Former Landmark CEO, Mike McGee talks about Wholesalers and Supply Chain Efficiency.
The Multiples Got Here First
The multiple supermarkets learnt very early on that the route to maximising profit did not just come with negotiating the lowest cost prices and driving footfall.
Supply chain efficiency is the great unsung hero in the story of the rise, and then dominance, of the multiples and discounters.
The best operators take a forensic view of every element of cost in the process of getting goods from supplier to consumer, and then find ways of either eliminating or minimising them.
This does not necessarily mean that the supplier takes a hit at every turn – just sometimes.
What is Involved
Starting with placing an order, map the process of a product moving from the supplier site through to the shelving and then paying it for it.
It sounds simple – it isn’t.
Out of this process comes a myriad of factors and consequences. With every aspect you should ask questions and find solutions which then are regularly reviewed to ensure that efficiency is always maximised. It can seem minor, like handling of pallets or major, like shelf ready packaging. It often is environmentally focused like reducing plastics or increasing recycling. It all adds up to a lot of money though.
The vital thing though is to question every supply chain step and ask – is there a better way!
The fundamental objective of this process for the multiples is to have an efficient supply chain that ensures stock is on the shelf all the time, at the lowest possible cost. Both elements are vital and lead to certain actions.
On Sale – All the Time
The multiples share a surprising amount of data with suppliers for nothing. This is not a charitable exercise – it is to ensure that the supplier has enough information to ensure that the shelves are full. Run out of stock and there really is no excuse, and a large penalty then comes into play. There is very little back up stock in the system and the most valuable asset is that half metre of shelf space allocated to the supplier’s product – if it is empty there are huge consequences.
The provision of third-party warehousing, factory gate pricing, promotion forecasting, shelf space allocation, category reviews – they are all ultimately about the right offering at the right cost and 100% availability.
The Opportunity for Wholesalers
The concentration to date has been on price and income generation in supplier relationships. Indeed, it is generally the supplier community that have driven efficiencies with their initiatives such as electronic ordering, drop sizes and packaging mediums.
In the new world of wholesaler consolidation there must be an opportunity to address this area proactively and with some clout.
Some mind sets will need to change though – some information will need providing. Some resource will need to be given to specifically look at supply chain issues – it is not just an appendix to a term’s negotiation or promotion discussion.
There is a huge benefit to be garnered by sitting down with the supplier community and developing a better way of moving goods to shelves.
Ultimately wholesaling should be as challenging an environment as the multiples in driving mutual supply chain benefits.