business news in context, analysis with attitude

by Michael Sansolo

It’s hard to know when and where these trends begin, but suddenly the unseen parts of business are getting a lot of love. Consider the following:

First, UPS now runs ads all about the company’s logistics, including a rewritten song extolling the virtues of the unseen work of its supply chain. Then, about a week ago, The New York Times ran an article about Apple’s money management practices. That’s right, nothing about cool technologies or Steve Job’s choice in black turtlenecks. Instead the article details how Apple manages accounts payable and receivable to create an additional source of funding for research and development on all those cool new products.

Next thing we’ll hear that Justin Bieber and Katy Perry are writing songs about distribution centers and Paris Hilton is hanging out with the IT staff. After all, what could be cooler than the supply chain?

The truth is the unseen parts of industry are really never the cool stuff. No shopper selects an iPad because of Apple’s money management strategies. They don’t select a single product in a supermarket based on whether it was direct-store delivered or sent through the warehouse. They really don’t know about logistics and they don’t care.

But they do care that the products they want are in stock and that prices are sharp. The simple truth is that cost cutting in the backroom can lead to better deals at the front end.

I got two stark reminders of this on the road recently. First, I had the wonderful opportunity to see Don Dufek, a retired Kroger executive and one of the chief drivers of the industry-wide Efficient Consumer Response (ECR) movement in the 1990s. Dufek, who might know more about the industry than anyone else you can find, says he believes there have been three key revolutionary changes in the industry’s history. The first was the invention of the shopping cart, which altered the shopping trip itself. The second was the Universal Product Code that enabled scanning and the birth of the data revolution.

And the third was ECR and its sharp focus on inefficiency and wasteful practices. ECR wasn’t sexy, but, as Dufek says, every company that took the effort seriously is among the winners in today’s competitive marketplace. Those who ignored it have struggled or disappeared.

The depth to which Dufek is right was on display this week at PLMA’s annual convention near O’Hare airport in Chicago. Private label may be hot for a host of customer focused reasons, but supply chain issues aren’t forgotten. In fact, PLMA last year launched an Innovation Hall designed to focus attention on all the support systems needed in private label, whether they are technological, data driven or simply about thought leadership.

PLMA’s show is dominated by the increasingly sophisticated sights, tastes and smells of food. It features an extensive array of non-foods showing the ever broadening reach of private label.

But it’s hard to ignore that growing emphasis on the unseen part of the business and the growing sophistication of systems to help private label vendors find all the efficiency and effectiveness pursued by national brands.

At a time of tough competition, ignoring the backroom is a sure strategy for losing.

Michael Sansolo can be reached via email at . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
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