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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

The Law Of Attracting Your Success

Once you discover your who, you automatically discover your why, which in turn allows you to lead with your heart rather than your head. Discover that energy source, and the world is your oyster.

John Sanei

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From the teachings of Buddha to the concept of karma, the Law of Attraction has been expressed in many ways by both ancient and contemporary thinkers. In its most simplistic interpretation, the Law of Attraction states that ‘like attracts like’.

Your ability to Magnetiize exists whether you are aware of it or not, whether you are positive or negative. You make daily decisions to choose whether you want to attract success or failure (however you define them), whether you want to live a more conscious, elegant and curious life or whether you want to keep your head down and stick to the old rules.

We are constantly Magnetiizing in every aspect of our lives, whether we’re running a business, interacting with friends or simply walking into a room. Changing how you do it can be a scary prospect, but it will move you from a stagnant space to one in which you can develop with meaning.

When you are in a space of positive magnetism, the momentum builds and your access to energy is incredible — it feels like electricity running through your body, with your ideas in focus and creativity flowing.

Magnetiize in 3 Steps

To Magnetiize is to take control of your own future and, in so doing, transform from a state of panic to a state of calm; from chasing ambition to seeking meaning.

  • The first step is a process I call Micro Inspection: How to confront the obstacles in your mind and start making decisions that are led by your heart.
  • Then comes Mega Exploration: Examining the qualities of future-forward and conscious businesses.
  • Finally, you need to bring it all together into your own reality, with the Macro Perspective: Understanding new technology and trends, and embracing the future.

Related: Global Speaker John Sanei On ‘What’s Your Moonshot?’

This holistic approach allows you to Magnetiize into your life the right type of people, appropriate access to opportunities, and the money and power you need for sustainable success. To truly achieve, you must combine Micro Inspection, Mega Exploration and Macro Perspective.

When you learn how to Magnetiize, you attract a tribe of people who you can work (and socialise) with in harmony. Your tribe should consist of elders, advisers and friends who complement your skills and personality and bring out the best version of you — the best ‘I’ behind your ‘I’. You’ll find that the tribe changes, for the better, the type of decisions you make and the discussions you have.

And as a result, your ability to Magnetiize will rub off on those around you, encouraging them also to step out of their comfort zone and to participate in shaping the future.

GET IT

Magnetize is circulated through all good book sellers and at www.johnsanei.com

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Lessons Learnt

Lessons From The Rich And Famous: Manage Your Money Like Oprah To Avoid Going Into Debt Like Nicholas Cage

Have a plan in place for your money, no matter how much you earn.

Christopher Tracy

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nicholas-cage

Seven-figure pay cheques are enough to buy a lifetime of financial security, right? Well, not exactly. Despite making millions, seemingly wealthy celebrities often have a tough time keeping their heads above the financial waters.

Johnny Depp spending $3 million to fire Hunter S. Thompson’s ashes out of a cannon, or Nicholas Cage shelling out $150,000 for a pet octopus, are both prime examples of how lavish lifestyles can quickly lead to debt. The two A-listers are part of a long list of actors, musicians, athletes, etc. – including Floyd Mayweather, 50 Cent and Curt Schilling – who have all experienced financial troubles.

While there’s nothing wrong with celebrities enjoying their earnings, a little budgeting can go a long way. Just take a look at Tori Spelling. After failing to pay a balance of more than $35,000, the actress was taken to court by American Express. Another example is 80s movie star Corey Haim. He became so desperate for cash after filing for bankruptcy he tried to sell his own tooth on eBay for $150, which didn’t get any buyers.

Avoid falling into any of these situations by keeping a close eye on your spending. Regardless of how much you make, the following few budgeting tips promise to help you practice safe and responsible money management.

Put a plan in place

mike-tyson-tigers

Nearly everyone lose sleep over their finances. Get a good night’s rest by figuring out where your money should be going long before it’s in your bank account. Spending without a plan, even if it’s only splurging on a one-time event, can have unintended consequences.

Related: 6 Money Management Tips For First-Time Entrepreneurs

One example of this is former NFL star Vince Young – after dropping $300,000 on his own birthday party he was forced to file for Chapter 11 bankruptcy. Another example is Mike Tyson, who went into debt after overspending on Bengal tigers, 110 cars and a $2-million bathtub.

