Small Businesses and the New Supply Chain [opinion]

In recent history, there have been two radical transformations in the way we interact and do business that have impacted the global supply chain. These were driven by great innovations that touched every facet of our day-to-day lives. The first was in the 20th century, when the focus was on speed and agility. Arguably the biggest game-changer of that century was the invention of the aircraft, which allowed people and freight to travel at unprecedented speeds. Global trade became fast, with goods moving across entire nations in less than a day.

The second transformation is the digitisation of the 21st century, which has not only made things faster, it’s created greater precision and connectivity. Widespread access to the internet and the proliferation of internet-enabled mobile devices has revolutionised the way customers and businesses interact. Businesses have never been more connected to such large numbers of people across the globe. This means being more accountable to customers than ever before. For businesses transporting their products, recent technologies such as tracking devices have given consumers visibility that wasn’t even imaginable 40 years ago.

For businesses to effectively expand their customer base, both domestically and internationally, they must not only understand these shifts, but how to act on the opportunities they present.

Big changes with big opportunities

One of the most significant opportunities presented by the new realities of the supply chain is the rise of the ‘micro-multinational’ – the potential for smaller businesses to become international. In the early 20th century only big businesses were able to gain the economies of scale that allowed them to export. Now, whether you’re a multi-national conglomerate or a two-man operation being run from a garage in Wagga Wagga, you can sell to customers from Beijing to Berlin. Put simply, smaller businesses are now able to get their piece of the pie.

FedEx customer Jane Ramsay provides a perfect example of how anybody with an idea can have customers on a global scale. Her fashion business launched right after the Global Financial Crisis, leaving Jane second guessing her decision to start a company. Consumer confidence was down as the Western World recovered from the largest financial crisis it had experienced in decades. To add to the mix, Jane’s business, like many small businesses, started with minimal capital, seeing her run a fashion label from her family home.

Jane Ramsay still operates today as a successful Australian fashion label, because the new supply chain allowed Jane to ship products across the globe to customers who were able to engage with her brand via the Internet.

Efficiency is the new speed

Another trend that businesses of all shapes and sizes need to understand is the move away from focusing primarily on speed, to looking more holistically at efficiency. For many businesses, a slower process that allows for precision and predictability can serve their customers better.

For example, it may make economic sense for a business to transport certain goods by sea rather than by air, particularly for heavier types of freight. This is all about trading off the costs of holding inventory versus the costs of faster air freight. But for many commodities, businesses can benefit from lower inventory levels supported by international air freight. In these cases, customers benefit from better price mixes, and they are able to track the progress of their goods through the use of tracking devices meaning they’re less likely to experience anxiety over transit and arrival information. At FedEx, we’ve adapted to changing customer expectations by developing innovative new technology. For example customers transporting goods such as healthcare shipments may be concerned about the impact of environmental factors like light, pressure and temperature, particularly on a longer journey. In response we developed SenseAware, technology that not only tracks the location of the package, but provides this environmental data on a real time basis. It’s all about delivering what they want.

 Businesses have a wealth of options, so they should tailor their solution to their customers’ needs. With consumers’ expectations changing, businesses need to manage their supply chains effectively and use the technology available to them to ensure a streamlined, sophisticated approach. A sophisticated supply chain creates a better experience, which results in the tangible business result of a long-lasting customer that is loyal to your brand.

What’s the next destination?

We cannot predict where the supply chain will go next, but we do know that the transformation isn’t over. It’s likely we will still use planes, trucks and ships to transport goods well into the future, but technological advances will undoubtedly create new modes of transportation and communication.

Already in manufacturing, people are no longer talking about ‘off-shoring’ or ‘near-shoring’, but ‘next-shoring’ – not moving manufacturing from one location to another, but “adapting to, and preparing for the changing nature of manufacturing everywhere” according to a report from McKinsey.

According to the report recent innovations such as 3D printing could embed themselves in the supply chain, with companies choosing to replace traditional suppliers of parts with targeted usage of in-house printers. 

Another trend we can be sure of as technology advances and more people gain access to the Internet in different ways, is that the world population will become more connected. This will mean new opportunities for the supply chain, as businesses will be able to access more customers around the world.

Business leaders will need to keep up with these changes and ensure they’re leveraging the potential of new technologies to enhance their customers’ experience. Failing to adapt means losing the competitive edge and ultimately losing customers.

Kim Garner is the managing director of FedEx Express Australasia.

Are you breeding customers or victims?

When was the last time something you ordered didn’t show up? Can you remember the frustration you felt?  The anger that surfaced when what was promised wasn’t delivered – made even worse if that in turn prevented you from fulfilling a promise you’ve made to someone else.  You are powerless.  A victim of someone else’s failed system.

We can talk delivery statistics all we like but at the end of the day when an order isn't delivered on time, or is wrong for whatever reason, there is a very human outcome; we turn a perfectly good customer into a victim. You are as powerless as any other victim of circumstance and feel equal measures of frustration, anger and betrayal.  And as a victim, you are very unlikely to come back for more of the same treatment. 

Inventory applications often boast about their ability to deliver a wide array of key performance indicators (KPIs), metrics or measurements.  But to the customer that is sitting waiting for a delivery that never happens, or opens a box of goods that wasn’t what was ordered, there is really only one metric that matters:  Delivered In Full and On Time (DIFOT).  

DIFOT gives a very clear indication of the quality of your service provided to customers.  It confirms whether your customer has received the right stock at the right time, in line with their expectations.  At face value, it provides a measure of wether you have the right stock on hand at levels to meet order requirements.

 But DIFOT is so much more than a measure of inventory availability, it is a measure of an organisations ability to successfully bring together all of its line functions and suppliers to meet customer demand – each and every day! Most businesses fail to achieve 100% DIFOT not because they don't care, but because they don't have the capability to ensure all the critical factors required to guarantee delivery are in place.

