Supply Chain Strategy for Early Stage Companies

You are a new entrepreneur, a visionary, a focused person. What gets your juices flowing are ideas for innovative new products, new markets to penetrate or perhaps a groundbreaking channel of distribution.

Leaving the competition in the dust really fires you up. Unlike prior entrepreneurial generations, you have no desire to be encumbered by employing large numbers of highly paid staff, managing inventory, order fulfillment and shipping problems; not to mention endless meetings, manufacturing hassles, purchase order snags, and an abundance of electronic documents.

Your workday should be spent on blazing new paths. All of the “noise” from the aforementioned artifacts of prior generations holds little interest for you.

The new entrepreneurs who truly understand this must be able to articulate their vision for one, two and three year increments. Remember, a vision isn’t a detailed business plan. Rather, it is an expression of where you see your company in a stated period of time.

Say for instance that your company is three years old and is experiencing triple digit growth by selling one or two products. Most of your sales are taking place in the region in which you are based. The company is poised for explosive growth and you are clear on plans and timing for new products, markets and distribution channels. You are reasonably comfortable with sales forecasts for the next twelve months.

Here are some common mistakes you should avoid:

  • Resist the temptation to buy or lease warehouse space. Why lock your rapidly changing company into an agreement for space in a location that may not suit your business needs beyond the short term? Business history is replete with examples of companies that started off like a ball of fire only to fizzle under the inability to properly fulfill orders in the heat of growing demand. Give yourself the flexibility to quickly gain more space or reduce space in the same or a different location as business needs dictate.
  • Understand your priorities. As the CEO of an early stage company, it is important not to get bogged down in the excitement of every order. This is a recipe for disaster. Your goal is to be working on your business and not in your business.

In today’s day and age, the entrepreneur of an early stage company will operate virtually. This means no corporate office buildings, no warehouses and just enough headcount to manage outsources that take care of all the “noise,” leaving you to innovate.

In its most basic form, outsourcing for early stage companies will include vendor management, order fulfillment and all related transportation. Advanced applications will also include outsourcing the manufacturing process. These functions should be properly overseen by a Lead Logistics Provider (LLP) that specializes in early stage companies.

The LLP will help identify the proper human, technological and physical resources. The LLP will design the appropriate supply chain process; build it to your company’s specification and manage and report appropriately.

Give yourself the luxury of building your business and avoid the stress of any activity that should be considered non-entrepreneurial.

What is Your Greatest Supply Chain Success Story?

Recently, I was asked this question. Given our firm’s 66 year history, it took a while to come up with one I might call the greatest.

For me, it dates back to the early 90′s when the U.S. was part of an allied force fighting Iraq during the first Persian Gulf War.

The Allied soldiers were fighting under the specter of nerve gas attacks from Iraq. A longtime client of ours, Survival Technology, Inc. (STI), in the Washington, DC area had created a nerve gas antidote that could be administered with an auto-injector unit directly through the soldier’s uniform. 

STI had a contract with the Department of Defense to ship the antidote into the Middle East. The embargo imposed by most airlines inhibited STI’s ability to deliver the antidote.

Enter TBB Supply Chain Guardian!

TBB was able to work with its contacts having specific expertise in government air freight movements. After considering numerous paths, TBB and its air freight contacts settled on the route and carriers to get the antidote into the hands of the Allied forces.

After the Allied forces prevailed in the conflict, the CEO of STI shared with TBB the commendation he received from the Secretary of Defense. The CEO’s letter to TBB stated that they never would have earned the commendation without a helping hand from TBB.

This was most definitely a supply chain success story to be proud of!

The 3-D Impact on Supply Chain

At a recent conference, the CEO of a company that manufactures castings told of how a trucking company damaged a custom piece on a time-sensitive order. The damage was discovered on a Friday afternoon. The product was needed, without fail, on Monday to meet a tight production schedule. No problem! The CEO called his plant manager who walked out to the shop floor, downloaded a customer- specific software program, hit a few buttons and went home for the evening. While the plant manager enjoyed the start to his weekend, the machine he engaged worked without human intervention to manufacture the damaged casting. The next morning, the plant manager went back to the factory, removed the finished piece and drove it to the customer’s dock.

This story was made possible through the innovation of 3-D printers, which really aren’t printers at all. These unique machines, with their CAD-like software capability, really represent automated manufacturing technology at its best. In fact, the term “3-D printer” may soon be giving way to the more appropriate term, “rapid manufacturing.”

Consider the advantages of fulfillment velocity for MTO items. What about the impact on inventory strategy? For MTS items, the ability to carry less inventory with improved customer service cannot be underestimated in terms of monetary savings, space reductions in the distribution center and the impact to the P&L.

Can you imagine a day where manufacturers don’t even need to make the product? The customer will have a 3-D printer in his own facility and will merely buy the product design software via download from the “manufacturer.”

This almost qualifies for the long-term vision I laid out for the transportation sector a dozen years ago. In that tongue-in-cheek vision, we would simply beam the freight from city to city. While that may not be realistic, custom manufacturing at the point of consumption or distribution may now be.

Innovating Business Success

Innovate or die! 

