Sunday, January 02, 2011

Success is in the Supply Chain

If you begin to think about the companies that have been successful in the past few years, you will notice that they all have one common trait: a good supply/value-chain strategy. Think about it, the technology and innovations of today provide the means for a flexible organization to adapt to any situation or circumstance, assuming there are competent leaders to recognize the changes in the environment.

Branding and marketing experts claim to have the ability to capture an organization's brand essence. The reality of this farce is that your brand image/essence has already been captured; the logos and brand statements come secondary. For 2011, it is important to get back to the essence of your business, assuming you know what that is. Once you get to the essence of your business, then it's time to figure out the advantage - the differences in cost structures that give you the competitive edge. If you don't have it, you need to figure it out quickly. If you can't find one, you may be in trouble, or it may explain why you are having trouble.

Just to bring this home, let's think about the well-known drug cartels in history. Work with me here. If we remove the acts of violence (which could be translated to laws, policies, and wars on the legal side), we can see a common theme of an efficient supply/value-chain. Some gangster/criminal develops a systematic process to distributing their product at a level that moves product quickly. If you disagree, try selling a kilogram of cocaine today on your own and see if you can get the margins of the kingpins. That's right, how will you grow it, process it, get it here, distribute it, set a competitive price, and most important not get caught or killed.
The legitimate world is not different.



In a world of mass production and global enterprises, it's very difficult for small businesses to establish any form of competitive advantage. However, you can't always think of competitive advantage simply in the product cost itself. You need to think of the cost of ownership, the complexity of the purchase decision process, and the higher levels of Maslow's Hierarchy of Needs. People still want good local news that has an intellect appealing to the entire world. Customers are giving hints to their preferences in shopping through their search terms. What if a car dealership only sold black cars - different brands?

The problem with our economy is that we still want to build stuff, mainly because we are a materialistic society. We think building things creates value, because we value people by the things they have. The problem with our economy is not from the lack of building stuff, but from the lack of understanding value. Figure out that common value in your region, and develop an efficient system to supply this thing that your customers value.



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