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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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Pierre-van-Tonder-Spur

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.

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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.

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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%.

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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.

Lessons Learnt

11 Things Very Successful People Do That 99% Of People Don’t

Consistency is a big part of succeeding. The top 1% of performers in the world know this is the secret to their success.

John Rampton

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successful-entrepreneurs

Becoming wealthy and leaving an impact on the world is not an easy feat. If it were, everyone would go around doing it. At that point, it would not be much of an accomplishment at all.

Rather, being extremely successful requires an extreme amount of work. Especially when there is nobody looking. The best people have developed habits that help them reach their goals. These routines are not necessarily challenging to form, but they take consistent effort over extended periods of time. Creating these tendencies in your own life will propel your success.

Here are 11 things, that 99% of people (myself included) do not do, but really should.

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Lessons Learnt

Brian Tan Of FutureLab.my – Bridging The Knowledge Gap Through Social Learning

Brian Tan a young Malaysian Entrepreneur whom has built the largest social learning platform in South-East Asia.

Dirk Coetsee

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futurelab

“The meaning of life is to find your gift. The purpose of life is to give it away” – Pablo Picasso

As a keen observer of the behaviour of successful entrepreneurs I have learnt that:

“You do not attract what you want but you attract what you are”

Brian Tan truly believes in what FutureLab stands for and therefore has attracted the belief of key partners such as Cradle whom has invested in his ground-breaking project.

Brians’ gift is to solve big problems. In unison with his two other co-founders he is giving this gift away in the Form of FutureLab, a company obsessed with learning and more specifically bridging the gap between education and careers.

Brian wants to play a role in making humanity better by applying his knack for solving unique problems and firmly believes that quality and ongoing education is a powerful catalyst for positive change. FutureLab is a social learning platform featuring diverse applications that not only connects mentees to mentors but also empowers several companies to track their employees utilising Futurelabs’ technology as they navigate through development and talent development programs.

Slowly but surely FutureLab is becoming much needed feedback loop between university and industry and brings exposure to people who have not had it before. Brian believes that a lot of people have not fullfiled their potential due to low standards of education in general.

Related: Channeling The Fire Of Authenticity: Asia’s’ Top ‘YouTuber’, Joanna Soh

I fully realised that I was engaging a modern entrepreneur as he described his company culture as:

‘Geeky, awesome & badass.’

He elaborated on that by explaining that his team do not follow trends, that they authentically like what they like, and do what they love in their unique way. When you act according to the Leadership principle of Authenticity you avoid having regrets as you did not apply unnecessary energy to attempt to become someone that you are simply not.

This unique company is founded upon three core values which flows through all the activities that they engage in:

  • Giving back to society
  • Continuous Learning
  • Creating your own reality.

The FutureLab team does not only pay lip service to these values but instead actualise them as a matter of regular practice. Brian gives his team ‘homework’ in terms of things that they need to learn and the CEO of FutureLab himself is engaged in a lifetime commitment to learning. Regular ‘Stand up meetings’ are held were team members give feedback and hold each other accountable.

Brian is a Biochemist by trade whom constantly seeks opportunity to learn more about business and has completed several business programs to learn how to build a company which included spending 3 weeks at Stanford University studying entrepreneurship and meeting teams from Google, Apple, Facebook and Pinterest as part of a government initiative for the top 25 Malaysian start-ups. This young entrepreneur believes that his passion for teamwork has helped him a great deal to transform from being a biochemist to being an entrepreneur. He finds joy in ‘pushing a team forward’, as he puts it and loves seeing his team members grow in self-confidence and belief in the vision of the company that he co-founded. He has a keen knack for finding potential and then helping his team members to unleash their inherent talents.

What follows is Brians’ clear description of how Futerelab obtained cradle funding and how they managed to secure the top universities in Malaysia as clients, in his own words:

“We wanted to prove that FutureLab was solving an actual problem before applying for Cradle funding so what we did was to invite mentors from specific industries (at this early ideation stage of FutureLab it was our own personal networks).

