Can social media reduce the price that a retailer pays for bread? Can big data help a manufacturer reduce hundreds of thousands of dollars worth of waste? These much-hyped tech buzzwords may not seem the obvious answers to supply chain management issues, but they are producing results at a number of companies.
Take Asda and the price of bread. The UK supermarket group was keen to make its network of 34 bakery suppliers more efficient, reducing the prices it paid for products as well as improving its environmental and sustainability credentials. Simply telling suppliers to improve seemed heavy-handed, however. So Asda turned to a social network, 2degrees, to help “nudge” suppliers into taking action.
2degrees is an independently run network where retailers and their suppliers can exchange information about energy-saving and environmental initiatives. Companies might, for example, post questions about energy-saving lightbulbs, or waste management best practice and receive answers from other suppliers on the network – in much the same way that an individual might post a question to friends over social media.
Asda’s bakers were all encouraged to join the network and to take part in a confidential survey asking them what percentage of their costs were related to energy.
Martin Chilcott, founder and chief executive of 2degrees, says: “When we asked bakers where they thought they would stand as regards energy efficiency, they all said they would be in the top 50 per cent of their peer group. They all believed they had been making incremental improvements over the years and assumed they were doing well.”
In reality energy consumption as a percentage of costs ranged from 0.5 per cent to 12 per cent – and the distribution surprised many of the worst performers. Asda did not see the results, but the networking platform plotted the answers on a chart to show each company where they were compared with the rest. 2degrees then asked the best performers about what they were doing to save energy, shared a list of best practice and put suppliers in touch with each other to share tips.
“There was something close to £60m worth of savings to be made from getting the worst performers to behave like the top end,” Mr Chilcott says.
At no stage did 2degrees reveal to Asda any of the individual performance ratings – or details about the cost savings suppliers were making.
“It has to be a blind collaboration and the golden rule is that any savings you make, you keep,” says Mr Chilcott. “Suppliers were not keen for Asda to know about their savings, because they did not want the buyers to put pressure on them to pass those savings on in prices.”
Stock control can be done in a matter of minutes, a speed that was simply not possiblebefore
Nevertheless, over time, with all its 34 bread suppliers more efficient, and with normal market competition at work, Asda expects to see prices fall.
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