Contribution by Sujan Muraleeswaran – Senior Manager at Bristlecone
There are several companies that have gone from ‘Good’ to ‘Great’ purely by virtue of their supply chains. While selling great products and offering excellent customer service is vital for any business to be relevant, the real enabler of a rewarding customer experience and brand loyalty is the supply chain. In this regard, the supply chains that have been most scrutinized and written about in the past decade would be of Dell, Apple or Walmart.
Dell’s supply chain was predominantly focused on Just-in-Time, Mass Customization and rapid Inventory movement. One could say that they revolutionized manufacturing (assembly) for the Computer industry by eliminating the number of links from Manufacturer to Customer. Perhaps the first company to move to a complete ‘online only’ selling model – Customer Orders, Updates, Support, Catalogs, Offers all done through the web, virtually eliminating any latency in communication between Demand and Supply points. They also perfected ‘manufacturing on the move’ – where subcomponents from all suppliers are assembled into the end product at their carrier’s routing centers. This eliminated latency in goods handling, drastically cut down lead times, increased utilization of their existing supply chain nodes and reduced capital expenses required in setting up additional sites. All other KPIs like Inventory Reduction, Fulfillment Time, Service Levels, Competitive Pricing, etc. fell in line.
While the entire Computer industry benefitted with the Dell Model, Apple took it one step further, focusing on Supplier Performance. The company is known for its end-to-end control on everything – hardware, software, retail stores and of course its suppliers. This ensures highest product quality that is synonymous with Apple products, extreme flexibility and commitments from suppliers (suppliers are known to block capacity for months in advance in preparation for the ‘Customer Frenzy’ Apple Launches), highest audit and compliance to ensure secrecy, patents, etc. regarding products or features. The importance of the supply chain at Apple is underlined by the fact that the company chose its Chief of Operations, Tim Cook, as the CEO over the heads of hardware or software.
Walmart, on the other hand, has risen from a family run grocery chain to becoming the world’s biggest company through their single-minded focus on ‘low price guarantee’ to its customers. In pursuit of this goal, they have completely reimagined their processes around
- Strategic Sourcing – best price, best quality, capacity to meet Walmart’s demand;
- Supplier Collaboration – Vendor Managed Inventory (VMI) and Electronic Data Interchange (EDI) ensures 100% fulfillment and Zero time spent on ordering, acknowledgements, analyzing stock levels;
- Innovation in Logistics– concepts like ‘Cross Docking’ that virtually eliminated inventory sitting idle in warehouses, empty ‘back hauls’ (even US military is known to undergo training with Walmart to improve their Logistics);
- Technology – Walmart is a pioneer in the use of technology like Bar Codes, UPC, RFID, etc. that enabled accurate tracking of inventory, easy goods handling, faster turnover and increased warehouse utilization.
Lower distribution costs backed with bulk discounts adds up to a healthy margin. What do you do with it? Pass it on to your customer and grow!! That’s Walmart’s motto…