If you are an innovative business leader, you understand the meaning behind this aging axiom, supporting the idea that products and services must remain relevant. 

In the eyes of a progressive, innovative entrepreneur, technology is vital. Think of technology as your own personal form of research and development. It is a process that never stops. As the world goes forward, the pace of advancing technology will move faster and faster. The companies that consistently embrace this premise will be the winners. Innovation of new products and services are the keys. 

Many companies discover technology but ignore the need to implement it. As mind boggling as it is, a Kodak scientist invented the first digital camera. Kodak filed for bankruptcy earlier this year because they believed the future remained in film based technology. 

Consider object oriented programming, a technology that took computer screen displays from monochrome text to vivid graphics and images. Object oriented technology was invented in an R&D lab in Palo Alto, California…by a Xerox scientist. 

That’s right! 

Xerox. 

Had Xerox realized what they had in the palm of their hand, we might all be using Xerox PC’s and laptops today. Instead, a young entrepreneur named Steve Jobs saw the technology and knew immediately how to monetize it. 

Which companies are continuous innovators? 

How about Google? They started as a search engine and are now responsible for the popular Droid operating system for smart phones, internet TV and a host of other innovative products and services. 

 Amazon began by offering only books and CD’s. Today, Amazon is the world’s largest online retailer offering an electronic marketplace consisting of more than 10 million products.   

3M stands for Minnesota, Mining & Manufacturing. The popular Post-It Notes and other products are a long way from the company’s historical roots of mining. Despite being over 100 years old, 3M understands the vital role that technology and innovation play in achieving sustained success. 

We know that innovating business success means embracing technology, new discoveries and refined processes. The progressive company will also embrace the same principles of business success when it comes to supply chain. 

Consider the supply chain ramifications of innovation when new products and services are still on the whiteboard. Your new product may not play well within the confines of your existing supply chain. Products come in different sizes and shapes and are made of materials often requiring temperature control. These and other factors greatly affect your ability to service customers with a transportation and warehousing plan designed for a completely different product line. Companies who combine uncomplimentary products in a single supply chain often experience the pain of angry customers, excessive costs, or both.

Innovating business success means staying in front of the velocity of business change. This principle applies, across the whiteboard, for your products and services and the supply chain supporting the revenue growth generated by all those new, innovative ideas.

Supply Chain Excellence Means Customer Service

If you read this blog regularly, you already know that the worst customer service responses include, “I’m sorry, there’s nothing I can do” and “That’s our policy.” This week, I got hit with both.

 The story begins with my online purchase of a Sharp sound bar which I purchased from Sears.com. For reference, a sound bar is a device that hooks to your TV to offer home theater style sound without a dozen little speakers having to be spread around your family room.

 I ordered my sound bar on February 7. Sears never sent me an acknowledgement of my online order (bad supply chain practice number one). Days went by and I wondered if I had truly ordered this item.

Seven or eight days after the order, Sears emailed a ship notice. The sound bar arrived at my home on February 17, ten days after the order date (bad supply chain practice number two). As it happened, I left the next morning for a business trip to China and was gone for nearly two weeks.

 By the time I came home, got settled and opened the carton, I realized that I had ordered a component that was not compatible with my TV. So I repacked it in the original carton and set about following Sears’ instructions for returning the item.

 While reading the instructions, I discovered that there was a 30 day policy on returns of electronics. The 30 day period, according to Sears’ policy, was from the order date (bad supply chain practice number three). Well, clearly I was beyond the 30 day period.

Given that Sears took an excessive 10 days from the order date to get the product to my home (see bad supply chain practice number two), I figured I had a reasonable case for an exception to be made.

 With this thought in mind, I called Sears’ toll-free number and explained my story to a customer service representative. I told her that I preferred to simply return the item to my local Sears store and receive a refund. After hearing my saga, all she really heard was, “He’s beyond the 30 day return period.” This gave her license to recite the aforementioned worst customer service responses to me (bad supply chain practice number four).

 She then told me I could attempt to return the sound bar directly to the manufacturer, Sharp Electronics (bad supply chain practice number five). I explained that Sharp was their vendor and I was Sears’ customer (at least for the moment). Her response, as indicated earlier, was to tell me about their rigid returns policy. This was simply unacceptable!

My reply?

”Obviously, you are only empowered to say ‘No’ and I’d like to speak with someone who might be empowered to say ‘Yes.’”

I was told that, “Everyone at Sears will give me the same response that she did.” My answer probably shocked her. I explained that this is why Sears fell from the number one retail slot many years ago. I also expressed my faith that someone there, even if it was the CEO, understood that customer service excellence was a key part of business success.

To get me off the phone, the CSR offered another toll-free number for “escalated concerns.” The young man who answered the second toll-free number understood my point on excellent customer service.

 After taking down the basics of my order, he sent me an email with an RMA label to ship the sound bar directly back to the manufacturer, Sharp Electronics, in Mahwah, New Jersey.  My wife took the sound bar to our local UPS store the next morning and the item was sent along its way, freight free, from our home in Maryland northbound to New Jersey.