 

Inventory is more than counting stock

Most inventory software easily supports picking, shipping, prioritisation and visibility; many do that extremely well as it is their single purpose in life.

It's not until you get to predictability and forecasting that the options begin to narrow dramatically as it takes a really good, fully integrated inventory system to help you anticipate future inventory needs. This is where a business can obtain real cash flow and service advantages, and really make a difference to your DIFOT (Delivered In Full and On Time) statistics – but it is a far more complex task than simply knowing what's in the warehouse. 

Anticipating customer needs and order patterns requires knowledge of activity outside the warehouse including information about purchasing and future order patterns to ensure appropriate lead times for replacement stock and avoid out-of-stock disasters.

Without real-time production, ordering and sales updates from your business system, it’s difficult to achieve any real improvement in customer service. When standalone Warehouse Management or Inventory System projects are put together, much of the effort, cost and risk are associated with building these critical interfaces back to the core business system. For many such projects, this is often a point of pain, if not outright failure – with an integrated system it is simply business-as-usual functionality.

Taking an enterprise view

Customers today expect your business will understand and anticipate their demand. When they approve a quote, they expect the order will be fulfilled on time, regardless of how long they sat on the quote. This means it is imperative to ensure linkages between CRM and quoting systems, to allow the inventory management system to obtain a three-to-six month advance view of likely order requirements – right down to individual line items.

For these reasons, inventory management software must be considered an essential and imbedded component of the overall business system.  Far from simply existing in its own space, inventory software must be capable of real time data sharing with key systems across the business.  And the easiest way of achieving this is with a single, fully integrated, solution that can help you to effectively manage your business delivery against your customer’s expectations.

Most customers will accept if you can definitively tell them when an out-of-stock item can be delivered.  It is your inability to answer their questions with any certainty that raises alarm bells. I find it incredible the number of relatively large businesses still working on an end-of-day batch system environment that blindly accept that they will get a certain percentage of orders wrong.  Many of the customers we work with in a Greentree environment believe that anything less than 100% DIFOT is unacceptable, simply because they know it is achievable.

All of the systems that feed your supply chain create these inter-dependencies. It’s only when you have true intergration across your purchasing systems, production, delivery, and resourcing that you can start delivering to your customers’ expectations, with good real time forecasting being the icing on the cake.

 

But at what cost?

Collaboration and visibility at all points in the supply chain is essential to achieving dramatic improvement in efficiency and customer service. There is an increasing importance placed open real collaboration with supply chain partners. Invariably, the businesses that perform best today are those that successfully manage their role in the greater supply chain.

 Many organisations are now opening up their systems to provide critical partners with visibility into stock and forecasting to ensure that their partners are able to predict their needs.  These businesses understand that in a collaborative world, if they can add value to their suppliers business and take costs out of the supply chain, all parties stand to share in the benefits not to mention the improvement achieved in SIFOT (Supplied In Full and On Time).

But this can't come at any cost.  You still need to turn a profit, so you equally need to manage the cost of supply, production, delivery and resourcing while delivering to your customers’ expectations and service levels. Full integration gives you the reporting power to ensure you are getting your pricing and margins right.  You can test out scenarios that take into consideration shifts in the cost of raw materials, petrol, labour costs or foreign exchange and how that will play out across your business.

Stand-alone, best-of-breed inventory applications will undoubtedly deliver improvement in your warehouse. But if you are looking at implementing a profound and sustainable level of improvement to your business and customer service performance, then you need a lot more. Selecting an integrated ERP system with a very strong inventory management component, will ensure that you are not only breeding satisfied customers but continuing to build a sustainable, profitable and growing business to boot.  
 

Rob Sheldrick is the Business Development Manager at Greentree Partner, GT Business Solutions.

Largest parcel facility in Australia puts Toll in growth position

Toll Group is positioning itself for growth in the express parcels market by building a $170 million freight facility in Sydney.

Toll say the facility in the city’s west is the largest of its kind in Australia and will be used by express road freight business Toll IPEC to grow the capabilities of its new online parcel delivery service.

“This custom-designed facility, with its highly specialised sortation system will increase Toll’s parcel sorting capacity in Sydney more than three-fold to an unprecedented 35,000 parcels per hour,” Toll Group managing director Brian Kruger said.

“Given the expected long-term growth in both our traditional B2B and the online retail parcel markets, it is important we continue to enhance our capabilities. Investments like this will help Toll continue to improve its already-extensive national distribution network, making it second to none.”

Kruger thanked the New South Wales Department of Planning and Infrastructure and site developer Goodman Group for their hard work in the planning and construction of such a landmark project.

“Finding land of this size adjacent to major transport routes is increasingly difficult in major cities like Sydney. Our extensive 12-month modelling process that looked at infrastructure and demographic data and projections decided Goodman’s Bungarribee Industrial Estate, with its immediate access to the M7 and M4 motorways and the Great Western Highway was an ideal location to service Sydney and its expanding western suburbs,” he said.

“The custom-built facility provides all sorts of benefits in terms of improving traffic flow and congestion, fleet productivity, staff safety, parcel sorting speed and accuracy, and energy and cost efficiencies.

“Once built, the new facility will enable Toll IPEC to move operations from its current sites in Moorebank, Homebush and Bankstown to a single, purpose-built facility, cementing Toll’s presence in Sydney and allowing for decades of growth in the express parcel delivery market.

“This $170 million development adds to Toll’s recent industry-leading investments over the past few years that includes a $54 million express road freight terminal in Perth, a $39 million facility in Brisbane and a $10 million terminal in Canberra.”

Kruger said Toll was investigating similar opportunities in South Australia, and will also look to grow its capacity in Victoria over the coming years.

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