The supply chain looms ever larger as a component of today's business. However, while the logistics and management of the supply chain have been focus areas for many channel players looking to improve their businesses, the benefits of rationalising the supply chain have often been ignored.
Simon Campbell-Young, CEO of Phoenix Distribution, says this is changing as the channel increasingly focuses on rationalising the supply chain and cherry picking products. "We are seeing an international trend of companies focusing on the lines and suppliers that are the most effective for their businesses. In the past, they could afford to absorb a certain amount of inefficiency, but in today's tough economic climate, it's the simple evaluations of lowering costs and increasing returns that are driving these changes."
This applies equally to retailers and distributors, he adds. "Retailers internationally are starting to consolidate supply chains in order to maximise efficiencies. The same is true for distributors, when it comes to choosing products to distribute."
For retailers, feeling the pressure of lowered consumer spending, efficiency has become the cornerstone of success. With fewer suppliers into the business, they are better able to manage their offerings and improve on their sell through. Campbell-Young points out that the business practices, processes and operations of retailers have never been more important, especially for those that are in the e-commerce arena.
"Getting retail right is no small undertaking. Geographic locations, or even different divisions of the same operation, have different customer bases and requirements. Ensuring the retailer can meet those needs and provide products that are in demand but that also provide the highest margin requires careful planning. By establishing closer relationships with fewer suppliers, this is easier to achieve."
Similarly, distributors need effective sell-through out of their warehouses in order to gain the greatest benefit. "Meeting demand and getting products to the customer on a timely basis involves efficiency in the management of product portfolios. It is pointless to sit on bloated inventory, when only 20% of the stock is fast turning," says Campbell-Young.
Everyone - customers, employees and partners - benefit from a more targeted, consolidated approach. The savings in product redundancies and range overlap are significant enough, but the ability to utilise lower inventory levels and service the same number of orders is the real value in cherry picking products and using fewer suppliers.
"To seize the cost opportunities that this approach presents, the channel must become nimble. In essence, supply chain rationalisation allows the company to eliminate days on hand, but they must find ways to create supply at a rate that meets marketplace demand. Together, the supplier and the business - whether retailer or distributor - can reduce costs and improve customer service levels," Campbell-young concludes.
Share