By Mike Croza

Understanding every part of a supply chain – and filling the gaps – is a must in today’s high inflation and increasingly competitive market. 

How do you get the most out of your supply chain? The answer to that question is simple enough: Make every mile count. How to actually do that gets a little more complicated.

The supply chain is facing a barrage of inflationary pressures. The average cost of diesel has soared 47% over the past year. The labour markets in Canada and the U.S. are highly constrained, with unemployment sitting at 5.1% and 3.7%, respectively – both of which are at or near historic lows. Borrowing costs are surging. Finding available real estate feels next to impossible, while industrial real estate vacancy rates in key North American distribution markets currently sitting below 3% and, in some cases, under 1%. 

These pressures are challenging, but we view them as temporary. There are signs that the tightening in the real estate sector may be easing as developers currently have hundreds of millions of square feet of distribution space under construction. Much of that space will come on stream over the next 12 to 18 months, although it will take years for a balanced demand/supply scenario.

Whether you’re trying to streamline an existing business or with a private equity firm looking to find synergies between acquisitions, at times like these, the best thing you can do is focus on what you can control. You may have little power to influence things like energy costs and real estate, but you can buffer those pressures by optimizing your network. 

It’s not hyperbole to suggest that investing in your supply chain unlocks efficiencies and pays big dividends, especially now. While the recent cost pressures may motivate some businesses to take a hard look at their supply chains, the leading businesses already know that a healthy supply chain can be a significant contributor to their growth.

Optimize your network
Customer expectations through COVID have forced businesses to reluctantly add infrastructure and inventory closer to where it is consumed. As you reimagine your supply chain, your plan must consider your needs today but, more importantly, ideas around future growth. 

To accurately model your future network, your plan must include factors like new acquisitions, projected sales growth data, product assortment additions and future sourcing locations. It’s well worth the effort. The potential cost savings for a large national retailer or manufacturer could reach into the millions – money that can be reinvested in the business to accelerate growth. We have helped clients with the analysis and business cases to realize savings on this scale by optimizing their network (inbound and outbound transportation, DC operations, and carrying cost of inventory reduction). 

We’ve seen it firsthand. For one client, a network optimization project contributed to net annual operational savings of over $4 million within two years. Initially, this client had a large footprint, with many backroom storage areas at its various branches, each of which held a full range of parts assortment. By adopting a centralized distribution centre model, it was able to reduce the frequency of deliveries to its branches. At the same time, the client moved towards a more centralized planning and systems model to effectively manage its customer service fill rates with less inventory and capital assets. Immediately after the project, the client committed to an aggressive implementation plan and 24 months after the project completion performance on inventory turns improved to 3.5% from 1.89%.

While network optimization is still used to identify facility locations and balance the cost/service tradeoff, it has the potential to offer much more value than that for today’s supply chain leaders. The dynamics of the polycrisis we are facing means businesses can’t expect to find the answers to their challenges on a spreadsheet. Businesses need to remain agile by stress-testing their operations by running what-if scenarios to inform strategy development, which touches everything from sourcing and inventory deployment to final mile delivery and order management. 

Location matters, but it’s not the only factor to consider

Where you place those distribution centers is still critical, but it takes more than drawing lines on a map to determine the shortest distance between your warehouse and customers. Unless you’re prepared to move produce from the middle of a farmer’s field, you want to make sure that location has access to the resources you need to support your business.

Apart from access to roads and highways, does the community have the infrastructure to meet your needs? What are the available commercial real estate options like? How much do they cost, and do they offer room for growth? And what about the employment market? Can you find the right people to staff your facility at the right price point? Does it have access to carriers, distance to ports and railyards? Or is the location susceptible to the growing risk of natural disasters, such as flooding, hurricanes, or tornados?

We add value by challenging internal assumptions, sharing experiences from other industries, and leveraging our collective learnings from many prior network optimization assignments.

From there, we help determine if you need one distribution center or six and then work downstream to your last-mile deliveries to further refine your merchandise flow, storage and efficiencies for store replenishment and customer pickup stations.

Your supply chain needs to be part of your green plan

Finding efficiencies through this process goes beyond savings in operating expenses, working capital, and customer service.

