A Window On The Supply Chain
Helping growers understand and negotiate the complexities of the supply chain will make you a true partner.
September 9, 2008
World stocks are down. Consumption is up and so are prices. Production agriculture has waited a long time for this time in the sun. But as the industry basks in the glow of 2007, preparations toward 2008 will require execution of sound business fundamentals. Regardless of where markets are headed, there will be volatility in the coming year.
This is a big opportunity for retailers to establish themselves as a strong partner in the grower's business planning cycle. Specifically, you can show your mettle as a valued supply chain partner. Record demand for seed, fertilizer, and other inputs is pushing growers to commit to plans now to ensure access to desired products. A grower can't afford NOT to be affiliated with a smart retailer who knows how to stand alongside them through the journey to 2008 production.
Being A Smart Retailer
What are distinguishing characteristics of a smart retailer? Being an effective supply chain partner is one. The old adage says you can't sell from an empty wagon. But with higher costs for everything, keeping the wagon full can strain dealer working capital beyond the breaking point. The costs to carry inventory for months can be staggering. Carrying too many products or the wrong product mix simply isn't an option. However, the cost of losing a customer because you didn't have the right product is an ever-present threat.
The keys to successful supply chain management are planning, forecasting, and replenishment. The science of six sigma supply chain efficiency, pioneered by General Electric and others, has transformed many industries and there is a wealth of information in the management literature about its application. However, a key point about effective supply chains is that communication effectively flows between participants. You don't have to take the plunge into six sigma.
Five Steps To Follow
1. Make sure your customers are informed of the latest market conditions for key supplies like fertilizer. Don't be afraid to provide the best available industry intelligence and information and let them make their own decisions on timing of purchases. This is especially important as more product is sourced offshore. Your insight and industry contacts will provide them with some of the best information they can hope to find anywhere. Will it be 100% accurate? Probably not. Use all the disclaimers you need to use, but keep customers informed and give them a chance to make an intelligent decision.
2. Educate your customer on supply chain logistics. Shoot straight on what it takes to move a truckload or pallet of a particular item from Point A to Point B. Growers are learning that last-minute impulse purchases of items like seed are a thing of the past.
3. Embrace technology and automation. Help suppliers become more efficient by utilizing Web-based ordering systems/account management. Supply chains aren't clogged with paper.
4. Take a hard look at your own inventory procedures. Can your employees access real-time inventory information from your computer system? If not, you are probably carrying "just-in-case" inventory rather than practicing the preferable "just-in-time" management.
5. Are you afraid to talk about financing with your customers? Time to get over it. Supply chain partners work together. That means sharing the load on the cost of capital. Competitively priced capital is being effectively delivered through vendor-sponsored programs from a variety of sources. Available capital facilitates opportunistic purchase opportunities for your customers. This includes early purchase discount programs offered by manufacturers and wholesalers. Work to pre-qualify customers for appropriate credit limits and programs so they can pounce on a short-lived ordering or pricing opportunity. More importantly, they won't be tying up your working capital and preventing you from making your own opportunistic moves.
Smart retailers can come in all sizes and categories, from independents to cooperatives to publicly traded corporate giants. There are opportunities to elevate customer service and business performance in all environments and all settings. The 2008 season will be no exception with plenty of opportunities to be a Preferred Supply Chain Partner.
Lange is business development manager for ProPartners Financial. The company has offices in St. Paul, MN; Fargo, ND; and Bloomington, IL.