PROCUREMENT; supply chain blending is a must-have skill

By | Business Complexity, Data Analytics, Leadership, Marketing Procurement, Point of Purchase, Retail Fixtures, Shopper Marketing, Supply Chain | No Comments

If you are in Marketing Procurement and are looking for a mantra to guide you throughout 2018 then there is no better one to consider than “One size does not fit ALL”. It is wrong to assume that one supplier can provide a best-in-class solution across all the requirements of a supply chain. This is especially true when considering the complexity of spend areas like retail investment programs. These types of programs require highly skilled disciplines such as market research, shopper marketing, conceptual design, technical engineering, production management, logistics optimization, merchandising etc. These all need to work seamlessly together to deliver the best possible outcome.

“If you expect a supplier to do everything, you will only be able to receive an average at best solution, where there is no discernible competitive advantage.”

There is a growing trend in the marketplace for companies to outsource the management of complex supply chains to just one company. In this way, they are able to reduce internal complexity as they now only need to hold one supplier accountable for delivery. The challenge however, with this approach, is that in all likelihood that one company will not have the skill base or resources to provide a high level of performance for every step of the supply chain. If only one area of the supply chain does not function well then it can significantly impact the final outcome and the level of value that is delivered overall. To abdicate the responsibility for overseeing the supply chain to an outside company is risky at best and, in most cases, will significantly erode the value that should be delivered.

The reason that there is still a growing trend to move to a single source supplier is due in part to one small but very important fact; the responsibility for data capture, insights and performance reporting is also outsourced. As an example, I continually come across instances where cost saving reports are generated by the suppliers themselves, with no validation undertaken through any other means.

“Abdicate the responsibility for data capture and performance reporting to your supplier and you will become the least knowledgeable party in the relationship.”

So, what other approaches can be considered? The other traditional method of sourcing marketing requirements is to adopt the “preferred supplier” strategy where several competing suppliers are identified and included in all future tenders. This does have the advantage of ensuring a highly competitive focus on a specific area. However, the problem with this approach is that the entire supply chain is generally not considered. Tenders are usually disconnected from supply chain outcomes and this breaks the chain and negatively impacts overall performance.

The real opportunity lies in BLENDING; working with the best possible suppliers but in a way that they are seamlessly integrated across the entire supply chain and all working to generate the same outcomes.

Key principles are:

  • Supply Chain over Purchasing
  • You in Control over Supplier in Control
  • Specialists over Generalists
  • Connected over Isolated
  • Flexible Supply over Single Supply
  • Waste Reduction over Margin Reduction

Here are six very simple key principles to bear in mind when seeking to implement a blended approach:

1.Big Picture

The only result that matters is the one that positively influences the end customer. Own the supply chain and focus on the final outcomes. Ensure there is clarity and focus on your goals. Embed continuous learning.

2.Gain Control

Put yourself in control. Make sure you have the data you need. Become better informed than your suppliers. Ensure your data sources are stable, reliable and owned by you. Act on the insights generated. Validate all your decisions.

“What gets measured gets improved.”  ~ Peter Drucker, considered the father of Modern Management

 3.Find the best

Don’t settle for average. Find the best providers. Seek competitive advantage by developing the best outcomes. Do not accept mediocrity. Identify tangible points of differentiation as this is what will give you the edge in the market.

4.Connect the dots

Ensure clarity on roles and accountability. Focus on handovers. Identify possible break points and ensure there are agreed remedial actions. Link the data, so dependencies are clear. Always use data visualization to help identify areas of improvement.

“Without data, you’re just another person with an opinion.” ~ W. Edwards Deming

5.Embed flexible sourcing

One size does not fit all. Ensure the supply chain is flexible and can embrace new sources of supply. Blend local production with centralized supply to always deliver the best solution. Achieve this by controlling the data, specifications, standards and processes.

6.Focus on waste reduction

Remove waste and you create value. Discard anything that does not directly influence the final customer. Treat people’s time as an investment and find ways of improving the Return on this Investment. Always demand transparency.

