Understanding Brand Supply Chains
Today as customer experience gets pushed to the front of every action or process in a company, the brands those customers purchase really drives your brand supply chain. Can you influence the customer to select those brands that reduce costs or drive efficiency in your supply chain? I suspect that in some industries that is still possible; however, in more and more industries with e-commerce and the IoT, brands have a life of their own.
The power of a brand can really impact the costs of a supply chain and company, if not prepared correctly for intense scale. That is why understanding your supply chain impact by the few brands that represent 80% of your profitability is essential. It comes back to the age old story of the tail wagging the dog or the dog wagging the tail. In today’s market it is a little of both. Brands are driving sales for their products over other like items. Also, new products that are “blue oceans” of opportunity are driving sales with strong social media drive.
How do you measure brand supply chain metrics? Here are some ideas. Certainly there are many ways to look at this. Let’s look at few of our favorites:
A. Profitability by SKU by brand. This rolls up the costs and margin to develop a profit by SKU and then rolling all that up by brand. What does this do? This can tell you where costs for this brand are leveraged or deleveraged. Perhaps logistics costs are high for brand x but that brand makes up costs on warehouse and last mile delivery costs. Overall brand x may be a higher total profit per case than brand Y. Why profit per case or unit? This really focuses on the volume driving everything.
B. Sales projections relative to costs per case/unit by SKU & Brand. This levels out the costs as volume kicks in. For example on a new item the cost/SKU/brand may be very costly. However, once the breakeven point is visualized for that brand once that point is reached, profitability grows exponentially. This gives insight into how to support brand growth and when to discontinue an item. When that breakeven point is in the distance and remains there, it’s time to think about alternatives.
C. Rank distribution pain points by high costs for that brand. The insights from this metric can tell you the story of brands that may be generally heading in the right direction in profitability by SKU but have certain cost pain points that if fixed could drive the profitability even farther. Also included in this may be some subjective data that can add insight as well. For example:
- Order is always cut by 25% by supplier (unchanged PO is not good).
- Carrier is always late by several hours and we need to put in OT to receive this product weekly.
- Packaging is poor and thus we damage product during selection.
- Looking at metrics: identify those brands with high handling costs.
How do you affect change in your supply chain when a brand has high potential but the costs to the supply chain are impeding its success? Typically working together with the supplier and all levels through out the supply chain creates a great recipe for success. Everyone wants to see the product be successful if profit and customer experience using the product is fantastic. So leveraging relationships on the potential success of the brand in collaboration with others, will drive further success. Of course eliminating supply chain costs but keeping amazing service will continue to drive positive customer experiences.
If you need help developing this, there are many companies who can help you. Link Supply Chains has helped companies succeed in understanding their brands that drive overall success. Doing a business review of your brand impact is a good start.
I hope this was very helpful and useful. Thank you for reading this blog.
For other links to brand advice please see the following:
Check out our other POST on: Understanding Supply Chain Cost To Serve