Optimizing your supply chain can also help you lower your carbon footprint. Through the same process, companies can also assess the carbon footprint of various scenarios and make informed decisions that support both financial and ESG objectives. Even if ESG is not a top priority next to the other challenges you’re dealing with, repeated studies have shown that it’s top-of-mind for many of your investors and customers. Having an optimized supply chain that tracks and measures your emissions is not only smart because it protects the environment, but will also help protect your reputation. Three-quarters of Generation Z survey participants prefer sustainability over the brand name of a product, and 71% of Millennials, 73% of Generation X and 65% of Baby Boomers agree.

The supply chain disruptions we’ve seen over the past few years have raised awareness about the cost of this on businesses. If you want to be successful, your business needs a resilient and optimized supply chain. Make every mile count – it means more to your business than distance. We should indicate that disruptions are likely to continue, so all the more reason to run “what if” scenarios and develop continuity/resiliency plans.

By Mike Croza

If adversity makes you stronger, then the C-Level will feel revitalized as COVID-19 fades from our daily lives. Over the past two years, the repeated challenges thrown at the industry have built up a muscle that many have taken for granted for far too long. Managing a supply chain before the pandemic seems almost easy by comparison.

While the industry faced challenges before COVID-19, there wasn’t as much urgency to solve them. Politics and country of origin issues would crop up from time to time, but they would be short-lived. In the C-suite, three-to-five-year business strategies often gave way to new three-to-five-year plans without yielding much change.

It seems hard to believe today, but pre-pandemic, companies could count on stable lead times across supply chain nodes. Few worried about whether they could find the people, space and transportation logistics, particularly shipping containers, to keep the chain moving. No one dares be that complacent today.

Supply chain executives must now look to a new future, where labour shortages, inflation and other issues are the norm. Here are a few areas to keep a close eye on:

Labour shortages
Although labour shortages are being felt across the economy, the issue is particularly acute within supply chains. Not only are drivers retiring by the truckload, but few younger workers aspire for jobs behind the wheel or in a warehouse to support their families. And the people they can hire cost more. With businesses desperate to retain staff and workers feeling the pinch of runaway inflation, we can expect to see a resurgence in the unionization movement in this employee-driven market.

Inflation
Inflation, which is expected to stay high for some time, isn’t only causing employees across the supply chain to seek better compensation; surging prices are wreaking havoc on demand as consumers cut back on spending. As a result, supply chain planners are finding it more challenging to estimate how much merchandise to stock. Inaccurate forecasts either mean running out of in-demand products at inopportune times or stockpiling goods.

Commercial real estate
If you do have to stockpile goods because of a change – or a misread – in demand, then you’ll need to find a place to hold everything. At the same time, growing unreliability with supply chains has prompted some companies to stock more components and finished goods. In the GTA, one of North America’s largest markets, only 1% of ready-to-go distribution real estate is available. Prices, which are already in record territory, will be driven even higher by real estate scarcity.

Geopolitical instability
Conflicts are nothing new on the world stage, but they seldom create deep divisions between superpowers. The war between Ukraine and Russia has opened a rift in Europe, disrupting food and energy supplies and forcing ships and air freight traffic to take long circuitous routes. Cool relations between the West and China and its aggressive approach to COVID have exposed businesses that have relied on Chinese suppliers.

These headwinds will have an outsized effect on how companies grow and protect their market share, with some players needing to redesign, if not rebuild, their supply chains to remain effective. If the surge in the number of Chief Supply Chain officer roles over the past year is any indication, those three-to-five-year plans that were once sloughed off will be taken more seriously.

The focus will shift to integrated end-to-end business understanding, planning and execution, leveraging appropriate metrics that reflect a “balanced scorecard.” But there will be trade-offs. For manufacturers, it will be a question of just-in-time manufacturing efficiencies versus building inventories and dealing with the associated costs and impacts. For companies in the finished goods and consumer goods market, those plans will need to contend with higher carrying costs of holding that inventory before it gets to market and higher storage and labour costs.

Downstream, where inventory is deployed, companies may need to trade off investments (and related costs) to support sales and revenue and focus more on time in full (OTIF) delivery and customer satisfaction. Amazon is a superb example of how to build capabilities into a powerhouse marketplace supported by a well-oiled supply chain and execution. As a Prime member, if I order a book with next-day delivery, I receive it. I will have paid more, but the convenience and experience keep me coming back for more.

