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How Spur Overhauled Its Supply Chain

Proving that large organisations can innovate and make big savings on the bottom line that benefit all their stakeholders, Spur has overhauled its supply chain to grow its R5 billion restaurant group.

Paul Smith

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Vital Stats

  • Player: Pierre van Tonder
  • Position: CEO
  • Company: The Spur Corporation
  • Turnover: R5 billion
  • Visit: spurcorporation.com

In 2005 Spur was a very different company to the one it is today. Revenue was less than a third, restaurants were in charge of sourcing some of their own supplies, as well as phoning through orders to many of Spur’s centralised suppliers. Pierre van Tonder, the current CEO of Spur refers to it as a ‘call and collect system’.

It was a distribution system riddled with inefficiencies and a decade behind best practice in the world’s top food franchises.

We-recommend-tickWe recommend: Mark Pilgrim On Authenticity In Business

A leakage problem

Realising there was value leakage in its processes, Spur’s team started exploring the Australian and UK market.

It was apparent that their supply chain performance was poor and needed to change.

Van Tonder spearheaded this research in much the same way as many of the world’s most innovative CEOs do, by using ‘discovery skills’ that explore other national markets for ideas.

Research has shown that innovative CEOs spend 50% more time discovering new ideas than CEOs with no innovative track record. For example, Koos Bekker got the idea for M-Net while doing his MBA in the US.

Howard Shultz got the idea for Starbucks while on holiday in Italy. Monitoring international competitors and best practice is a simple and easy way to generate new innovation ideas for your own business and is something every innovative entrepreneur and CEO should be doing.

Today, Spur runs a world-class distribution model that has improved numerous areas, from reducing costs and food preparation time to improving quality and customer satisfaction. The net result of these supply chain improvements has been a win-win-win for the franchisees, suppliers and the franchisor. By working together, they have been able to optimise and improve profits for everyone involved.

The key to this transformation has been finding the right supply chain partner.

“We’ve learnt that in business, your queen in the game is your supply chain partners,” says van Tonder. Through a tendering process, Spur partnered with Vector Logistics, a local logistics company that initially started as the distribution arm for I&J foods.

Vector brought a wealth of supply chain knowledge that enabled Spur to take a three-and-a-half-year journey that transformed its supply chain.

Key supply chain improvements

  1. Consolidating suppliers: By purchasing from fewer suppliers, Spur was able to reduce costs of food, and improved standardisation of the product, resulting in a cost saving and a higher quality meal on the plate.
  1. Value-added suppliers: Spur also partnered with value-added suppliers that could improve food preparation. By transferring work that had previously been done in each restaurant to suppliers, franchisees suddenly enjoyed massive cost savings as they were able to reduce kitchen space and have greater consistency in the preparation of their food.
  1. Business intelligence systems: Spur added a point of sales analytics system that better enables the supply chain to forecast demand and therefore reduce stock-outs and optimise inventory levels.
  1. Improved standards: By working with fewer suppliers and an expert logistics team, Spur was able to improve health and safety standards with an unbroken cold chain. In addition, they could improve monitoring of suppliers to ensure compliance. Better standards result in higher and more consistent quality – which ultimately leads to greater customer loyalty.

We-recommend-tickWe recommend: How Rethaka Was Started With No Money

Supply chain fails and wins

Spur’s excellent results with its supply chain turnaround are not as common as you would imagine.

While many large businesses have invested heavily in improving supply chains, the results are often lack-lustre, or even abysmal. While statistics vary, some studies have found that up to 70% of supply chain projects fail.

In 1999, Toys R Us, advertised that any toys ordered before 10 December would be delivered by Christmas.

An unexpectedly high number of orders meant that many customers got their toys after Christmas, resulting in a major PR disaster that ultimately lead the company to outsource its logistics to Amazon.

Similarly, IBM lost hundreds of millions when it launched its Thinkpad laptop, not because there was a problem with the product, but because it was out of stock for over a year – millions spent on R&D and no follow-through sales due to poor supply chain management.

The true cost of logistics

Spur-franchise-logoAnother study done by a leading department-store chain found that a quarter of its customers left the store empty-handed due to out-of-stock products. An industry study done on the US food industry estimated $30 billion was wasted annually due to poor coordination in the supply chain.

It’s not just international companies struggling with supply chains though. According to a survey conducted by KPMG, South Africa ranked 124th, the lowest of all BRICS nations on domestic logistics costs.

