Date of publication: November 2, 2005
Source: Brand Strategy
Investing time and money in above-the-line communications counts for little if you fail to deliver your product. Morag Cuddeford Jones examines the potential brand benefits of the supply chain
Managing the supply chain may not seem as sexy as filming the new ad campaign, or as exciting as the cut and thrust of competitive marketing. Yet it is the single most important foundation upon which your brand delivery rests. If your suppliers don't deliver, neither will your brand. If that happens, you can kiss the cut and thrust goodbye. From cogs in manufacturing equipment to the person delivering service with a smile, via all points in between, each element of the supply chain has the potential to enhance or destroy the end brand.
There was no bigger lesson in how supplier issues can send a brand's delivery awry than British Airways' (BA) catering debacle this summer. An industrial dispute within the airline's in-flight meal supplier Gate Gourmet rapidly mushroomed - over hours, not days - until BA's staff also went on strike and its Heathrow operation was grounded. It took nearly five days for flights to return to normal and an estimated 100,000 travellers were disrupted.
Flight plan
Two months later, and in-flight meals on short-haul flights have yet to resume. BA's passengers have been left with a bitter taste in their mouths. No one from the company was available for comment, but new chief executive Willie Walsh told British newspaper The Sunday Times: "It was damaging to our reputation, to our brand and to morale, and we are going to have to work hard to recover customers who were impacted."
Some believe that the latest BA incident has been a lesson in the fundamentals of looking after your supply chain. "You have to ask yourself: is it really sensible to put one important area of your operation in the hands of a single supplier?" questions Andrew Pharoah, EMEA head of corporate practice at public relations company Hill and Knowlton. "When you outsource your supply chain, you outsource your reputation."
Pharoah recognises that BA's supply chain is still a victim of its pre- privatisation heritage: "Not only was it reliant on a single supplier, it created a market where there was only one supplier. The culture of nationalised industry seems to have a number of problems, one being the scale of the business and its dependence on suppliers. If BA had bought from a wider number of people, it would have created a more stable market."
Contingency planning is key if brands are to survive any interruptions in supply. Swedish clothes retailer H&M has to service 400 stores in 22 countries worldwide with up-to-the-minute fashion items that change every four to six weeks. In the highly competitive high-street market, an interruption in supply could result in serious customer defection to its rivals such as Spanish fashion tour de force, Zara.
H&M's spokeswoman in Sweden, Annacarin Bjorne, hints at the importance of expecting the unexpected: "Obviously this sort of thing contingency planning is an important part of our strategy," she says.
To anticipate any such hold ups, the company reportedly keeps a number of 'finishing' items - zips and fasteners, for example - to hand. However, emphasising how critical supply management is in the fast- paced fashion industry, Bjorne adds: "You've picked up on an important part of our business, but I don't want to go into any more detail about H&M's supply strategies because they are highly commercially sensitive."
Scott Bedbury, chief executive of US-based consultancy Brandstream and former worldwide chief marketing officer of Starbucks, cannot over- emphasise the importance of keeping supply running smoothly. "In the early years, Starbucks in North America didn't keep up with enough soy milk. At the time it was a niche product with few consumers, but regardless, it's all about providing consistency of product and service," he reveals. "The most important thing about brand is trust, and if any part of it falls apart and doesn't meet customer expectations, the brand is eroded."
Hill and Knowlton's Pharoah notes that despite the significant impact of BA's supply interruption, the brand's positive values should help it weather the storm. "It's hard to find a better airline than British Airways for the business traveller. It has a strong heritage and still does a lot of other things very well, such as quality of service and ebooking, where it has led the way."
Pharoah admits that constant reinforcement of the company's brand values elsewhere in the business will help paper over the cracks on this occasion. However, he asks: "BA's challenge is that the product is moving ahead, but are the structures delivering it able to keep up?"
Transparently obvious
But supply needn't always be viewed as a risk to the brand. Indeed, there are many ways it can add value. Tim Kitchen, director of stakeholder relationship consultancy The Glasshouse Partnership, believes that transparency is the way forward for brands to achieve differentiation in crowded markets. "Brand owners can capitalise on consumers' anxiety over a number of today's issues, whether that's ethics, environment or health," he says.
For supermarkets, the big issue is increased customer scrutiny into every aspect of food production, ranging from authentic produce to animal, even farmer welfare. UK supermarket chain Waitrose, part of retailer John Lewis Partnership, has brought positive elements of its supply chain right to the forefront of its brand communications.
"Our supply chain is one of the things that represents the Waitrose difference," claims Graham Cassie, Waitrose buyer responsible for brand development. "Waitrose customers vote with their feet when it comes to the provenance of products. In the past year, sales of local and regional lines have increased by 73%; sales of organic chicken are up 66% and organic pork 47%."
Overall, Waitrose trade grew by 17% in the past year, in a largely underperforming retail sector. The supermarket underlines its values through its packaging and communications strategies. Photographs and the full names of its farmers feature regularly on pack and in advertising. The traceability aspect is then further underlined by its sustainability message: 'Quality food, honestly priced'.
"Relationships with our suppliers are based on mutual trust and that allows us to consistently supply high quality products," says Cassie. "It provides our customers with the peace of mind that they are buying ethically-sourced and fairly-traded products. These are all dominating aspects of the Waitrose brand promise."
"There's a heightened consumer sensitivity to corporate social responsibility and what's behind the low prices," Brandstream's Bedbury reveals. "The influence of retailers such as Carrefour and Wal-Mart on the price landscape has been underestimated. Now the consumer is picking up information about how these brands operate. Wal-Mart in particular has come under a lot of pressure about offshore labour - 65% of its products are made in China. It's having to do a lot of local community work and image PR to compensate."
