Supply chain efficiency can lead to bottom line success, says retail shipper
October 08, 2012
The concept of “following the money” may apply to the supply chain and freight transportation sectors more than most. It comes from a school of thought, which states where the freight is, the money is.
What’s more a case can certainly be made in that having a strong supply chain can, in fact, equate, into a successful bottom line for a shipper. That mindset was front and center at a session at last week’s Council of Supply Chain Management Professionals (CSCMP) Annual Conference last week, entitled “How Supply Chain Drives Shareholder Value.”
In his comments at the session, Greg Rake, senior vice president-supply chain, at Pier 1 Imports, explained that supply chain’s influence on company value can be measured through speed to market.
“The faster you get products to market, the more full-price sales you get,” said Rake. “When you look at what we do, we understand there is some period of time where we bring in a brand or a new product line, color, or style, we have some sort of a proprietary system—or timeframe—where we actually are allowed to be the only company in the market that has that style, color or whatever that is. When [larger companies] get your business, it is going to be a bad day. If we can figure out a way to get a new product into the market prior to Target or Wal-mart, Kohl’s or J.C. Penney…we get to enjoy full-price sales for some period of time. This shows why speed to market is important.”
The engine that drives speed to market is effective supply chain management. Rake quipped that as a college student at Ohio State University 30 years ago, supply chain was someplace where old manufacturing and sales majors were out to pasture.
But now, especially in manufacturing and retail environments, supply chain ranks in the top 3 for a company’s cost of product, along with real estate, which is more of a fixed cost, and labor.
“People are now looking at the supply chain and saying ‘that is really a place where we can drive gross margins,’” he said. “It has become increasingly important that we as supply chain executives recognize the impact we have on the bottom line.”
Another area in which supply chain can boost the bottom line is brand protection, said Rake, while stressing that nothing good happens when you touch products.
When products are touched, costs are added, the product is slowed down, and the chances of it being broken increase, according to Rake.
“At Pier 1, each product is touched 11 times before it gets to the consumer,” said Rake. “Every single day, our team works as hard as it can to figure out how to reduce the number of touches we have before the product reaches the consumer.”
And when dealing with tough situations, Rake said there is always a “best” answer for every supply chain, which identifies what is best for the shipper as it relates to the best use of money and time. This also applies to mode selection.
If Pier 1 moved its goods by only air freight, Rake said the company’s transportation costs would easily triple.
“They talk about the fast plane and the slow boat; you need to figure out where your supply chain fits,” he said. “And the best answer changes very frequently. You need to always look at things like macroeconomic issues in Europe, currency fluctuations in China, geopolitical things, and the costs of real estate and fuel.”
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