Thursday 29th Oct 2020 - Logistics & Supply Chain

The Italian renaissance

Some of the historic buildings that surround St Mark’s Square in Venice are beingr enovated and to protect them during the work they have been draped with covers. These huge dust sheets are emblazoned with advertisements promoting leading international brands.

Italy is adept at preserving its cultural heritage but the country’s businesses also have their eye on the future and the giant billboards symbolise this struggle.

Renowned for energetic, home-grown entrepreneurs who have given Italy the biggest proportion of medium-sized businesses in Europe, the country is now looking to lose its ‘mom and pop’ image and create international companies.

Italy’s traditional strengths in the arts and creative industries may make its citizens ace consumers but they also make them reluctant to adopt a systematic approach to business, especially in the supply chain.

‘The reason why Italy is a wealthy country is the extraordinary quality of our entrepreneurs but we lack large public companies,’ Franco Bernabé, vice chairman of Rothschild Europe, told a recent conference organised by software company TXT.

‘Only in the US or Britain are there such wealthy individuals. The assets of Italian families are up to six times wages. Our problem is not that we have too many assets but how to mobilise those assets. There is huge growth potential but we are like a surgeon who does not want to cut because he does not want to see blood,’ says Bernabé.

Nonetheless some Italian enterprises have submitted to the operating table in the quest for growth. Lavazza, the coffee company, has supplemented its traditional revenue streams by selling coffee machines. Helicopter company AgustaWestland which came back from the brink of bankruptcy in the 1990s, is reorganising its business around the fact that maintaining helicopters can be as profitable as making them.

Trendy footwear firm Geox is also ringing the changes, setting up a string of retail outlets around the world. Not to be outdone, Elica, a maker of cooker hoods, has turned its previously prosaic products into designer items with their own branding.

‘There are half a dozen Italian companies that have made big changes to their supply chains in the pursuit of growth,’ says Francesco Maderna, executive vp of TXT and a supply chain specialist. ‘Their supply chains became demand-driven, moving from make to sell to sense and respond.’

The computer company is also looking for growth overseas. TXT, which gets 30 per cent of its revenues from outside Italy, recently won business from apparel company Russell Athletic in Atlanta, the home town of one of its main rivals. ‘We want to do the same thing as SAP but at half the price,’ says Alvise Braga Illa, chairman of TXT.

Volatile demand
The company’s strengths reflect those of Italian business in general. The Milan-based outfit is strongest in fashion and clothing. It is a market characterised by volatile demand, short shelf life and a global supply chain. Other industries have much to learn from the way fashion companies manage their supply chains, says Maderna.

For example, short lead times mean fashion firms must often begin production before they have decided on the final product. They have also begun to exploit their brands by getting into retail. The fashion industry is good at dealing with uncertainty, Maderna maintains. ‘Processes are never perfect. It is more important to adapt and use tools that allow you to reassess your supply chain.’

So what can other European businesses learn from the way Italy runs its supply chains? ‘The main difference between the way supply chains are run here and in the rest of Europe is that Italians shy away from standards and models. That can be very positive but on the other hand it means we are always reinventing the wheel,’ points out Enrico Camerinelli, director and chief analyst of the European Supply Chain Council.

In common with their counterparts elsewhere in Europe, Italian supply chain managers are focussed on ensuring their businesses run as effectively as possible, Camerinelli says. This means that too often they are seen as operations managers and strategic decisions about supply chain management are left to chief financial officers.

As with the craftsmen toiling away to remake Saint Mark’s Square, it is the creative element that will transform Italian business.

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