business intelligence

People Will Keep The Lights On- Warehouse Management of Tomorrow

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Robots, algorithms, automated answering machines, self driving cars and unmanned drones….Are organizations moving closer to the lights out supply chain? Not. Most organizations have learned that keeping a close pulse on their customer’s market trends and utilizing this valuable information to make supply chain decisions can improve the brand growth and ROI. There are certainly technology solutions aiming for a lights out outcome, and market leaders, like Amazon, increasingly investing in automation and testing new solutions; however even from Amazon the prospect of a lights out fulfillment network in decades away.

Supply chain is the new competitive weapon of the business. As consumer closely scrutinize every business decision of their favorite brands, the supply chain ability to be accurate, timely and deliver goods as promised has become more important than ever. Progressive organizations are leveraging their supply chain and creating competitive advantage by building stronger partnerships with their main suppliers, diving deep into last mile delivery solutions, and incorporating the voice of the customer in forecasting and supply planning.

1.      Build Strong Partnerships with Key Suppliers

Companies cannot guarantee the integrity of their supply chain or quality of their product being far removed from sourcing and manufacturing processes. The growing expectation of accountability from consumers is pushing companies to become more engaged within their supply chain, build closer relationships with original equipment manufacturers and raw materials providers. Millennials prefer to make procurement deals directly with manufacturers- cutting out distributors. This process helps ensure tight quality controls, improve direct from factory cost savings; it also impacts margins and health of distributors who have thrived in this space. A research study conducted by UPS shows that millennials prefer researching companies online using tech channels that may be less familiar to older buyers. This trend has seen a 20% increase in the past two years and is expected to continue growing over the next 3-5 years, potentially eliminating a percentage of middle market distributors.

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As companies shape stronger partnerships in their supply chain and become more informed about their provider’s operations, new opportunities for data sharing, process improvement and collective costs savings will emerge. Currently, supply chain professionals struggle with the types and integrity of data available within and outside of the enterprise. Lack of accurate data sharing and collaborative analysis causes demand forecasting, supply and inventory bullwhip problems.  Accurately predicting and communicating demand trends across the entire supply chain will help businesses negotiate year-over-year price reductions in the order of 3%-5%. These are a direct result of setting shared goals with suppliers’ brands trust over time.

Successful organizations need to be connected to their partners to ensure real time sensing of risk, changes in demand, or updates to orders. In supply chain, as in business at large, success is 100% dependent on strong partnerships, the sustained consolidation of the marine shipping industry over the past five years is a clear indication that together we are stronger.  Will we start to notice more vertical integration of organizations across varying industries?

2.      Dive Deep into The Last Mile

This is the #1 opportunity for the supply chain to interact with the customer, and oftentimes one of the most impactful times in the customer delight process of any purchase. The last mile offers unique opportunities for optimization, and cost savings with a focus on guaranteeing customer happiness and brand loyalty. Many traditional, and online only retailers focus on improving the last mile service with real time order updates, which include reverse logistics, and sometimes even. Consumers expect products to arrive on time and not damaged, with continuous visibility into the delivery status. Some organizations, such as Amazon have gone so far as to ensure the package is pleasant for the consumer to open, while maintaining packaging costs low with their SIOC (ship in own container) program.

Over the past few years, as ecommerce growth has increased, leading companies invested pointedly into research and development for autonomous vehicles to help last mile delivery processes. Other service providers are expanding partnerships outside of the traditional shipping industry to continue improving services and transit times to consumes. For example, FedEx is increasing its partnership with Dollar General (8,000 locations) and Walmart (500 locations); the company is also investing in additional store fronts to continue servicing their most important customer sector, ecommerce SMBs. According to FedEx CMO “the FedEx Office retail locations bring in some of our most profitable small and medium business because [of] the experience they get when they are shipping…and they want the peace of mind of proper packaging.” This illustrates an understanding FedEx of just how important success in the last mile is for all involved.

