Gambling on innovation

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Chairmen and CEOs ignore the supply chain at their peril. Retailers may consider their main activity as selling, but the more astute may make a more considered analysis. The ‘Chairman’s Agenda’ column on page 22 of this issue refers to Wal-Mart’s description of itself as ‘a procurement agent for the consumer’. In essence, the World’s largest retail organisation understands the significance of its immense buying power and the central role the company’s supply chain plays in bringing the consumer what he/she wants. The function of a retailer may be to source and deliver product the market demands – but the secret is to deliver at the lowest cost.

Too many senior board directors regard the supply chain as a necessary cost, tolerated in order to convey merchandise to the buying public. Few fully understand the critical issues at stake in the supply chain that can make or destroy competitive opportunity in the market. It takes a natural innovator to implement strategic change within the supply chain that can deliver value to the customer – however, innovation can be a double edged sword and, in many respects, it takes a bold person to wield it.

Perhaps the boldest project within the supply chain in recent years has been the $4.5 bn revamp of J Sainsbury’s logistics operations, overseen by Sir Peter Davies. Well publicised technical problems within Sainsbury’s vast, highly automated, ‘fulfilment factories’ has taken its toll on the company’s operating board. First, Sir Peter Davies was ousted as Chairman in early July and now it is understood that Martin White, supply chain director responsible for the project is to be replaced by industry veteran, Lawrence Christensen, from Safeway. 

While many may be hardly surprised by this outcome, given the scale and complexity of the task at hand, few will have realised that the ambitious goal off attaining the most competitive cost per pallet moved in the food retail supply chain was necessary if the company was to regain its predominance in the sector. Innovation is essential to any dynamic enterprise striving for market leadership, but with it comes risk and unfortunately, if problems are encountered, the innovators take the hit. The irony is that most technical problems are solved eventually – only investors are seldom patient.

Nick Allen, Editor

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