Leadership

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.

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!

 

Let’s Talk Supply Chain

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I was recently interviewed on Let’s Talk Supply Chain as part of their Women Leaders in Supply Chain Series. This was an absolute honor considering the other amazing group of women who comprised the speaker lineup and a pleasure to share my experiences with others. Thank you to the podcast host Sarah Barnes-Humphrey,CITP, CCI. Sarah and I will be speaking together on a panel at the Footwear Distributors and Retailers of America in Los Angeles at the end of October- stand by for insights!

Listen to the episode here: “>Let’s Talk Supply Chain- Women Leaders in Supply Chain- Irina Rosca

For more awesome episodes follow Sarah’s popular podcast:

  1. Let’s Talk Supply Chain Website
  2. LinkedIn
  3. Twitter 
  4. Instagram: @letstalksupplychain

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.

 

 

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. 

Supply Chain or Value Chain?

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Michael Porter first addressed the notion of value chains in his famous business writing Competitive Strategy. He explains the concept as a set of business processes operating within a firm that together provide increased value to customers. This value building set of process operations incorporates information and activities connecting a company’s supply side with its demand side, and thus covering raw materials, inbound logistics, production process, marketing, sales and all other aspect of a diverse supply chain. Following this explanation, companies whose values lie in corporate social responsibility and sustainable operations should think of their supply chain as a value building mechanism. To do this organizations must shift focus from the customer centrist approach to a more holistic one that incorporates the well-being of people, environment and resources in countries where they have a licenses to operate.

From the perspective of the organization the concept of value is subjective, but there are various benchmarks that help companies measure and quantify efforts. As an example, the textile industry is one of the most chemically dependent industries on earth and the #2 polluter of clean water.  As we have seen in recent years, clean water is becoming a coveted treasure as drought and bad business practices continue to deplete the last remaining clean water sources. In countries like Pakistan, India and China, where the textile industry is booming, we can notice the most deplorable water situations. This is not sustainable for the local societies, and it builds instability up the supply chain creating a very risky environment for large multinationals.

New technologies are available to help multinationals gather information from the bottom of the supply chain such as water use in cotton growing, energy use in knitting and weaving, or chemicals used in dying and cleaning. At the moment these are measured at factory level, and are rarely shared with buyers. Such practices allow bad practices to continue unnoticed, and the supply chain in weakened by unsustainable practices. Multinational corporations cannot make proper forecasting decisions when they depend solely on production from unsustainable suppliers; their supply risk increases as they choose to ignore these practices.

Furthermore, the public is keeping a much closer eye on the business practices of large organizations. Take for example the multiple scandals that Nike has been a part of over the years. From unsafe working environments, to child labor their stock prices have suffered one blow after another. This has weakened their buying and negotiating power to suppliers and hurt their image to customers around the world. The public relations department tried to defend the company by placing the blame on suppliers’ business practices, but in the eyes of Nike customers the company should have assumed responsibility for all practices in their supply chain.

So is value building through improved business processes a concept that should still be questioned, or is it the norm for industry leaders? Organizations must find ways of monitoring materials and information flows in the supply chain. A resilient supply chain is one from which all actors benefit and want to be a part of for an extended period of time. This ideal supply chain is built on best practices learned over years of exchanging information with customers and suppliers in a transparent manner; this IS building value through operating processes. Companies can implement best practices offered by organizations such as the Global Impact Investing Rating System or the Global Reporting Initiative to ensure the maximum amount of value is drawn from all business processes for all actors’ part of the supply chain.

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