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Roundtable Series: Growth Tactics for a High-Cost Economy

Supply chain
10 minutes
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by Bryony Hampton

Posted 27/01/2025

inventory costs

Today’s product businesses are fighting a battle on many fronts, with the lingering effects of high inflation, high raw materials costs, supply chain uncertainty and an expensive labour market. But with smart customer retention and sales tactics, combined with ruthless optimisation across the three biggest lines of spend – labour, inventory and production – small-to-medium firms can outperform both their peers and the larger players that dominate the market. 

As ever, we chat to four SME experts to unearth their methodologies to scale in these challenging times. 

Meet the experts

Darren Glanville – Country Manager for UK and EMEA with Fathom

Dr Neil Keegan – Manufacturing and Operations Specialist

Phil Oakley - Managing Director of Outserve.

Thomas Laird – Managing Director of Salt of the Earth Deodorants.

Check out the video below or visit our supply chain podcast page to listen to the full roundtable.

How to drive growth without increasing headcount?

So let’s start by looking at arguably the three biggest lines of spend; labour, inventory and production. When asked ‘how would you drive growth without increasing headcount?’ the response was unequivocally ‘AI’. As if we hadn’t heard enough on the topic, but for Thomas Laird, MD of Salt of the Earth and Neil Keegan, Manufacturing and Operations Specialist, artificial intelligence is going to be a long, bumpy but exciting road for SMEs.

“I think it's really going to change the productivity of the workforce going forward as a collaborative tool to reducing a lot of the manual, the annoying tasks, and also bringing in some new ideas and improving overall output from companies.” Offered Thomas, adding that the opportunity lies in automating mundane and monotonous tasks such automating the filling in of the ‘weights and dimensions of pallets’.

Neil went on to outline some of the impressive things already being done with Claud AI,

“There's multistep desktop automations, process optimisation, there's advanced decision making that goes in there, there's APIs that are already being connected into it as well to allow better connection between different applications, particularly on business information and competitive analysis.”

Neil agreed with Thomas that there’s a massive opportunity to streamline manual backend processes to reduce the time spent ‘slogging away on Excel’, and that in the future, staff are likely to shift towards managing information and being decision makers rather than collating and creating data themselves.

Where might the adoption of AI be slower?

Neil explains that some areas may take years to feel the benefit of AI and goes on to shed light on certain FMCG processes that might eventually benefit.

“Software and engineering have been the first teams to experience AI, but as we move closer and closer to people that are moving physical things, it's going to become a slower adoption rate, particularly for manufacturing processes where you've got some form of statistical process control involved. Particularly in industries like food where people are combining ingredients, and the ingredients are not always consistent.”

AI and SMEs

Neil also warned that the road for SMEs adopting AI may not be plain sailing; in that training and developing these models normally needs a big and reliable information set which is ‘something that most SMEs are very bad at’.

“It's going to be really scary, exciting and interesting to actually go on the journey and see how it pans out over the next few years.”

Phil, MD of Integration Specialist, Outserve, agrees with Neil, that SMEs trying to harness AI may struggle but points out that there is much ground to be gained in pure automation before turning to AI.

“I'm thinking tools like Microsoft Power Automate, Shopify Flow, the things that we're still doing some basic manual tasks that actually doesn't need that much intelligence. So, when we think about doing more with less and not increasing our head count, we're just looking at some of the basic tasks that people are doing where actually we can get quite complex algorithms to work out just on an ‘if this then that’ basis.”

And once some basic automation is realised AI can rest on these foundations

“We'll see copilot, which is obviously Microsoft's AI on top of Power Automate Shopify, building AI tools into things.”

Sustaining peak production

When asked ‘How do you maintain production efficiency?’ Thomas explained that he has a main line that is flexible enough to handle all their SKUs, and they’ve spent time optimising those changeovers. He also learned through COVID that raw materials sometimes prove hard to source, so Salt of the Earth now use stock and final product buffers to buy themselves time, should suppliers struggle.

“We tend to try and keep three to four months of raw materials in stock and then three to four months of finished product in stock. The reason we do that is because actually, the cost of us running out of stock is a lot more, and the disappointed customers is a lot more than the cost of holding the inventory and the risk of holding the inventory.”

Neil supports the notion of buffers and goes further suggesting that business should better consider the popular JIT (Just In Time) model as the ‘go to’ option.

“It's one way of doing things”, Neil argues, “and it fits a certain kind of business. For other businesses, the economics and the way that they actually put their products together and the kind of raw materials that they actually use, you have to create your own answers. A lot of it is about actually finding your own secret sauce.”

Finally for Thomas, staff schedules and training are key.

“Some of our staff have done lean manufacturing training as well, so we try and hear feedback from our staff as to what their bottlenecks are and how we can improve them to drive together. And we're also quite keen that we can't run people at full speed for a whole day. So, we try and build our production outputs based on a normal day rather than everyone working at 110%.”

What’s the reality of bringing manufacturing in-house?

Unleashed customer, Salt of the Earth, takes the panel on their steep learning curve after nearshoring manufacturing to their home in Hampshire. They’ve been producing natural and vegan deodorants since 1993, but various outsourcing issues caused them to rethink the way things were done. Thomas explains,

“They drop it on your front door and they're like, here you go. And I was like, well where's the manual and you don't get a manual, and I was like, how do I plug it in? And they're like, well it doesn't come with a plug or a thing, you've got to get the electrician to do that.”