In many ways, success today means getting back to basics. Here’s how to do that:

Develop a robust business strategy
We are often surprised by how many companies we work with don’t have a robust three-to-five-year business strategy, which would help drive behaviour for the rest of the company. It’s up to ownership and senior leadership to fill this gap.

Designing an optimal supply chain starts with the business strategy, which might pit resilience and agility against higher costs and efficiency. No matter how those factors balance out, they will impact the end customer either by poorer service or higher prices.

Leaders must also think beyond the supply chain and prioritize the value chain, which looks beyond simply producing and distributing a product. Effectively managing your company’s value chain involves careful decisions and taking a stand on investment.

Integrate end-to-end planning and have meaningful metrics
Creating an integrated value chain starts with strategic thinking. It means breaking down silos and aligning your processes, people and tools with your business objective.

For instance, what may be good for sales could be a manufacturing and distribution headache, resulting in cost overruns from overtime, expedited and premium-priced raw materials, or services. These issues can narrow margins by impacting the cost of goods sold. You then risk losing consumer loyalty as people seek more affordable alternatives.

Another challenge is that finance and supply chain teams are often out of sync when defining business operations. Collecting data points that are not only wrong, but also have little meaning to the business, compounds the problem.

For example, merchandise teams may look at sales revenue from a distribution centre and fail to understand how product mix might affect operations. In these situations, you may see leadership pushing a seasonal sales target comprising big, bulky, hard-to-handle and store product types, which hobbles distribution and operations for throughput and productivity. The result? The company does not meet its distribution centre management targets and then gets penalized for being unable to service the business.

Capability for continuous planning, visibility and what-if modelling
When it comes to supply chain management, companies have been forced to up their game. More rigour and rules need to be in place when it comes to continuous forecasting and short-term horizon planning.

A focus on consumption is also an emerging philosophy. Sharing partner data, and on a timely basis and in a usable format, has always been a key best practice, but it’s no longer enough. Working with consumption-based data can help companies avoid the bullwhip we are seeing post-COVID on lead time extension and logistics capacity issues.

Innovation is often the antidote to adversity, and many businesses will be looking for new supply chain solutions. Amid rising labour shortages and a lack of skilled talent, there will be pressure to embrace automation, whether in offices or distribution centres.

Despite all that’s happened over the past 30 months, most of our clients are adapting and thriving. We’re helping our clients not only rethink their value chains but unlearn what they’ve done in the past. True innovation, collaboration and a solid game plan aren’t just something you read in a business book, they also must be put into action.

In the midst of its peak season, West Marine— a global boating supply retailer — needed to quickly stabilize its South Carolina DC operation to meet its productivity projections.

Working directly with leadership and the DC operation team, SCA immediately assessed West Marine’s building throughput, store replenishment, ecommerce and pro fulfillment. SCA focused its turnaround on West Marine’s order- flow, pick-accuracy and on-time delivery, in addition to the safety of West Marine’s DC workers and its people strategy.

Recognizing it needed support in implementing the turnaround plan, West Marine asked SCA to assume the day-to-day responsibilities of its DC operation and help source, interview and hire a new site director and senior team. For the remainder of 2018, provided leadership and mentorship and worked on implementing its people strategy.

Converting West Marine’s highest performing temporary workers to full-time associates, SCA built out the company’s frontline leadership by hiring and promoting team leads and supervisors. SCA also provided performance management training, weekly individual KPI reporting and a new hire rating and selection process. For further support, SCA developed a full labour planning model to manage labour by activity level and shift using targeted productivity rates and the latest volume forecasts.

During this time, it was clear West Marine also needed to concentrate on its warehouse catalogue fulfillment (WCF) to ensure it could meet its daily ecommerce demands plus its forecasts, so it asked SCA to run a KAIZEN event in early 2020. Using current and future state gap analysis, WCF flow mapping and resourcing, SCA worked with the team to apply LEAN concepts to improve West Marine’s communication, production and workflow. In addition to other notable metrics, West Marine achieved more than $600,000 savings in its year-over-year labour costs from this intensive four-day event.

