Charles Orton-Jones finds five areas where, without you realising it, a well-managed supply chain can drive competitive advantage
How can your marketing team make claims about your product and the ability to deliver it without knowing the capabilities of your supply chain? They can’t. Worse, if marketers make claims which the supply chain can’t fulfil, there will be hell to pay. Research by logistics consultancy P2P Mailing shows that 87 per cent of online shoppers will switch to a different supplier following just two or more delays with orders. And 25 per cent of consumers said they had already used social media to complain about poor order and delivery services. In a nutshell: supply chain professionals can cause untold misery for marketers.
But there can be a positive impact too. Supply chain improvements can be valuable to marketers. For example, green initiatives contribute to an eco-friendly marketing narrative. Unilever uses government-funded Chemistry Innovation to improve its carbon footprint and recycling along the supply chain. The gains created by the supply chain team from this programme form a central plank of Unilever’s group marketing story.
Here are two departments which ought to be so close their husbands and wives start to get jealous. Just consider the potential dangers a supply chain poses to the financial health of a firm. A bottleneck in the chain can leave inventory rotting in warehouses, triggering cash-flow illiquidity and maybe insolvency.
And bottlenecks are common. A large-scale survey by Zurich Insurance of five sectors shows almost 90 per cent of British firms experienced “significant” disruptions to their supply chain over a 12-month period. Yet only 50 per cent claimed to have mapped out the impact on their revenue and profit. Even in the manufacturing sector, 70 per cent of firms rank supply chain as “critical” to them, yet only 49 per cent have been reviewing and monitoring supply chain risk at board level, according to Zurich. Even global blue chips can screw it up. Just ask unlucky parents who tried in vain to buy a new Sony Playstation 4 console before Christmas.
There is a danger of mutual misperception here. HR professionals can assume supply chain is all about technology and hardware. And the supply-chainers are prone to dismiss HR as little more than
hiring and firing, with payroll thrown in. Both views are dangerous. Gutter Supplies, an online vendor of guttering and building plastics, got burned by expanding faster than HR could handle. Director Colin Evans recalls: “In the summer, we reached such a growth in our business that we had to employ new staff to fulfil the orders, but because our time was limited for full training, we soon found that we had to put a halt on marketing activities until we could get our employees up to speed, otherwise we would risk offering poor-quality service. The impact of this decision was not only on sales, but also on our margins, as we effectively had to take a break, order less from suppliers, accept fewer orders and just do staff training.”
Do you know where all your materials come from? Your legal team are hoping you can answer in the affirmative. Especially if you trade with the United States. In 2010 the US Congress passed the Dodd-Frank Act which requires firms to investigate the sources of tin, tantalum, tungsten and gold used in their products, and to identify whether any such materials originated in or around the war-torn region of the Democratic Republic of the Congo. The UK Foreign and Commonwealth Office is also issuing guidance to firms on how to conform to national and UN regulations on these materials.
Since the region contains up to 80 per cent of the world’s columbite-tantalite reserves, 49 per cent of cobalt reserves and significant reserves of other rare minerals, it is more than an academic issue. Mobile phone maker Motorola Mobility uses PTC software’s Materials Compliance Solution to track and certify the ethical origin of all its materials in accordance with Dodd-Frank and UN requirements.
Some of the best examples of how supply chain professionals can add polish to an entire company can be found in customer service. Booming online clothes retailer Asos.com pioneered the free delivery and free returns policy. The offer led to consumers ordering many variations of the same product; for example, dresses in five colours each in three sizes. It was the ability of the Asos.com’s supply chain to make this offering cost effective which gave the firm a critical and unique selling point.
And how about speed of delivery? Brands such as Karen Millen, Warehouse and Jewson offer super-fast delivery, often to the consumer’s door within an hour. How? By integrating Shutl’s courier aggregation service into their ordering and supply chain processes. Also, Taylor Guitars and bespoke suit maker Cad & The Dandy are among firms offering customers the ability to design each part of their product. Taking the order is the easy part. It’s the supply chain which makes the offer a reality.