Last mile delivery is most impactful for the food industry, there are numerous opportunities to learn from innovations in this space. Whether prepared or online grocery, organizations providing these services to consumers must be even more vigilant of last mile services.

3.      Listen to the Voice of the Customer

Traditional supply chain solutions were designed to solve problems within the walls of the organization. Globalization forces all businesses, including SMLBs to think globally. Most realize that success with continued growth fully depends on outside factors, some out of our immediate control but some which can be influenced. Analyzing existing or historical data only teams do not get full visibility of their customer trends. This approach delivers sub-optimal supply and demand forecasting models and leads to making decisions on based fragmented information.

Supply chain teams require real time point of sale data, consumer online sentiment, alongside partner driven forecast to assemble the monthly demand and supply planning. To successfully utilize the information organizations must diagnose customer behavior to prescribe the right market segmentation. Customers are getting closer to the supply chain- this is especially noticeable for higher end brands and items, where customers have immediate and direct impact on the well being of the organization, but this is increasingly truer even in highly commoditized consumer goods organizations.

Tracking the brand, the consumers who interact with it, and translating this data into intelligent information that can help drive precise winning decisions. Supply chain needs to work with the data and truly know the customer. Who drives the business? E-commerce companies such as Amazon have huge amounts of customer data that can be used to target specific people and convince them to buy certain things. With mobile apps and loyalty programs, chains such as McDonald’s, Burger King, and Starbucks are attempting to similarly track customers, adjusting options to convince them to spend more. Supply chain teams need to be in the know of all these push/ pull strategies and collaborate cross-functionally to truly understand consumer trends.

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So, are we heading towards an era of lights-out supply chain management? No! Supply chains, as most consumer dependent businesses, rely on people to run them successfully. People to build the right supplier partnerships, people who can strengthen the connection between a brand and customer when the product is delivered, and people who can reach into the hearts of consumers and understand what drives them.  Lights Out? People in the Supply Chain of Tomorrow.

This article first appeared on https://www.letstalksupplychain.com/blog/- make sure to visit Let’s Talk Supply Chain website for the latest #supplychain discussions, videos, articles and podcasts.

The SC – Supply Chain TV

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I joined Sarah Barnes-Humphrey, Audrey Ross and Leah Goold-Haws to debate the hot topics in supply chain including but not limited to telnet acquisition, the “New NAFTA”, tariffs at large and how these impact the consumers. Check out the episode at the link below and leave your comments on the YouTube Channel.

Webinar: Automated Order Processing For Proactive Inventory Management

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Webinar sponsored by Esker on Supply Chain Brief:

Organizations need to focus on demand driven supply planning, utilizing real time information on customer orders from all marketplaces (e-commence, Amazon – or other online retailers, and point of sale data from brick and mortar).

Focusing on this information once per month during the S&OP meeting is too late for all business units to align. Companies should have seamless integration between order entry, inventory management, forecasting and supply planning models and purchase order status to sense risk, pull levers to mitigate potential risk, and communicate within and outside the organization. This is especially important for new product releases, in store programs or promotions (sales, end caps, PDQ. etc) or online promotions (company run or 3rd party). Depending on total supply chain lead time, not having real time visibility and analysis of this information can significantly affect sales and the bottom line.

Automated Order Processing for Proactive Inventory Planning_Irina Rosca

ePlanning: Leverage the Logistics Network for Competitive Advantage in eCommerce

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IMG_0704Check out my presentation at the SCOPE Supply Chain Summit: SCOPE Atlanta 2019_ ePlanning Presentation Slides

 

 

 

 

Takeaways:

Key Actions for an Optimal Distribution Network:
1. Design an Agile Network with Optimal Inventory Distribution
2. Create End-to-End Visibility Connectivity
3. Pivot to Demand Driven Forecasting and Planning

Supply Chain Leading Strategic Opportunities for Continuous Growth:
• eCommerce Evolution
• Price Control
• Drop Ship Opportunities- Retail Strategic Partner
• Own the Amazon Marketplace- Seller Fulfilled Prime
• International Growth
• Forecast & Revenue Security
• Robust Reverse Logistics
• Best Customer Service
• Offer Innovative Solutions

 

When a customer has opted into the brand, there’s no mystery
about what they want- retention is key!

