On July 8 supply chain and logistics professionals from retail, distribution and manufacturing gathered at Wroxall Abbey, Warwickshire, to discuss the challenges and opportunities available to players in UK supply chains. TMs Jane Gray attended to listen to the debate.
Organised by supply chain consultants SCALA and chaired by the Chartered Institute of Logistics and Transport (CILT) this year’s National Supply Chain Debate was led by Duncan Lowe (supply chain director at PepsiCo) Neil Ashworth (supply chain director at Tesco.com) and Keith Newton (customer logistics director at Cadbury).
The remit of the debate was to explore the relationship between supply chain collaboration, on shelf availability, and competitive advantage. The issues raised were broad ranging but the following points were those which seemed to have most resonance or cause most dissidence among attendees.
One of the first, and more disappointing, points to be made in the debate came from John Potter, senior partner at SCALA. He related “a moment of déjà vu” as he recounted his frustration over the feeling that intentions voiced by leading retailers and their supply chains to collaborate as long as 15 years ago were still not being realised on a large scale. Others corroborated this assertion. Duncan Lowe pointed to ECR data showing total supplier improvements in product availability with retailers over the past two year. As Lowe elegantly phrased it, there was “diddly-squat” to see.
So, if the intention for collaboration has been there for so long and the potential benefits recognised what barriers are holding true collaborative enterprise back?
First and foremost a laggardly approach to the development of internal supply chain management skills and end-to-end efficiency among many supply chain players. Keith Newton stated that “To enable good collaboration you need good basics – Cadbury were performing very badly in the delivery of services to customers back in the early 90s when we first piloted some collaboration projects. These really didn’t bear any fruit because collaboration, particularly with your customers will only work when you get you base offering right.” Neil Ashworth backed this view up saying “Many organisations are yet to grasp internal supply chain event management and therefore the stuttering move towards external relationships is not surprising.”
Secondly, speakers and delegates agreed that an inability or unwillingness to change perceptions about competitive rules was holding collaboration back – particularly horizontal collaboration between suppliers of similar product types. In particular an unwillingness to accept collaboration opportunities with third party logistics partners in sharing facilities was highlighted.
Manufacturers were identified by one delegate as the sticking point. “From my time as head of business development in the TNT fashion business I say that there are loads of opportunities for collaboration. But I find myself talking to manufacturers every day now about opportunities for sharing facilities, to service people like ASOS [an online fashion retailer] as well as the traditional retailers, and they [manufacturers] are slow to pick the ball up and run with it.”
The illogic of this attitude was thrown into sharp relief when speakers raised the idea that competition really starts at shelf – when and where the consumer makes a purchase – and that little competitive edge is gained in the warehouse or truck. This dynamic is further complicated in the modern market place by online shopping and a fading definition as to where the shelf edge really lies as Ashworth pointed out. “There is no doubt that the measurement of real shelf edge availability has in recent years generated a focus on progress in relationships between organisations – largely because of the energy and motivation provided by direct consumer data. This is all that really counts in an organisation like Tesco.
“However my view is that despite improvement we are looking at a case where the battle has been fought but the war is yet to be won. That is because not only have the goal posts been moved but we are also moving pitches – and I stress pitches not pitch. We are playing on a field of multiple games where you can score into any goal defended by any team. This is the world of multi-channel, cross-channel retail.
“Consumers are travelling across channels in a way that is probably more technology agile than most organisations. The shelf edge is now on the web, on a mobile phone and, most challenging of all, in the coffee machine discussions that consumers have as they go about their daily lives.
“Up to 80% of purchases over £30 pounds are now researched in some way online and consumers act very differently online than they do in stores. They do not select what they want. They eliminate and de-select. They edit you out of their choice by a process of price comparison and availability. Increasingly they also eliminate on the basis of environmental and moral perceptions of the supplying company and also the ethicality of their supply chain partners.
“The challenge now is how to optimise across all these various channels – in terms of price, stock positioning, cost management and responsiveness. The opportunity for collaboration under these unprecedentedly complex conditions is far more pronounced than we have ever seen before. The challenge for all partners in this kind of collaboration is in building a real understanding of market dynamics and – in supply chain – to position inventory in line with opportunity. Inventory needs to follow the information flow from the customer. It needs to follow the consumer to the place at which they chose to shop and enable them to purchase it in the way they chose, to suit their busy lifestyles.”
While some present blamed software integration challenges for stalling collaboration there was far wider agreement that attention to consistency in relationship building was a far greater challenge. Ashworth acknowledged that a large proportion of Tesco’s successful and “relentless” customer focus lay in the 20 year consistency of its board but Emma Pawson, customer innovation and continuous improvement manager at Cadbury thought that they were unusually lucky in this scenario and there was some discussion at the debate over the challenges Cadbury and kraft have encountered in collaboration since the latter’s hostile takeover triumph.
One way of maintaining closer operational contact with retailers and supply chain customers is through stationing ‘implants’ with partner organisations. This certainly seems to be an increasing trend and one which mitigates against the unpredictability of events like promotional offers.
At the close of the debate there was a slightly lack lustre conclusion that all players could be doing a lot more to reap the rewards of collaboration and an acknowledgement that if action is not taken soon then EU legislation over carbon footprints as well as spiralling consumer power would take collaboration choice and design out of suppliers hands.
There are some fantastic examples of truly entrepreneurial collaboration between companies like Mars and Nestle or Kimberly-Clark and Kellogs but they are far from the norm. Supply chain players need to stop looking for someone else to take the lead or be nominated as the responsible partner and start communicating better with their logistics partners, competitors and customers to understand a marketplace which no longer adheres to the traditional competition rules that still bind the majority of business operations.