Hi, let me ask you a question about your supply chain. How good is the performance of your
supply chain in terms of cost and service? You know, I've been looking at the cost and
service performance of supply chains for well over 20 years. And let me just illustrate
this with a diagram. And I've come up with about four different levels of service performance,
which I'd like you to think about for your own supply chain. So just while I set this
up, and apologies I'm no great artist, but we'll get the point across. So I reckon most
supply chains fall into about four levels of service performance. And as I'm going through this,
think about your own supply chain, and where you think it fits. So down the bottom here,
this level I would tend to call blissfully unaware. Which is a bit sad, really. So these
businesses, these supply chain managers, these senior execs, really don't know how well their
supply chain is performing. They're not sure how competitive they are. They're really not
sure what good looks like. And they're kind of stumbling along, missing lots and lots
of opportunities. So, that's a really sad spot to be. Hopefully you're not there.
You might be, along with the bulk of people, in this level. And I call this good enough.
And I reckon that's a really dangerous place to be. And why do I say that? Well, that's
why I've marked it with this big fat line as well. These businesses are okay in terms
of cost and service performance. There's no great issues. And they're reasonably competitive.
They're quite happy. But that's complacent, and there's no incentive or drive to actually
improve. And what happens is their competitors will improve and overtake them. So this is
not a good spot to be. If you think you're there, you really ought to be pushing up to
this next level which is Best in Class. Now you might be saying, okay, what's best in
class? Well, Best in Class is internationally recognised
as the top 20% in terms of cost and service performance. So, that's a good spot to be.
Okay. You might be now wondering, what's in the top? This is the 2% club. And what's the
2% club? Well, we've been Benchmarking supply chains for well over 20 years now, and a funny
thing we found out about 10 years ago, it took us a while, is that the really top performers
in terms of service, deliver that service at a lower cost than the average. How can
that be? I mean, when I learned supply chain, and I'm sure when you learned supply chain
as well, you remember this graph where we had service up here, and costs up here? So
cost going up, service going up. And I can remember learning that as service levels improve,
and maybe this is 97%, and getting up here is 98. What happens to costs? Oh, they go
up almost Exponentially, don't they? As the service goes up, so the cost goes up. Well,
it's not true. We found that through about 10 years of Benchmarking.
What is actually true, is that the businesses that focus passionately on service, and deliver
outstanding service, the best service in their industries, actually do so at half the cost
of the average. Why could that be? What do you think? Comment below. It's an absolute
fact. We've benchmarked it across all different industries. The best service delivery is done
at a lower cost, lower cost than the average. Why could that be? Comment below. And maybe
what I'll do in the next video is explain why these guys actually enjoy a much lower
cost. And why they start to streak ahead of the competition, because not only are their
costs low, but their sales start to lift as well. So where do you think you're performing?
And why do you think the 2% club can actually deliver at a lower cost?