 

Logistics and Supply Chain E-Planning: Last Mile Delivery Strategy

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Last mile delivery services can mean different things to organizations depending on the key revenue driving marketplaces. In some organizations last mile can be US domestic only, for some it could expand across all of Americas and others it can cover a global marketplace. This article focuses on steps organizations can take to resolve last mile delivery challenges in North America with current service providers constantly competing and changing their service levels.

  1. How To Manage Conflicting Priorities For Different Business Units?

 Business units within organizations have metrics tied to either cost or revenue, while all teams are working towards the company’s common goal. Generally, for most retailers, and consumer goods companies these common goals revolve around providing customers with the best service, while growing the company’s market share at the lowest cost. As such, when e-commerce expansion the impact of last mile delivery costs become significant in strategic decisions such as: inventory optimization at different location and site optimization through a well-developed distribution and logistics network. Supply chain leaders must really understand where their inventory is located and how this empowers the business to interact better with customers. Offering ground delivery services with 5 business days in transit is not optima- the customer is waiting longer for the product and the company is paying more for ground or expedited delivery.

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These factors can meaningfully impact the costs of last mile delivery and the service levels delivered to end consumers- both of which are important attributes.1. How Do

2. Last Mile Delivery Costs Affect Sales And Growth?

 When a business has a clear consumer- centric strategy around increasing its e-commerce footprint, the first question that needs to be clarified is around shipping costs. Will these be covered by the business or passed on to the customer?

According to leading e-commerce fulfillment service Flexe, shipping fees are the number 1 reason for cart abandonment in the US.

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Some questions to ask prior to forming a strategy include: will free shipping apply to all orders, all zip codes, even international? Is there an order minimum- will this encourage customers to add more items to their cart, or will it cause more cart abandonment? Is the shipping service level the determining factor for consumer shipping costs?

From the UPS “2017 UPS Pulse of the Online Shopper” report:

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  • 74% of consumers said options for free shipping were the most important part of checking out online
  • 94% of shoppers have taken action to qualify for free shipping

 

 

 

3. Supply Chain Factors To Consider For A New Strategy?

There are numerous factors to consider when reviewing the company’s logistics network and last mile delivery, cost should not be the only input. Is the company’s goal to lower the time in transit to the end consumer? If so- then the best solution for the logistics network might be a multi-node location which both optimizes last mile delivery costs and time in transit, however this does not come without challenges on the inbound side. Depending on where the company’s products are manufactures, assembled and where they enter the American market some of the below considerations are of utmost importance:

  1. Production consolidation
  2. Order frequency
  3. Inbound/ Outbound transportation costs
  4. Risk of damage
  5. Number of touches and varying labor costs
  6. Holding costs
  7. Customer service

Improving last mile delivery metrics is a balancing act with competing goals across internal business units. A deep data dive into marketplace information and a stable logistics partner are crucial to successful change. The below diagram was presented by Expeditors Logistics and I have always found it to be a very useful visual for this ongoing balance:

44. Long Term Vision

Understand where the company’s current consumer base and forecast for future growth. Given current market trends and the impact of e-commerce organizations should consider supply chain planning- location and inventory optimization- as e-planning and account for all available and real time inputs such as click, views, product reviews to help predict future demand and trends. Leaders in future markets will be the companies who can see, interpret, and act on data the most efficiently on a global scale.

Supply chain and operations changes are costly, risky and take a long time to implement. Organizations must understand and have a clear vision for future marketplace development prior to adjusting for last mile delivery improvements and supply chain flexibility.

