Companies don’t need to be big to be successful. SMEs can use logistics to level the playing field. Malory Davies reports.
The quality of the entries from small and medium sized enterprises in the 2015 European Supply Chain Excellence Awards highlighted the fact that you don’t need to be big to be great at what you do. There is no doubt that good logistics can play an important role levelling the playing field for SMEs.
Not only did Scandinavian House, the company behind the Kids Avenue brand, win the SME of the Year category, but online retailer Firebox took the Team of the Year award.
Scandinavian House supplies children’s bedroom and furniture products through mid and high-end retailers. Products are manufactured in Europe, imported and then delivered to consumers throughout the UK primarily from its headquarters in Shipley, West Yorkshire.
The company partnered with software developer Proximity to develop a cloud-based order, delivery and transport management system, STREAM.
STREAM features a collaborative self-service customer portal that gives Scandinavian House and its partners control and real-time information throughout the order-to-delivery process.
Retailers such as Asda, Dreams, and Great Little Trading Company now have direct access to STREAM to view the status of their own customer orders, and can request certain changes to order details online.
The system has enabled Scandinavian House to deliver a significant increase in business volumes without increasing staffing levels. It has also resulted in better cash flow, and a major reduction in call volumes and costs.
The system was also designed to be available commercially to other SMEs looking for a cost effective solution to their order and supply chain problems.
It was another partnership that won the Team of the Year Award – Firebox and arvato. Firebox is a fast growing online retailer specialising in unusual products. Its best sellers include Unicorn Tears Gin, emoji pillows, Marmite chocolate, and VW camper tents. It has formed a partnership with arvato, part of the giant Bertelsmann group, for its logistics. Tony Matthews, head of e-commerce at arvato UK & Ireland, highlights the closeness of the working relationship, with a real-time system in place which reports against all SLAs and KPIs.
“This is particularly key when it comes to the launch of highly popular products, such as the Star Wars BB8 droid – an app-enabled toy which you can control with your smartphone or tablet, says Matthews. “Its release sparked the steepest order increase Firebox has experienced in its 17-year history. Sales were 2,000 per cent higher than forecast, meaning the team had to react quickly and organise the warehousing and fulfilment operations to handle the sharp rise in demand. The processes we have in place, which enable close communications on expected inbound deliveries into the warehouse and real-time reporting on how specific orders are progressing, were key to ensuring all orders were fulfilled on time.”
Matthews points out that delivery of the right brand experience is crucial for brands such as Firebox, whose customers expect all of their touchpoints with the company to be fun and quirky. “As such, the unique personalisation that typifies the brand has been built into the supply chain. This includes ‘CrapWrap’ – Firebox’s signature service that delivers goods wrapped in a slapdash fashion – mystery boxes, and surprise sweets in every order, which make sure each customer interaction is memorable.”
SMEs are increasingly being targeted as potential customers by large players, particularly in the parcels sector. When TNT Express set out its “Outlook” transformation programme almost two years ago, it paid particular attention to serving the needs of small and medium sized businesses.
In July 2015, Tex Gunning, TNT’s chief executive officer, said: “TNT’s turnaround is progressing well under our Outlook strategy. Service levels and customer satisfaction scores further improved. We are achieving good growth in the SME customer segment after years of decline.”
The growth of online shopping and the opportunities that it opens up to smaller companies has also been attracting attention from UPS and FedEx.
Martin Davidian, FedEx managing director sales UK north and Ireland, highlights the growth of “micro-multi-nationals”. Historically micro-multinationals operated in niche sectors, including engineering and technology.
“However the concept is now spreading to other industries and is becoming a more established feature in the UK. These businesses demonstrate real dynamism by reducing their costs, staking their international presence and going against the traditional business structure.
“At FedEx, we believe that micro-multinationals will change the face of global business across industrial sectors and geographical boundaries. This is an area SMEs should consider venturing into. There has been a recent movement and increase in micro-multinationals, resulting in small businesses spanning the globe and benefiting from cross-border trade. The logistics industry has a key role to play in this, providing not only rapid and reliable logistics, but also deep expertise in trade regulations and supply chain management,” says Davidian.
And he argues: “Small companies can now think big. They have an increased opportunity to break down barriers to entry and follow this rising trend. By creating a seamless international value chain, SMEs really can see the bigger picture. Global reach needn’t be perceived as a large companies’ playground – it is feasible for SMEs too.”
And it is not just the traditional carriers that are looking at the SME market. Amazon has its own “Fulfilment by Amazon” (FBA) service for retailers selling on Amazon and through other sales channels.
