There have been many multi-industry success stories that reinforce the benefits for tightly integrating both product development and supply chain strategy. One particular area of learning reflects how certain manufacturers have been able to successfully compete with the tide of lower cost competitors by emphasizing product, process or service focused innovation along with supply chain speed.
A timely reminder is a published article by Bloomberg Businessweek reporting on the current boom of shoemakers residing in Portugal, whom are currently with global exports up 50 percent since the severe recession that impacted Europe. The industry’s evolution from low-end to high-end exporter comes from the vision of producers such as Alberto Souza whom rather compete on price alone, instead nurtured high-end fashionable product labels.
According to the report: “Portuguese shoes now command the world’s second-highest average export price after Italy- almost $32, compared with about $4.50 for shoes made in China, according to the manufacturers’ association.” Portugal’s shoe production has increased at a faster pace than those of other European countries.
The strategy outlined is plowing profits into improved machinery and equipment that supports more flexible manufacturing, small batches of multiple styles for luxury designers. That is the speed to market factor, often emphasized by well recognized case studies such as Spanish based retailer Inditex, and its Zara chain, which in the Bloomberg report, acknowledges Portugal as a very significant supplier base.
After constantly reading and calling attention to so many manufacturers investing cash in either buying their own stock or boosting dividends to satisfy activist investor zeal for near-term financial results, how important long-term competitive strategy trumps short-term response.
Success stories remain and they continue to provide us reinforcement that emphasizing product, process or service focused innovation along with supply chain speed reaps far broader rewards.
What’s you view? Are product innovation and supply chain speed investments being overshadowed by a dominant focus on short-term financial results?
I’ll definitely agree that supply chain efficiency is not a focus of high end products. I think the image of a company is more popular than maximizing revenues (especially in the example of shoes). Low cost producers on the other hand will continue to do what ever they can to save money in these ways, especially with how costly supply chain and innovation costs can get.