But Thomas is confident the decision was a good one,

“I think it took weeks of being drenched in deodorant to really understand how to use it. We’ve got a really good team who do our manufacturing. Obviously, equipment goes down all the time, but we try and keep good maintenance schedules in place.”

Neil can see both sides the story when it comes to bringing production in-house and outlines the arguments for and against. In the case ‘for’ Neil suggests,

“Quality control, supply chain control, they're all the key points as to why people choose to actually make in-house. Particularly if you've got some form of IP in what you're actually doing as well, this is another layer of protection. It's yours and it's close to you so you know exactly what's going off.”

Neil goes on to suggest that although there are clear circumstances where a business might readily outsource their production, a firm should budget for certain eventualities, namely,  

“There's a bit of a quid pro quo. Normally if you're going to successfully outsource, you have to spend a proportion of your saving on enhanced quality control and supplier engagement and that whole piece to kind of shore up the supply chain and make sure that things are being done in a way that you want.” 

Having inventory control

The balancing act between too much and not enough stock is crucial for a healthy cash flow explains Phil,  

“You've just got cash tied up in that stuff that's never going to sell. It's probably costing you money because it's in a warehouse and it's on a shelf. Or stuff that you're going to run out of. And actually, I can't hold enough of that one because I've got shelves full of this dead stock. I need the systems to point all this out to me quickly, clearly.” 

Long time Unleashed customer, Thomas, illustrates Phil’s point beautifully, 

“I think it's so easy to find out for us what our best-selling lines are and track them over time. And that helps the inventory but also gives us a clear look at sales. And I think particularly for me, we can see what the cost of our inventory for sales was. We know our gross profit very easily and very accurately every month.” 

And once systems are in place, Darren, Country Manager for Fathom is naturally an advocate for understanding much more that profit, 

“But what was the cost of acquisition? What's the lifetime value? How are they a returning customer? What's their average order value? And what's our cash runway if things went south tomorrow, how much cash runway have we got?” 

What can you learn from FMCG inventory management? Quite a lot as it turns out. 

Neil builds on Phil’s point suggesting product businesses should take a leaf out of the FMCG firms’ book and use tools that exist for less obvious components,  

“Wood, you wouldn't think there's any need to track the batch days, but if you have large sheets of flat wood and leave them in a warehouse for eight months, they warp. You put them on the CNC machine, you get bad product.”

Now, how to drive sales?

Where to start? There are so many right answers to this question. Thomas recently ran a campaign leading up to Christmas, in the London underground.  And although it’s always difficult to assess the ROI of such a thing, Thomas explains how such an event laid the foundations for halo activities such as social posting and sharing the news with big retail buyers. 

“What we're trying to do at the moment is tell more stories from inside the business because for years we would go about doing lots of things. We would win awards and be like, oh that's great and we'd celebrate for a couple of minutes in the office and then get back to what we are doing.” 

The resurgence of in-person events

Phil’s business is enjoying the fruits of finding the right events and then attending these events consistently. Phil would argue one event isn’t going to change your fortunes, but a steady attendance at the right events could. 

“I think businesses really benefit from going along, networking, learning from each other, collaboration and talking to different people. I know it's tough especially when you've got a small business. Get yourself out of your warehouse, out of your factory and go out there and learn some stuff.” 

Darren agrees, 

“I think we've traditionally looked at events as an ROI, but I think it's moving beyond that now, it's a return on experience. What is that experience we're getting when we're talking to someone at an event or at an exhibition or a conference, how do they feel about that?” 

H3: There always more data 

The last word on this topic falls to Phil, always with his data hat on, and reminding us all that there’s value inherent in the system to drive sales, 

“Where we've seen people have success is actually using that sales data of who are your top customers, who are your best customers, what are they buying, what are they not buying? And let that data then influence the sales and marketing.” 

Avoid the pitfalls of overtrading?

What happens if it all takes off? Have a party? Well yes, but here’s how to avoid the pinch points of success. Thomas staves off this good risk and bad with buffers.  Salt of the Earth holds 3 or 4 months’ worth of stock and finished product just in case (JIT), to protect against the next crisis.  

“A ship can get held up in the Red Sea or a customer might not pay you on time or you might not be able to get certain items of stock because of geopolitical tension. There's so many things that can go wrong.” 

Neil suggests you need to be proactive with your comms, be close to your stock and numbers to know what you can make, which then allows you to be proactive with your customers, should you need to be, and make decisions about when you can supply. 

“Quite often when something's paid for, it's a negotiation. There are things that can be discussed and if you've got a genuinely meaningful product that's relevant to them, they don't want to walk away.”

Don’t let a loan take you by surprise

Phil makes a good point in that whilst you still have cash you can continue, but if you want to scale you may need more stock, so you may need more cash to buy more stock, and this shouldn’t come as a surprise.  

“If you need to go and get cash, where would you go and get it from? Not the most effective, obviously, when you're doing that under pressure, in the short term, you don't always get the best financial deal when you've got to borrow money, so start thinking about that now.” 

Data is nothing without the human touch

Whilst data is king, Thomas points out that data is nothing without its human counterpart and shares an example that many may empathise with.  

“I think it is really, really important to have good data, but you've also got to share that with your team so your team can interpret it because you might think all this product's doing really well, but then you speak to your salesperson and they're like, well actually our major customer for this is thinking about de-listing some of those for another product of our range.” 

bryony hampton blog author bio picture

By Bryony Hampton

Bryony heads up content strategy for Unleashed. When not interviewing customers for the Stock, Collaborate and Listen podcast she can be found trying to write a musical about a bunch of peace protesters in 1983.