Creating lasting change in a DC requires commitment and collaboration. The organization’s drive to improve its DC’s processes, procedures and performance was clear at all levels of the organization — from its Board of Directors and senior executives across the organization, right through to DC leadership and floor associates.

In the heat of the Covid-19 pandemic, a government agency needed to quickly add to its distribution infrastructure so it could procure and deploy critical personal protective equipment (PPE) to the non-health entities of the broader public sector, such as our Police, Fire and Correctional Services front-line heroes. 

While the agency established a procurement team and commandeered internal resources to staff the project team, SCA moved rapidly to source sufficient available space and a proficient third-party logistics (3PL) service provider. Leveraging the expertise of its team and network, SCA quickly defined requirements, drafted and executed an RFP, and selected a partner within the first three days onboard. 

Operations began immediately with the rerouting of inbound product and first receipts beginning on day four. The project team organized itself around a two-phased approach, with Phase 1 focused on activities enabling immediate “start-up” and Phase 2 on ensuring “stabilization and a successful transition”. 

During the six weeks of Phase 1, SCA led and supported a cross-functional project team comprised of agency and 3PL resources, through: 

With operations successfully up and running, and with SCA playing a significant role in managing daily operations, efforts during Phase 2 shifted to stabilization and, ultimately, to ensuring a successful hand-off to the agency’s management team. These final six weeks focused on: 

Establishing a regular cadence of operations and IT meetings, and lines of communication between key stakeholders 

The development and approval all standard operating procedures and supporting documentation 

Enhanced reporting, establishing KPIs (key performance indicators), and developing an operational dashboard 

Freight management and visibility tools 

Development of initial planning tools 

Implementation of customer and vendor returns processes 

Oversight and prioritization of ongoing IT development and related initiatives (new and/or improved functionality, integration, reporting, visibility, etc.) 

Prior to completing the engagement, SCA developed and executed a detailed transition plan that ensured the completion of all key deliverables and the successful hand-off of ongoing initiatives to the care and control of agency staff. In addition, SCA developed a time- phased roadmap of additional recommendations to further improve operations that will guide the team over the next 12 months. 

Peak Achievement Athletics (PAA), owner of legacy brands Bauer Hockey, Easton Baseball and Cascade/Maverik Lacrosse, is a leader in the sports equipment and apparel industry. To meet increasing customer demand through its ecommerce channel, the company needed to improve operations at its 430,000 square-foot distribution centre in Plainfield, Indianapolis. 

Working directly with the team at PAA, SCA led the distribution centre turnaround. The first step was assessing the full distribution centre operations to better understand the organization’s systems, processes and people, as well as the facility layout and seasonal product flow. SCA then worked hand-in-hand with a strike team to identify any influences PAA’s customer channel requirements, HR, finance, IT, and inbound/outbound transportation might have on the DC operations. 

By the end of the first week, SCA had identified the key initiatives that would deliver quick operational and productivity improvements. The team then got to work on executing the 12-week turnaround solution, which included significant changes to picking, packing, layout, equipment, people, systems, safety and infrastructure. 

To improve efficiency, SCA focused on the product slotting and the picking process. This included creating primary pick bins for all skus, rightsizing of pick bins to ensure availability and balance replenishment workload, and effectively zoning the pick area to reduce pickers’ travel time. 

To improve the product flow, SCA sourced new equipment and redesigned the packing stations, implemented 5S methodology, and automated the flow of goods and information through the use of powered conveyors and new system developments. 

At the heart of every organization are its people. In its people strategy, SCA instructed PAA to rebalance its ratio of full time to temporary personnel and implement performance management training, weekly individual KPI reporting, and a new hire ratings and selection process. 

To monitor performance, and the impact of the changes being made, productivity targets were established, and operational performance reporting implemented. 

Toronto, October 9, 2020 – Metro Supply Chain Group (MSCG), a North American leader in end-to-end supply chain logistics solutions, today announced the acquisition of Supply Chain Alliance (SCA), a Toronto-based consulting firm focused on helping clients solve the complex challenges inherent in modern supply chains.

“New challenges and disruptions in global supply chains continue at an unprecedented pace,” says Martin Graham, Group President of MSCG. “With this acquisition, we can respond faster with the right strategy, plan and execution to help clients succeed.”

