November 20, 2015

Partnership up and down the chain is key to widespread, long-lasting improvements

By Nancy Appelquist, Director of Operations

If you scroll through cable network programming, there’s no question we've got a fixation with house flipping and refurbishing dilapidated old buildings into modern masterpieces. A few repairs and upgrades can transform a wrecking-ball-ready home to fit the lifestyle of today’s home dweller—making it more efficient, functional and marketable.

When it comes to efficiency improvement projects, there’s no better fixer-upper than the ag supply chain. While the outbound side of the chain is taking advantage of the latest technology and innovation, the input side looks much like it did in the 1980s. Sure, the ag distribution channel has seen a proliferation of ERP systems and advances in electronic information exchange, but the nuts and bolts of product delivery have remained relatively stagnant. It’s prime time to bring this industry into the 21st century.

Of course, we’re talking about an industry with arguably one of the most complex distribution systems around. Unique challenges like weather dependency, the ever-changing regulatory environment, the unpredictability of pest pressure, and others make “fixing up” the ag supply chain a mammoth undertaking.

Modernize and Maximize

You can hide a multitude of sins when corn prices are climbing, but when a downturn hits and belts are tightened, everyone up and down the channel is looking for ways to improve efficiency and save money. Suddenly, inefficiencies become more glaringly obvious and end up as prime targets for improvement. In reality, this is a huge opportunity for the ag supply chain to eliminate inefficiency and contribute to improving the bottom line.

So, to rehabilitate an infrastructure as rooted and massive as agriculture’s, where do we even begin?

Little research is available on what’s driving the supply chain, so earlier this year Entira dug deep into this issue with a multi-client benchmarking study. We conducted a series of qualitative interviews with supply chain industry veterans and quantitative surveys, talking with supply chain professionals at 100 retail locations across the country. The majority (70%) handled greater than 500 inbound deliveries per year.

Our research affirmed our belief that with the ag supply chain, there’s plenty of room for improvement. There’s a tremendous opportunity for cost savings. Our supply chain infrastructure has remained relatively status quo for the past 25 years; and yes, it works, but imagine what would happen if technology and innovation were the norm, rather than the exception—at least on a widespread scale.

One example of an eye-opening find is this: More than 70% of the retailers we interviewed still handle orders by phone. In 2015! Incorporating automation on orders could move a company forward by leaps and bounds with relatively low effort or investment.

Here’s the catch though: supply chain cannot be fragmented anywhere along the stream—up or down. These enhancements do nothing if applied to just one level of the chain. For example, bar codes on product packaging is a hot topic right now, but implementing that technology at any one level of the distribution channel is not nearly as effective as when it’s done in concert at all levels—manufacturer through retailer and beyond. When everyone is labeling and scanning products, information flows seamlessly among trading partners, errors are reduced and more time is spent focusing on making sure the grower has the product they need when they need it to produce a successful crop. 

Digging into Supply Chain

Our study, “Supply Chain Benchmarking—What is Driving the Ag Distribution Channel” asked interviewees to rank the big six chemical manufacturers on their supply chain performance in benchmarking areas related to product availability, reliability (both in terms of timing and quality), accuracy, responsiveness and communication, and how easy they are to work with. We then asked them to rank the relative importance of each of these attributes to their business and industry so we could map them together and show subscribers where to focus their energy.

And at the end we asked which of the big six had the best supply chain overall, and why. Those answers were surprising!

Subscribers came away with key areas to focus on for improvement and some potential collaboration projects with key downstream channel partners, plus ideas for operations and technology improvements.

Forecasting and product allocations were two big topics we explored in the study. It used to be that points downstream on the supply chain had no interest in forecasting because they preferred to get product on demand. Now, however, they’re realizing more and more that forecasting can mean the difference between having inventory available, or not. Retailers do expect their product needs to be met if they submit forecasts, but they don’t necessarily want to be held accountable for purchasing everything they forecast.

Overall, at both the high level when we did qualitative interviews with key thought leaders and in the quantitative surveys, we found a willingness to work with basic manufacturers not only on daily operations but on a more collaborative front to forge true partnerships. Throughout the channel, there is recognition that it’s imperative to work together to gain supply chain efficiency from both an operational and technological perspective. Pushing problems up or down the supply chain doesn’t help anyone; but when points up and down the stream work together to make updates and repairs to the chain, that’s how we’ll finally see that long-overdue extreme makeover.

If you would like to talk about rehabbing your point on the chain, please contact me at 845-544-1985 or nappelquist@entira.net.