Bedbury isn't predicting Wal-Mart's immediate demise in the face of supply-chain scrutiny, but notes that consumer attitudes to supermarket sourcing policies are changing and will continue to do so over the next 15 years.
"Unless there's a global collapse in the economy when the question of price will come down to the lowest common denominator, there will always be consumers making discretionary purchases on the basis of provenance and quality. It's a trend, but it's not going to go away," he says.
More brands, more demand
Glasshouse's Kitchen believes brands should be actively stimulating that trend. It's not enough to show that the supply chain is responding to consumer desires. He suggests developing standalone brands to answer niche demand, inevitably stimulating consumer awareness and ultimately, more demand. "Consumers will demand more when they wake up to the richness of shopping choices," he claims.
It's true that while consumers make noises about wanting locally- sourced produce, or authentically organic meat, in many cases they fail to turn talk into action. Worldwide attitudes are certainly changing, but perhaps not as fast as first thought.
For example, research by Australian HomeGrown, a labelling system to guarantee the provenance of supermarket goods, found that 89% of shoppers favour Australian produce, and of those, 65% do so because it supports local farmers and jobs. These results were initially mirrored by UK-based research from IGD, which found that 87% of people felt it important to support British farming. But only 20% would buy British if it was more expensive than the alternative, and 51% didn't care about origin.
Kitchen realises that it may not be possible to re-engineer the supply chain to cope with new consumer sensibilities overnight. "It's not the supermarket's job to reform the food value chain. These brands have to manage the supply chain in response to specific areas of customer concern and in time, new value propositions can emerge."
For the time being, Waitrose has chosen not to create distinct brands for its locally- or ethically- sourced products. However, the company claims it is answering consumer demand for greater transparency by flagging up its sourcing policy in cyberspace.
Waitrose's Cassie explains: "In May we added a series of microsites to Waitrose.com. The farming microsite is aimed at bringing customers closer to the origins of their food. There's information on where meat is farmed, how it is produced and where it is available." It is currently the most visited part of Waitrose's online offering.
Consumers are demanding more information, but is there a limit to the amount brands need provide? Greg Sturmer, chief executive and founder of leather goods brand Romp, doesn't think so. "Knowledge empowers the consumer. Complete knowledge is full traceability of the supply chain," he claims.
Selling organically-sourced leather goods, Romp insists customers don't just take its word for it. Instead, using online technology, it allows the customer to trace and examine every element of the supply chain, from the food the animal ate before slaughter to the dye used on the trim of the garment.
"What we're doing now may look stratospheric, but all we're talking about is information," says Sturmer.
Ethical dilemma
For many brands, the first step towards supply chain transparency is to highlight any projects coming under the umbrella of corporate social responsibility. For consumers, this means seeking products with the Fairtrade mark. But experts advise caution when highlighting the 'good' parts of your supply chain. Making some of your supply transparent exposes other parts of your brand you may not wish people to see.
Nestle UK is the latest to announce the launch of its first Fairtrade coffee brand, Partners. Coming hot on the heels of a report which cites the company as 'the most boycotted in the world', does Nestle hope it will deflect attention from its more heavily criticised practices? Hilary Parsons, head of corporate communications at Nestle UK, says not.
"The Partners blend has been created with a different look to the rest of the Nescafe range and the Fairtrade mark applies only to this product. I don't believe in the halo effect and I don't think it applies here," she insists.
Parsons is at pains to insist the brand reflects Nestle's ongoing commitment to sustainable sourcing, claiming: "This is simply an evolution of what we have already been doing."
But by highlighting one element of its supply chain, has Nestle opened itself up to greater scrutiny and criticism? Bama Athreya, deputy director of the International Labour Rights Fund, Washington, isn't convinced by the company: "Nestle needs to do far more than merely source a small percent of Fairtrade coffee if it is serious about making a change for farmers around the world."
Ian Brettman, deputy director of the Fairtrade Foundation, welcomes Nestle's growing policy of supply chain transparency, but warns: "Consumers will begin to look at other elements of your business much more closely."
Hill and Knowlton's Pharoah also dismisses any suggestion that Partners coffee is used to sweeten Nestle's reputation. That said, he exhorts the company to pay close attention to how it is managing its supply reputation.
"You have to think through very clearly what the communications aspects of the supply chain are and then tackle perceptions through discrete and specific programmes," he says.
It's clear that wherever you look in the supply chain there are benefits to be had, but the prospect of risk is never far away. Contingency is a key word, transparency another. Various elements such as ethics and Fairtrade marks can be highlighted in the supply chain to enhance the brand, but only if the corporate values add up. Get it wrong and you're not just managing risk, you're generating it.
Karl Marx once said: "Workers of the world unite. You have nothing to lose but your chains." As brand owners, if your workers lose control of these particular chains, there's much more at stake.
KEY LEARNINGS
* Your supply chain is an asset, not just a risk. Use it to add brand value and differentiation. Speed, quality and the promise of consistency matter in a crowded market.
* Manage risk: problems that are out of your control are not viewed as such by the consumer. Ensure you have a contingency to deal with supply problems and liaise closely with suppliers on a continuous basis to manage any issues before they arise.
* Transparency in supply chains is a growing trend. It reassures consumers and they are demanding it more and more.
* Beware of applying a CSR 'band-aid' to supply; you may end up attracting more attention to flaws elsewhere in your supply chain.
* Be ahead of the informed customer curve. Providing as much information about your brand as possible increases consumer trust and helps your brand become self-policing.