business news in context, analysis with attitude

We had a piece on Friday reporting on a new study by Deloitte Consulting that suggests companies have placed so much emphasis on efficiency and cost-cutting that they have helped to create safety problems in the supply chain, and are ill-prepared to deal with their consequences.

Three recent examples were cited in the study: Exploding laptop batteries, melamine-tainted pet food, toothpaste laced with anti-freeze.

We commented that the folks at Deloitte quite rightly point out that efficiency hasn’t just put the supply chain at risk, but also, more importantly, consumers and brands:

The drive to make efficiency the primary focus in so many businesses – often at the cost of effectiveness – has the potential of hurting a lot of people, especially if the created weaknesses can be exploited by our enemies. Part of the problem, of course, is the commoditization of so much business, with the constant harping on cheap, cheaper, cheapest. Many businesses have forgotten how to talk to and with their customers, and have reduced the conversation to this coupon or that deal…ignoring the possibility that by really engaging with the customer, the nature of the shopper-shopkeeper relationship can be changed.

One MNB user responded:

I am a Regional Director for a very successful regional company. Our regional company has perennially been one of the most profitable chains in the country through continued evaluation and analysis of operating cost as one of our core business competencies, providing a solid foundation for sustained profitability and growth.

Our executive team committed themselves to a two hour presentation from our regional group this week which allowed green light thinking from a team of field operators to discuss and suggest objectives that were built around customer service, freshness, and training and development. Not only was there a refreshing spirit in the room, but most importantly, healthy dialogue about possibilities and implementation of best practices that place focus on the customer and the associate. How's that for opening the window of opportunity and looking for a competitive edge to blow in to compete in an ultra cost efficient industry.

It's like a great marriage, you get out of it what you put into it. As loyal and faithful leaders, if we don't generate and stimulate thoughts that allow our company to stay balanced, the odds of becoming one dimensional are extremely high and place us at higher risk. My respect and regards to our executive team for their commitment to creating an environment that promotes innovation and interaction.

The question we’d ask is this:

Is this the rule or the exception in US food retailing and manufacturing?

Another MNB user wrote:

I grew up with my father actively involved in bringing innovative and unique products to the cosmetics and HBC categories. 20 (A-hem) years ago, the process was so much more personal - The consumer study groups on his new ideas consisted of myself and my girlfriends trying the product, my Mom having a bunch of other “baseball Mom’s” over to our kitchen to try out a concept item, or taking the product down to the local beauty salon where there was one tiny woman painting nails in a back corner. All of their feedback was recorded, handwritten on a legal pad and filed under “NEW ITEMS”. Sales calls resulted in an answer right then and leaving a meeting with a PO in hand was a beautiful thing. People were ultimately decision makers at all levels, and took responsibility for their decisions.

To this day, our company is still the innovator in our industry, but the cost of “doing the business” has driven the actual costs of the products much higher than the cost of the components themselves. I wish we had a dollar for every time we have been told we had to “bring it in cheaper so I can make my margins”. We manufacturers pay astronomical slotting fees, horrific reclamation costs when a retailer brings in too much of our product (only to have them re-order it the following week many times, thus managing their inventory FOR them), and all of this with the rising costs of everything from raw materials to freight. We have HAD to find the way to make our products more efficiently, but each and every company makes the CHOICE to either compromise the integrity of the “Brand”, or the components in them, in order to make more profit, or to put pride in their product and find a way to build a better mousetrap.

I still firmly believe that the “soul” of a company is only as good as its product integrity, and well executed efficiency will ultimately bring profit. Commoditization is the merely the “soul-less” search for profit. Unfortunately, we do not always get what we pay for… sometimes they get what they ask for.

MNB user Guy P. DiCenzo wrote:

I'm not making light of the three supply problems you mention, but that's three highly publicized problems out of hundred's of millions of transactions, (maybe billions), each year. Seems like the supply chain is remarkably good. Would it be great if politicians could match that.
KC's View: