The 2:00 Minute Warning

Here’s a quick question for you. Are you interested in increasing your company’s profitability by 1% of your sales? That’s not a trick question. Multiply your company’s sales by 1% and drop it right to your bottom line. Now, let's talk. 

Last year I had an hour long interview with Jeff Wilke, a former CEO of Worldwide Consumer at Amazon. Jeff was credited with helping to design the logistics strategy that allowed Amazon’s delivery operations to be so successful. He reported to Jeff Bezos directly and retired about a month before him.

In the interview we covered a lot of topics. But for me, the highlight of our conversation was our discussion about supply chains. That’s because during our discussion, I shared that I’ve been giving a presentation titled: “Is your supply chain an asset or an anchor?”

This presentation has proven to be a bit of an eye-opener for me. That’s because during the presentation, I ask the audience members - many of whom have been C level executives - to stand if they believe supply chains are really important to the success of their organization. To lighten things up, I state that they can only stay standing if they are willing to raise their right hand, swear to tell the truth and proclaim: "MY COMPANY'S SUPPLY CHAIN IS REALLY IMPORTANT TO OUR SUCCESS!"

Since just about everyone remains standing, I ask the audience to rate their supply chain on a 5-point scale. A ranking of “5” means that you have a “World Class” supply chain that is holistic and proactive. A ranking of “1” means your supply chain is disjointed, reactive and often operates in “fire fighting” mode.

I mentioned to Jeff that even though virtually everybody says their supply chain is really important, 80% of the people (from over 2500 executives), have rated their supply chains as a “3” or lower. Only 20% of executives rate their supply chain as better-than-average.

I then asked Jeff how he would rank Amazon’s supply chain. Jeff said that Amazon's supply chain was at least a 4.5 - if not higher. Amazon recognized that their supply chain was a key ingredient in allowing them to beat their competition since it enabled them to offer capabilities that competitors could not match at a comparable point.

Unfortunately, far too many executives don’t believe it’s possible to drop 1% of their company’s sales to the bottom line. If you are one of the ones saying “That’s impossible!” brace yourself.  There are numerous articles talking about how companies have invested in their supply chains and it yielded substantial savings – savings in excess of 1% of their sales. 

For example, a recent article by Supply Chain Dive shared how Whirlpool announced that they’re using their supply chain to reduce costs by $800 million. The article explains how they're using a strategy that involves dual sourcing and reducing parts to achieve this improvement.

Another recent article shared that Hershey’s is investing a billion dollars into their supply chain to drive savings and improve their flexibility, agility, and innovation. And companies such as Mondelez and others have also made sizable investments that have yielded substantial savings in excess of 1%.

These companies see their supply chain as an asset. And when supply chains are viewed as an asset instead of an anchor, companies are more likely to invest in optimizing them because of how it can impact their financial results and improve their working capital.

Let me get a bit personal with you. How would your company's supply chain rank on a scale of 1 to 5? Find out by taking our quick twenty question supply chain diagnostic quiz. It’s okay to have an average or mediocre supply chain if all of your competitors have average or mediocre supply chains. But is that a risk you’re willing to take?

If you’re interested in having a supply chain that you can be proud of, let’s talk. TranzAct’s Rapid Assessment is a dynamite tool that helps companies move up the supply chain spectrum and drop 1% of sales to the bottom line. 

To get in touch, simply give us a call at 630-833-0890, send us an email or schedule a time to meet.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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