How can you build a build your business by streamlining the supply chain?

For the past 100 years business has been struggling to create an efficient flow of products through the supply chain from manufacturer to end user. In the late 90's the Internet was heralded as the answer to achieving these three business objectives based on the paradigm "Build it and they will come".

1. Differentiate your offering in order to gain competitive advantage. "First to market" would ensure your advantage.
2. Grow your business by finding new revenue streams on the Internet. Suddenly the world was your marketplace and all you needed to do was put up a web site, add an online catalog and orders would poor in.
3. Streamline customer service to get costs out of the transaction. You could push order desk responsibility to the customer, customer self-service was the order of the day. Your online catalog would replace the outside sales rep. Integration of customer purchasing systems with internal business management systems.

In 1999 Forrester Research projected that online e-commerce transactions would exceed $1.3 Trillion by 2004. In the MRO space, that was projected to be more than $130 Billion. The numbers were all over the place depending on who you listened to - but they where big numbers so who was counting.

What has been the reality?
A recent survey by Industrial Distribution found:

• Increasing pressure on margins. 52% of distributors identified pressure on margins as having a primary impact on their business.
• Vendor consolidation. 63% of distributors reported that customers where consolidating their vendor base by an average of 30%.
• Customer consolidation. 46% of distributors reported customer consolidation as having a major impact on their business.
• Product line changes. 57% said they were adding more product lines, 38% said they were adding more brands within product lines.
• Competition. 14% reported new competitors as the biggest effect on their marketplace.

It would seem that if you want to have a significant influence in the supply chain then the same old "me to" plans relying on adding sales people, expanding product lines, going after new brands, building the corporate web site and signing up new accounts are not going to deliver the results you are after. Was the promise of e-business a hoax or are there some underlying principles that hold the answer?

In the past 5 years most distributors have focused on reducing costs. However, progressive distributors are now looking for ways to leverage integration of business workflows and systems to increase profits and find new revenues. On-demand business is a new business imperative that will allow you to out-market your competition.

Connecting the Information Dots

This article begins a series of topics on the area of supply chain management and how to leverage technology to efficiently move information between buyers and sellers - connecting the dots. Information may be product based, activity based or transaction based it does not matter. The more efficiently you connect buyers with the information they need to make the buying decision the larger your market share will be. You'll create competitive advantage, you'll have stronger customer relationships and greater wallet share with customers.

One area of focus is the creation and execution of a catalog marketing strategy - print and electronic catalogs, promotional flyers and Web/e-flyers. The best results come from a multi-channel approach. According to a survey conducted by Boston-based AMR Research, the multi-channel customer spends 53% more than the customer that is addressed with a single channel approach. Nowhere is this more evident than in Industrial Distribution where 67% of e-business buyers were using the print catalog as the primary reference source. The secret to managing your customer relationships has to be in a multi-channel approach that proactively delivers consistent messages at every touch point with your customer.

For most distributors, the creation of the product catalog is a lengthy and highly manual process. Product information is non existent or resides in different business systems, making it hard to find and keep accurate. Pricing might be in the ERP system, text in a Microsoft Word document and graphics on another desktop computer. Catalogers struggle to find, retrieve and compose product information into a manageable product catalog. Getting the catalog to market involves too much work - endless communication between product managers, suppliers and production people. The whole workflow is laborious, time-consuming and frustrating.

The challenge for distributors is not only producing the master catalog but also producing higher quality targeted catalogs in order to reach market groups with the right product offering and pricing. All this in the face of pressures to decrease costs and get to market faster.

What can be done?

1. Get a handle on customer and product information. Finding, adding or changing product information in a typical publishing workflow usually involves 10 to 15 manual or paper-based steps and take up to one month to complete, according to UCCnet, the industry's data synchronization standards body. CAP Ventures estimates the publishing cost to manage the production of a document represents 87% of the cost with print cost representing the other 13%. Inefficiency kills the supply chain - it is estimated that 30% of the product items in a catalog have errors.
2. Get a centralized view of information in the enterprise. Integration of information within a secure environment needs to happen. Most distributors do not have a central repository that stores all product content (text, graphics, pricing, etc.) and customer content. Lack of a 360 degree view of information in the enterprise leads to brand inconsistency as well as costly, labor intensive processes gathering, distributing and managing product information to support sales and marketing. Centralizing customer and product information drives your catalog strategy across all publishing channels while streamlining the workflow.

Addressing the Challenge

Technology meets these challenges head on. It's not about buying new systems and hardware, what we are talking about is getting existing business systems - both inside and outside your organization - talking to each other. With 60% of supply chain activity happening outside your organization's four walls it is imperative that you develop strategies to link trading partners - customers and vendors - into an end-to-end information network. It all starts with a centralized view of information in your enterprise that can be leveraged into sales and marketing tools like print (catalog and flyers), electronic (e-commerce, online catalogs and e-mail flyers) and e-content syndication to customer marketplace portals and EDI networks. That's what connecting the enterprise dots is all about.

You'll also gain the efficiency of automation in the publishing workflow supporting production for catalogs, flyers and e-commerce sites. You'll do this in a more cost-effective manner and achieve higher response rates because you can target your promotions. First to market no longer needs to be an e-commerce myth - the reality is you can do it today.

The Bottom Line

Differentiating your company is tough business. Getting control over information in your supply chain needs to be a core strategy as your customers demand more integrated solutions to drive out costs from the supply chain and as competition gets more aggressive.

We all understand that distributors play a role in driving more efficiency into the supply chain - this increases capacity. As capacity increases from more efficient management of information and transactions the distributor needs to focus equally hard on generating new revenues from both new and existing markets and customers to fill the capacity. This is accomplished by targeting customers with consistent, relevant and timely messages, monitoring the performance of promotional campaigns and taking a multi-channel publishing strategy to ensure you are top of mind when your customer is ready to make the buying decision.

I'd like to hear your feedback. Do you have ideas you'd like to share? Please feel free to contact me to discuss these topics.