On the bright side, companies that create world-class supply chains outperform their competitors – often by miles. By being able to get the right product to the right place at the right time consistently, companies can increase sales, avoid mark downs to move old stock and improve customer satisfaction.

For example, in the shoe industry, most companies require stores to pre-order at the beginning of the season. In its start-up days, Crocs bucked this trend, and made the strategic decision to innovate by building factories and warehouses around the world.

While there was a cost to the decision, the resulting sales more than made up for the financial outlay, because stock could be delivered to stores in weeks.

Let’s look at this in action. When Crocs introduced a new sandal in 2006, 250 000 pairs were pre-ordered.

According to a traditional supply chain model, this meant 250 000 pairs would have been sold – it was a popular product, and would have sold out. Because of the additional factories and warehouses however, the manufacturer was able to replenish stock quickly.

As a result, 25 million pairs were sold – ten times greater than a traditional shoe-manufacture model.

Choosing the right supply chain

Marshall Fisher, a global expert on supply chain strategy and a professor at the Wharton Business School, believes the most common reasons supply chain initiatives don’t lead to great results is that companies don’t understand their own products and the right supply chain strategy to suit that product.

To understand the right supply chain strategy, products can be divided into two broad categories: Innovative products and standardised products.

Innovative products: Innovative products are categorised as products with a short product life cycle, large profit margins, large ranges and they usually have to use season-end mark-downs to get rid of old stock. Examples include high fashion and innovative electric goods.

Standardised products: Standardised products, on the other hand, are usually products with longer life cycles, smaller profit margins and should have small ranges that seldom if ever require mark-downs. Common standardised products include toothpaste, stationary and most restaurant franchises like Spur.

Depending on the type of product that you sell, these two categories require very different supply chain strategies.

Innovative products require supply chains that are agile and responsive and can get products on shelves within very short lead times.

Remember, with high margins and fluctuating demand, out-of-stock products mean huge lost profit opportunities. For example, if Crocs had not had an agile supply chain, it would have lost out on the sales of millions of pairs of sandals, just as IBM did with the Thinkpad laptop.

In contrast, standardised products usually have demand that is highly predictable. By using the right forecasting tools, stock-out rates in a well-run supply chain can be as low as 1%.

We-recommend-tickWe recommend: Entelect CEO Shashi Hansjee’s 4 Life Hacks and 1 Little Quirk That Deliver the Dough

The supply chain strategy for a standardised product needs to be focused on reducing the cost of delivering the product, just as Spur did when optimising its supply chain.

This simple insight has helped a number of new businesses leapfrog the competition by using supply chain as the core of their competitive advantage.

One of the most famous examples is Zara, a Spanish clothing retailer that realised fashion clothing can be an innovative product.

Instead of focusing on efficiency within the supply chain as many retailers do, Zara focuses on responsiveness and speed. While most of the clothing industry has developed supply chains that focus on efficiency within a six-month lead cycle, Zara was prepared to spend more on getting the right product to market and building an agile supply chain.

Zara designs, manufactures and distributes clothes within two weeks of the original designs first appearing on the catwalk.

Its responsiveness allows Zara customers to wear the latest designs within the shortest lead times possible. The company owns every step in the supply chain, enabling it to get innovative clothes to market faster than any of its competitors.

As a result, in 2014 Zara did around R165 billion in sales. Not only has Zara’s supply chain enabled it to differentiate itself from other fashion retailers, but it sells 85% of its clothes at full price compared to an industry average that’s closer to 60%. The percentage of unsold stock items are less than 10% compared to an industry average closer to 20%.

In short, a world-class supply chain could help you leapfrog your competitors, but you spend millions to make sure your company strategy and your product strategy are really aligned.

Supply chain management

Paul Smith is a writer and startup scientist. He currently manages an accelerator, Ignitor, which helps entrepreneurs start and grow their businesses. Ignitor has developed a new model that significantly improves early stage start-ups odds of success. His primary research interests include understanding the behaviours of expert entrepreneurs, as well as, how to most effectively support high potential start-ups. Follow him on Twitter and visit his website.

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Lessons Learnt

Scaleup Learnings From Our Top Clients – What The Most Successful Entrepreneurs Do Right

So, how do our successful clients move through these constraints to scaling up? We see four key drivers of success, and they are: people, strategy, flawless execution and finance.

