The hallmark of early stage entrepreneurs is their ability to react quickly to changing market conditions, competition, regulations, and many other external factors.
The organization is small, systems and business processes are informal. Reactive and immediate change is necessary for survival. “Doing what it takes” to get every deal provides the lifeblood of cash. Alignment is relatively easy because the players are few.
As the business grows, strategic alignment becomes more difficult.
The informal systems and processes that were once a competitive advantage begin to be an impediment.
Informal supply chain relationships become overwhelmed or less effective as shifts in products, services, markets, geographies, etc change.
It is an unfortunate but common milestone most organizations hit in their evolution. There are sudden tradeoffs between responsive service and products – which are weighed against sourcing costs, logistics costs, and inventory carrying costs.
Inevitably, there are misalignments between the company strategy and the current state of the company supply chain.
Identify the Issues
In our decades of experience, we see the best-in-class organizations making the time and effort to identify those strategic misalignments.
Organizations that team with external experts are better able to start a candid conversation with the management team to understand strategic goals and desired market differentiation related to innovation, customer experience, quality, and cost.
In our client engagements, Adroit works with companies to understand or clarify the goals of the supply chain strategy in key focus areas such as:
- Customer Service: What is the desired service level agreement with customers? How are customers segmented? What are the targeted order lead times? What are the quality objectives? For example, service levels for B2C customers may be quite different than B2B customers.
- Sales & Distribution Channels: There are many options for getting goods to customers. These can range from direct ship from the producing location to indirect channels such as through a distributor or retailer. Frozen product has different requirements than fresh or shelf-stable. Geographic locations matter in the Cold Chain with direct impact on energy costs, and other considerations.
- Partnership Responsibilities: What are those areas of decision-making that our clients want to own, and which areas do they want to rely on the expertise of others? Where should limited company resources be tasked with execution and where should the tasks be outsourced? How do these decisions impact the client’s ability to differentiate and what effect do they have on cost, service, etc? How effective are the ongoing partnerships? Are there service level agreements?
- Operating Strategy: There are two ways to buffer for demand uncertainty in the supply chain. The two methods are through inventory levels and through capacity. Delaying production or purchasing until receiving an order limits risk of expiring product but stresses service levels. Stocking ahead of orders makes it possible to ship on demand but increases risk of expiring product. Further complicating matters is that in many food industry verticals, processors are impacted by limited and seasonal supply. Throughout the lifecycle of a SKU, the operating strategy may change. Often our clients take a one size fits all approach, which is an ineffective way to go, considering complex operational dynamics.
- Material, Process, and Equipment Design: Supply chains are ultimately the sum of all the material, equipment, people, business processes, and information systems used to source, convert, move, and deliver goods. The location and design of those assets are almost infinite. Requirements are driven from the product life cycle and sales and distribution channels. Production assets can be organized to produce from one location or multiple with associated impacts on lead times, supply costs, logistics costs and service levels. Are the needs of specific channels and customer segments being met by the current configuration? Are they optimized to provide the best balance of service levels, cost to serve, and adaptability?
Getting Aligned
Adroit sees a direct path to strategy and business alignment when teaming with organizations.
The process starts by acknowledging all that is unique to the company and the market in which it operates. The next step is detailed feedback provided to management on where there is strong alignment and what can be changed given the organization’s ability to influence partners upstream and downstream.
Our team will advise where there is unnecessary complexity and where investment is required. We will identify vulnerabilities and suggest mitigation strategies.
It is also critical to provide insight into where there is transparency for social and environmental disconnects from the company’s core values.
Ultimately, getting aligned depends on getting insight into where the business strategy requires flexibility and how that agility can be delivered by the food and beverage supply chain.