Insights

Steve Baskerville

Supply Chain Capability Lead, Bluefin Solutions

Collaboration - how to win friends and influence retailers

Globalisation amplifies the need for effective collaboration

Supply Chains are becoming ever more extended and complex. Organisations have not only moved their manufacturing off-shore, but many of the processes have been outsourced and placed in the hands of third parties.

With a full outsourcing operation, companies that were once seen by consumers as a manufacturing organisation have become a company with a Brand.

To then put Brand reputation at risk with an outsourced model which has limited visibility of stocks, deliveries and lead times, appears to be a very short term business strategy. Putting "all the eggs into one basket" changes to 'putting all the eggs into somebody else's basket'.

Take a simple example of shipping raw materials, part assembled or a finished product, from Greater China to Europe. There are numerous loading and shipping points the materials pass through with each transfer being recorded electronically or by a signature on a paper manifest. Little of this information passes to the customers or organisation receiving the goods in transit.

With an increasingly complex and global supply chain, isn't effective collaboration a must? And isn't effective visibility of information a key enabler?

The consumer experience trumps the corporate experience. Again!

However in the consumer experience, basic tracking of deliveries is now part of everyday life when making online purchases. . What sort of experience do you get as a consumer when tracking a purchase from Apple for example?

There are recent examples of corporate supply chains accepting total invisibility for issuing the request for a 3PL warehouse to dispatch product to a customer. The next update from the 3PL is the evening upload of successful deliveries to the end customer. If the customer wants to know when the order will be delivered the only communication is by phone.

Another example of 3PL integration (or lack of) is where the carrier has the ability to report, in near real-time, all the significant goods movements (loading, depot receipts with warehouse location, estimated delivery time, etc) and the market channel organisation is unable to handle the detail and rely on the customer not requiring updates.

Why, if tracking is the norm in on-line shopping, does there seen to be so little visibility when it comes to the corporate world?

Collaboration and information are key to customer service...and keeping the retailer happy

If the locations of goods are not accurately tracked customer satisfaction is put at risk. For the supplier, visibility of dispatches and shipping enables the possibility to alert customers of impending problems, or put steps in place to remediate the situation. As the recipient of a delivery, visibility allows contingency plans to be implemented and reduce the risk of impacting the final customer.

Simple "Advanced Shipping Notifications" using standard Electronic Data Interchange (EDI) or Secure File Transfer (SFT) can relatively be introduced to update delivery dates or shipping statuses. If we then look to the new world of collaboration with Web services collection or delivering updates all these options give improved visibility.

Collaboration is not just about customer service - you can save money, too!

In a recent survey by Logistics Magazine some companies are spending up to 15% of revenue on freight services (domestic and international). This figure is only the transport cost and does not include the goods in transit or financing of the in transit stock.

With such high levels of expenditure for transportation the acceptance of zero visibility between placing an order and receipt at the destination defies belief.

Coupled with the lack of visibility on the goods in transit, there seems to be a lack of analysis into where and how the costs of transport are being incurred. There is acceptance that once a transportation cost is identified then that is the end of the story. There is little attempt to analyse the element of the cost breakdown to enable meaningful comparisons between carriers and shipping options.

When creating a relationship with a Third Part Logistics provider (3PL) it is important not just to look at the headline cost. There are a variety of models to engage from a simple cost to a full open book cost whit shared gains and pain. But whichever model is chosen reporting should not just be considered from a cost perspective but also delivery updates, adherence to schedule

To encounter companies that record the dispatch date as the final measure of customer satisfaction and ignore actual customer delivery date as a measure illustrates the lack of information exchange between 3PL and manufactures/wholesalers/retailers.

Simple data exchange through the web, EDI, SFTP etc with an event driven reporting system would open up the supply chain to examination and enable targeted efficiency savings. As revealed in the survey any company spending 15% of revenue on freight services must have some scope for rationalisation.

Delivering on the collaboration promise, to drive profit for the consumer products company, and the retailer

So, with the lack of transparency highlighted so far, is collaboration is beginning to look like a myth peddled by software vendors without any substance to support it? Collaboration may be a hot topic but finding evidence of the majority of companies dealing with these issues is hard to find.

Gartner recently issued their annual survey of the top 25 supply chains. Gartner went on to identify six tactics that exemplified the leading companies. In fact, Gartner went on to say that few companies do them well).  (Reference: Top 25 Supply Chains - Gartner 7th annual report)

The message seems to be that there is plenty of room for improvement in supply chains.

First steps:-

• Identify the actual situation in your company
• Analyse the gaps
• Assess the costs today
• Create a road map for improvement
• Implement a phased approach (pick the low hanging fruits first)
• Monitor the improvements
• Go round the process of identification, measurement and improvement

There are some excellent ROI's out there, if companies are willing to look.

According to a recent survey by the Aberdeen Group (August 2011) "best in class" organisations saw a 2.5% decrease in freights against the last years base line. "Best in class" were typified by being at least twice as likely to automate carrier information exchange.

So with freight costs being such a large part of some companies' revenue surely some investigation should be initiated.

What are you doing to highlight potential savings and improved customer service?