educate and need to do a better job.  They benefit the most, so those that put some skin in the game will surely reap the rewards.

Education is the long term solution but it will take years to see the effect.  How will companies deal with the reality of today when faced with a supply chain problem?  How do you fix a problem without the proper tools?  Supply chain outsourcing can be a solution to help until the talent is available. Supply chain issue experts have the ability to quickly diagnose and offer proven solutions without the risk of adding additional head count. Outsourcing can be a much needed bridge to get companies through temporary issues.

If you would like to learn more about how outsourcing can help your supply chain issues please send an email to info@atssoutherncal.com for more information.

Question:  Will the lack of supply chain talent cause you to lose business?

Collaboration creates synergy in the supply chain

UM huddle

Supplier collaboration is like synergy-the whole is greater than the sum of its parts

In sports, working together for a common goal to win a championship is a given. Those teams that do it the best separate themselves from the competition creating lasting legacies that live forever. The winning spirit (a collaborative process) begins when the coaching staff lays the foundation for the season long before the season even begins.

Developing collaboration in the supplier base has a lot of similarities to winning championships.  Collaboration and winning teams share common characteristics such as a team vision, a foundation built on trust, structure and accountability to each other. All of these elements that create winning teams also help drive a shared collaborative team environment.  Creating collaboration in the supply chain, much like winning championships, will separate you from the competition by providing opportunities not afforded to those that work alone. Expanded market penetration, product innovation, cost reductions and shorter lead times are all possible when using a collaborative approach to engaging the marketplace.

So how do you translate winning on the field to collaborative winning in your supply chain?  Follow these four elements and you will be on your way:

1. Invite the supplier to participate.

Sounds simple, but if there has been a long standing relationship or the players have changed over time, it is time to reset. This is especially true if there has been friction in the past.  Besides who doesn’t like a warm invite?  It does not matter if it is about business, dinner or just a drink with friends.  No one wants to feel like they are crashing the party. A warm invite is usually well received and if done in the proper context can help to set the table for a collaborative relationship

2. Establish a foundation

Kate Vitasek (Founder of Vested Outsourcing and world renowned supply chain author) says it best, “trust, transparency and compatibility” help to define the basic foundation of any business relationship.  Once these three key elements are established, the creativity is allowed to flourish instead of being stifled.  It is in this freedom where ideas are developed to create unique solutions throughout the supply chain. The entire supply chain becomes open to discussion so opportunities may be found in planning models, product innovation, pricing, packaging, logistics, capacity, distribution or simply better information.  No one wants to feel boxed into a corner and the right foundation allows people the freedom to engage in new ideas.

3. Develop a structure

Just like a building, once the foundation is set, the structure building can begin.  A common vision helps to frame the structure, but a forum of communication needs to be developed that helps support an environment of ideas and provide feedback throughout the process for what is working and not working.  These communication tools are also key elements in establishing a method for accountability to keep all parties on track.

4. Create incentives

Setting the foundation, creating strong communications and accountability are great, but without the proper incentive, sustainability is difficult. Only through fair incentive policies will all parties feel justly compensated for their involvement. Incentives are not always restricted to just direct compensation.  Incentives such as exclusive rights, product innovations, inventory solutions, additional capacity or shorter lead times may be creative methods that can provide a winning edge over the competition.  What is it worth going to market knowing you can be first with product innovations or shorter lead times?

Champions in sports stand out above the rest of the crowd.  Winning in business involves creating a profitable and sustainable game plan. Collaboration in your supply chain can be a vital key to creating that game plan.  Isn’t it time to make your entire supply chain greater than just the sum of its parts?

Question: what are some of the most unique collaborative projects you have worked on?

Why companies are leaving money on the table in their supply chain

Money-on-the-Table

Would you ever leave money on the table if you were aware of it?  Of course not!  However, if you do not think of your supplier base as an asset in your business you are leaving money on the table in your supply chain.  Businesses have a tremendous amount of money invested in their supply chains from direct costs such as inventory to indirect costs such as maintenance.  Unfortunately most organizations fail to think this way.  The direct effect is that they are leaving money on the table and in most cases they don’t even realize it.

Below are a few areas examples where companies leaving money on the table:

  • Considering only your in-house talent
    • If you only consider the expertise within your own 4 walls as part of your business competence, think again.  Every company has their core business they are good at, but what about tapping into the skills of your supplier base? I have seen many times a company dictate irrelevant requirements that add costs and lead time with no added value.  This is the equivalent of asking your supplier to count every grain of salt in a recipe when you just need a couple of shakes. In cases like this, the supplier may often be incentivized to follow strict requirements that are not needed and because their only stake in the relationship is to make money, guess what they choose to do? Globalization is forcing all companies to find cost effective solutions that go beyond their in house talent.  The time is now to give suppliers incentives to change the process and use the skills they bring to the table.  You do not need to know every skillset, instead use your supplier base to expand your capabilities.  They are not the enemy and should be considered an asset and given incentivizes to provide solutions that add value.
  • Marketing opportunities
    • Partnering with the right supplier not only helps you find cost effective supply solutions, but can give distinct growth opportunities.  For example, restaurants and grocery retailers may have opportunities to build campaigns around local fresh ingredients that supply their businesses.  This can also be used to help reduce carbon footprints, reduce emissions in the supply chain and help promote local partners. “Made in the USA” is a slogan frequently used with US manufacturers to help identify companies sourcing components within the US.  Even the opportunity to provide the exclusive distribution offerings can be incorporated with the right partner.  What was the iPhone worth to AT &T when it was first introduced?
  • Collaboration to drive innovation and cost reduction
    • What is it worth to be first into the marketplace, have favorable payment terms or have your suppliers invest in product development costs?  Giving the right incentives and an environment that fosters innovation, suppliers will often find ways to offer unique advantages not afforded to the others in the industry such as cost reduction projects.  These incentives give suppliers the trust needed to take risks to provide solutions such as vendor managed inventories, favorable payment terms, product innovation and much more.  These solutions can provide opportunities to be first in the market, increase innovation and drive down cost.  Costco for example uses their suppliers to develop packaging solutions that increases volumes but at the same time lower cost per unit.  That’s not by accident.

Don’t limit potential advantages to just your within your own team, it will cost you in the end through higher costs and less distinction.  Creating a supply chain advantages is a must for those companies looking to differentiate from the competition.  If you or any organization you know are looking to develop supply chain strategies that create marketplace advantages contact me for a no-cost assessment.

Question: what unique supply chain solutions have you experienced that gave your business a distinct advantage in the marketplace?