In his book War As I Knew It, General Patton wrote: “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” This interesting statement is sometimes used by teams working on strategies to focus the analytical processes on answering the question of “What should we do?”. In our opinion, today, the answer to the question “how should we meet customers’ needs?” is also becoming more and more important and should not be overlooked.
Companies in the retail chain are competing with one another on many levels in terms of “what they do”. The development of management tools in various areas, means that more and more of the practices applied are becoming standard. The growing share of online sales means that it is easier to compare prices and manage pricing. Management of the assortment of goods, numerical distribution or the visibility of different categories of goods on the shelves is slowly becoming a standard that everyone sees and uses. Therefore, in our opinion, as the sources of advantage in these areas are exhausted over time, the next area in which manufacturers, wholesalers and retailers will look for competitive advantage will be the supply chain. That is why the question “How do we serve our customers?” will become really important.
The results of an analysis performed by PwC for IATA, published on 14 October 2020, also point to factors that have caused a huge number of shifts in the flow of goods across economies. Firstly, long-term flows depend on economic growth, staff shortages, reorganization of international transport in the EU due to the mobility package regulations, digitization and industrialization of transport. Secondly, distancing requirements, mobility restrictions and other measures implemented by governments in response to the COVID-19 pandemic have further accelerated automation and the shifting of distribution centres closer to customers (shifting global supply chains to regional ones to be able to respond to local demand). Thirdly, due to lifestyle changes, the channels through which goods are transported have also shifted – in 2020 there was a very dynamic increase in the share of online trade in total retail trade resulting in increases in the volumes of goods handled by courier companies (according to PwC data, these volumes grew in Poland by 35% between 2019 and 2020). At the same time, the slowdown that occurred in certain industries, e.g. in the automotive sector, caused a decrease in flows for some transport operators operating in LTL or JIT models.
As the environment is changing so rapidly, it is becoming increasingly important “how” we respond to demand and there are also many different approaches to this matter (see fig. 1).
Figure 1: Five generic approaches to supply chain offering in the responsiveness & innovation spectrum.
Source: PwC analysis.
Companies can analyse their operations on two levels – from the perspective of responsiveness and innovation of their supply chain – ranging from focusing on cost optimization with a simple product and not very high responsiveness, through maximizing customer (consumer) coverage and availability, to being a leader in process management and even in consumer experience and innovation. Global beverage manufacturers such as Coca Cola and PepsiCo, whose products can be found within walking distance of most of the world’s population, are examples of leaders in consumer accessibility. However, the spectrum outlined above offers many different possibilities.
The examples of our customers show that working with the supply chain can achieve real results, from an 8–12% reduction in logistics costs by aligning resources, automating processes and optimizing distribution flows, through improving customer satisfaction to achieving two-digit revenue growth by ensuring better availability of products to customers. Such huge results are increasingly difficult to achieve without taking into account the supply chain perspective in the strategy.
However, service positioning is not limited to cost vs innovation and flexibility considerations. An analysis of the right approach to supply chain management should begin with the strategy and its dimensions:
In the financial perspective, the analysis should start with defining the role we should take in the value chain, i.e., can we achieve better margins as a manufacturer, distributor or retailer, or perhaps by partially integrating these stages or developing online sales?
In the customer needs perspective, the customer value proposition should be looked at in terms of innovation, cost, service, shopping experience, brand image and quality.
From the processes perspective, strategy dictates how the End-To-End processes in the supply chain should function and be synchronized with one another – managing them is essential to delivering the promised value.
From the perspective of capability and resource development, translating strategy into supply chain will show which assets and collaboration with which entities are necessary for us to operate within the chosen model.
Since much can be achieved and there are many paths to success, the question is “how to begin?”. Some may say that digitization or the implementation of e.g. the 4PL Control Tower solutions could be the solution to all supply chain problems. Nothing could be farther away from the truth – as with every strategy, when preparing supply chain operations you should begin by defining the objectives, and determining not only what you can do, but also – and more importantly – what you should not do (especially since the answer to the latter question is usually more difficult). So, starting with strategy, you might ask, for example: “How should we improve order fulfilment?” “How can I provide better visibility of supplies to the customer in the international supply chain?”, “At which points in the supply chain can I make savings?”, “In which areas should we improve the level of availability of goods/ service/ delivery of services?” or, for example: “How will changes on the market affect our future demand and what does that mean for us?”. There are many questions, so starting the strategic process with analysing changes to the supply chain is essential to building a focused plan to build a strategic advantage. Lastly, it is important to remember that there are two different “How” questions at stake. One relates to “How should we fill the clients’ needs” and the other is about “How organize our operations to deliver on the promise”. General Patton’s writings are timeless in that respect - it’s all about finding the right answer to the first problem, and leaving the space for our people’s ingenuity to solve the second one.
Contact us
Follow us