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Using current sales data and partnering with a leading service provider who can assist in conducting a thorough supply chain gravity analysis can help ensure that the company’s long term operational strategy will support the organization’s growth and expansion goals.

5. Immediate actions

Key drivers of success are data and technology. Organizations might supply a different product to consumers but at the core of success lies the ability to gather all pertinent data and translate the story it is telling. First and foremost, organizations should invest in the right technology to get as close to the information generated by end consumers as possible, then consider the above outlined goals.

 

 

Supply Chain Dynamics: What if… We Could Think Differently

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Supply chain innovation means taking full advantage of best of breed technology and data algorithms that empower intelligent decision-making. The exchange of information, from inside and outside the organization, must be real time, autonomous and continuous.

Previously, I shared an article with insights into the integration of advanced data analytics in supply chain planning. Last week I had the opportunity to participate in a discussion on this topic at the 13th Annual Supply Chain and Logistics Summit. I also attended presentations from Kellogg, Johnson & Johnson and Colgate Palmolive; companies recognized as leaders in supply chain innovation and part of this year’s Gartner Supply Chain Top 25 report. Each speaker mentioned the importance of real time data integration and end-to-end visibility, and gave examples of how this is currently achieved in their respective organizations.

For more than 98% of global companies, implementing a data strategy and using advanced analytics, especially within the supply chain, is a challenge. Not all companies have the talent or financial resources to undertake this type of project. Investments in data structures, analytics and employee training are costly. Knowledge gains from this information are still fragmented between functional silos and across supply chain networks, creating a lack of value and low ROI.

What if we think differently about supply chain data, network collaboration and knowledge sharing?

1. What if we brought everyone to the planning table?

The Sales and Operations planning process (S&OP) has taken a leading role in supply chain design. S&OP is a great way to connect previously detached processes and prepare a better forecast. This process often falls short because we do invite all departments involved to the planning discussion.

In the consumer-packaged goods industry the cost of logistics accounts on average for 7% of revenues. Logistics partners and internal stakeholders are not part of the S&OP process. This creates a discrepancy in understanding the total cost to serve, and can lead to major challenges in meeting demand and preventing stock-outs at retail stores. Unforeseen trouble in the transportation and logistics network can also hurt brand image. When we involve all actors in the planning process and use data from all nodes within the network we are able to prepare more accurate forecasting models.

Speed and agility are the most important drivers in meeting customer demand. As supply chain executives we must take full advantage of all the knowledge available in the data and capitalize on our partner’s core competencies. This is the model of future intelligent supply chains.

2. What if we removed longstanding communication barriers?

Functional, siloed organizational structures are standard. A chain of command exists in every organization, each department has specific KPIs, and actors in a supply network have individual vested interests. The ultimate goal is to drive down costs, extend payables periods to release working capital and increase gross margin, all without regard for how this affects the overall system.

This is a direct result of the lack of communication and visibility within organizational departments, and throughout the entire supply chain.

What if we used data knowledge to create an unprecedented alignment of all stakeholders, with common KPIs across the entire network?

If we did this, we could create truly agile supply chains with increased flexibility and visibility. This network could offer better response to omni-channel customer demands. We could lower overall costs and risk by incentivizing shared inventory, shared operations and gain complete chain visibility.

Ultimately, we would create real time automated information sharing networks and continuous supply chain optimization. Participating in such a system creates value for all actors; it promotes proactive policies for risk prevention and creates cognitive systems that learn over time.

3. What if we built supply chains with end customers in mind?

A recent study from Terra Technology finds that for most companies 10% of items generate 75% of sales, and that the bottom 50% creates a long tail contributing to only 1% of sales. The costs associated with planning, producing, moving, storing, marketing and shelving all of all products affect the overall bottom line.