Louw Barnardt

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You’re out of your start-up boots, staff is increasing, your client base is growing, revenue is up and you’ve proven your case to the market. Now it’s time to scale up. The challenges of this vital growth phase are different and it’s a time that demands different mindsets and different actions. In a world littered with small business failures, it helps to be well-prepared for scaling up using a proven methodology. At Outsourced CFO, we get an inside look at the success factors of our clients who are mastering the transition.

On the one hand, scaling up is a really exciting phase; this is what moves you into real job creation and making an impactful contribution to economic growth. On the other hand, it is really hard to scale up successfully. We see three major constraints that limit companies’ transition from start-up to scale-up:

Leadership

The business has to have the leadership that can take it to the next level. When you start scaling up, especially rapidly, the founders can no longer do everything themselves. The team must grow and include new leadership talent that can take charge and execute so that the founders are working on the business instead of in the business.

Infrastructure

The processes, procedures, networks, systems and workflows of the business all need to be scalable. This is imperative when it comes to your infrastructure for the financial management of your business. You’re only ready for growth when your infrastructure can seamlessly keep pace.

Market access

Scaling up demands more innovative marketing and storytelling so that you can more easily connect and engage with the new employees, clients, network partners, investors and mentors that need to come along with you on your scale-up journey.

Businesses that build a market conversation and a compelling brand narrative during their start-up phase are better positioned to have this kind of market access when they need to scale up.

People

It is critical to have the right people on your team. Our successful entrepreneurs have what it takes to attract, inspire and retain top talent. A strong team of smart, ambitious and purpose-driven people who love the company and want to see it succeed contribute greatly to a world class company culture. They are adept at communicating a compelling vision and establishing core values that people can take on. These entrepreneurs are tuned into the aspirations of their people and focus on developing leaders in their teams who can in turn develop more leaders.

Strategy

It is planning that ensures that the right things are happening at the right times. At successful scale-ups strategies and action plans are devised to ensure that the most important thing always remains the most important thing.

Strategy includes input from all team members and setting of good priorities for the short, medium and long term. Goals are clear and everyone always knows what they are working towards. The needle is continuously moved because 90-day action plans are implemented each quarter to achieve targets and goals that are over and above people doing their daily jobs.

Flawless execution

Top entrepreneurs are not just focused on what operations need to achieve, but how the business operates. They have the right procedures, processes and tools in place so that everyone can deliver along the line on the company’s brand promise. Frequent, quick successive meetings ensure the rapid flow of effective communication. Problems are solved without drama. There is no chaos in the office environment. Everyone is empowered to execute flawlessly to an array of consistently happy clients.

Finance

Everyone knows that growth burns cash. A rapidly scaling business faces the challenge of needing a scalable financial infrastructure to keep the company healthy. Our successful entrepreneurs pay close attention to finance as the heartbeat of the business, ensuring that everything else functions. They look at the tech they are using for financial management and for the ways that their financial systems can be automated so that they can be brought rapidly to scale. The capital to grow is another vital finance issue.

The best way to finance a business is through paying clients on the shortest possible cash flow cycle. However, when you are scaling up and making heavier investments in the resources you need for growth, it is likely that you will need a workable plan for raising capital. Our scale-up clients know the value of accessing innovative financial management that provides high level services to drive their business growth.

Navigating the scale-up journey of a growing private company is one of the hardest but most rewarding of careers to pursue. Having people in your corner who have been through this journey before helps take a lot of pain out of the process. No growth journey looks the same, but there are tried and tested methods that will – if applied diligently – lead to definite success. Happy scaling!

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Lessons Learnt

That Time Jeff Bezos Was The Stupidest Person In The Room

Everyone can benefit from simple advice, no matter who they are.

Gene Marks

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When you think of Jeff Bezos, a lot of things probably come to your mind.

You likely think of Amazon.com, a company he founded more than twenty years ago, that’s completely disrupted retail and online commerce as we know it. You probably also think of his entrepreneurial genius. Or the immense wealth that he’s built for himself and others. You may also think of drones, Alexa and same-day delivery. Bezos is a visionary, an entrepreneur, a cutthroat competitor and a game changer. He’s unquestionably a very, very smart man. But sometimes, he can be…well…stupid, too.

Like that time back in 1995.

That was when Amazon was just a startup operating from a 2,000 square foot basement in Seattle. During that period, Bezos and most of the handful of employees working for him had other day jobs. They gathered in the office after hours to print and pack up the orders that their fast-growing bookselling site was receiving each day from around the world. It was tough, grueling work.

The company at the time, according to a speech Bezos gave, had no real organisation or distribution. Worse yet, the process of filling orders was physically demanding.

