As most of our readers know, I travel quite a bit on the supply chain and logistics conference and seminar circuit.
Almost always, someone cites examples of great supply chains, and about 98% of the time the references are to Wal-Mart and Dell, and occasionally one or two others (e.g., Procter & Gamble).
In April 2005, for example, I participated at a Supply Chain Management conference at Penn State, during which a panel of supply chain pundit types was asked specifically to name some great supply chains besides Dell and Wal-Mart. I recall the panel managed to cite P&G and not a whole lot more.
Dell, Wal-Mart and P&G are great companies all, with excellent supply chains. That said:
- Dell and Wal-Mart have had their troubles recently. Relative troubles, for sure, meaning they are still growing revenue and profits, just not at the clip they once did. In both cases, I’ll argue supply chain plays some role in the challenges (see below).
- We just need some “new blood”
- Many pundits can’t articulate why these companies have great supply chains. I often ask the people citing these leaders that very question. Generally, the answer is “the build-to-order model” for Dell, and hardly any clear response for Wal-Mart, other than that its prices are so low, its supply chain must be great.
I’ll repeat again that Dell and Wal-Mart are great companies with great supply chains (I own the stock of one – you’ll have to guess which). But their supply chains are arguably not delivering the competitive advantages they once did. Innovation is eventually matched, and operating conditions change.
In Dell’s case, competitors have simply caught up from a supply chain effectiveness and cost perspective. That’s in part why we’ve seen both IBM and HP very active and public about their supply chain stories in the past couple of years. They want the market and Wall Street to know Dell isn’t the only computer firm with an impressive supply chain.
The advantages Dell had in terms of make-to-order model are also reduced as the price of finished units and individual components continues its relentless drive south. The cost of inventory and the dynamics of component pricing just have less of an impact. There is also some evidence that the make-to-order model is less attractive in some global markets, and in the growing category of notebooks. Notebooks also require more R&D today than desktops and many servers, and Dell’s generally small level of R&D spend versus sales may be hurting them there.
Wal-Mart has also had some troubles internationally, having major stumbles in Germany and South Korea, and a tough time in the U.K. versus Tesco. Some have stated that the centralized “command and control” model that drove store operations and the supply chain in North America may not be effective in other parts of the globe. Wal-Mart itself is now moving in part to a more decentralized operating model in the U.S. (see In Search of More Growth, Wal-Mart Follows Best Buy in Move to Tailor Stores to Individual Markets). The company had also allowed inventory to grow at a much faster rate than sales growth for a couple of years, leading to this year’s Inventory DeLoad program (which appears to be having a positive effect in reversing this trend).
I think very highly of P&G’s supply chain, and think the company is especially good at continuous improvement. It has continued to thrive. Still, I’ve also heard from some people in the know that there have been some things to learn from the Gillette supply chain team post acquisition about sales and operations planning, collaboration and some other supply chain processes.
So while giving these companies their due, I think we need to find some additional icons, and be more explicit about why any of them are “in the club.” I’d love to hear from our readers about their companies, or other companies our readers would cite. A very imperfect list of new icon candidates is offered below, some of them “likely suspects,” maybe some others that will surprise.
- IBM: For the massive and impressive job they have done under the leadership of Bob Moffat in building an integrated supply chain organization on a huge global scale.
- Cisco: Sometimes mentioned as an icon, Cisco impresses with its ability to run a huge, almost totally outsourced supply chain with a relatively small team and heavy infusions real-time information and visibility.
- Zara: This European retailer is also cited a bit but not nearly enough in North American circles, probably from a lack of familiarity and U.S. store presence. Zara has implemented the demand-driven, “Quick Response” supply chain that many hoped was the future for the industry 15 years ago but which has largely failed to materialize.
- Tesco: Powerful global retailer coming soon to U.S. shores, it adopted lean principles throughout its supply chain, and seems very savvy in its approach to RFID.
- The Limited Brands: Seems under-recognized to me, probably in part because (of necessity) its supply chains are tightly aligned with its many individual store brands. But the specialty retailer seems always on the supply chain move, and is known for the quality of its supply chain and logistics development programs.
- Frito-Lay: A division of PepsiCo, the snack team has leading edge distribution processes, is an advanced user of supply chain technology, and is one of the few companies performing true continuous network optimization. Like The Limited, it is also one of the “farm teams” for the rest of the industry.
- Canadian Tire: This Canadian retailer does outstanding work letting demand drive the rest of the supply chain, and has shown strong operating results competing north of the border against Wal-Mart.
- Ashley Furniture: This rapidly growing furniture manufacturer and retailer does one of the best jobs we’ve seen managing a long global supply chain like a just-in-time one.
Wegmans: This smaller profile, privately held grocery chain doesn't get enough credit for seemingly always being in the forefront and driving real value from initiatives like CPFR and data synchronization.
We’ll be providing more detail on many of these stories in the near term – but would love to hear your company’s story or your suggestions for others.
Do we need some “new blood” in terms of our supply chain role models? What companies would you suggest and why – including your company? Let us know your thoughts.