Only 18% of suppliers receive point of sale data from retail partners. Without SKU level data from downstream partners in the retail sector it is impossible for upstream actors to plan accordingly. Furthermore, the retail sector continues to charge upstream suppliers for these insights. New research from GT Nexus finds that around the world 81% of adults have tried to purchase a product that was out of stock at a brick and mortar store. The study also shows that this leads consumers to become dissatisfied with the brand, 1/3 of shoppers blame the retailer and 65% of them shop for the product online from a competitor.

Unlike excess inventory, we cannot measure the lost sales due to inventory stock outs. We must rethink the design of our supply chains, the sharing of knowledge within organizations and networks to gain visibility and become truly agile. Lack of collaboration is an archaic practice in supply chain management and will serve to further distinguish leaders from laggards.

If we really planned the supply chain with the end customer in mind we could significantly lessen the number of stock outs. E-commerce and click-and-collect models apply new pressures on global supply chains. We can no longer use the same fragmented processes, information and technology to meet demand and enhance customer experience.

The future of competition is no longer business vs. business, but supply chain vs. supply chain. We must empower our supply chains to sense system changes and adapt accordingly, while increasing collaboration within our global networks.  Our ability to think differently about managing supply chain processes will lead to the development of truly intelligent organizations.

Why Companies Need a Supplier Relationship Management Strategy

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The business landscape is ever changing, numerous innovations have allowed companies to transcend borders and become global entities. While the opportunities are numerous so are the challenges; in this fiercely competitive global marketplace success requires companies to pay closer attention to supplier relations. Global leaders should retain suppliers with vested interest in the long-term success of the company. These partners should be willing to extend more value added services, flexibility and resources. To attain this level of trust with suppliers, companies should approach these relationships with the same care they use when approaching customers. A vigorous supplier relationship management (SRM) strategy can assist organizations in maximizing partnership value, minimize risk, and manage costs through the entire supplier relationship lifecycle.

When formulating a supplier relationship management strategy organizations must consider the following implications to be successful:

1. Become the Customer of Choice

In May, 2014 Raytheon gathered a group of its largest suppliers in Boston, MA to discuss the launch of the company’s Supplier Advisory Council. This advisory board is to serve as the first step towards a more comprehensive supplier policy and the building block for Raytheon’s new SRM strategy. As stated by Michel Shaughnessy, Vice President of Integrated Supply Chain for the company “In order to reach a level of earned preferential treatment, Raytheon has to build stronger bonds and greater trust into supplier relationships.”

By working closely with its suppliers to receive the best sales terms, fluctuating manufacturing capacity when needed and first access to the latest innovations, Raytheon secured its status as a leader in the defense systems market. The company also realized a 10% increase in stock price since the summer of 2014, in a highly competitive and regulated market.

2. Connect your supply chain

Supply chain concepts are generally understood in a linear pattern of consecutive planning in the form of plan-source-make-distribute-return/dispose. What happens when a company plans to bring a product to market and outsources all of the steps in between to suppliers that do not communicate? Take for example lithium batteries, which are intermediate parts destined to be incorporated into finished goods such as laptops, cameras or cell-phones. The transportation of lithium batteries is dangerous, as they overheat, which can cause significant damage. In electronics supply chains, transparency and visibility is key to ensuring that products get to market as promised. To do this, the production and transportation of all component parts must be closely monitored and coordinated.

3. Foster partnerships based on trust

In 2013 B2C e-commerce sales accounted for more than 1.2 trillion US dollars. Omni-channel shopping has given customers a wider selection of goods and a platform for price comparison. Because of this, businesses are finding it challenging to forecast demand and therefore they risk escalating inventory costs or stock outs. Organizations need more flexibility in their supply chains and should seek stronger partnerships with their suppliers, moving away from transactional relationships based on costs and delivery times, and focus more on long-term mutually beneficial relationships.

SRM software, much like a CRM system allows supply chain personnel to keep track of supplier interactions and address concerns early. This type of system can also help organizations understand when their suppliers are undergoing change or hardship, and offer them an opportunity to step in and help, or provide them with enough time to source from different suppliers.

