Over the years, I’ve been lucky enough to work with hundred of companies across many
industries in many different countries, and one of the things I always say to people is
that in 99% of businesses, there is no single solution to the supply chain. By that, I mean
that most companies need to be flexible in how their supply chain is structured and managed
to best meet the needs of their specific customers and products. If you’ve watch our Cost to
Serve video, you’ll know what I mean. This need for flexibility in our approach to managing
the supply chain is probably most obvious in the retail sector. Retailers often have
very broad product ranges, and products that might have a short life cycle, so they need
to have different approaches within the supply chain to deal with this based on the product
characteristics. Let’s look at a simple example, and we'll breakdown our product range
into two, Continuity products and Non-continuity products. Continuity products are those that
the retailer aims to stock and sell over an extended period as long as the customer wants
to buy them, bags of rice in a grocery retailer, bags of fertilizer in a gardening retailer,
plain black socks for an apparel retailer. These continuity products will come through
the supply chain in a steady flow, and we need to manage that aspect of the supply chain
well, to ensure that we’re never out of stock and we get the product into the store
at the lowest total supply chain cost. Non-continuity products, on the other hand, are not expected
to sell forever, they might be seasonal or fashion items. The retailer needs to buy effectively
to get the product into stores at the right time and quantity, and then sell through effectively,
minimising the degree of mark downs, and then move on to the next product. Examples of these
non-continuity products might be winter coats, barbeques, swim wear, mother’s day cards,
Easter eggs. I'm sure you get the idea. So the management focus for managing these different
types of products through the retail supply chain is very different. Some retailers may
only have continuity products, some may only have non-continuity products, and some may
have a mix. Most retailers have a mixed to some degree. So let’s look at these two
main value streams and how our approach needs to vary. For the continuity products, they’re
in stock all year round, and we need to carry out range reviews periodically. We might be
using planograms to guide the stores on layout. In most cases, we should be. We need to focus
on maintaining high levels of stock availability. We need to maintain high stock terms of 10
or more. We need to have the lowest possible supply chain costs. We need to measure supply
performance well, as this has a big impact on availability. And we need good replenishment
processes and systems. For fast moving products, we might use high frequency short lead time
replenishment. We might use some form of unit load to reduce handling, such as the plastic
crates you see used in supermarkets for fruits and vegetables. For the non-continuity products,
it’s all about seasons, fashion, promotional events and opportunity products. Our trading
and promotional calendar will drive the product range reviews. It’s also about closely managing
the product life cycle from ranging to buying, to distribution, to selling it through with
minimum residual product and mark down remaining. This needs a critical part approach to managing
the supply chain. It’s about product entry, sell through, mark down and exit, then move
on to the next products. It tends to be much more of a push or allocation system. Pushing
products out into the stores ready for the next season, event or promotion. It needs
quick response and replenishment during the season. So as you can see, it’s a very different
approach to the continuity products. So let me just a have quick summary of how supply
chains needed to be managed differently, depending on the characteristics of the products being
sold using retail supply chains as an example. As you can see in many supply chains, more
than one approach needs to be used. So when you think about your own supply chain, does
one size fit all?