SCA has a 27-year track record of successful engagements with a diverse portfolio of over 250 clients across North America. SCA’s team of results-driven, seasoned supply chain professionals provide deep expertise in everything from supply chain strategy and assessment, network design optimization, and forecasting and replenishment, to distribution centre design, operational turnarounds, and transportation management.

“The market needs innovative, cost-effective and pragmatic solutions to quickly deal with complex multi-channel operations. This is where SCA excels,” explains Mike Croza, SCA’s Managing Partner. “With MSCG’s investment, we will further deepen our bench strength and capabilities to provide the appropriate automated solutions for our clients.”

While SCA will continue to operate as an independent organization, the two organizations will come together to further develop experienced teams with unique skills and capabilities, with the objective of becoming the most attractive place to work in the supply chain industry.

“Under Mike’s leadership, SCA will be managed as a distinct brand within the Group to maintain the independence necessary to offer customers the best advice and solutions,” says Chiko Nanji, Group Chairman of MSCG. “This acquisition is incredibly strategic to our clients. The partnership with SCA is a natural fit between two strong, long-standing organizations who share a commitment to thought leadership, entrepreneurship and a focus on operational excellence for our customers.”

About Metro Supply Chain Group

Based in Canada, Metro Supply Chain Group (MSCG) operates a significant network of over 70 sites across North America and Europe with a team of more than 6,000 associates. Its scale, deep capabilities and entrepreneurial structure enable it to quickly solve its customers’ most challenging supply chain needs. The Group is privately held by its founder, Chiko Nanji, with the support and backing of the Caisse de dépôt et placement du Québec (CDPQ) as a financial partner.

About Supply Chain Alliance

Recognized as a leader in supply chain strategy, Supply Chain Alliance (SCA) has helped a diverse portfolio of over 250 clients across North America navigate the complexities inherent in fast-changing supply chains for 27 years.

SCA’s team of results-driven, seasoned supply chain professionals provide deep expertise in everything from supply chain strategy and assessment, network design optimization, and forecasting and replenishment, to distribution center design, operational turnarounds, and transportation management. Focused on innovative, cost-effective and pragmatic solutions, SCA accelerates the change customers need to transform their businesses.

By Mike Croza

If you’ve managed a supply chain in the last decade, chances are you’ve been advised that an optimized supply chain is nimble, agile, flexible, responsive and scalable. As we navigate the ongoing effects of COVID-19, you’ve likely seen “resilient” added to the list of terminology.

However, this crisis has shown us that for the most part supply chains are anything but resilient, and far from nimble, flexible and responsive. As of June 19, many of our clients with both offshore and domestic manufacturing are awaiting inbound shipments for past-due customer requirements, and we anticipate this continuing for several more weeks. Given most officials project a second wave within the next six months, supply chains and end consumers will be stressed even further.

While we’ve all seen great examples of manufacturers being able to retool operations to quickly produce needed goods such as personal protection equipment (PPE), it’s clear many companies have learned the hard way that their supply chain is brittle, inflexible and slow to respond to changing market needs.

One of our colleagues, Greg Christopher, describes this current state as a by-product of a decade’s worth of “leaning out the processes and tasks for optimal profitability using ERP (enterprise resource planning) systems designed to drive internal efficiency.” By following a linear “lowest-cost solution” to gain the best short-term financial results, companies have made it impossible to pivot operations to respond to massive shifts like the global pandemic we are currently navigating.

So, where does this leave us? Knowing the next pandemic or global crisis is not a matter of if, but when, we’ve pulled together some best practices we’ve learned in our 27 years of helping companies build a more resilient supply chain.

Start your supply chain strategy at the top
Supply chain needs to be baked into a company’s overall business strategy and values, and this integration begins with owners and C-level senior leadership. Without top-level sponsorship, the process of envisioning, developing and implementing a new supply chain strategy won’t result in lasting change. We’ve seen this time and time again – both when it works and when it fails.

Clearly define roles and rules of engagement
Who is accountable for the supply chain? What are the rules of engagement? Blurred lines can lead to internal confusion and flux, which ends up impacting the customer experience. When the unexpected happens, organizations need a clear understanding of who is steering the changes and what procedures to follow.

