14 SCS:GLOBAL VIEW DECEMBER 2008 SUPPLY CHAIN STANDARD
IN ASSOCIATION WITH DHL EXEL SUPPLY CHAIN
www.supplychainstandard.com
RETAIL
TIME TO TAKE STOCK OF
THE SUPPLY CHAIN
Although the current economic climate is proving challenging for
businesses across the world, MARK PARSONS argues that forward
thinking retailers have the opportunity to transform their supply
chains and cut significant costs.
At a time when businesses across the world are
facing tough economic times, retailers have
the option to take stock and review their
strategies and identify the appropriate back office
improvements to deliver an agile and flexible supply
chain without high-cost infrastructure changes. For
most retailers, weathering the current storms
involves three key strategies: enhancing the
customer experience to maintain market share;
ensuring that they deliver the right products to meet
consumer demand; and - of course - trimming
whatever costs from the back office that they can.
While cutting costs has been a retail priority for
years current circumstances provide even more
reason for making this activity a priority. And, of
course, those costs are very different from the last
time we had a serious downturn. In the past decade
retailers have become multi-channel, they have
embraced global sourcing, many have expanded
overseas, and the product assortment has
dramatically expanded, for example, as leading food
retailers have grown their non-food sales.
Complex
The result has been increasingly complex supply
chains, both to operate and to manage, and getting
the goods to the shelf to meet burgeoning
consumer demand has more often been the priority.
Supply chain change is perceived as an expensive
activity and if retailers were unwilling to undertake
such initiatives during the boom times, then they are
certainly not going to contemplate such capital
expenditure during a downturn.
This perception, however, is not necessarily
correct. Developing a flexible supply chain need not
always be a matter of capital investment. Quick wins
can be achieved by identifying improvements in
efficiency that can often involve purely operational
change rather than any alteration to infrastructure.
As always, a major problem for many is in
understanding precisely where costs occur in the
supply chain. It's an area where DHL's adoption of
the "DMAIC" approach to process improvement -
standing for define, measure, analyse, improve and
control - really can be profitably applied. As they say,
"you can't control what you cannot measure" and by
focusing on each supply chain activity and
understanding its role and what it costs, many small
changes can be made that collectively add up to
significant savings.
Such a process can often put the focus upon
many of retailing's "sacred cows": do you really need
multiple daily drops to stores? Do you need different
delivery cycles for general merchandise and food?
Do you even need to deliver big ticket items to a
store rather than managing fulfilment from the RDC?
Many of these practices can continue almost as a
habit without anyone actually sitting down and
thrashing out the rationale for each process or
operation. DHL understands that its success and
that of its clients are intrinsically linked to efficiency
and effectiveness of operational processes. Sharing
the value delivered through these improvements
between the partners is a key enabler in driving out
cost. “Within the retail and consumer group at DHL
Exel Supply Chain, we've already held almost 100
Process Improvement / DMAIC workshops this year,
which have contributed to continuous
improvements and identified effectiveness
equating to £4m."
Another tactic for cutting supply chain costs is to
look at the whole value chain - physical flows,
information, financial flows, systems, business
structure / silos, culture, etc. "We offer our
customers these as ‘Value Chain Assessments’ (VCA),
where a customer may have a broad question -
where is the risk in my supply chain? Where are my
major costs and how can I impact them? Answering
these questions is often easier said than done as
many in-company logistics or supply chain
managers lack visibility beyond their own supply
chain operations. We can fill in the gaps in the
picture - especially with today's highly complex and
extended retail supply chains. With a wide range of
clients, 3PLs can provide benchmarking and
information on best practice drawn from a range of
industries, as well as practical deliverable solutions.
Our VCA methodology challenges our customers to
embrace change - but it also challenges our own
teams to do likewise. Success is not in the delivery
of VCA report - it's in being a catalyst to deliver
benefits to our customers."
Thirdly, there is what is increasingly being called
"co-opetition" - a new approach to co-operation that
We offer our customers these
as "Value Chain Assessments",
where a customer may have a
broad question - where is the
risk in my supply chain? Where
are my major costs and how
can I impact them?
is already delivering real cost savings to many
retailers: again it is an area where 3PL expertise can
add value. With its cross-section of retail customers,
DHL can see where sharing resources can cut costs
for everyone involved by sharing transport to reduce
dead running and increase capacity utilisation. A
number of trials are under development to deliver
this agenda. Last year interest in such initiatives was
largely being driven by the green agenda, but now
cost pressures are accelerating these discussions.
Obviously there are a number of issues that must
be resolved before such schemes can get off the
ground - the two biggest being delivery priority and
vehicle liveries, but making store delivery times /
volumes visible to all parties is a key part of the
discussions. As for having someone else's liveried
truck delivering to your store while this can still be a
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