 The CSR at the “escalation” number gave me his direct contact information and assured me he would follow through until my return was processed by Sharp and my refund was issued. This young man restored my faith in Sears and raised the possibility that I might someday shop there again.

Two days, later, I received a call at home from Sharp in New Jersey. They had received my sound bar and wanted to know how I got an RMA label for their location. You see, the returns center in New Jersey had closed over a year ago. The man calling me was from the mailroom at the Sharp corporate office. Sharp, unlike Sears, understands supply chain excellence starts with outstanding customer service.

Even at the mailroom level, this man was trained to do whatever it takes. He called the customer at home, uncovered the root cause of the problem (Sears database had obsolete information – bad supply chain practice number six), outlined the steps he would take to solve the issue and then explained how he would forward my item to the “current” returns center in Romeoville, Illinois. He further pledged to send an email to a CSR in Romeoville to finalize the return and expeditiously process my refund. Wow! Promote this guy!

A few hours later, Sharp’s CSR in Romeoville called in response to the email sent by the gentleman in the corporate office mailroom. She took my information and told me that she would issue my refund, in full, as soon as the sound bar arrived from New Jersey. She also said she would deal with Sears and took me out of the middle of the disconnected situation between a manufacturer and its retail customer. Thank goodness!

At the most basic level, Sharp gets it. They obviously train their people extremely well and insure that every employee understands the corporate mission and values. More importantly, the mission and values at Sharp are aligned with supply chain processes such as customer returns.

 Companies like Sears will continue to struggle to gain market share until they learn two things.  1.) Supply chain excellence means customer service and 2.) The customer is always right.

Managing The Asian Supply Chain

ImageMeeting with clients to discuss global supply chain needs, plotting import ocean rate strategy for the upcoming contract year and exploring the expansion of TBB’s growing portfolio of Lead Logistics Provider (LLP) services were amongst the objectives achieved in our recent trip to Asia. Ray McGuire, TBB’s VP of Supply Chain Strategy & International Operation and Ann Bruno, our VP of Global Trade, recently traveled with me to Beijing, Qingdao, Shanghai and Hong Kong (seen above on a quick trip to The Great Wall). During the ten day trip, we met with TBB’s Chinese and Australian agents, multiple clients, a global sourcing company, a company offering social compliance audits and toured The Port of Hong Kong.

Our meetings revealed that the May GRI will be hard to predict. We do remain confident, however, in our abilities to continue offering clients competitive rates on cargo leaving China and destined for U.S., Canadian and Australian ports. We certainly understand the critical nature of cost control in the continuing, volatile global economy. The outcome of the GRI will be important to all clients but especially so for those who opt to view supply chain through the TCO (total cost of ownership) model. For those employing TCO, TBB’s exploration into new Asian-based supply chain management services will assist in ensuring that all engaged factories are compliant with laws preventing abuse in areas such as labor, discrimination, health, safety and even corruption. In addition, other new services encompass product development, vendor qualification, product sampling and testing, raw material approval, production tracking and quality assurance.

As the premier Lead Logistics Provider focusing on SME clients, TBB is dedicated to spanning the globe to evaluate the best resources enabling competition and sticking up for the little guy.

The Benefits of Progressive Supply Chain Strategy

If I asked you the name of America’s largest grocer, what would you say?

Kroger?

Safeway perhaps?

Maybe Costco?

The answer is Wal-Mart.

At the turn of the century, Wal-Mart was enjoying its rank as the number one retailer in America. They were beginning to explore penetration of the grocery market. Do you think the aforementioned chains were worried? Probably not. They scoffed the same way K-Mart, Sears and Montgomery Ward did when Wal-Mart begin its ascent to the top of the retail world. So how does a consumer products retail chain like Wal-Mart become the country’s largest grocer in record time? Wal-Mart gained a competitive edge and a seemingly insurmountable lead by studying the competition and understanding that a second, parallel supply chain would be required for the grocery business. It only stands to reason that baked goods and produce will require different forms of warehousing, handling and transport than cartons of paper products and wearing apparel. By creating a progressive supply chain to accommodate the specific needs of both groceries and consumer products, all in the same big box store, Wal-Mart jumped over every major competitor and never looked back.

Creating a progressive supply chain involves the development of an agile network of assets that can rapidly expand, contract, or relocate. Assets include distribution centers, trucks, people and technology. The progressive supply chain approach takes into consideration the introduction or retirement of SKU’s, customers and geography. The Wal-Mart story is but one example of how a company uses progressive supply chain strategy to gain an edge and improve net income. Companies ignoring the principles of progressive supply chain do so at their own peril. Rapid growth has been known to strangle a static supply chain leaving the company to play catch-up. Catch-up is deadly because the velocity of business growth can far exceed the company’s ability to throw money and resources at a sagging foundation.

The remedy? Plan ahead! Your next product innovation will guide the progressive steps required of your supply chain. The size, value or makeup of that new product may dictate a different supply chain strategy. Having an agile supply chain in place in advance of the product launch will be a gateway to intelligent growth. Would Wal-Mart be the country’s largest grocer had they failed to adhere to this strategy? Now that’s food for thought!