Invest and keep top talent
Organizations need a supply chain leader with the right experience and skills to help build the strategy, communicate it up and down the organization, and provide day-to-day leadership for the team. As the saying goes: “A Players hire A Players; B Players hire C Players”. It is People that make the difference. Create a transparent environment that incents and encourages creativity and teamwork. Make sure company and department goals align with Executive goals.

Build deep, transparent relationships with 3PL partners
The most successful client/3PL partnership we have seen to date was between Walmart Canada and its 3PL at the time, SCM (supply chain management), which was a division of the original Tibbett and Britten Group (later acquired by Exel in 2004). Formed in the mid 90s, this partnership was so important that SCM’s senior executive sat in on Walmart Canada’s board meetings. This is a lesson in how a trusting and transparent partnership, managed by well-defined joint expectations and tied to meaningful key performance indicators, helps companies build flexibility, allows it to tap into needed resources and helps it grow and scale

Build processes that can re-plan the supply chain quickly
A monthly integrated planning cycle may no longer be enough to properly interpret and act on future demand and supply patterns. Demand and supply managers will need more manual yet expert turning of system attributes like lead-time, MOQ’s and safety stock. They will also need a greater understanding of the data flow to interpret the demand signals, inventory coverage and supplier orders. In the pandemic’s early days, capturing micro/regional demand was key to figuring out the variability given the number of retailer shut-downs, the burst in e-commerce channels and the spread of the virus by region. Our long-time partners Mike Doherty and Jeff Harrop from Demand Clarity (co-authors of Flowcasting the Retail Supply Chain), say the crisis has shown us that organizations need to implement an integrated, time-phased planning process for each of their sku/locations from consumption to supply to allow micro/regional demand plans to be revised and then automatically translated (i.e., flowcasted) into projected flow, inventory, and order plans for all supply chain partners.

Boost visibility with the right technology solutions and data capture
Without end-to-end supply chain visibility, companies are feeling the weight of COVID-19. One way to achieve this transparency is through a Control Tower technology and data capture process. While this management practice isn’t new, not all leaders understand how it can support decision making within the supply chain. By combining these visibility capabilities with expertly run “what-if” scenarios using various modeling tools, organizations can overcome the static and inflexible supply chains the industry has built over many years and gain a competitive advantage.

As we continue to battle the effects of COVID-19, organizations are being forced to continually pivot to survive. Building a resilient supply chain is not about returning to normal. It’s about building capacity to recover quickly in the face of a crisis. And that may mean dismantling some of the thinking and processes the supply chain industry has relied on for many years. Having a “resilient supply chain” are nice words but getting there is a journey worth the effort.

By Mike Croza

Over the past 27 years of supply chain consulting, we’ve had to explain the meaning of “supply chain” to many friends, family and colleagues — but not so today.

Having supported the Ontario government pre-H1N1 in 2008 in establishing a distribution centre and transportation network to move personal protection equipment (PPE) across the province, we are again assisting Ontario in managing the PPE supply chain during COVID-19. We truly hope this event is a catalyst for change in how medical equipment and supplies are governed and deployed so our courageous healthcare and frontline workers get what they need.

As the country mobilizes to bring personal protection equipment to our hospitals and long-term care facilities, perishable and packaged goods to our grocery stores, and medicine and healthcare products to our pharmacies, the public is gaining a greater understanding of the importance of supply chain to how we function as a society. You just need to look at Google’s search trends to see this is true. Last week, “How to handle groceries during coronavirus?” was one of the most often asked questions.

The pandemic is also giving us an up-close-and-personal look at the dedicated people who are keeping the supply chain running. Our distribution and manufacturing workers. Our truck drivers. Our grocery store cashiers. These important members of our supply chain are all working around the clock in stressful situations to get us what we need. I encourage all of us to remember all of the many frontline people who stepped up and kept our supply chains running when we needed it most. Thank you.

Visibility into live inventory was a key concern for Rebox Corp., so it invested in software that boosted its efficiency and lowered its costs. Visibility across the entire supply chain is a common reason why clients are turning to Supply Chain Alliance. Our managing partner, Mike Croza, was asked to comment in this <Globe and Mail> article

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Having advised companies of various sizes and corporate cultures on supply chain for 27 years, Supply Chain Alliance founder, Mike Croza, shares the five key principles of business he’s learned in this Leadership Lab article for The Globe and Mail.

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