Ensuring alignment between supply chain strategy and broader business objectives is an increasingly critical success factor in any competitive market, particularly as companies evolve to meet new challenges and conditions. Three examples from the office products sector show how the supply chain function can be an integral player in supporting overall business goals.
[From Supply & Demand Chain Executive, October/November 2004] Mark Yoshimura is the first to admit that differentiation can be a tough nut to crack in the office products business. The director of supply chain vendor integration with Delray Beach, Fla.-based Office Depot, Yoshimura points out that many of his company's competitors are able to purchase goods at about the same price, in many cases their stores look very similar and even their advertising can appear indistinguishable at times. In fact, Office Depot's own market research has shown that about 50 percent of customers buying office supplies couldn't say for certain at which of the major players they had shopped for the purchase.
So when Office Depot rolled out its Millennium2, or M2, concept this past June, it's not surprising that this initiative featured as a core component redesigned "super stores" intended, in part, to distinguish the company from its rivals in the office supplies market. But what might be surprising is the extent to which the company's supply chain function was a key behind-the-scenes player in supporting this initiative. "One point of differentiation is who can get the product to the right place at the right time, with the highest service and the lowest cost," Yoshimura says. "From that perspective, supply chain can be and should be a potential competitive advantage for us."
Aligning supply chain strategy with broader business objectives is becoming more and more critical for companies across a variety of industries in the face of growing global competition and shrinking margins. Where once supply chain was an afterthought, brought in after engineering and marketing had their say, now the supply chain function is increasingly being included early on in the design and planning of major corporate initiatives, particularly when an enterprise's competitive edge is on the line. This article will look at how three players in the rough-and-tumble office products market Office Depot, Corporate Express and Staples have relied on their supply chain functions to support changes in their overall business models. In each case, the supply chain has played a vital role in ensuring the success of new and ongoing initiatives at these companies.
Building a Better Mousetrap at Office Depot
Office Depot, which operates 1,105 stores in 14 countries and had 2003 sales of $12.4 billion, began working on its M2 concept in November 2003 when its top leadership tapped Rick Lepley, then president of Office Depot Japan, to work on a clandestine project to reinvent the company's core retail operations. Goals set for the project were ambitious: creating an Office Depot store that was less expensive to open, more efficient to operate and easier to shop. Lepley gathered a small team to work on the initiative "undercover" to ensure confidentiality and a fresh approach, going so far as to establish, separate from the company's main test facility, a prototype laboratory in an old furniture building scheduled for demolition.
Lepley's team visited Office Depot stores as well as competitors' outlets, delved into extensive research on customer preferences and shopping habits, and quickly assembled a wish list of elements that would go into building a more customer-friendly and employee-efficient store. Through the research, for example, the team came to understand both the perception of value and the efficiencies created by using pallets of merchandise, the advantages of effectively utilizing "display-ready" packaging, and the benefits of highlighting key product categories such as paper, ink and writing instruments in "mini-worlds" or "pods" within the store. With its vision for the new Office Depot taking shape, Lepley's team began working with an outside design agency, Miller Zell, to transform its learnings into a next-generation store layout, and they also began to involve other functions within the company, including the supply chain organization.