4. Manage working capital

To establish and maintain leadership, organizations must innovate. Most often capital is tied up in paying suppliers with few funds invested in R&D. Some companies choose to extend accounts payable as long as possible to free up capital that can be invested into R&D and innovation. This requires strong supplier relations, built on trust as most times delaying payment can erode partnerships, affect terms of payment, and cause less willingness for collaboration. These strategies are even more beneficial in the retail space where suppliers consider special arrangements on payments in exchange for better shelf space and product visibility.

5. Set clear expectations and KPIs

Suppliers are not mind readers; their success relies on communicating with their customers, understanding their demand needs, and receiving honest feedback. Organizations that rely on hundreds, maybe thousands, of suppliers to fill demand find themselves reacting to supplier behavior rather than anticipating concerns and preparing ahead of time. A comprehensive supplier management strategy helps organizations arrange suppliers based on different tiers of importance and reliability.

Suppliers should be held accountable for their promises; all communications, formal and informal should be properly logged and followed up with. It is unwise to trust a supplier with more work or a better project, if they have repeatedly failed to meet deadlines in the past.

Organizations should keep detailed information on supplier communications, contracts, and improvement based on their internal key performance indicators. While all businesses appreciate a supplier’s ability to deliver high quality goods on time, organizations should also have individual characteristics they value from their suppliers. It is important that these characteristics are shared with suppliers and used to measure their ability to improve on these indicators.

6. Find opportunities and improve supply chain sustainability

Consumers are becoming increasingly more concerned with how their products are manufactured and sourced. According to The Nielsen Company: 55% of global online consumers in over 60 countries assert that they are willing to pay more for products and services provided by companies that are committed to positive social change and environmental protection. In the past we have seen numerous examples of global leaders fail consumer expectations. These organizations depend on a vast network of global suppliers to bring their products to market, but in the eyes of consumers it is their responsibility to ensure that their practices have minimal impact.

To meet the growing demands of customers, organizations must work closely with suppliers, conduct regular audits, and analyze findings. Managing supplier relationships strategically allows global companies to set standards and utilize existing assessments such as the Higg Index. To reach sustainability best practices, communication with suppliers must be collaborative and transparent with stated common goals and clear ability to measure efforts.

According to the Council for Supply Chain Management Professionals (CSCMP), supplier relationship management is a comprehensive approach to planning and managing an organization’s interactions with providers of goods and services. This practice is supported by a dynamic SRM strategy that retains information that can be used for analysis. The overall objective of SRM is to streamline transactions and manage communications. As supply chains become more diverse and exposed to various global risks, these practices help organizations become market leaders, mitigate risk, hold suppliers accountable and measure their supply chain footprint.

This blog appeared on the Cerasis Transportation Company Blog, visit them for more information on logistics, 3PL and supply chain management thought leadership. 

Holiday Season is Fast Approaching, Compete with Amazon Without Free Shipping

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If an organizational goal is to compete with Amazon at e-commerce you’re likely setting your company up for failure, it also underlines a business strategy that lacks an understanding in the power of their brand and market niche. However, this should not discourage any company or brand from striving to improve on their e-commerce metrics, operational or otherwise. In the past month we’ve seen Amazon force brand giant Nike to become part of their platform, after years of resistance. This is because Amazon is only as successful as the power, and quality, of the brands in which it transacts.

Nike, along with many other strong brands, have concerns about this partnership: counterfeit products, Amazon cannibalizing customers from the Nike web storefront platform, and eventually Amazon private label production of Nike style footwear. These are all valid concerns, and when a longstanding leader like Nike is reluctant, enterprise and SMB’s should all take notice. Amazon focuses on three main pillars of service: price- right price, not always the lowest; selection- all the selection; and convenience- best way for the customer to get to the products; however, they cannot control a brand’s connection to the customer and will never have the ability to build strong relationships across such a large and diverse network.

