The next evolutionary step in leaning supply chains: de-s(c)ale’ing? Last mile service comes to B2B

evolution

Cost reduction nowadays is on of the biggest headaches for businesses. Leaning internal operations, managing demand, solving “make or buy” questions. The time comes to re-think value adding activities in business. And guess what happens to non-value creating activities? You are right! They disappear! The big question now is: what is the next one to be challenged and when? I say: SALES!

Before you carry on thinking this is impossible, let me address main concerns:

  1. I cannot do it. Who do I buy from and how do I do it?
  2. Why would I do it?
  3. Nobody will talk to me. Manufacturers simply do not talk to the end users directly.
  4. How will I manage the supply chain if the manufacturer has no distribution capabilities?

Let’s think. The lack of information was the biggest barrier some years ago. This has changed. Access to information is unlimited nowadays: (r)evolution of internet, technologies gave us the tools; behaviour change (publicising on Youtube, various blogs) gives access to content. While writing this article I googled “how to buy stationery”. Google gave me about 44,100,00 results in 0.43 seconds – mainly sources of items, but also articles about the process itself. Youtube offered videos (fine, simplified versions, but nonetheless) on demand management while buying stationery (Things I actually use). Several weeks ago, I would have argued, that you can buy only very restricted list of items like this (only low value, standardised, non-business critical items). But then, one of my friends – a technical director – proved me wrong. We were talking about equipment buying and some technical specifications of a special thermo-forming machine. What would be your first instinctive move? Pick up the phone and call the representative of the manufacturer? Scribble an e-mail? My friend said: “Nah, I’ll just google“.

bazinga

 

So if you can even buy capital equipment without sales reps – what can you NOT buy without them?

That is all to show you, that you COULD by-pass sales if you wanted to.

Next question is about WHY. Let me give you some indicative numbers. Everyone knows, that sales are expensive. Sales people are expensive. Good salespeople are even more expensive. In my work, I have meetings with suppliers. All procurement people do. The people, that spend their time with you on meetings, are very likely the same expensive sales people. Have you ever tried to estimate, how much the sales process to one account costs? According to my calculations, one day of average ranking sales person, devoting for going out and meeting a customer, can be anywhere from €200 – €1000, if not more (flights, hotel, transportation, salary, expenses). Let’s take €600 as an average. That is the one-off expenses. According to similar estimation, maintenance of an account for a year can be anywhere from €10k to €20k.

  • Sample number one. Indirect spend category, with overall spend of €180k in 20 locations across Europe. More costs in hassle and administration of the category than the category is able to deliver savings. During the process I had two meetings with two people each time from one company. That is, not including my time,  €2400. Plus the ongoing costs of another, let’s say, €15k a year. Plus, to select the supplier, I had another two meetings with two different suppliers, where each of them delegated one person. That is another €1200. Overall, that is additional costs for sales, related to our account: €18 600. It is not on the bill, but someone will have to pay it. Speaking in context of value for money – how many sales people do you need to buy toilet paper, a pen, a chair, disposable clothing… or even a car?
  • Sample number two. 8 locations across Europe, spend circa 1 million Eur. Four physical meetings held, involving overall fourteen people from suppliers’ side. Total – €8400 only in meetings. Mostly from one supplier. Then additional maintenance of account – €20k. Since this category was very mature, the goal was to achieve 5% of savings. Removing these costs would be more than half of the job done.

Nothing comes for free, in general. All of the companies have a ratio of unsuccessful sales attempts. Successful attempts have to cover the expenses of the failed ones. Someone has to pay for everything. And if it is not on the bill, on a separate line – do you think it is not in the price?

So that is why. Because, sales, quite often, is not a value added expensive function. Their job is to maximise the profit for the company they work for. Because when it comes to buying items for household, people go online. There are no sales managers and still, simple people with simple laptops buy various things online: kitchen equipment, holidays, insurance, clothes, furniture. If a simple person can do it – why would a business NOT be able to do it? Yes, there are some technicalities. Yes, there are risks and opportunities. There is some homework to be done. But hey, face it, you would do the homework anyway – with or without sales managers and agents.

One could argue, that the old way of seeing things is still very strong. That manufacturers will not be willing / able to sell directly to the end users, they will not want to adapt to a changing business playground. My reply to them is: BHS, Austin Reed, Woolworths – none of them wanted to adapt to a changing business landscape. Look at them now.

When all of the other questions are replied, there is one last left. How. This is where “uberisation” comes in. In retail, this service is widely called “last mile service“. Why would businesses not take advantage of it? Yes, there will be some points to negotiate, but it is not as hard as it looks. I already know quite a few companies, who are more and more becoming good service providers rather than just being “a specialist in non-specialist products”.

Do not get me wrong – there will be some items, which require more specialist knowledge. But these changing ways of working give as much opportunities as they cause challenges. Instead of talking to a “sales specialist”, who would afterwards would put you through to R&D or quality or technical departments, you would be speaking to a real subject matter expert (whether it is cleaning chemicals specialist, manufacturing line designer or process improvement specialist). The companies would not lose their faces, they would not become “faceless software and hardware monsters”. They would shift. Focus should be on the activities, that really add value. And these cannot be replaced by machines. They bring clear value to the customer, therefore, would be worth buying. Not like sales. Sometimes.

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The next evolutionary step in leaning supply chains: de-s(c)ale’ing? Last mile service comes to B2B

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