GS1 UK – Supply Chain Strategies

April 10th saw the GS1 UK annual conference, the second hosted at Leicester City Football Club. Malcolm Bowden, GS1 UK’s Business Development Director, in his letter of welcome said, “This annual event aims to show you (our members) how GS1 UK and the GS1 System of standards can improve the effectiveness and efficiency of your supply chain”. In a series of three articles, I will share my understanding of what the speakers at the conference presented. In this, the second, I will look at three speakers who talked about different Supply Chain Strategies.

First up was Stephen Proud, Partner at Accenture responsible for PLM and Manufacturing practice. Proud was looking the drivers and characteristics of this latest phase of globalisation and how organisations can achieve peak performance from their supply chain in the very changeable business world of today. His presentation was based on an Accenture article, entitled The Rise of the Multi-Polar World. The key to the presentation is that globalisation is starting to shift the economic power base away from the West to the developing nations and in particular China. Proud discussed this in terms of 5 dimensions:

• New consumers in the developing countries;
• The war for talent—97% of the people entering the worldwide workforce are in the developing countries;
• The flow of capital—he looked at the number of companies from the developing countries who are buying companies in the UK;
• The battle for scarce resources—the example was the extent to which China has been buying up the world’s steel;
• Innovation is no longer a western world progative.

Proud ended his talk by saying, “High performance will depend on a finely tuned ability to adjust market focus and positioning to constantly shifting locations and sources of competitive advantage. National and regional boundaries will become less important as companies begin to organise by value creation rather than geography. This could mean grouping consumer markets in terms of growth potential rather than location, or segmenting the workforce by skill level rather than location.”

The second presentation of supply chain strategies came from Alan Muskett, Senior Manager of Supply Chain Development at Kraft Foods, and looked at the effect on sales of getting product data wrong. Muskett is a member of ECR UK Retail Packaging Workgroup. This group has produced a number of guidelines for the industry on successful implementation of Retail Ready Packaging (RRP—another TLA!) (see their site www.igd.com/ecr for further details). To illustrate the problem, Muskett showed a video produced by Asda, which was in the form of a 1920’s silent movie comedy. This led to him expounding the 5 Easy’s:

• Easy Find (in back of store)
• Easy Open (for store colleague)
• Easy Fill (Replenishment to Shelf)
• Easy Shop (for our consumers)
• Easy Dispose (for environmental purposes)

The current situation shows that dimensions and weights are consistently inaccurate across the supply chain. Additionally there is no recognisable common process for product management amendments. Muskett illustrated this with a number of real life examples.

GS1’s Get It Right booklet has made a great difference by giving companies real guidelines on product management. What ECR UK has done with their web site and documents is based on the back of the GS1 to cover all the other areas to make this work better. Muskett concluded by stating that, “Data Accuracy is more important than ever in getting the right level of shelf replenishment—it is vital in maximising sales and space, and minimising stock”.

The final talk on supply chain strategies was by Elena Pasquali CEO of Warelite. It was Elena who had invited me to the conference as one of her company’s guests. Pasquali was looking at a new approach to On-Shelf-Availability Measurement, based on an event-driven process. According to a survey she presented, shoppers are more interested in the convenience of a shop than in price of goods (62% to 38% in 2007). By carrying out her own survey of friends and colleagues she had found that retailers were not meeting this demand for convenience, and to emphasise this showed that the number of shoppers walking out of stores because they couldn’t find what they wanted had increased from 14% in 1991 to 47% in 2006! Her message was “Three stockouts and we don’t come back!”. Unfortunately out-of-stocks are getting worse not better. This results in a serious financial impact not just on the retailers but also on the manufacturers. Pasquali then looked at the root causes for out-of-stocks:

• We’ve got the product in the backroom, but not on the shelf
• We got our forecasts wrong
• We didn’t talk to our suppliers

The problem with the supply chain lies in the fact that the efficiency drops from the back of store to the shelf. Pasquali stressed that forecasting did not reflect true customer demand as it took no cognisance of walkouts or product substitutions. Warelite have been working with a number of partners and customers on a new approach called event-driven store check. This approach pulls together data from a number of different sources into a single model that provides better response to the potential of out-of-stock situation through the use of mobile technology. Pasquali summed up this new approach by highlighting the benefits, “We always know OSA for all products in store. We prevent OOS. If the supply chain doesn’t keep up we know where it broke and what it’s costing us. We always know what customers really want to buy, and this means we can get prepared. We don’t rely on people power to do anything other than replenishing shelves.”

Three different strategies all dealing with important issues that organisations face, from the strategic globalisation of Proud to the tactical issues of Muskett and Pasquali. The problem is what do you do first because they are all important. Maybe the approach Stephenson of Deloitte (see first article in the series) talked about around stakeholder value chains has some real weight as a technique for setting priorities.