Products are held at an Amazon fulfilment centre and Amazon will then pick, pack and ship it EU-wide when customers order. Amazon uses a pay-per-use model: there is a storage fee per cubic foot per month, and a fulfilment fee which is based on dimensions and weight.
Eric Carter, solutions architect at Indigo Software, says: “Smaller companies need to overcome a number of challenges to be able to compete with larger organisations and provide the level of service required to keep their customers happy. In most cases, they will not be able to justify the cost of maintaining their own vehicles and so need to create strong ties with regional logistics providers, many of whom will typically use pallet networks to be able to offer a nationwide distribution service.”
He highlights the importance of a good WMS in managing the stock picking process, and then assigning the items picked to a licence plate or SSCC (Serial Shipping Container Code) label. This allows the supplier to inform the customer using ASNs (Advance Ship Notices) where appropriate, of each pallet’s exact configuration.
Success comes from agility – and a good partner
SMEs shouldn’t lose sight of the fact that in many instances they actually have key advantages over larger organisations, says Luis Arriaga, president UK, Ireland & Nordics at UPS.
“One powerful advantage that the SME sector has is agility. SMEs are able to react quickly to shifting market needs and are typically more flexible than larger organisations with ingrained ways of doing things.
“Take the ability to sell goods online. This has been a real game changer for businesses, particularly SMEs. With a good web site and the right logistics, SMEs can take advantage of the same international opportunities as larger competitors, and are able to look and act the part despite having a fraction of the resources.”
Companies that streamline their supply chain will undoubtedly benefit, yet many SMEs lack confidence when taking steps to set theirs up, he says.
“There are many ways that the SMEs can improve the efficiency of their logistics operations – the first is doing your research. When choosing a supplier it’s important to do your homework before entering into any contracts with them. In addition to the typical factors considered when vetting a supplier, such as credit rating and method of payment, when assessing international vendors you should also consider their region’s local supply chain and how that will impact their supply to you, as well as considering the cultural nuances and how these could impact negotiation and relationship building.
“Expanding into new markets requires significant assets and infrastructure. If you are considering moving your business into markets abroad, partnering with a dedicated logistics provider with an existing storage and transport network will help access these new opportunities.
“Secondly, establishing the right method of payment early on is crucial to the success of any supply chain as it effects everything from your buyer-seller relationships to ensuring there is enough cash-flow to keep the business going.
“For a buyer, cash-in-advance means avoiding credit risk and allows businesses to have greater control over the timings of their shipments, but this can come at the expense of cash flow.
“Thirdly, remember that it’s not just about getting your product to your customer. It may also be about providing flexibility with easy returns options,” says Arriaga.
“One of the main reasons people don’t want to buy from abroad is that they don’t want the hassle of shipping their products back.
“The recent UPS Pulse of the Online Shopper study found that 61 per cent of consumers will shop more often with a retailer if they offer a hassle-free returns policy. ”
Arriaga also highlights the importance of partnering with a trusted logistics advisor and problem solver to provide the necessary consultancy and tailored logistics solutions to access new markets, navigate complex regulations and achieve growth objectives.
“Logistics expertise and tools can help optimise supply chains and let SMEs react quickly to shifting market needs, which can turn the challenge of going global into a lucrative growth opportunity, just like large companies,” he says.
WMS delivers service boost
Evans Vanodine makes janitorial and livestock protection chemicals, which it exports to more than 60 countries globally and operates four overseas manufacturing plants. It won a Queen’s Award in 2015.
It moved from a paper based system to using Indigo’s WMS software at its Lancashire warehouse some years ago, and has seen not only an improvement in performance but also a £100,000 cost reduction.
Evans Vanodine’s systems director Anthony Evans says: “We have over 2,000 finished good SKUs which could be located in any of the 3,500 pallet spaces in the warehouse. Now we know exactly where all stock is located and what quantity is available for sale in real time. Once a customer places an order, we know straight away whether we can fulfil all their requirements and can inform them accordingly. The system is automatically updated on a continuous basis with stock allocations, ensuring any orders in the pool do have stock available to promise, avoiding incomplete shipments and disappointed customers.”
After implementing Indigo, it now achieves 98 per cent “on time in full first time” delivery rates – up from the original 80 per cent success rate.
In addition, having an automated system ensures the company is better placed to cope with sudden peaks in demand for particular products. Previously, it would have relied on staff working overtime at periods of high demand but now, busy periods can be managed as part of its business as usual operations, across two standard shifts. The company has estimated its ability to avoid overtime labour costs and manage warehouse operations across just two shifts has saved more than £100,000 over the past two years.
Over the past few years, the strategic benefit of the investment in WMS technology has become clear and the company reckons total business levels have increased by ten per cent.