“Blending is a business technique that seamlessly connects high quality services into a fully integrated supply chain to deliver the maximum influence on the end customer.”

Here’s to a very successful 2018.

If you would like more information on how LeanPie can transform your shopper experience supply chain, please feel free to contact David at david.newberry@leanpie.com

One trend that will really matter to Marketing in 2018

By | Business Complexity, Data Analytics, Engineering, Leadership, Lean Manufacturing, Lean Thinking, Marketing Procurement, Point of Purchase, Productivity, Shopper Marketing, Supply Chain | No Comments

It all started back in January of 2017, when Marc Pritchard of P&G, laid down a new set of guidelines for the digital industry to clean up its act. Here is an article that kicked off a potential transformation of how marketing is managed.

In summary, there are two very simple issues at stake. The first is the lack of transparency across the supply chain. The second is a result of the first. If you don’t know how the supply chain works, you won’t know where the value is created and more importantly where the waste is happening. It is back to the age-old question of marketing attribution. The reason why attribution in Marketing is so hard is that all the various activities that are undertaken cannot be easily connected together to clearly ascertain how, and if, they actually impacted the customer outcome and therefore delivered a benefit.

“It is all well and good, increasing the number of impressions, or website visitors but if that doesn’t influence any change in perception, affinity or behaviour on behalf of the customer then it isn’t valuable.”

Itis time for Marketing to start focusing on connecting the supply chain. This has been underway for decades in many other departments and disciplines. It is about time Marketing finally catches up.

Lean Manufacturing and the resulting concept of Lean Thinking originated in 1988. The foundation is based around gaining control and transparency across the entity of the supply chain and in so doing to optimise workflows and to remove waste. Another concept that is very similar in thinking is Total Cost of Ownership . This was pioneered by Gartner in 1987. A very simplified view of TCO is to look at all the costs associated with an activity — acquisition or set-up costs, operating costs and finally replacement or upgrade costs — as a means of being able to evaluate the return on the total investment made.

“Three decades is probably enough time for Marketing to wait before applying Lean Thinking & Total Cost of Ownership concepts.”

So how can Marketing adopt these concepts? Here are seven recommendations that will start you on the supply chain connection journey in 2018:

1. Have a clear customer outcome

Every objective should deliver discernible value for the customer. Establish a hypothesis against which you can measure success. Make sure the objective is measurable. Define and agree in advance how it will be measured.

2. Seek transparency from partners

Ensure that all your partners provide full transparency. Agree on what data will be provided and how. Ensure that all the data can be referenced to and analysed for customer value creation.

3. Understand the entirety of the supply chain

Map out the entire supply chain. Understand each task and activity. Define how each handover will be managed. Identify who is responsible for each step. Agree on how issues, delays etc. will be handled. Know the journey. This will ensure you gain complete control and thereby the opportunity to influence and create measurable value.

4. Connect the data

Ensure that data is not siloed and not looked at in isolation. You need to be able to aggregate / consolidate all the effort and resources applied and compare that to what outcomes were delivered. In addition, the closer a relationship can be established from one stage of the supply chain to another, the easier it will be to understand how a change in one area can positively impact the performance of the entire supply chain.

5. Consider human resource costs (for a more complete view)

A significant level of resource can be invested in people’s time. In many cases, this may not be that valuable. How often have you been in a meeting that has not been productive? It is worth considering what the costs are associated with this effort. By considering this, you may uncover significant opportunities for workflow improvement and waste reduction.

“Meetings should be small enough that two pizzas would feed the entire group. If not, the meeting would probably be too big and unproductive.” Jeff Bezos

6. Work with specialists (to build understanding and insights for waste reduction and improvement)

Supply chains are complicated. Ensure that you work with specialist partners. If third parties cannot add value e.g. they are only a communication cog, then seek ways to reduce their involvement. Data is only as good as the insights they provide. If you don’t know how to apply the data to create value, then work with people who can.

7. Adopt continuous improvement (validated learnings)

Good supply chain management will provide you with the full cost of the investment made. With a clear hypothesis of what that investment was established to deliver, you have a clear way of assessing the return on that investment. Invest time to learn as next time round it will pay you dividends. Always validate your outcomes and apply learnings to every future programme.

