Supply chain strategies

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.

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5 reasons why procurement outsourcing works for small business

Hat trick

A hat trick for small business owners translates into wearing every hat in the company sooner or later.  Wearing all these hats creates strong emotions for owners from hope and accomplishment to frustration, fear and anxiety. There is nothing like having to wear every hat from CEO to janitor in the same day.

What you quickly realize is that time is the most precious commodity and you never seem to have enough of it.  The reality is that you only have so many resources no matter what your size.  You know in your gut that staying focused on your core competency is what will ultimately help you become successful.  Unfortunately, there are many other tasks outside of your core that requires your time too. Procurement is likely one of those tasks and in most cases, people do their best to ignore procurement challenges. I often hear from small business owners that they have a solution in place that has been working for years and causes no problems. Most of these same owners do not realize they can get the same service levels or higher at a reduced costs.

Procurement outsourcing for small business is designed to help the small business owner take advantage of many of the strategic benefits larger companies have been using for years.  According to KPMG, nearly 75% of all large companies plan to increase their use of outsourcing.  Entrepreneur.com recently stated “Entrepreneurs have long seen outsourcing as a strategy reserved for big business, but technology has made it a more accessible tool for small businesses.”  Times indeed are changing.

Here are 5 ways procurement outsourcing is helping small businesses succeed:

  1. Accesses to expert talent – most small businesses have very limited procurement support that is usually a shared resource to other departments. Procurement leaders know there is an expected large talent gap coming soon due to baby boomers retiring and small businesses will feel the pain as they have limited resources to attract talent. Procurement outsourcing solves this problem by allowing access to industry experts on demand.
  2. Risk management – adding additional head counts for small business is a major risk due to the fluctuations in business. More employees mean more risk.  Having procurement outsourcing reduces risk since you get the benefit of the service without the additional overhead expense.
  3. Access to strategic partnerships – any small business can use additional purchasing power, but how can you create negotiation leverage on your own? This is a huge benefit to using procurement outsourcing.  There are strategic alliances in place to provide immediate savings across many goods and services that most small businesses are already using.
  4. Competitive advantages – using procurement outsourcing allows small business to tap into competitive advantages most of your competitors are not using. Creative solutions come from collaboration with the supplier network which is exactly where the procurement outsourcing lives. Exclusive distribution, new product development, inventory solutions, packaging, and financing solutions are all areas that can help to separate small business from the competition.
  5. Cost savings –using best practices helps to drive cost savings and it can even come through existing solution providers without the additional overhead costs. Needs change, technology changes and services from providers are constantly changing but most contracts remain in place costing small business huge amounts of money simply because they don’t address these changes. In many cases, procurement outsourcing even pays for itself through cost saving splits creating no risk for the small business owner.

There has never been a better time for small business to take advantage of procurement outsourcing to develop best in class solutions that can that can help separate you from the competition and increase your cash flow.  These principles apply to virtually every industry. Procurement outsourcing allows small business owners to access many benefits larger companies use without the risk.

If you know any small business owners that can benefit from procurement outsourcing please email info@atssoutherncal.com for more information.

Question: have you seen procurement outsourcing projects make a positive impact for companies?

Remembering our military supply chain

Arlington cemetary

Memorial Day in the US is a time for us Americans to remember those who gave and risked their lives for our freedoms.  In observance of Memorial Day, there will be no article, but instead a salute to the men and women gave the ultimate sacrifice.

Since this is a supply chain blog, I thought it was best to remember those in the military supply chain.  Logisticians do their best work behind the scenes and away from the battlefield but they play a vital role to the success on the battlefield.  Today my salute to them is remembering their work by posting my 5 favorite military logistics quotes:

“Gentlemen, the officer who doesn’t know his communications and supply as well as his tactics is totally useless.”
– Gen. George S. Patton, USA

“You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics.” – General Dwight D. Eisenhower

“Forget logistics, you lose.”
– Lt. Gen. Fredrick Franks, USA, 7th Corps Commander, Desert Storm

“Logistics … as vital to military success as daily food is to daily work.”
– Capt. Alfred Thayer Mahan, Armaments and Arbitration, 1912

“Amateurs talk about tactics, but professionals study logistics.”
– Gen. Robert H. Barrow, USMC (Commandant of the Marine Corps) noted in 1980

Tank in C17

On behalf of a grateful nation, thank you for your service.

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?

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?

10 reasons why the West Coast Port shutdown has companies looking at domestic suppliers

Port congestation

As the West Coast Port negotiations between the ILWU and the Pacific Maritime Association continue to stall creating lockouts and slowdowns at the West Coast Ports, the effect is killing companies dependent on the supply chain moving effectively.  What no one in the media is talking about is the effect this is causing companies whose business model is dependent on moving goods in and out of the ports.

Frustration is growing rapidly at companies that have inventory locked up inside the supply channel.  It is now common place to take weeks to get containers through the ports these days.  This is adding to the already extended time frame for delivery form overseas.  For example, ships going directly from China to Los Angeles may take about 12-16 days to cross the Pacific to arrive in Los Angeles.  But actually getting your container once it has arrived to the Port?  There is no answer at this point. Some containers are taking weeks to be unloaded and released.  Others are getting lost in the shuffle. The effect of all this slowdown and lockouts are creating is a massive backlog of containers waiting to get through the port.  This backlog of containers is what I call “Containergeddon” due to the stacks of containers parked at the port and on the water.

“Containergeddon” is creating havoc for supply chain executives trying to provide answer to their respective companies as when the products will be delivered.  Lost sales and ultimately cash flow is being squeezed due to the supply chain nearly stopping.

So what are the options?  The answer may be closer than they think.  Domestic suppliers have no risk of port shutdowns!  There are several huge benefits to on-shoring products back to the US.   Here are my 10 reasons for looking at domestic suppliers to eliminate the risk of foreign supply chain:

  1. Eliminate the risk of dealing with the port entirely
  2. Job creation here in the US
  3. Reduced lead times due to shorter delivery routes
  4. Reduced transportation costing
  5. Reduction in order quantities due to the decrease in transportation costs
  6. Increased cash flow due to higher inventory turn over
  7. Less risk to intellectual properties that are often experience overseas
  8. Environmental friendly supply chains – reduction in delivery length means less requirement for oil and carbon footprints
  9. Opportunity to promote the supply chain as a competitive advantage through localized partnerships
  10. “Made in America” marketing opportunities

If you are looking for help with domestic alternatives to foreign suppliers, I currently have immediate sourcing solutions for you in the following areas:

  • All types of metal fabrication
  • Aerospace
  • Hospitality products

If your needs include other industries, I can help you with those, too.  Please call or email me right away to get started.