Editor’s Note: The following is an excerpt from Part 2 an Executive Brief series co-written by Adrian Gonzalez, President of Adelante SCM, and Mike Glodziak President & CEO of LEGACY Supply Chain Services. You can download the full brief at LEGACY’s website.
The rules for success in e-commerce and omni-channel fulfillment are still being written, and they will likely be different tomorrow than today. What’s clear is that customers, whether they are consumers or other businesses, are now the center of every company’s supply chain universe; they are the center of gravity that all supply chain processes must revolve around and respond to.
This new customer-centric reality is prompting manufacturers and retailers of all sizes to revisit their strategies and capabilities to succeed in this highly-dynamic, highly-uncertain, and highly-competitive environment.
The first step toward success in this new era is arguably the most important: taking a broader perspective on the role and value of supply chain and logistics.
For a long time, C-level executives have viewed supply chain management, especially the logistics function, as a cost center. It’s still the dominant perspective at many companies today. For example, in a poll conducted during an SAP webcast last year, 42 percent of the attendees responded that logistics is viewed as a cost center at their company and 31 percent said it’s viewed as “warehouses and trucks.”
Today, however, cost management is a given — it’s what every supply chain executive is expected to do. Therefore, how do you differentiate and make a larger impact on the organization? You have to think and act beyond cost management and find ways to leverage supply chain and logistics as a competitive weapon — that is, look for ways to leverage supply chain management to drive top-line growth, increase market share, and enhance customer loyalty.
Amazon: Leveraging Logistics as a Competitive Weapon
Amazon is the best example today of a company that is leveraging logistics as a competitive weapon. Its Amazon Prime service, which provides members with free 2-day shipping (among other benefits), and its large and diversified distribution network are not only pushing the envelope on consumer delivery expectations, they are also driving higher sales and market shares for the company.
According to a study by Consumer Intelligence Research Partners, Amazon Prime membership doubled in the last two years to more than 80 million people in the U.S., with about 60 percent of all U.S. Amazon shoppers now being Prime members. CIRP also found that Prime members spend almost twice as much as non-Prime customers on an annual basis — $1,300 versus $700.
And according to data from Slice Intelligence, on the Monday before Christmas last year, 49.2 percent of all online sales in the United States were made on Amazon, with consumers doing their shopping later, “secure in the knowledge that Amazon’s two-day delivery would still get them what they’d ordered before it was too late.”
Intel’s “SC@Intel” Program
Intel is another example of a company that is leveraging its supply chain and logistics capabilities and expertise to drive top-line growth, increase market share, and enhance customer loyalty.
At the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in 2016, Ninette Vaz and Greg Skrovan from Intel shared the success the company has achieved to date with its SC@Intel program, where volunteers from its supply chain organization, working collaboratively with the sales team, provide insights and advice to existing and prospective customers to help them with their supply chain challenges and objectives. These subject matter experts (SMEs) also work with Intel’s product teams to see if some of the company’s existing products and technologies can be used to improve supply chain and logistics operations.
According to Skrovan, in the first year of the program, supply chain SMEs have participated in 50 customer engagements, including six deals accounting for $30 million in new revenue. They also launched 7 proof-of-concepts, including using Intel RealSense technology in warehouses to quickly calculate dimensional weight for shipping and improve load planning.
Amazon and Intel provide clear evidence of the benefits companies can achieve if they take a broader perspective of supply chain and logistics, but going from a “logistics as a cost center” mentality to a “logistics as a competitive weapon” one is not a quick and easy transformation.
How do you get started? Download the full Executive Brief for four recommendations and additional insights and advice on this topic.