  1. Take Advantage of a Diverse Logistics Network

 

Amazon does logistics right; there’s no denying that the company has become a leader in supply chain optimization and operational efficiency. One reason Amazon is so successful is that they have mastered a flexible and wide logistics network; that the company primarily runs with its own employees. They also have numerous vendors who service them through Drop Ship programs therefore expanding their outreach. Various platforms exist that connect organizations that need warehousing space that have organizations with extra space in over 45 markets across North America. Using these types of shared space networks will empower businesses to proactively plan for peak times, better understand their marketplace and place the right assortment of product closer to the end consumer. By placing the product closer to the customer companies can offer free shipping without detrimental hits to their bottom line; but more importantly they can offer fast delivery and further delight the customer.

 

  1. Develop Deep, Collaborative Relationships with Suppliers

 

In total Amazon sells over 480 million products just in the USA, this is an 8% growth from December 2016; the company is also shipping a large portion of their assortment to 180 countries around the world. Their Achilles heel is forecasting! Brands know their product, assortment and suppliers better than Amazon. This creates increased risk in the Amazon supply chain which is why there is an increased effort to start sourcing most of their fast moving ASIN (Amazon Standard Identification Number) directly from vendor factories. Their ultimate desire, as we can see in the apparel industry, is to move their supply chain directly to the OEM (Original Equipment Manufacturer).

Build trust with suppliers, create collaborative forecasting program and share in raw materials risk. Provide manufacturers and factories with visibility into your sales and operations planning data and give them a stake in the game.

 

  1. Brand and Assortment

New product launches are the best opportunity for brands to connect or reconnect to customers, educate and listen to their feedback. With a vast and global supply chain Amazon cannot understand all nuances of their vendor’s supply planning and network risk. As such, the company is searching to increase the number of drop ship partners across the country. Unlike most retailers, Amazon does not accept a fee for this program, however they pitch the service as the brand’s opportunity to place the product in the customer’s hands faster as it does not have to circulate through the Amazon network.

For some legacy products this makes sense, but for newly released products brands should be very weary of placing these into the Amazon supply chain. The optimal approach for new products is to limit and control the supply chain as much as possible, and back this up with enough marketing dollars that the needed visibility exists and sales take off without Amazon.

  1. Shipping

Shipping does not have to be free, however it does have to be hassle free on the outbound as well as reverse logistics. Analyzing Amazon’s SEC filings for 2016, the company calculated a net landed cost for products at their customer’s doors of $7.2B.

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According to Amazon’s CFO, Brian Olsavsky, the total spent on shipping increased by 30% YoY driven by the fact that more than 50 milling items on their catalog are now eligible for free two day shipping, which has also increased over 70% from the previous year. As a percentage of the total company revenue the shipping costs were reported at 53.3% a the end of 2016; this would cripple most other businesses.

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Provide customers with realistic expectations, partner with the best last mile delivery providers and keep a pulse on the average rate in the market. Exceed expectations and impress the customer by anticipating post-delivery needs, do not put the business at risk to compete with Amazon’s free shipping policy.

The best thing about not being Amazon is that your customer service team can excel in understanding your brand and product and speak to the customer from experience.  Brands can listen, receive feedback, and act on their customer’s opinions. Amazon invests in improved customer service, but without the brand and product knowledge their service is lacking expertise and revolves around product delivery and directing the customer back to the original manufacturer.

Excellent customer service, coupled with strategic management of your supply chain will set you up for a successful holiday season and a strong brand in the future. Amazon will continue to grow. Being small, nimble, innovative and true to the customer will help true brands survive and strive.

Supply chain disruption – 3 lessons learned from past trends

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Supply chain disruptions are business disruptions. There is no portion of the business that is isolated from interruptions upstream or downstream in the supply chain. As SCM become more strategic in business planning, we gain a deeper understanding of how challenges and opportunities in the supply chain can impact the overall performance of the business.

