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Supply chain management, inventory management, eCommerce

5 lessons from the top 25 global supply chains of 2015

BY Vera Lim 11 Jan, "16

The beginning of a brand new year is always an exciting time. In our efforts to look ahead and plan for a successful 2016, let’s not forget to take a quick glance back at 2015 to take away lessons from what went well.

One such place to takeaway pointers from is this list of companies that made it into at the top supply chains of 2015. How did they do it? How can you replicate their successes in your own business?

This is Gartner’s 11th annual global supply chain top 25 list, covering the manufacturing, retail, and distribution sectors, and companies listed include household names like: Amazon (#1), McDonald’s (#2), Unilever (#3), H&M (#7), Samsung Electronics (#8), and Nike (#10). If you’re wondering why the much lauded Apple isn’t sitting in first place, it’s because they’ve done such a great job holding on to the supply chain management crown over the past 10 years that they’ve been promoted to a special category for masters of supply chain management.

So how do these companies do it? Well, Gartner posted up the key performance indicators used to evaluate and determine their top 25, and it’s time to learn from the best.

  1. Accurate demand forecasts

    What’s the difference between the forecasted and actual demand? The idea is to have minimal discrepancy between the two. An accurate forecast means you won’t be burning capital on carrying costs for extra goods or discovering you’re running out of stock and having to expedite shipping.

    In order to hold less inventory and improve their demand forecast accuracy, L’Oréal (#22 on the list) is moving towards a more agile supply chain. They’re doing this by feeding their suppliers weekly demand forecasts so production can be adjusted to better suit customer demand.

    When it comes to predicting demand, referring to past data is always a great place to start - but don’t just look to it when the reorder point rolls around. Instead, take a hint from L’Oréal and check your sales order reports on a weekly basis so you’ll be able to pick up on sales patterns and adjust your purchase orders accordingly to match market trends.
    Loreal matches market trendsBecause you’re worth it!

  2. Perfect order fulfillment

    A perfect order is one that’s complete, accurate, on time, and in great condition. And when it comes to order fulfillment, look no further than Amazon - the clincher of this year’s #1 spot and supply chain maestro. Amazon is constantly pushing the limits of order fulfillment with services like same-day delivery, drone delivery, and even instant ordering devices to enable easy reordering of common household items.

    While I’m not advocating for haphazard placement of products wherever there’s space (that’s what Amazon does) - there’s method to this seeming madness. Amazon realized that the time it’d take to sort out all incoming products wasn’t worth it, and instead elected to key in the location of every product as the stockers find space on the shelves. If you’re tracking every single product, you’ll know exactly where everything is, equipping you to better fulfill customer orders.

    If you’ve got a brick and mortar store in addition to your storage facility, it’s time to put it to use and channel your inner Amazon. Part of the reason they’re so effective at delivery is because they’ve got distribution centres all over. For smaller retailers, back rooms of the store can double up as distribution centres, allowing customers to pick up their purchases from the store, or even a return point.

  3. Reduced supply chain costs

    These include manufacturing costs, transportation costs, warehouse operation costs, inventory holding costs, and customer service operating cost. I know, the ability to cut some of these down are limited to the large, public companies, rather than small independent businesses.

    But there some great moves practiced by these companies when it comes to trimming costs. Like L’Oréal’s rule to limit SKU counts with a simple rule: “One in, one out” - which basically means you’ll have to remove an existing product in order to introduce something new. It’s a great tip when you’re looking to prevent your inventory from becoming bloated.

    Or how about Unilever’s low-cost business model, which focuses on packaging among other things. Making the switch to smarter packaging will let you reduce your environmental footprint while saving costs - and if you’re selling B2B, your retailers may thank you too! For example, one idea is to use paper-based cartons that double up as display boxes that’ll save you paper costs as you’ve just rolled two items into one.

  4. Innovation excellence

    It’s hard enough to achieve accurate demand forecasts, perfect order fulfillment, and reduced supply chain costs… but what sets these top 25 supply chains apart is the added dollop of innovation excellence to the mix.

    One interesting metric raised by Gartner in their report is Time to Value. It’s the amount of time it takes to realize all the expected business benefits of a technology solution. Take Inditex (#6 on the list) for example. They’re implementing a reusable item-level RFID tracking system for all clothes sold by Zara, and looking at the benefits of more efficient inventory counts, stock replenishments, security control, and better service for customers looking for specific products online and offline.

    So what can you do for your business to put yourself ahead of your competitors? You don’t need a customized solution. It could be something as simple as signing up for new technology solutions that’ll help you save time and improve efficiency.

    Let’s take automating inventory management as an example: Research has proven that 55% of businesses save 5 hours or more a week with inventory management software. On top of that you’ll be able to track stock movement and know where everything is… kind of like what Zara’s doing, just on a smaller scale.

  5. Going digital
    Going digital
    Going by how many of the 25 listed companies are lauded for their eCommerce successes (or are planning to venture into eCommerce), it’s not much of a stretch to say eCommerce is the future. Consider Gartner’s observation of H&M (#7 on the list): “Its next challenge will be reinventing the ability to capture demand and fulfill across all channels, given the recent expansion into eCommerce.”

    eCommerce is obviously a massive growth driver, especially with the prevalence of smartphones that now allow for anything to be done on the go - including selling and purchasing. Take a cue from brands like Nestlé (#17), staying competitive means you’ll have to get online (if you haven’t already).

    And to enjoy the success akin to the top 25 guys, the ultimate goal should be to marry all your sales channels - online and offline - to provide your customers with a seamless shopping experience.

As another year begins, it’s a great time for resolutions and plans to take your business to new heights. And there’s no better place to start than implementing ideas used by the top supply chains of the world!

 

Sources: 1 | 2 | 3

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See Also:

7 ways to save on inventory holding costs

6 tips from Xero advisors on preparing for 2016

How does Santa Claus manage inventory: An eBook



     
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