When a company can’t get enough inventory, it makes sense to discriminate among these customers. “Take your ‘pro t peak’ customers and give them 100% of their historical demand,” Byrnes suggests. Large customers that drain pro ts should receive 80%. The many tiny customers whose revenues contribute almost nothing to the business should get 60%. The vendor can then work with large, unpro table customers—the “pro t drains”—to help them graduate to “pro t peak” status, Byrnes says. “Change the order pattern, change the services, and then you get 100%,” the vendor should tell them. A similar analysis could determine which products to keep selling and which to drop. “In most companies, 3 to 5% of pro t peak products sold to pro t peak customers are giving them 100% of the pro t,” Byrnes says.
point of consumption, with components also made in the region. Another solution is to design a product with parts so simple and modular, you can make it practically anywhere. Take Lego-brand toys, for example. You can buy a Lego Hogwarts castle, a Lego Darth Vader helmet, or a Lego pirate ship. Details vary, but the sets mostly consist of the same kinds of plastic bricks. “We recently brought several of these Lego sets into our own lab,” Kapoor says. “We found that about 80% of the bricks are common among a bunch of sets. I call that genius.” With simple common parts, a company could manufacture anywhere in the world and use any number of suppliers for components or materials. “You simplify the supply chain piece of it, but you can make your public-facing portfolio as rich as you want,” he adds.
Experts at Boston-based Pro t Isle help companies analyze how various aspects of their operations affect pro ts. In today’s era of supply chain disruption, this kind of investigation, called Enterprise Pro t Management (EPM), could help determine how best to allocate inventory to different customers. In many companies, 10 to 15% of customers account for 150 to 200% of the pro ts, says Jonathan Byrnes, founding partner and chairman of Pro t Isle and a senior lecturer at the Massachusetts Institute of Technology. Another 10 to 20% of customers actually make the company lose money. “And then the rest of the company is doing nothing,” Byrnes says. “Typically that’s a lot of small products being bought by small customers but taking up the company’s resources.”
Don’t Look Back Boston Usually, learning from past
Inbound Logistics asked readers to suggest the song titles that best describe their experience in the supply chain over the past two years. Here are just some of the many musical notes we received.
experiences is a valid way to move forward. However, with the amount of disruption over the past two years, supply chain professionals could not rely on what worked in the past to succeed. As a profession we need to look forward, not back. Hank Canitz Vice President Industry Solutions, Nulogy
Stuck in the Middle With You Stealers Wheel John Reichert Senior Director, Supply Chain Execution Systems Tecsys Truckin’ — “What a long, strange trip it’s been.” Grateful Dead Joe Dagnese President and Chief Executive PECO Pallet Paranoid Black Sabbath Arjun Chandar Founder & CEO, IndustrialML Helter Skelter The Beatles Sean Elliott Chief Technology Ocer /
If You’re Going Through Hell Rodney Atkins Jonathan Parks Senior Vice President, Supply Chain, iGPS Logistics It’s the End of the World as We Know It (And I Feel Fine) R.E.M. Jeff Pepperworth President and CEO, iGPS Logistics Nikki Baird VP, Retail Innovation Aptos Float On Modest Mouse Nathan Strang Director, Ocean Trade Lane Mgmt. Flexport
You’re All I Need to Get By Marvin Gaye/Tammi Terrell The past couple of years have
highlighted that no one succeeds alone in the supply chain, as there are so many dependencies within all supply chains. With humans so dependent on supply chains, the interdependence between different supply chains is pronounced, from PPE to computer chips. It is evident that collaboration is critical to building resilient supply chains of the future.
That’s Life Frank Sinatra Bruce Lancaster CEO, Wilson Electronics
Jason Tham CEO, Nulogy
Chief Digital Ocer Körber Supply Chain
110 Inbound Logistics • January 2022
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