1. You are only as strong as your partners are!

Supply chain disruptions are rarely under the control of business operations or supply chain executives. Oftentimes we build partnerships to help us plan for the future and put our trust in companies to support our supply chain goals.

“Freight is the heart of supply chain management. Without the ability to quickly and effectively move merchandise around the globe, the business’ ability to succeed is limited”

Global companies agree to large ocean freight contracts to stabilize yearly transportation costs, and have a baseline budget for their expected TEU transportation.

Most SMBs will likely use an NVOCC for this service; this means that a 3rd party forwarder handles all the company’s documentation and freight arrangements door-to-door. Such a practice puts SMBs at a disadvantage which became very clear during the demise of Hanjin Shipping Line. Without their knowledge, many U.S. businesses found their merchandise on Hanjin vessels due to decisions made by their NVOCC. According to SeaIntel, at the time that Hanjin filed for bankruptcy protection, the company had 43 vessels in transit with 540,000 TEU of cargo on board.

Given the time of year, the merchandise on board of the ships was planned inventory to service the U.S. and other global consumers during the 2016 holiday season. One way in which larger businesses can protect themselves from such disruption is to take this decision in-house and assign a responsible party to manage their logistics network. In this case, companies can go directly to the shipping line and negotiate long term contracts at fixed rates. Companies should fully research the shipping lines they contract with and their terms of service. Generally, there is a high TEU requirement for competitive rates and this can often backfire if the logistics team chooses a poor partner.

2. Useful, accurate predictive analytics are key 

Data from the closing of 2016 shows that retailers had increased faith in consumer spending during the holiday season, and accordingly, increased inventory holdings in the last quarter. The National Retail Federation states that the year-end increase in import volume came as a surprise to many in the retail industry. The NFR raised its forecast to a 7% gain at major U.S. ports, from 3.2% in an earlier report, while November imports rose 11.2%, beating the prediction for a 3.6% year-over-year gain.

For manufacturers and wholesalers, customer trends often include paying close attention to the retail channel as well. Very aggressive sales and inventory management trends from Amazon, and other e-commerce retailers, created market disruptions driving many brick and mortar shops out of business. Their aggressive practices continue to take markets by surprise.

“Staying ahead of customer trend curve-balls requires alignment and communication”

At the end of 2015, days before Black Friday, Amazon reconstructed their inventory management strategy, significantly shortening their days of inventory on hand. This was a strategic move enabling the company to release cash at the end of the year, and force their vendors to enter a vendor-managed inventory system within a few weeks.

Amazon, Alibaba, and Ebay changed the way end consumers search for products and make purchases. Companies have to be prepared for last minute decision-making and must have flexibility in their supply chain to deal with spikes in demand or disruptions upstream.

Understanding shifting consumer behaviors is not a one-time effort, and must be ongoing. Successful organizations are proactive in learning about their customers’ needs and prepare to meet them ahead of time. It is imperative that this effort be shared across the organization to connect knowledge from the sales team to the supply chain.

3. Your supply chain must be flexible enough to adapt

For operations professionals, the constant goal is to continuously improve on previous processes and recognize tangible cost savings. In business, however, we cannot operate in silos. Our planning and preparation can only solve for a certain percentage of all the processes covered globally. To prepare for events such as the disruptions listed above, a company’s supply chain must be flexible and the managing team must have the tools to make last-minute well-informed decisions.  A flexible supply chain should be able to detect and respond to issues and opportunities in the short and long-term with the best choices for the business.

Understanding and preparing for operational challenges is crucial to growing a successful global brand. 

Strategic planning can make the difference between hitting the mark on profitability and customer service and failing to compete in the global marketplace. Understanding the sources of disruption in a company’s supply chain makes the operations team indispensable in drafting future growth and driving strategy to support this.

This article first appeared on TradeReady the Blog for International Trade Experts.