You wouldn’t think a saying from a fictional pirate would have much relevance in the real world, but sadly the quote attributed to Captain Jack Sparrow: “The problem is not the problem. The problem is your attitude about the problem,” sums up one of the biggest challenges facing today’s supply chain: an inflexible mindset. Too often the industry is constrained by its approach to supply chain problems, not the problems themselves.
One of the greatest challenges in supply chain management is to get beyond the focus on cost reduction as opposed to revenue generation. As a supply chain executive, it can be difficult to introduce this discussion with the rest of the executive team. Sometimes a different approach is required to get the point across.
Retailers by-and-large have to justify the value-added services they offer by the number of home deliveries on any given route. The general belief being that fleet productivity would be dramatically impacted with no way to relate that to the incremental revenue from the value added services on offer. The problem here is that traditional metrics and attitudes are being applied to a new business opportunity. Metrics such as cost per mile and deliveries per route have been built to address delivery operations as a cost, not a revenue generator. However, fleet productivity is only one part of the overall financial picture.
A simple change in metric “attitude” from cost per mile to ‘cost per minute’ for delivery resources reveals the gains that can be made. This new calculation allows for a clear comparison between incremental revenue for the value added services and the time-based cost it takes to deliver the services. In some instances, depending on the mix of products and value added services, it is possible to make more money with fewer stops on a route as opposed to a lot of stops that contain no value added services and lower margin products. With this new mindset it is possible to drive revenue, profit and increase customer satisfaction.
Having a traditional supply chain attitude could be holding your business back from reaching its full potential. Supply chain strategies, tactics, and technology are constantly evolving and if there were ever a place to change attitude, it is here.
Chris Jones is Executive VP Marketing & Services at Descartes Systems Group
www.descartes.com