“Validated learning is a unit of progress process and describes learnings generated by trying out an initial idea and then measuring it against potential customers to validate the effect.” Eric Ries, The Lean Startup

May 2018 be the year that Marketing starts to connect their supply chains. In so doing, Marketing has the opportunity to transform the function and to really get to the heart of what true attribution means.

Wishing you all every success in 2018.

If you would like more information on how LeanPie can transform your shopper experience supply chain, please feel free to contact David at david.newberry@leanpie.com

Why outsourcing is beneficial to retail investment programs

By | Business Complexity, Leadership, Lean Manufacturing, Marketing Procurement, Point of Purchase, Retail Fixtures, Supply Chain | No Comments

As a supplier of retail fixtures and shopper marketing programs to some of the world’s leading brands and retailers there is a question which we are always asked. “Do you have your own factory?” It is an important question that should be asked but it is not the question itself, but it is the answer that is looked for, that continues to puzzle. When we reply and inform the client that no we do not have our own factories, this is immediately assessed as a weakness in our offering.

BUT is this really the case?

“Outsourcing is a very powerful strategy that enables a company to leverage market innovation, new technologies, specialist talent, sourcing flexibility, cost efficiencies and risk management.”

In today’s global marketplace, it is critical that companies are able to respond in a timely fashion, to any challenge or opportunity that presents itself. This is as important to how the company goes to market as it is to how it operates and Procurement have a leading role in ensuring that the company is agile enough to respond quickly and sufficiently to improve operational performance.

“The measure of intelligence is the ability to change.”  Albert Einstein

So here are 8 reasons why outsourcing provides significant advantages over in-house manufacturing:

1.Innovation

Innovation is a consequence of the scale and depth of ideas that are put forward. By limiting innovation to one company, the level of innovation that can be achieved will be significantly curtailed.

2.Design focus

Companies that have in-house manufacturing will design to their own production capabilities and expertise. This will not necessarily deliver the right solution for the client. In a market where creativity and differentiation are essential to ensure shopper engagement, it is imperative that the focus for design is on desired outcomes rather than on what can be manufactured.

3.Production techniques

Retail investment programs can be highly complex and can include a variety of different substrates and production techniques. No one supplier can manufacture all the requirements in one factory, so there will always be elements that will be outsourced. When you don’t have outsourcing expertise the overall outcome can be significantly compromised.

4.Engineering skill

New techniques, tools and innovations are always coming to market. By outsourcing, you can always ensure that you have access to the required talent and engineering skill without relying on investment and in-house training to take place.

5.Capacity demand management

The level of requirement will always fluctuate and by restricting yourself to just one source of manufacture can limit your ability to scale up or down as required.

6.Flexibility of supply

The world is constantly in flux. Substrate prices change, currency exchange rates move, shipping rates fluctuate. Nothing stays still. This is why flexibility on supply is essential. A client must be able to source the right solution at any given moment and not be restricted or constrained to one source of supply for a given period.

7.Cost efficiency

When you have in-house manufacturing you have an ongoing overhead that you need to cater for. In many cases when you have spare capacity, the costs of this have to be made up in future production. When outsourcing, you can seek out the most efficient factories. In addition you can consider other locations and countries where substrate prices, labour rates, land costs and conversion rates are lower.

8.Risk management

Managing risk is becoming increasingly important. The real value in adopting an outsourcing approach is that you switch your focus from supplier management to supply chain management. With the right partner you can model the supply chain to be able to respond to any event or circumstance. In addition, you will receive increased transparency over the entire supply chain, leading to improved CSR management of all suppliers involved in the supply chain.

So when that same question is asked in the next meeting, please take a moment to reflect on what an outsourcing specialist can provide. They can help transform the management of a very challenging and complex spend area through insights, innovation, transparency, flexibility and overall supply chain modelling.