That doesn’t mean you can never treat yourself, but make sure you’re not spending money faster than you can earn it. Set up a series of “fun funds” each month to splurge on nonessentials. Depending on what else you have going on that month, each fund should be adjusted accordingly.

If, for example, you’re heading out to a friend’s wedding, there may be a little less left over for eating out. Stay up to date on your spending by downloading a budgeting app. The easier it is to see where you are for that month, the better chance you have of staying under budget.

Carry around some cash

Credit cards are becoming the most common payment method among consumers. The average American currently carries around three credit cards at any given time. While they may be more convenient, credit cards can easily lure consumers into a false sense of security.

After all, a simple swipe or tap is often all it takes to complete a purchase. However, it’s important to take time to research any costly items thoroughly and ensure you won’t regret them like Nicholas Cage. He learned this lesson the hard way when he blew $276,000 on a dinosaur skull that he was forced to return after it was discovered to be an illegal import.

Curb some of your impulse spending during a night out by bringing enough cash for the occasion. In addition to avoiding spending money you don’t have, you’ll also sidestep costly ATM fees at establishments that only accept cash.

Whether it means stopping by your bank on the first of every month or getting cash back at the grocery store, do whatever it takes to have a little bit of cash on hand. As you cut back on credit card purchases, your chances of falling into debt should begin to dwindle.

Lean on an expert

hugh-jackman

When it comes to your finances, take a lesson from the likes of OprahTyga and Hugh Jackman, who invest in financial and life coaches. Many celebrities, including Oprah, attribute their success to their coaches helping put them on the right path. Even celebrities are human and can find it difficult to stick to budgeting goals.

Personalised features of a comprehensive coaching programme, such as daily check-in texts and bi-weekly budget reviews, promise to provide you with the encouragement needed to remain accountable even as the going gets tough.

Better yet, a financial coach can take your individual goals into account. Say you decide to start a family or need to make a cross-country move. Instead of wondering what that might mean for your budget, you can work with a financial coach to modify your spending habits and investments long before a change comes to fruition.

Related: 15 Wise Money Quotes From Millionaires And Billionaires

Budgeting goes beyond class. No matter how much you make, responsible money management has shown itself to be a necessity. Avoid following in the footsteps of celebrities who face serious financial trouble by keeping a close eye on where your money is going.

As we’ve seen all too often, failing to do so can mean losing millions. Simple steps – including creating a spending plan, occasionally relying on cash and reaching out to an expert – can help you achieve financial security sooner rather than later.

And if you plan carefully enough, you might just end up with the funds you need for that pet octopus.

This article was originally posted here on Entrepreneur.com.

Related: 6 Habits Long-Time Millionaires Rely On To Stay Rich

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Lessons Learnt

The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

The most successful people on the planet are also the people likeliest to devote an hour a day to reading and learning.

John Rampton

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You just walked in the door from an exhausting day at work. You’re hungry and spent, just wanting to catch your breath for a minute. You grab something to eat and then veg out in front of the TV. Next thing you know, you’ve just binge-watched five episodes of “Jessica Jones.”

While that’s OK occasionally – we all need ways to decompress and shut down – this isn’t a healthy habit. That’s why the most successful people in the world spend their free time learning.

It’s not exactly breaking news. During his five-year study of more than 200 self-made millionaires, Thomas Corley found that they don’t watch TV. Instead, an impressive 86 percent claimed they read – but not just for fun. What’s more, 63 percent indicated they listened to audiobooks during their morning commute.

Productivity expert Choncé Maddox writes, “It’s no secret that successful people read. The average millionaire is said to read two or more books per month.”

As such, she suggests everyone “read blogs, news sites, fiction and non-fiction during downtime so you can soak in more knowledge.” If you’re frequently on the go, listen to audiobooks or podcasts.

Related: 6 Leadership Lessons From Bill Gates On His 60th Birthday

Maybe you’re thinking: Who has the time to sit down and actually read? Between work and family, it’s almost impossible to find free time. As an entrepreneur and a father, I can relate – but only to an extent. After all, if Barack Obama could fit in time to read while in the White House, what excuse do you have? He even credits books to surviving his presidency.

