Beauchamp says that the move to increased use of private-label products, with the greater use of international sourcing and the introduction of the mixing centers, has added a new level of complexity to Corporate Express' supply chain. Beyond the obvious issues of having to operate on a 24/7 basis, sitting on conference calls late in the evening in the United States when it is morning in a supplier's home country, or dealing with language issues when working with offshore suppliers, Beauchamp finds himself these days managing increasingly intricate international supply chains for individual products. "You have to work through the timeline to source the product from multiple places," he says. "Some components come from one part of the world. They're brought to another part of the world. They go through assembly. Then you have to look through forecasted demands and conversion factors from branded stock-keeping units (SKUs). It's getting to be a pretty challenging process."
Looking Left, Looking Right at Staples
For Paul Gaffney, executive vice president of supply chain at Staples, the hallmark of his company's business strategy over the past few years has been about learning how to deliver high returns to shareholders while also growing the business. "It's about balancing profitability with growth," he says, "and supply chain plays a big role in that, because those two economic imperatives are sometimes at odds with one another. It's often more profitable to deliver lower service, and, vice versa, it's easier to think about delivering higher service with more expense. What we've become quite good at is figuring out how to deliver higher service with lower investments in inventory and lower expense."
Staples, based in Framingham, Mass., operates 1,400 retail stores throughout the United States and Canada, as well as 265 stores in Europe, and the company had 2003 sales of $13 billion. Like other companies in this market segment, Staples has been in a growth mode in recent years, both in its brick-and-mortar presence and online, particularly with its B2B Staples Contract division. But the company has also been focusing on improving its supply chain performance. In fact, one of the company's five corporate-wide objectives for 2004 has been to "drive supply chain performance by improving merchandising, distribution and fulfillment center management."
As the supply chain organization within the company works to support Staples growth on the one hand, and at the same time to drive new efficiencies on the other, a key focus within the organization has been on, as Gaffney puts it, "getting people to understand how their role fits into accomplishing the end goal and to recognize that just optimizing their part of the supply chain doesn't necessarily lead to the best results." Gaffney says that he emphasizes what he calls a culture of "looking left and looking right," that is, cultivating an environment in which actors in the supply chain seek to understand how their actions affect other players upstream and downstream in the supply chain. Part of the trick to building this type of culture, he says, involves continuously communicating and reinforcing the company's priorities as a mechanism for ensuring that employees see and understand their role in the bigger picture. Another component is aligning compensation plans to ensure that everyone is focused on the same economic and customer-service levers.
In addition, Gaffney points to the need to spend institutional energy building teamwork for example, by making sure that the right meetings are happening and that the wrong meetings get canceled. "The wrong meetings would be those that continue to allow people to silo-focus, and the right meetings are those that have a number of participants who span several different links in the supply chain and that are run and driven in a way that force people to work together, versus blaming each other for things that have gone wrong," Gaffney says.
Staples has taken this "look left/look right" philosophy one step further by working with both customers and suppliers to drive down costs for all concerned. For instance, the company has invested in technology that allows Staples to provide its own customers with visibility into how their order patterns affect costs for the supply chain as a whole and how changes in those patterns can produce shared benefits. "In many cases, they had no visibility into their pattern of ordering and certainly couldn't connect that to a driver of our costs," Gaffney explains. "We've been able to collaborate with them to essentially allow them to 'look left' and understand how changes in their behavior can positively impact the whole economic value chain." On the supply side of the equation, Staples has worked with its supply base to effectively replace safety with synchronization, that is, to put in place the processes and systems necessary to give Staples confidence that its suppliers will be able to deliver reliably, allowing Staples to hold less safety stock. "Taking away a lot of that safety is what allows the economic efficiency to be harvested," Gaffney says.