If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” Lee Kuan Yew

If you would like more information on how LeanPie can transform your shopper experience supply chain, please feel free to contact David at david.newberry@leanpie.com

Remove the 5 key roadblocks to global retail investment programs

By | Business Complexity, Culture, Customer Experience, Distributed Teams, Leadership, Marketing Procurement, Point of Purchase, Retail Fixtures, Shopper Marketing, Supply Chain | No Comments

In Marketing one of the hardest things to achieve is consistency of brand execution across multiple markets. This is especially true when the presentation of your brand in physical retail outlets is a very important part of your marketing mix.

The role of Marketing is to emotionally connect your brand with the customer. From one country to another, customer needs and expectations will vary. Combining this with different cultures, beliefs, language, etc. it is clear that brand engagement needs to be customised. Then add the different retail landscapes into the mix and the level of complexity changes again.

This creates the so called “perfect storm” for local markets to go their own way and shun any attempts by the global brand teams to establish a coordinated and synergistic approach to retail investment. Does this sound familiar?

“The three rules of marketing; everyone has an opinion, every opinion is different and every opinion is right”

So what are the main barriers facing global and regional teams who are trying to implement regional programs and how do you overcome them? Here are the five main roadblocks, that we are sure you will have heard of before:

1.The centre doesn’t understand my market

Regional retail investment programs often fail before they are started. The reason is that not enough data and corresponding insights have been gathered to ensure there is a clear understanding of the differing retail environments that are to be invested in. It is imperative therefore that this weakness is addressed. Consider undertaking retail outlet assessments and using augmented reality tools to test how certain concepts may work across markets.

“Collective wisdom will always outshine individual judgement. This has never been truer than in shopper marketing.”

2.”This program won’t work in my market”

The challenge is that the focus for the program ends up on the materials being designed. Each market looks at the materials being proposed in context of their own retail landscape and this is when they see issues. The focus needs to be switched to desired outcomes. The objective is all about delivering the most compelling and immersive experience possible to the customer to influence purchase behaviour. Develop a Purchase Decision Journey that connects every touch point into a consistent retail experience for key outlet types. If everyone can become aligned around the journey and the desired outcomes, then gaining commitment to the regional program is so much easier.

3.”There is no ability to customise the materials”

In many cases, materials are designed without a clear definition of their exact role from the customer’s perspective. This also impacts the way they are deployed. In addition, materials are often looked at in isolation of each other. Establish a retail investment kit for each specific outlet type. Build in customisation so that materials can be “flexed” to deliver a specific customer experience that meets specific brand, product or outlet objectives. This will remove the need for many local markets to have unique alterations.

4.”I can source it cheaper”

Invariably, when this position is put forward, it is more often than not a comparison of apples and oranges. The materials being compared are not to the same specification.

For an objective like-for-like assessment to be undertaken of the various potential sources of supply, there is a need for accurate and full availability of technical specifications. If a full technical specification is not available, then this claim has absolutely no validation.

5.”I need to buy locally”

Having a local source of supply is usually put forward for two reasons; lower cost and speed of response. Once you have full technical specifications you need to engage with a supplier who can provide full flexibility on supply. A supplier who can provide a supply chain model that meets the local market needs and can be adapted as requirements change. You need a supplier who can arrange offshore production (for lowest cost), local manufacture or a combination of the two.

“For a regional retail investment program to succeed, you need to switch the focus from the materials being developed to the customer experiences that you wish to deliver.”

So in summary, the format for running regional retail investment programs has to be fundamentally adapted to include the following 5 key criteria:

  1. Market insights on the differing retail environments
  2. A clear and aligned Purchase Decision Journey for each outlet type
  3. Customisable retail outlet investment kits
  4. Detailed technical specifications for every item
  5. A flexible supply model that can support offshore and local sourcing

By following these principles, many of the challenges of implementing regional or even global retail investment programs can be removed.

If you would like more information on how LeanPie can transform your shopper experience supply chain, please feel free to contact David at david.newberry@leanpie.com

Understanding COST – why Procurement should care

By | Lean Manufacturing, Lean Thinking, Marketing Procurement, Point of Purchase, Supply Chain | No Comments

The terms “cost” and “price” are often interchanged when used in Procurement circles but they have fundamental differences when they are being reviewed as part of a supply offer.

