by: Jonny Kramer | On: 12, Aug 2020
Whether in response to market demand, new competition, unprecedented crisis or technological advancement, changes in supply chain processes and relationships can have far-reaching effects for businesses for decades to come.
These are the supply chain advancements from Engineers and Manufacturers that revolutionised industries and economies around the world.
5 Most Influential Supply Chain Transformations
3. Ford – Assembly Line Efficiencies
First sold in 1908, the Ford Model T is renowned for being the earliest affordable car. The mass appeal of the vehicle was due to the revolutionary manufacturing process created by Henry Ford.
Ford spent years crafting a more efficient assembly line. The world’s first moving assembly line utilised conveyor belts that Ford attributed to inspiration from Chicago meatpacking factories. The car factory was divided into hundreds of sections, each assembling a single car part in an incremental building process.
Ford’s innovations dramatically reduced manufacturing time – for the Model T motor alone, build time was cut almost in half from nine hours and fifty-four minutes to five hours and fifty-six minutes. The assembly line advancements also cemented the company’s overall efficiencies and scalability, with the Model T becoming the first vehicle that used parts entirely built by Ford. In the next 14 years, Ford produced over 15million Model Ts.
2. Amazon – Strategic Insourcing and Outsourcing Inventory Management
Global giant Amazon dominates retail and delivery markets thanks to its outsourcing and insourcing strategies.
The same-day shipping that fulfils instant customer demand are only possible through its own highly efficient logistics. Utilising its own delivery vehicles reduces the possibility for miscommunication and supply chain errors at this stage, and removes the risk of brand damage resulting from poor customer experience with a third party supplier. The brand’s warehouses are strategically located around city centres and densely populated geographies to minimise transportation time, and its stringent forecast measures narrows down specific regions to accurately predict local demand. Its multi-tier inventory management goes further: warehouses are divided into five storage areas according to demand, quantity and type of product to maximise efficiencies.
Amazon’s supply chain diversifies its approach between its own products and products from third-party sellers. Over 80% of Amazon’s sales derive from third-party sellers, with these products sold using a pure pull strategy through an order-by-order fulfilment model. Products that are infrequently ordered are not stored in regular Amazon warehouses, but managed efficiently by storing in fulfilment centres. Exactly like Amazon’s warehouses for its own proacts, fulfilment centres are located near local urban markets to minimise transportation time and maximise deliverability.
Tailored approaches to inventory and logistics have enabled Amazon to grow from a $7 billion revenue in 2004 to $233 billion in 2018. The brand became the fastest ever company to reach $100 billion in sales revenue, and since its inception has grown by around 20% every year. Subsequent innovations in warehouse robotics, e-commerce investment and customer experience advancements are aiming to help Amazon reach its target of $1 trillion revenue in the new decade.
3. Walmart and Procter & Gamble – Sharing Information for Continuous Replenishment
In the early 1990’s, the relationship between the supermarket and the goods manufacturer was not strong, and the two were out of alignment: Procter & Gamble focused on day-by-day selling with an aggressive push for short-term sales without long-term planning, and fragmented internal processes meant that each organisation operated in silos without shared knowledge. However, with the business relationship bringing in over $2billion at the time, a more unified approach was clearly identified as a worthwhile opportunity. As major players in their industries, the two brands decided to collaborate to develop a mutually beneficial channel partnership with the aim of increasing both short-term and long-term sales and generating efficiencies.
P&G and Wal-Mart developed a strategy that would share data across teams of people and technology throughout their mutual supply chain. Several P&G leaders were installed in Wal-Mart offices, P&G was electronically linked into Wal-Mart’s systems that tracked when each individual product left the supermarket, and continuous replenishment processes enabled P&G to ship replenishments to Wal-Mart’s distribution centres in perfect timing from dock to truck to shop, with the aim of reducing costs and increasing efficiencies. The two brands also shared data to better understand customers, thereby reducing the need for inventories and fulfilling more closely to customer demand, with the aim of driving category growth and increasing sales, revenue and profit.
With more co-ordinated channel activities, the partnership generated unprecedented efficiencies and transformed its supply chain to lead with a customer focus, that has benefited both parties significantly. In the past 15 years alone Procter & Gamble grew from $56 million to $9.6 billion revenue, and ranked No. 42 on the 2018 Fortune 500 list of the largest American companies by total revenue. Walmart grew from $25 million revenue in 2000 to $514 million in 2019, and after being listed for the first time as America’s largest corporation on the Fortune 500 list, the brand has remained at the top every year except 2006, 2009, and 2012.
4. Toyota – Lean Manufacturing
The famous Toyota Production System (TPS) gave birth to the principle of Lean Manufacturing that is responsible for the creation, growth and success of businesses across industries and around the world.
The car manufacturer spent decades developing an integrated system that organises manufacturing and logistics for the automobile manufacturer through communication with suppliers and customers. The aim of the process was to improve productivity and efficiency by ‘reducing unnecessary, unreasonable and uneven activities, thus decreasing our production costs’.
Toyota created a flexible just-in-time production that reduced waste in eight areas, including inventory, transport and working time of employees, by proactively identifying activities, spend and materials that do not add value for customers and then eliminating the areas without value. Toyota published a booklet and framework for their system, which they used to train employee across the organisation and educate suppliers.
In recent years, the company has extended its systems to help not-for-profit and charitable organisations to build a great volume and quality of homes in areas hit by natural disasters, feed millions more homeless and disadvantaged people and support schools and hospitals in making their budgets reach further. Toyota was the world’s first Automotive manufacturer to produce over 10 million vehicles per year, and is now the tenth-largest company in the world by revenue.
5. Provenance – Transparency and Customer Involvement
In 2013 Provenance developed pioneering blockchain technology to bring consumers into the heart of the supply chain.
72% of Britain’s millennials are willing to spend more on products from companies that demonstrate positive social and environmental impact, and over 80% of consumers of all ages are concerned about the origin of their food products. Provenance aims to fulfil customer demand for information and transparency at all stages of the supply chain, across industries and markets, before they purchase.
The Ethereum blockchain provides products with digital ‘passports’ that evidence individual origin, reassuring customers of authenticity and ethical processes. Products and raw materials can all be traced, creating an auditable record of the entire supply journey. In further upgrades to the technology, customers can access new experiences via smart phones through labelling from a product’s QR codes and smart tags (NFC).
The groundbreaking technology has been increasingly adapted to evidence environmental and social ethics, as well as delivering a unique and personalised experience for customers from their chosen brands. The tech has already been implemented by over 200 food and drink retailers, including for meat and fish, in addition to sustainable clothing, home furnishings and e-commerce.