Managing your supply chain

Developing a thorough understanding of your supply chain is key to a successful business, Neville Stein explains.

Over the years there has been a plethora of management theories, often encapsulated in a simple buzzword, that have become standard practice in many industries. Concepts such as "lean", "just in time" and "continuous improvement" have all gained respect among management circles and are now embraced.

However, one management phrase that has often been overused and perhaps misunderstood in its entirety is that of "supply chain". According to Wikipedia, the term first entered the public domain when Keith Oliver of management consultancy Booz Allen Hamilton used it in a interview with The Financial Times, but in the horticultural industry it really came to prominence in the 2000s.

What does it mean?

The term "supply chain" simply refers to an entire network of interconnected organisations that may be directly or indirectly involved in serving the same customer. Some industries may, of course, have a "short" supply chain with only a few interlinked organisations serving the end user, but that is generally not the case across many sectors of the horticultural industry.

Take, for example, the ornamental garden plant market. The long and slow process of getting plants to the great British gardener often starts with a plant breeder, who then develops a relationship with an agent, who then sells the plants to a grower, who then grows them with a wide range of inputs from compost to pots, and it might even involve an external marketing organisation to help produce point-of-sale material.

Once the plants reach saleable quality they may, of course, be sold to a "plant finisher", who will again have a wide range of inputs from third-party businesses. Once of marketable quality these pants will then need to be sold and distributed to the retailer, often involving a third-party distribution company, and once delivered to the retailer they will need to be merchandised and sold to the public.

Highlighting challenges

This complex description of the horticultural supply chain highlights some of the challenges that we have in our industry. It is not just that our supply chains tend to be long — there is nothing wrong with that if they are well oiled and in harmony — rather it is more that they tend to be rarely given a robust assessment and that each link in the chain is usually more concerned with its own individual part rather than how the functioning of the overall chain can benefit them.

A poorly functioning supply chain can lead to inefficiencies, weak links and increased costs with a negative impact on each link — even those at the start of the chain. Should costs go up for the customer at the end of the chain, or what they are buying is of poor quality, then demand will subsequently decrease.

So to improve profitability as an industry we need to manage our supply chains better. But what does this mean? In essence, we need to improve the management of materials, information and even finance as the supply chain progresses from plant breeder to end user, so supply chain management involves co-ordination and integrating these flows among all the organisations involved.

Effective management

Many commentators suggest that the overall aim of supply chain management is to reduce inventory, with organisations carrying less stock but having the right products, in the right amount, at the right time. I believe, however, that we need to take this further. In our industry we need to manage the supply chain more effectively so that we reduce waste, unnecessary activities and costs as well as shortening the time to market.

When it comes to managing and indeed improving the supply chain as a sector we all need to work together to develop more efficiency and it starts with having a better understanding of the needs of our end user. This, of course, involves understanding consumer trends, having robust data on the market size for product categories, identifying the quality and service levels that the consumer is demanding and then cascading this data down the supply chain so that decisions can be made.

Likewise, improving the communication flow between each organisation in the supply chain is vital. Having clear, open dialogue is important, as is being willing to share data, views and ideas. This means taking the opportunity to attend conferences, join networking groups and business improvement schemes and going on study tours. These all help in developing an open, sharing industry.

At an individual level you can also play a part in improving the supply chain. Here are some actions that you can take:

1. Depending on the size and complexity of your organisation, you might consider dropping
the use of spreadsheets and instead use specialist supply chain management software.

2. Identify who should be your partners in the supply chain. Perhaps you could outsource your deliveries to a specialist haulier, one that has an expertise in handling live produce perhaps, or maybe you could develop these skills yourself and simplify the chain.

3. Ensure your systems enable you to make rapid decisions — there is a cost to indecision.

4. Involve your employees and educate them as to how the decisions they make impact either positively or negatively on your customer.

5. Keep an open and constructive dialogue going with your customers. The more you ask them questions, the more you will learn about their needs and how you can help meet those needs.

6. Keep an open and honest dialogue going with your supply chain partners — those that you sell to and those that provide you with goods or services. The more that they understand about your business, the better they will be able to help you.

Along with information, however, money also needs to flow quicker through the chain. While I know this is a thorny issue, the lack of cash in the supply chain leads to inefficiencies, unnecessary add-on costs and ultimately increases the cost to the end user. It can also cause a small business to fail needlessly, and to the industry’s loss.

Neville Stein is managing director of business consultancy Ovation

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