Our tech and processes are leading the way post-Covid
Chalk and cheese comes to mind as Travis Erridge and Milan Andjelkovic talk about their 13 year partnership as co-founders of leading business logistics and supply chain consultancy TMX.
“I mean, we’re mates, we’re not friends, we don’t hang out on the weekend,” says the chief operating officer, Andjelkovic. “It’s Monday to Friday. But there’s a mutual respect and we know what we’re both good at and we have split up this role in a way that works for us and it works for the team.”
The duo have made a positive from their differences in personality and strength, moving from corporate life to start-up territory and a company of 200 staff with an annual turnover of more than $100m. And as the world struggles with supply chains post-Covid, they are taking their experience and IP global, working with Marks & Spencer in the UK and also with a US client.
Chief executive Erridge reckons the duo could never have built their business if they were the same with the same ideas and views.
I’ve only seen Milan angry once in 13 years. We’ve had all sorts of challenges but loyalty is key for me, and there’s an unquestioned loyalty. When we first started, we would put money in each other’s account, and there was never a question of what was going to happen or how it was going to happen.
They had worked together for five years previously including at Goodman Group, when they lost their jobs as the GFC hit in 2009.
Devastated, they were also “radicalised”, rapidly realising their dreams of making it in corporate life had been shattered and moving quickly to pool their skills in a consultancy called TM Insight, later rebranded as TMX.
At first they ran it from their respective bedrooms.
We’re still sort of, we’re a family business, we’ve got the C-suite titles, but we’re still founders.
They say they are not worried about the increasing size of TMX, but recognise how much the business relies on the culture forged as a start-up. “Up until 50 people we had no rules in the business, zero,” says Erridge.
“And we never had one incident of anyone doing anything incorrect. We then tried to put policies in, we tried to put structure in and to be honest, it killed culture. ‘Don’t you trust us any more? What’s happened?’
“So, we wound it back. I reckon in the last six months we’ve really got going again as a business (after Covid) feeling we are about to innovate, about to grow heavily again. We’ve gone back to basics and that is to trust people, to empower people.
We do have controls because we are too big to not have controls but those are pretty wide boundaries. Anyone coming into the business, we tell them, we trust you, this is where we want you to take the business, this is your role, and we’re going to measure the performance of that role.
They are committed to offering pathways for employees to take equity in the company and number about 25 per cent of staff among their shareholders.
Says Erridge: “The view has always been that we can grow if everyone grows. It’s not that we sit at the top and hold everything and don’t let people have it. We’re a 100 per cent better business because we gave up those equity positions.”
Andjelkovic says: “Our view is if everyone can feel what we feel as owners, they would do the right thing, so you wouldn’t have to have so many guardrails, so many rules, because they would just naturally want to do the right thing across the business.”
They do have an HR department but say it is focused on performance and onboarding rather than compliance and rules.
As well, the founders have sold a majority share to Next Capital to allow for expansion but remain as the major individual shareholders with the highest holding of those working in the business.
They say that as the pandemic changed the way people consumed product and their expectation of when and how it was delivered, companies were forced to pivot away from opening new stores and providing big retail experiences to investing in their supply chain. Indeed, “supply chains effectively became the new retail”.
Erridge says Australian businesses now understand what happens when 90 per cent of manufacturing is offshore and there is a significant disruption, such as the pandemic.
“What we’ve done for the last 10 years is lean out supply chains to the cheapest common denominator that you could get so that you can buy a T-shirt for $5 in a store,” he says. “But now, those five-month lead times between the order and getting it to the warehouse and actually selling it – which is what a lot of supply chains were like – now meant that those T-shirts were defunct and they couldn’t see where the sale was going to happen.”
What we’ve done for the last 10 years is lean out supply chains to the cheapest common denominator that you could get so that you can buy a T-shirt for $5 in a store.
But now, those five-month lead times between the order and getting it to the warehouse and actually selling it – which is what a lot of supply chains were like – now meant that those T-shirts were defunct and they couldn’t see where the sale was going to happen.
During Covid, “online retail went from 5 per cent of sales to 20 plus per cent of sales and for some of those businesses, like a $6bn business, that’s a lot of movement”.
“We saw (our) major customers with supply chain problems trying to get … throughput, we had others that couldn’t get product because of the delays upstream in terms of manufacturing.
“But what they said is, we can never get caught again like this. It’s a highly fragile supply chain and the end of the day, the age-old retailing (truth) is, if you haven’t got it, you can’t sell it.”
They say there is growing interest around the globe in using real-time analytics to make decisions about managing inventory. This a big problem this year as retailers cope with excess inventory left over after excessive ordering in the Covid period.
“Last Christmas, we couldn’t get the stock, this Christmas, we’ve got too much stock,” says Erridge.
He argues the future lies in using predictive analytics and AI to determine what sales will look like so product can be placed in the right spot.
“The technology in supply chain has gone through the roof in the last 24 months,” he says.
Whereas previously we’d look 12 back on 12 months of sales and determine when sales were going to happen and where, now it’s far more dynamic. We can shorten the supply chain lead time by using data and digitisation to reduce the risk so you don’t have to carry safety stock.
The duo say Australia’s huge geographical distances, once such a liability, have been an advantage in the development of good supply chains and we now lead the world in technology and thought processes. So much so that TMX has been approached for advice by major retailers in Britain and the US and is moving into both countries. It has an office in London and is working on a supply chain transformation with retailer Marks & Spencer.
In the US, it is working with an industry-leading bottling and distribution organisation.
“We’ve developed systems (the UK) didn’t have to because the cost of labour and distance was smaller,” says Erridge. “The interesting thing from an Australian perspective is that our cost of labour is very high, our supply chain is one of the more complex chains in the world and some of the stuff supply chains and consultancies in Australia have been doing, including ourselves, is world leading.”
They see significant growth in supply chain optimisation work in the next five years.
Geographic growth and global expansion is probably the biggest change because to us supply chain is a global concept that needs different help in different areas.
Says Erridge: “We’re moving heavily into simulation with the metaverse, so being able to predict and visualise and then find roadblocks to help clients unplug them, using digitisation to do that. We’ve built IP around these systems … so that clients get a massive advantage.
“On the most part, most clients save between 10-15 per cent of their supply chain costs, and on some supply chains that can be in excess of $3bn.”
This article was originally published in The Australian on December 22, 2023.