The Biz Box: Wholesale

The supply chain – cost centre or revenue engine?

Written by Richard Francis on . Posted in Wholesale

The traditional picture of the supply chain often depicts a cash guzzling monster. As a result, when considering their logistic processes, many businesses have focused primarily on stopping it from eating up their hard earned profits. Reducing operating costs and limiting damage to the P&L were the order of the day, managers sniffing out opportunities to stretch the margin by streamlining here or trimming there.

Mind set

Focusing on damage limitation is a largely defensive attitude, and according to more and more commentators, a missed opportunity to drive new business. Are companies following the traditional approach coming at the challenge of supply chain management from the wrong angle? Can it actually be a growth tool, helping create additional revenue and grow market share? And if so, how do you go about making the change?

Empowered by ERP

Looking at the way today’s successful wholesalers manage the supply chain tells a story, and it’s one closely tied in with advances in business software. As the power of ERP has increased, so has the ability to really leverage specific aspects of the logistic ecosystem. Thanks to developments in IT, businesses can now create greater customer interaction, increase service levels and create loyalty.

Real time

Systems that support customers in tracking purchases create genuinely visibility – reducing frustration and decreasing queues at the help desk. Greater visibility also supports businesses in coordinating activities more effectively – responding to issues more quickly, and identifying problems before they occur. Increased insight has made progress toward genuine efficiency and less wasted time a reality.

Dominoes

The additional positive knock-on effect is that lead times become more reliable, and businesses find it easier to make promises that can be kept. Customers like this, tending to come back to companies that do what they say they will. That said, transparency alone isn’t a game changer. Without the right level of reserve inventory, trustworthy partners with the same objectives, and consistent manufacturing processes, customers will only see that you’re not in control of your business.

Simplifying expansion

Technology is also helping businesses to simplify expansion into new markets – both in terms of product assortments and physical location. ERP systems support businesses in flexibly managing stock relative to demand, helping reduce the risk of overkill when preparing for a new expansion. The technology also assists businesses is phasing out end of line products that are being replaced – a key aspect of making profitable transitions in the portfolio.

Furthermore, businesses moving into new geographical territories can look to their software to help them manage new value-adding services or adaptations necessary to land firmly in new markets. As the global supply chain becomes ever more of a reality, the ability to fine tune to accurately meet appetite has become a key differentiator.

Communication

More effective integration of business processes and speedier communication through EDI has also fostered stronger relationships between retailers. Greater flexibility and transparency have increased trust and made managing risk easier. As such, businesses are more inclined to expand relationships, driving new revenue from existing partnerships. And greater volumes create opportunities for discounting, positively reinforcing the trend.

New science

This opening up of the supply chain certainly demands new understanding, and new professionals dedicated to creating the most cost effective, customer attractive set-up possible. Top level decision making now needs to consider where the opportunities for mutually beneficial relationships lie, and how the most value possible can be extracted from them.

Supply chain professionals now need to be as concerned with change and performance management as they are with the traditional skill set. Customer management and retention is now relevant throughout the whole process, companies able to be proactive towards their clients, as oppose to only hearing from them when something has gone wrong. With the whole set-up more responsive and more flexible, customer demand can become the key driver. Businesses can be enabled to respond quicker to changing market conditions, creating sales & operations plans for shorter term, genuinely customer-centric horizons.

Opportunities waiting to be discovered

With IT innovation continuing to drive increases in transparency, ease of communication, shorter response times and greater customer focus, businesses able to harness dedicated professionals with relevant skill sets can look at the supply chain with different eyes. It’s no longer simply about getting the product from A to B with your fingers crossed. Greater complexity together with effective insight has opened up opportunities to leverage relationships for competitive advantage. Effective use of the supply chain and the relationships within it can be a significant contributor to top line growth.

Play defensive, and it’s likely you’ll be left behind.