CEOs and CFOs of small- to mid-market companies are interested in two things — growing their company’s top line and reducing costs at the same time, says John DuBiel Jr., senior partner of Avon-based SupplyChainEdge.
If a company becomes a better logistics provider and puts more focus on customer service, he says, the company will grow the top line as an added benefit.
“The supply chain is going to be only as strong as its weakest link,” he says. “If … you don’t get good service from your motor carriers delivering product to your customers, the customer doesn’t care how well you manufacture the product. They don’t care how cheap you’re able to buy the components to make that product, and they don’t care if your packaging is pretty.
“All they know is they get poor transportation service, and they can’t get the product on the shelves to sell to their customers.”
The same scenario can occur on the other end of the supply chain. If a company’s transportation carriers are quick and efficient, but it can’t make the product for several weeks because the components aren’t available or the manufacturing process is slow, “What good is it to have fast carriers if you already screwed up the process in-house?” DuBiel says.
Having an efficient supply chain not only makes sense, it saves money. DuBiel says for typical companies, an additional $20 in incremental sales would be needed to have the same impact as $1 in supply chain savings. Many companies have tapped out their markets, and their top line has flattened out.
“If you can’t grow the marketplace, (a company) can certainly cut the bottom line through efficiency and cost-cutting measures, and not your typical slash-and-burn,” he says. ” … (Businesses) can streamline processes, take the resources people have and … shift those resources to more strategic deliverables.”
Decision-makers should take a strategic approach to accelerate cost reductions, improve cash flow and mitigate risk. This includes building strong relationships with customers, suppliers and service providers.
“Forecasting is probably the single biggest problem we see with small- to mid-cap companies,” DuBiel says. “Poor forecasting leads to poor sales performance. It leads to inefficient inventory levels, and inventory dollars equate to pre-cash flow.”
Because there is usually less bureaucracy and politics in small- and mid-cap companies, DuBiel says they should play up that strength, which allows them to be more maneuverable and agile.
“(In larger companies,) each department within a company is responsible for their own operating budget, so they may not do something that may be more attractive to the company if their individual budget is affected negatively or unfavorably, so they never seem to get out of their own way,” he says. ” … In small companies, typically people march to the tune of corporate results as opposed to departmental results.”
It’s also necessary for companies to research their competitors.
“That’s part of understanding and getting a good relationship with your customer,” DuBiel says. “They’ll tell you if somebody’s doing a better job than you are and why they are.”
It’s more important now than ever for companies to develop effective supply chains.
“Competition is more intense than ever. Good operating companies have taken the initiative to reduce their costs,” DuBiel says. “Mass merchandisers like Wal-Mart Target and Kmart have beat the prices down as far as the prices can be beaten down. They now are sourcing from offshore points like China and India … so they’re actually cutting out the middle-man in some cases. That should be a huge concern for small to mid-market companies.”
HOW TO REACH:
SupplyChainEdge, (440) 937-5151 or www.supplychain-edge.com
Oops, they did it again
With more than 25 years in the consumer goods and service industries, SupplyChainEdge senior partner John DuBiel Jr. shares the top supply chain mistakes that companies make.
* Outsourcing offshore before understanding the total cost of ownership. “I can buy something cheaper in China by 10 cents for this item,” DuBiel says. “However, by the time I load in the transportation fees, duty payments, fees at seaport terminals, brokerage fees and inland-to-transportation costs, the cost of ownership may be higher than sourcing the product from someone who’s geographically close to the facility.”
DuBiel recommends doing a total cost of ownership study to determine how it relates to cash flow. “In today’s environment with small and mid-cap companies, cash is king.”
* Focusing on transactional costs, not total value. “A rate may look cheaper on paper ,but if you can’t get that service at that rate, what good is it, really? We believe in the value proposition as opposed to the transactional proposition, which is, cheaper is better. Cheaper is not necessarily better,” he says.
* Monitoring events as opposed to measuring events. DuBiel believes that if you can’t measure it, you can’t manage it. “Monitoring would be more intuitive; measurement would be more data-driven,” he says.
* Considering the necessary evils as permanent fixtures. DuBiel’s company “has a field day” in client mailrooms. “Small and mid-market companies have a huge expense in the area of overnight and air freight envelopes and documents,” he says. “If they understood the ground service schedules, they would think twice about expediting via air.”
