9/2/2009 2:32:00 PM
Focus on core activities is critical
The UK industry has enjoyed continuous revenue growth for the past couple of decades, which came to a fairly dramatic end two or three years ago. It was a sobering moment, with some belated assessment of costs.
In the past, everyone made comments about looking at the cost base but frankly, when revenue is growing exponentially, you don’t really look at cost with any degree of gravity. Now with revenue declining, profit has become more of a focus than average spend.
One area that has most potential for cost-cutting is supply chain. I think all companies across the mobile industry should be asking four key questions on the issue of non-core activities.
1. Does the activity give you a competitive advantage?
2. Is it a core revenue generator?
3. Is it your core expertise?
4. Is it part of your core business?
If the answer is no, why are you doing that activity? Why not outsource it to someone for who it is core? We have already seen the operators applying those questions to their network infrastructure, particularly asking whether it gives them a competitive advantage. While they haven’t outsourced quite yet, that could happen down the line.
If you look at several companies collectively, there is further duplication as the likes of Carphone Warehouse and the networks take product from the same places and ship to the same high street destinations. It is worth considering whether a manufacturer could move away from creating bespoke kit at source for every network, shipping it individually. Why not ship bulk flat-pack and flash locally?
Networks are coming to terms with their identities and strengths as sales and marketing operations. With that in mind, they should outsource the rest to experts. It offers an opportunity for distributors to move their business models away from box-shifting and become logistics businesses.
What I’m talking about is a macro picture, where distributors consolidate the whole supply chain across a number of customers, saying to Orange, Vodafone and O2 that they will run the total end-to-end logistics. The fundamental point is to focus on a core speciality, which is an area you compete strongly, grow revenues and have expertise in.