“We were packing on our hands and knees on a hard concrete floor,” Bezos recalled. “I said to the person next to me ‘this packing is killing me! My back hurts, it’s killing my knees’ and the person said ‘yeah, I know what you mean.'”

Related: Jeff Bezos: 9 Remarkable Choices That Shaped The Richest Man In The World

Bezos, our hero, the entrepreneurial genius, the CEO of a now 600,000-employee company that’s worth around a trillion dollars and one of the richest men in the world today then came up with what he thought was a brilliant idea. “You know what we need,” he said to the employee as they packed boxes together. “What we need is…kneepads!”

The employee (Nicholas Lovejoy, who worked at Amazon for three years before founding his own philanthropic organisation financed by the millions he made from the company’s stock) looked at Bezos like he was — in Bezos’ words — the “stupidest guy in the room.”

“What we need, Jeff,” Lovejoy said, “are a few packing tables.” Duh.

So the next day Bezos – after acknowledging Lovejoy’s brilliance – bought a few inexpensive packing tables. The result? An almost immediate doubling in productivity. In his speech, Bezos said that the story is just one of many examples how Amazon built its customer-centered service culture from the company’s very early days. Perhaps that’s true. Then again, it could mean something else.

It could mean that sometimes, just sometimes, those successful, smart, wealthy and powerful people may not be as brilliant as you may think. Nor do they always have the right answers. Sometimes, just sometimes, they may actually be the stupidest guy in the room. So keep that in mind the next time you’re doing business with an intimidating customer, supplier or partner who appears to know it all. You might be the one with the brilliant idea.

This article was originally posted here on Entrepreneur.com.

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Lessons Learnt

How Sureswipe Built Its Identity By Building A Strong Company Culture

Culture is unique to a business, it’s the reason why companies win or lose.

Nadine Todd

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A company’s culture is its identity and personality. Since this is closely linked to its brand and how it wants to be viewed by its employees, customers, competitors and the outside world, culture is critical. The challenge is understanding that culture contains unwritten rules and that certain behaviours that align to the culture the company is nurturing should be valued and cherished more than others.

At Sureswipe, the core of our culture is that we value people and what they are capable of. We particularly value people who are engaged, get on with the job, take initiative, are happy to get stuck in beyond their formal job descriptions, and who sometimes have to suck up a bit of pain to get through a challenge.

We include culture in everything we do, so it’s a fundamental element in our recruitment process. In addition to a skills and experience interview, each candidate undergoes a culture fit in the form of a values interview. We look for top performers who echo our core values (collaboration, courage, taking initiative, fairness and personal responsibility) and have real conviction about making a difference in the lives of independent retailers. If we don’t believe a candidate will be a culture fit, we won’t hire them.

If we make a mistake in the recruitment process, we won’t retain culture killers, even if they are top performers. This is such a tough lesson to learn, but it liberates a company and often improves overall company performance.

Culture should be cultivated, constantly communicated and used when making decisions. At Sureswipe, we often talk about what it takes to win and have simplified winning into three key elements: A simple, yet inspirational vision; the right culture; and a clear and focused strategy. The first and third elements can be copied from organisation to organisation. Culture on the other hand is unique to every business and can be a great influencer in its success.

Catch phrases on the wall are not the definition of culture

A strong culture is purposeful and evolving. It’s what makes a company great, but also exposes its weakness. No company is perfect and it’s important to acknowledge the good and the bad. Without it, we cannot ensure that we are protecting and building on the good and reducing or eradicating the bad.

Mistakes happen. That’s okay. But we are very purposeful about how mistakes are handled. Culturally we’re allergic to things being covered up or deflected and have had great learning moments as individuals and as an organisation when bad news travels fast. It’s liberating to ‘tell it like it is’ and almost always, with a few more minds on the problem at hand, things can be rectified with minimal impact.

Related: Starbucks Coffee Is All About Culture… For A Reason

Culture should be built on values that resonate with you and that you want to excel at. In our case, some are lived daily and others are aspirational in that we’re still striving for them. In each case we genuinely believe in them and encourage each other to keep living them. This increases the level of trust within the team, as there is consistency in how people are treated and how we get things done.

We are always inspired when, after sitting in our reception area, nine out of ten visitors will comment on the friendliness of staff. We hear their remarks about how friendly the Sureswipe team is or a potential candidate will talk about the high level of energy and positivity they experience throughout the interview process.