President Obama is far from the only leader to credit his success to reading. Bill Gates, Warren Buffett, Oprah Winfrey, Elon Musk, Mark Cuban and Jack Ma are all voracious readers. As Gates told The New York Times, reading “is one of the chief ways that I learn, and has been since I was a kid.”

Breaking down the five-hour rule

The five-hour rule was coined by Michael Simmons, founder of Empact. The concept is wonderfully simple: No matter how busy successful people are, they always “set aside at least an hour a day (or five hours a week) over their entire career for activities that can be classified as deliberate practice or learning.”

Simmons traces this phenomenon back to Ben Franklin. “Throughout Ben Franklin’s adult life, he consistently invested roughly an hour a day in deliberate learning. I call this Franklin’s five-hour rule: One hour a day on every weekday,” Simmons wrote.

For Franklin, his learning time consisted of waking up early to read and write. He established personal goals and tracked his results. In the spirit of today’s book clubs, he created a club for “like-minded aspiring artisans and tradesmen who hoped to improve themselves while they improved their community.” He also experimented with his new information and asked reflective questions every morning and evening.

The three buckets of the five-hour rule

five-hours

Today’s successful leaders have embraced Franklin’s five-hour rule by breaking the rule into three buckets.

1. Read: 

Self-made millionaires including Mark Cuban and Dan Gilbert, owner of the Cleveland Cavaliers, read between one and three hours daily. Elon Musk learned how to build rockets, which lead to SpaceX, by reading.

Besides expanding your knowledge, Jack Ma, co-founder of Alibaba, says that “reading can give you a good head start; this is often what your peers cannot obtain. Compared to others, readers are more likely to know other industries’ strategies and tactics.”

Related: 20 Crazy Things We’ve Learned About Alibaba Billionaire Jack Ma

Even if you can’t commit to an hour or more of reading every day, start with 20 to 30 minutes. I always have a book with me so when I’m waiting for a meeting to start or in the waiting room of a doctor’s office, I can read instead of waste time on my smartphone. You could also try audiobooks during your daily commute or when exercising.

So how do they find the time to read daily? They adhere to the five-hour rule.

2. Reflect: 

Other times, the five-hour rule includes reflecting and thinking. This could be just staring at the wall or jotting down your thoughts. Jack Dorsey and LinkedIn CEO Jeff Weiner are well-known thinkers, while entrepreneur Sara Blakely is a longtime journaler.

Focusing on the past gives you a chance to learn from mistakes you’ve made, as well as assess what you did correctly. As a result, you’ll be better suited to achieve your goals and improve your life. The University of Texas also found that mental rest and reflection improves learning.

Need help getting started? Schedule reflection time in your planner. I’ve found blocking out 15 to 20 minutes after lunch is ideal because I’m coming out of that post-lunch slump. But start small: Allocate five or 10 minutes per day, and then work your way up so you’re not overwhelmed.

Know the questions you want to ask. Stick with just two or three questions focused on that specific day. For example, if you attended a conference, ask, “What were the key takeaways?” and “How can I apply this to my business?”

3. Experiment: 

The third and final bucket is rapid experimentation. Ben Franklin and Thomas Edison became leading inventors and thinkers because of their experiments. We have Gmail because Google allowed employees to experiment with new ideas.

The reason experiments are so useful is because you have facts, not assumptions. Experiments show you what’s working. You can learn from your mistakes and obtain feedback from others. Best of all, experimentation isn’t that time-consuming. Most of the time, you’re testing through the same activities you’d perform without testing.

Jack Ma even recommends applying the knowledge you’ve learned to a real-life scenario. For example, after reading a book about collaboration and teamwork, you could take on new volunteer work to put that knowledge to use.

When you make learning a habit, you’ll be more successful and productive in life. By investing in a reading habit, you can ensure you’re growing yourself – and your company – every day.

This article was originally posted here on Entrepreneur.com.

Read next: What Elon Musk Can Teach You About Getting Funding for Your Start-up

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