“We started with mentors from Management consulting and posted a google form up on Low Yat and Facebook to see whether anyone wanted to speak to them. Within a couple of days, we had 20 people signup to meet our mentors. At this point, we decided to close the google form since we didnt know what kind of people would show up. We set the meet up at a local coffee shop and only spent RM 50 on buying coffee for the 5 mentors from Accenture, BCG, PWC, Ethos Consulting and Deliotte. We split the mentees into mini groups and they cycled from one mentor to the next, the last stop for each mentee group was with me telling them what we are trying to build, how much we are thinking of charging and how would the system work. We got really good feedback from the participants and the mentors.

Related: Meet Jan Grobler: Serial entrepreneur, Advocate, And Job Creator

Me being a scientist by training, I like to see whether results are repeatable so we organised 6 of these meet-ups over the whole year inviting mentors from different industries, lawyers, accountants, entrepreneurs, doctors and we even tested on online mentoring session using google hangouts. At this point, we were convinced that FutureLab should exist. This is when we applied to Cradle for Funding along with all the evidence we collected on why FutureLab should exist.

When FutureLab was first launched, we already had 40 mentors and 60 mentees that were waiting to use the platform that we were building. Mentees really enjoyed speaking to our mentors and vice versa for mentors, our growth has been mostly from word of mouth from mentors and mentees eventually universities started being aware of our mentoring community and started asking us to get more involved with their students. Our mentors are big advocates for our platform and they are based in large companies around the world. So they play a big role in opening doors for us.

Yet another key business learning he has acquired is to always guard against complacency and this knowledge is encapsulated by the following quote that he shared:

“What got you here cannot get you there”

Meaning that the same behaviours and habits that got you to this point will not be enough to move you forward, you have to keep on evolving to remain relevant and successful.

Brian is passionate about FutureLab and business in general and reminds us that:“When you are passionate work is the fun part of the day”. His advice to other entrepreneurs is to truly find a project that you are passionate about and truly believe in. He is most certainly passionate about the future of his projects and wants to build an eco-system that generates high volumes of cash that will empower his company to invest in start-up projects.

In general he wants to invest in entrepreneurs that are solving ‘big problems’ and wants FutureLab to become an innovation company. He poses this challenging question to those thinking on starting their entrepreneurial journey:

‘Are you merely attempting to do what others are already doing or are you really solving a problem?”

He finds that many entrepreneurs overthink and then do little. The more you do and if done at a rapid pace the more you learn to become adaptable and will find that there are many ways to solve a problem.

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Lessons Learnt

6 Of The Most Profitable Small Businesses In South Africa

Zero to 100 million in only a few years, we take a look at South Africa’s start-ups that have grown from fledglings to million rand businesses.

Entrepreneur

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The Business of Iced Tea

bos-tea

Vital Stats

  • Player: Grant Rushmere
  • Brand: Bos Brands
  • Established: 2009
  • Visit: www.bosicetea.com

When Grant Rushmere first envisioned Bos Ice Tea, he did it through the lens of creating a global brand. This wasn’t going to be a small local brand that would grow organically, and maybe enter international markets in the distant future. No. This was a brand engineered for stratospheric growth, which required a ballsy optimism and willingness to go big or go home.

“From the beginning we jumped in with both feet. We approached retailers and secured contracts that we knew we wouldn’t be able to sustain down the line if we didn’t get funders on board, but it was a calculated risk that we were willing to take.”

“I had developed the idea, brand and product, but I didn’t want to be a lone ranger,” says Rushmere. “I was looking for a partner who would co-invest in the business and bring skills to the company. Richard was ideal. He loved rooibos and actually produced it, and he is excellent with contracts and HR matters. Where I think a handshake will suffice, he puts a contract in place that protects everyone’s interests. Together we had the skills this business needed.”

The Top Lesson

Gutsy moves and calculated risks aside, the success of Bos Brands is a lesson in the power of marketing. In their first year, Rushmere and Bowsher spent as much on marketing as their turnover. As their revenue has increased, they haven’t pulled back on marketing spend — they’ve grown it. Rushmere is a firm believer that you get what you pay for, and what he’s been aiming for since the inception of the brand is no-holds-barred growth.

Today Iced Tea has grown from zero to R100 million in under ten years

To read the full Bos Tea story click here.

Next Up > 720% growth in 5 years

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