The language of profit at Travis Perkins plc Travis Perkins plc (TP) is the largest UK merchant…

The language of profit at Travis Perkins
plc Travis Perkins plc (TP) is the largest UK merchant supplier of building
material to selfbuilders and the construction industry. It has doubled in size
in recent years, in part through acquisitions, and now owns 17 businesses,
including Wickes and Toolstation, which altogether encompass approximately
2,000 sales branches. The supply chain is highly decentralised, using multiple
warehouses and around 3,000 delivery vehicles tosupply in the region of 250,000
SKUs. Not surprisingly, given the bulky nature of many of the products (e.g.
timber,

The language of profit at Travis Perkins
plc Travis Perkins plc (TP) is the largest UK merchant supplier of building
material to selfbuilders and the construction industry. It has doubled in size
in recent years, in part through acquisitions, and now owns 17 businesses,
including Wickes and Toolstation, which altogether encompass approximately
2,000 sales branches. The supply chain is highly decentralised, using multiple
warehouses and around 3,000 delivery vehicles tosupply in the region of 250,000
SKUs. Not surprisingly, given the bulky nature of many of the products (e.g.
timber, gravel and bricks), about 80 per cent by volume of products are
delivered direct to the customers from TPs suppliers. Following the economic
crisis of 2008, the UK economy experienced a dramatic drop in activity in the
construction industry and demand for many of TPs products dropped circa 30 per
cent, with suppliers reducing delivery frequencies to save costs. These events
led to a reduction in product availability and excessive stock. There was a
need to motivate the branch teams, the senior management team and suppliers to
support the supply chain management (SCM) team in their endeavours to improve
the situation. However, the SCM team was small in comparison to the operations team,
who were focused on cost reduction. So how could they align the business to
invest in improving availability? TP had found that SCM language was a barrier
to improvements: Unfortunately your SKU did not arrive within lead time due to
a problem with the safety stock calculation, following our recent collaborative
partnership move to lean production postponement. Frequently, neither branch
operations nor senior managers understood SCM, so they devised the language of
profit a common language that all functions can understand, especially
operators and senior management. Importantly, it allows priorities to be
defined in terms of lost revenue and increased costs in order to initiate
actions in the business. Two examples of language of profit in use are:

_ Product availability example.
Stock-outs were losing TP sales and damaging its reputation. Communicating
availability percentages, e.g. simply saying We have 95 per cent
availability, did not motivate branch teams to rectify the situation. Using
the language of profit, TP calculated: Lost sales = stock-out days x average
demand x sales price The SCM team was then able to identify the top 30 SKUs by
lost sales, which motivated branch teams and provided a meaningful way of
prioritising remedial actions. They also totalled the impact for suppliers and
text messaged the supplier MDs with the opportunity to drive actions.

_ Transport efficiency example. Using
global positioning systems (GPS), TP was able to track its many delivery
vehicles and it was known that trucks could be standing stationary with engines
running (referred to as idling time) for long periods of time, needlessly
consuming valuable fuel. However, it wasnt clear just how big the problem, or
rather opportunity, was until SCM translated idling time into costs of
approximately 900,000. Branches were then league tabled for MDs to take
action. Both these examples demonstrate how the language of profit can be used
to great effect in supply chains to drive actions both inside and outside the
organisation, thus influencing a much larger sales team and the senior
managers. (Source: Robin Proctor, Travis Perkins plc, 2013)

Question

1 Identify other supply chain challenges
that companies might face and how they could be translated into the language
of profit to align other functions around important business goals.