These are indicators that our culture is alive and well. It’s these components of our culture — friendliness, helpfulness and positivity — that cascade into how we do business and how we treat our customers and people in general. Being able to describe your culture and support it with real life examples is a great way to communicate and promote the type of behaviour that is important and recognised within the organisation.

Culture doesn’t just happen

We are fortunate that culture has always been important to us, even if it wasn’t clearly defined in our early days. As we grew it became important to be more purposeful in the evolution of our culture. About four years ago, the senior leadership team and nominated cultural or values icons were mandated to relook all things cultural.

A facilitator said to us, “You really love it when people take the initiative, and get very frustrated when they don’t.” That accurate insight became core to our values. We love to see people proactively solve problems, take responsibility for their own growth, initiate spontaneous events, change their tactics or implement new ideas. It energises us and aligns to the way we do business.

We celebrate growth and love to see our staff getting promoted due to their hard work and perseverance. We recently had one of our earliest technicians get promoted to the Regional Manager of Limpopo. It was one of the best moments of 2018.

Be purposeful with culture, describe it, communicate it and use it in all aspects of business. Culture should change. Don’t allow phrases like ‘this is not how we do things,’ or, ‘the culture here is changing,’ to stifle the growth and development of your culture. When done correctly change is a good thing. Culture is driven from the top but at the end of the day it’s a company-wide initiative. Design it together with team members from different parts of the organisation to get the most from it. And then make sure everyone lives and breathes it.

Cost Cutting

The best ROI is achieved when you stop wasting money.

Peter Drucker once said that businesses have two main functions — marketing and innovation — that produce results. “All the rest are costs.”

If you agree, that means that the average business has a lot of fat to trim. Obviously you can go overboard trying to cut costs too. My philosophy has been to look at some of the general areas where you can add some efficiency but not at the expense of impairing your most valuable resource — your focus.

The following cost-cutting measures will do that. Think of these as adding value to your company, whether it’s time, creativity or a closer connection to your consumers.

Related: Wise Words From wiGroup On Building A “Wow” Company Culture

Uncover inefficiencies in your process

This is where I begin. In fact, it was analysing the inefficiencies of legal communication and knowledge sharing that led me to create Foxwordy, the digital collaboration platform for lawyers. I noticed that attorneys in our clients’ legal departments were drafting new documents from scratch when they could pool their knowledge and save time by using language that a trusted colleague had employed in a similar document. Business is all about process. When you create a new process, or enhance an existing process, you will drive cost efficiency.

Refine your process, then automate

If existing processes are lacking, it is time to create process. If you have processes, but they are not driving efficiency, it’s time to redefine your process. Either way, a key second step is refining processes that are needed in your business. Only then can you go to automation, since automating without a process will result in chaos — and won’t save time or money. Similarly, automating a poor process is not going to give you the cost-saving results you are looking for.

Thanks to the Cloud, there are very accessible means of automating manual processes. For instance, you can automate bookkeeping functions with FreshBooks and use chatbots to interface with clients — for very basic information. If you’re a retailer, a chatbot on your site can explain your return policy or address other frequently asked questions. Automating such processes allows you to spend more time focusing on clients and customers. Technology alone isn’t a panacea for all business functions, but if you find something you’re doing manually that can be automated, take a look and consider how much time and process definition automation would save you.

Rethink your outreach

Marketing and outreach are usually big and important challenges for an organisation. In my experience, there are two main components to successful marketing — knowing your customers and using the most effective media to spread your message. For the first part, I recommend polling. There are various online survey services that offer an instant read on what your customers are thinking. You may think business is humming along, but a survey could reveal that while consumers like your product, a few tweaks would make it even better.

For the second part — marketing messaging — once you have a firm idea of your marketing messaging, Facebook is a great vehicle for outreach. The ability to granularly target customers and create Lookalike audiences (from around 1 000 consumers) can help grow your business.

Related: Take Responsibility For Your Company’s Culture To Boost Productivity

Scrutinise your spend history

There are tools that can help you assess spend history and find cost-cutting opportunities. For example, you might be able to take advantage of rewards or loyalty programmes to reduce common business expenses, like travel, or consolidate vendors for a similar function. If you have a long-standing relationship with a vendor, negotiate better pricing.

The most important elements to keep in mind are resources that make your company special. Your company may be built on one person’s reputation and expertise. Guard against tarnishing that reputation with inappropriate messaging in advertising or social media. If your company’s special sauce is intellectual property, protect that too. But everything else — ranging from physical property to salary and benefits — are costs and should be considered negotiable. — Monica Zent

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