In terms of definition, “Cost” is the amount that has to be paid to get something. However, in business, cost is usually a monetary valuation of (1) effort, (2) material, (3) resources, (4) time and utilities consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of goods and or services.

“Price” on the other hand is the value that will purchase a finite quantity, weight, or other measure of the goods or services required. The differences may seem trivial but are actually very far reaching.

“If you don’t understand the cost, it is like being a buyer in a Middle Eastern bazaar, the price that will be offered is the one the trader thinks he can get away with”

Marketing spend

With spend categories like Marketing, which can be highly complex, Procurement teams are often only able to assess the value of goods or services on the basis of the prices provided.

As an example, Procurement runs a tender and they receive different price offers from the participating suppliers. By comparing the prices of the different offers, they are able to ascertain which offers are more competitive. However, this does not provide any real indication of what a fair price should be, based on the associated costs for providing those goods or services. This is because the prices are only reflective of the suppliers who participated.

“Relying on suppliers to help you identify the market price is like asking a second-hand car salesperson if their proposed price represents good value.”

Retail investment

One of the areas of marketing spend where this is a common challenge is in the area of retail fixtures and permanent Point of Purchase materials.

The industry is very fragmented with thousands of suppliers, a very complex supply chain, many different production techniques and substrates and suppliers who use a combination of in-house, near-shore and offshore manufacturing.

The suppliers in this industry only provide a price with no indication or transparency on underlying costs across the supply chain. This means that Procurement has its hands tied behind its back, as it has no benchmark against which to compare the prices received. These suppliers will often propose a price which they believe the client will accept or is in-line with the budget price originally provided. This clearly opens on the opportunity for suppliers to apply a significant profit margin to their offered price. It also means that they are not under internal pressure to secure the best possible price from their suppliers.

All Procurement can try and do, in these situations, is to negotiate a lower price via margin reduction, without having the evidence or data to validate why that reduction should be provided.

“Understanding cost provides an objective benchmark against which offered prices can be compared and negotiated against.”

Supply Chain Management versus Procurement

So, how do you achieve a true understanding of cost when there are complex supply chains involved? Very simply you need to change your approach from one of sourcing to one of Supply Chain Management SCM). Here is an article that provides more colour around this topic and why it really makes sense.

“It is a capital mistake to theorize before one has data.” Sherlock Holmes, “A Study in Scarlett” (Arthur Conan Doyle).

In summary, you need to work with suppliers who are willing to be open about their costs and the costs that they incur. Suppliers who see value in partnership where by working together, both parties can identify areas of waste and remove them for the benefit of all stakeholders. This requires a culture of trust, transparency, openness and fairness. It requires sharing of data and through that building insights that can lead to more informed and more insightful decisions.

“The goal is to turn data into information, and information into insight.” – Carly Fiorina, former executive, president, and chair of Hewlett-Packard Co.

We, at LeanPie, have embedded this philosophy into our offering. We believe that by building our client’s understanding of costs, we can collectively work towards a better solution for everyone. The benefits of this approach are significant:

  • Knowing the fair market price offers a benchmark against which you can identify real cost savings
  • If prices come in above the benchmark, you know the suppliers are either inefficient or taking excessive margin
  • If prices are below the benchmark, it prompts you to ask how they achieve these prices and to make sure that quality and other value aspects are robust
  • Identifying specific costs across the supply chain helps identify waste that can be removed to the benefit of all stakeholders
  • It enables a fair market price to be accepted leading to stable and sustainable relationships with your suppliers
  • A transparent supply chain enables you to ensure that all parties involved adhere to your CSR, environmental and ethical sourcing standards

It also means that your suppliers have to really understand cost, based on labour, utilities, substrate, tooling, conversion/production and margin etc. So, the next time a supplier walks in the door, isn’t this now a good place to start the conversation?

If you would like more information on how LG&P and LeanPie can transform your shopper marketing supply chain, please feel free to contact David at david.newberry@leanpie.com