Page 56 - RetailWorld-May2021-Tobacco-Updated

SUPPLY CHAIN THINKING ABOUT YOUR SUPPLY CHAIN SOLUTIONS The world is changing at an unprecedented pace. Supply chains are, too. Before you decide to change, just check your choice has longevity and isn’t a knee jerk reaction to a short-term spike. By Pollen Consulting Group founder and CEO Paul Eastwood. Is this the future? Holding more stock due to your long supply chain drives a bigger warehouse, but in the long term, is the better strategy to onshore or shorten the chain? Perhaps adopting technology to be smarter on replenishment and optimum stock levels is the solution. Think carefully before laying down your footprint, as it’s pretty hard to unpick a 10-year lease. If you’re planning short term, then get innovative with your solutions. Airbnb showed us that we can use someone else’s space for a short-term solution. Applying this concept in the warehouse world could be your answer. If you’re reading this as a business that has seen volume drop, consider that you may be the solution to your neighbours’ problem. Start from perfect but recognise what’s ‘good enough’ So, you’re through the first hurdle and it’s time to turn up the heat on your new supply chain. What should you do? • The word ‘chain’ is incredibly important. Every element is connected. You can’t consider a section without considering the whole. • Don’t be afraid to put costs in to take costs out that are greater – hence why it’s important to realise you’re working with a chain. • Consider the costs of others – your suppliers, your customers – and how you could put costs into your business that reduce costs, or vice versa. A great example is stock: the best place to hold stock is as close to the customer as economically possible. So often we see multiple stock locations that have buffer stocks just to ensure they replenish the next buffer. Consider the example of fresh milk (figure 1). • Start with perfect and work backwards. If you had a blank canvas and your volume tomorrow, what would you do? Once this is established, map the art of the possible in moving towards this. Figure 1: stock example. 54 RETAIL WORLD MAY, 2021 Know your onions Use science, brains and logic. What you change now will be the solution for the future, so consider the implications and risks. Will your solutions be flexible to respond while being lean, and a competitive advantage for tomorrow? Automation is the future, but is it your tomorrow? If you’re going to buy a fully automated solution, specification is critical. Under-spec it, and you risk buying a dud from day one. Over-spec it, and the business case might not stack up. Most importantly, you might have overcapitalised. Most businesses therefore play too safe and overspend. We’ve seen multimillion-dollar projects where the specification and design are based on a rudimentary calculation to work out depth of racking, and the number of robots based on safe averages. That business now has an automated warehouse that is running at about 60 per cent utilisation yet has some products that won’t work and are stored in a 3PL (third-party logistics) facility. Be flexible in design. Consider blending solutions and, most importantly, model your design using real numbers and proper maths. Using a digital twin and simulating the real- world volume and constraints will give you confidence before you sink $40 million when $25 million would do. Gatekeeper turned poacher Make sure the partners you choose are working in your best interests. Are they willing to advise the best solution, or are they incentivised on selling you the new and shiny? Build for what you need now and next, not for 10 years, no matter the cost reduction. Countless times we see businesses invest now, believing it will cost less in a fancy cashflow model. These are often built on either aspirational growth curves or, more importantly, because money is cheap. What you do need to consider is future proofing the growth opportunity. Land is sensible, but an oversized shed or automation solution is not. These things are modular and can easily be extended. Deploying capital now that doesn’t start payback until year five is just silly. Think about deploying that capital on a payback project (three-year) that starts tomorrow, and by the time you get to year five you’ll have raised the cash entirely to fund that extension, basically for free, even if it costs a 20 per cent premium.