collaborative supply chain

We want to work

Undoubtedly, UK is in a financial jam; and undoubtedly, deservedly so. But talking about what is wrong with Britain is a way of life for the chattering classes.

A business in a jam; the business of jam

This is a story about another kind of jam – one which you may not even buy anymore – though this story will have you looking at your supermarket shelf with more curiosity.

This is the story of McKays – an industrial jam-maker founded in 1938, in the berry-growing, marmalade-making east of Scotland around Dundee – perhaps better known for being home to several games-producers. Paul Grant bought McKays from global giant, United Biscuits, in 1995. In the following 12 years, the throughput of fruit and jam multiplied 10 fold.

So in the time that Sergei met Larry, founded Google, and took us to Google Street Maps and the Royal Channel on You Tube, a jam-maker in Scotland bloomed. This post is about what we can learn from Mackays. Their transformation is as modern as Google and is a practical working example of a idea that is often talked about abstractly.

MacKays worked on their whole supply chain but rather than trying to manage the whole chain and offload risk to suppliers, Mackays reformed the chain to manage variability. Because they can tolerate variability, they are able to up volumes, and of course grow at the phenomenal rate they did.

The market for jam

In 1997, Scottish jam-makers, MacKays, processed 30 tonnes of fruit into jam and marmalade which they sold to supermarkets as “commodities” – that is, they competed on price.

In 2007, they processed 350 tonnes and they had repositioned the MacKays brand as premium and sold a parallel line, Mrs Bridges, through independent retailers such as garden centres and hamper companies.

Premium jams

Premium jams depend upon “things staying the same”, or as we say in management-speak “taking the past into the future.” We move in the opposite direction to the box-ticking, target-setting fiends, and concentrate on what is good and true.

McKays retained its traditional taste by retaining its traditional production of jam with a slow roiling boil in copper-bottom pans
They used Scottish fruit allowing them to extend the recognisable and valued Scottish brand.
They used local produce which allowed them to coordinate more closely and manage variability that comes with agricultural produce.

Government help

MacKays did receive a government grant that gave their bankers the commercial security to lend them the capital to expand.

Supply chain

There were four key issues to reforming the supply chain and increasing upstream demand for fruit by 1000%.

MacKays had sufficient belief in their product and consumers to envision both repositioning as a premium product and multiplying their volumes, not by a few percent, by multiples of 100%.
MacKays had sufficient belief in their suppliers to negotiate the delivery of clean, fresh, full flavoured fruit suitable for bottling rather than the fresh produce markets.
MacKays invested sufficiently in relationships to welcome farmers in the factory and to be welcome on their farms.
Because they had good relationships, it was easier to work through the inevitable variability that comes with agricultural produce. MacKays retained a consultant as their agent for this work.

Learning from the jam business

These key five points translate to other businesses.

What is good and true? What is the equivalent of jam made with artisan manufacturing with fresh local produce?
What is better and possible? What is the equivalent of consumers who want a good quality jam?
Who can we depend upon and what do they need? Who are the equivalent of farmers who need clear signals about how our needs differ from needs of their other customers?
Who will work more easily with us if they have a sound understanding of how we work and if we have a sound understanding of how they work? What do our suppliers not understand about us and what do we not understand about them?
And most importantly of all, where is there natural variability in the system and where we need to be available, pay attention, and work together to keep our business relationship intact and prosperous on both sides? What is the equivalent of strawberries that are better some years than others and what does it mean in our business to adjust to variability in someone else’s part of the supply chain?

In this story, the slightly-new notions are that huge gains come, not out of investment or control or competition, but from

I hope this practical example shows you how networked supply chains work in ordinary, down-to-earth businesses but do remember that the details are different for every business. And that business is not a spectator sport. Talking about business does not make it grow. We need to be doing something. Now.

Reference: This cases study is part of a wider series of case studies on collaborative supply chains in agriculture in Scotland.

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The situation

Let’s set the stage. Twenty-seven dairy farms who together produced 17 million litres of organic milk a year thought their industry was overcrowded. Prices were falling and it seemed fewer and fewer farmers could make a decent living.

Luckily for them they have good extension services in Scotland and they got some help re-organizing. This is what they did.

Mission

To sell their milk only into the organic market where they get higher prices.

Execution

Acknowledged that to deliver fresh milk, end-to-end temperature control and hygiene in a milk supply chain is important and players have to co-operate in a process of give-and-take.

Noted that like consumers all over the world, Scottish consumers want Scottish milk simply because we all like to know where our food comes from.

Identified a mid-sized but Scottish dairy, Graham’s who already market organic milk and butter to supermarkets Sainsbury’s Tesco, Waitrose and coffee chain, Starbucks through an organization of 280 full time staff and a fleet of 100 refrigerated vehicles.

Arranged to supply Graham’s in return for milk pick-ups and level, consistent of supply which was achieved with seasonal pricing.

Provided dependable support so that Graham’s could develop a branded label to compete with supermarket ‘own labels’.

Results

In two years, the original 27 farmers achieved a price increase of 20% with a combined value of £7m (USD12m+).

Demand for organic milk increased possibly due to other factors but partly because it was available consistently and its source was pleasing to consumers.

The original goal of selling organic milk as organic milk helped achieve consistently higher prices.

Because Grahams could rely on dependable supply, they were able to take advantage of new opportunities that presented themselves downstream, particularly demand from upscale supermarket Waitrose, and pass the demand back upstream to the farmers.

Because the farmers, Grahams and the extension advisers had a track record of working together, issues which used to be subject of competitive bargaining could be addressed constructively and creatively.

The super-result: more jobs and a stronger economy

Consumers have more access to high quality food from a food chain they trust.

In exchange for being dependable and responsive, the current farmers have moved from believing their livelihoods were risky to better prices and consistent custom.

The producer has expanded their market and product range and know they could expand again if demand arose.

The farmers are able to welcome new organic dairy farmers to join the system.

Expand the economy one community at a time

What are the lessons to be learned from Scottish organic milk producers?

If you want to get your part of economy moving again, and I am sure you do, then:

#1 Don’t just think price and simple competition. Think supply chain which means lots of suppliers working with lots of producers and lots of retailers.

#2 Look for junctions where our naïve competition is creating silly inefficiencies.

#3 Use specialists in industry (as opposed to business) management to collect data from the supply chain and balance feedback and confidentiality.

If you mean to be in your business, then be in it. Love it. Shape it. Don’t just try to reap a profit, but work to create the economy that allows us to reap a profit.

One supply chain at a time, at home in our own communities and ‘without waiting for no one.’

Tag: collaborative supply chain

Business in a jam – or jam?