Almost a decade ago, I was involved in implementing a replenishment planning system for a large retailer. The new system used statistically projected demand forecasts, available and projected inventory, and dynamically computed lead-times to recommend the replenishments. It took care of order sizing to comply with vendor contract terms and pack-sizes, and rounded up/down using demand volume, frequency, and variability. The intent of implementing such an advanced system was to relieve the inventory planners from the daily grind of reviewing and approving thousands of recommended replenishment suggestions. The idea was to automate the largest volume of regular replenishment decisions so that the human intervention could focus on the most difficult replenishment issues, which were kicked out for human attention by the system based on a custom criteria. This was obviously supposed to reduce the inventory in the network, reduce capital requirements and enhance profitability. Care to guess the reaction from the planners?
Wednesday, February 19, 2014
Supply chains manage variability. Variability naturally exists in all processes. Specific to supply chains, you could quote variability in demand, supply, lead-times to replenish, and so on. So the corporate supply chains singular objective is to manage this variability profitably. If you can do it better than the next guy, you win! That is competitive advantage for you. Where do you see this most in action? Look around and you will see this principle in action in how global supply chains are emerging.
First there was off-shoring, the primary focus being cost. Then companies like Zara built their business models around being responsive to customer demand invented near-shoring. Now McKinsey says there is next-shoring and provides a blue-print for the companies to follow. But what is behind all this? The same old desire to reduce cots and increase the ability to quickly respond to emerging customer demand and preferences.
Wednesday, January 29, 2014
Tuesday, December 10, 2013
The reliability and efficiency of your supply chain obviously affects your operations and in turn how your customers view your brand. For example, if you are running a promotion, but cannot keep your stores optimally stocked during the promotion, obviously your brand image takes a hit. It does not matter to the customers whether your stores ran out of their favorite sweater because your marketing and supply chain systems don’t talk to each other or a broken supply chain was just not up to the task of supporting the event in the first place. The fact is that efficient supply chains not only drive profitability, but also enhance or sustain the brand image by enabling you to keep your promises to the customers on prices, availability, assortment, and delivery.
Several studies find that your supply chain may even have an (emotional) appeal to your customers. McKinsey reports that the buyers’ favor brands that are perceived to “act responsibly across (their) supply chains”. Another paper recently published in German Academic Association for Business Research also found that the right message about a responsible supply chain can help “lift a brand's reputation”.
Tuesday, December 3, 2013
I know that it is old news already: After all, it has been almost 24 hours since it was widely reported that Amazon may start delivering your packages using autonomous drones. And of course, there is plenty of commentary about how this may not happen soon (or never, may be) with the concerns about the technology, FAA rules, and even our ability to fight crime! But I think everybody is missing the point.
Tuesday, November 12, 2013
You might have heard of the USPS’s financial woes. With $65 billion revenue in 2012 and a $20 billion hole as budget gap – it is not going to be easy. Everything has been on the table, from cutting Saturday deliveries to delivering booze! Now of course, Amazon ties up with USPS for deliveries on Sunday. While no financial details are available, will this save USPS or at least make a little more viable?
Thursday, October 24, 2013
For eight long years, we had the same cable and internet provider, their customer service was bad, representatives were rude, service technicians did not come on time (in spite of the four-hour windows) and when they arrived, they were scarcely able to fix any problem the first time around. And worse: the cable stopped working whenever there was a game! But we persisted: There was just no other viable alternative. The provider and the county had a franchise agreement effectively shutting any competition and so the “oligopoly” persisted. Then we moved and had an alternative, so we changed the provider. Two years later, we are still getting the promotional material from the original provider with promises of great service, discounted rates, and upfront cash-cards – every single week with no break and never a disruption! If only they had shown a small fraction of that dedication/persistence when we were still doing business.
Thursday, October 3, 2013
New and expanding warehouses in all metro areas, same day delivery, free shipping over $25, Amazon Prime, Amazon Fresh, customer reviews, suggestions, hundreds of categories, millions of items offered through its “marketplace”, a large number of them “fulfilled by Amazon”: It looks like when it comes to retail, it has (mostly) been about Amazon in recent years. They set the standard and other (brick and mortar) retailers try to catch-up!
Most recently, two Amazon initiatives namely the same-day delivery and Amazon Fresh have generated a lot of buzz and discussions about how other retailers can or cannot compete. Now here comes a potential white-knight for these retailers from an unlikely source: Google.
Thursday, September 12, 2013
It ran more than 6,000 kilometers. It was founded during the Han Dynasty (206 BC – 220 AD). It contributed substantially in development of several of the oldest civilizations such as China, India, Persia, Europe and Arabia. It supported inter-continental trade over land for over fifteen centuries before perishing in about 1453 with the Ottoman supremacy. It made China and India the most prosperous nations at the time (see world GDP over time below). Then its disintegration caused the Europeans to find the sea route to China and India resulting in colonization and eventual demise of these two nations from prosperity to abysmal scarcity.
After more than six centuries of disuse, it is roaring back to life. Being revived by HP to run its high-tech merchandise on a 7,000 mile inter-continental journey to connect its global supply chain from China to Europe.
Wednesday, September 11, 2013
A recent article on The Atlantic by Derek Thompson wonders why the American auto industry has not contributed as much to the economic and specifically to the jobs recovery this time around. Derek’s analysis is impeccable and he refers to several irrefutable data points to reach the inevitable conclusion that should not really be such a surprise: In a market economy, capital efficiencies are rewarded!
We are all familiar with the electricity flowing along the path of least resistance. You could say the same about the supply chains: In a (free) market economy, (smart) supply chains flow along the path of least cost.
Friday, August 30, 2013
Life is too boring with 3d printing, all you can do is download the “printing” programs and build stuff at home! And it takes time. So MIT engineers came up with (what else?) 4d printing. But hold on, don’t all physical stuff has three dimensions? So what does the 4th dimension get you? Well, the answer is TIME. Yes, MIT brings to you materials that are pre-programmed to change shape, characteristics, assemble themselves, or otherwise affect physical and/or chemical changes in response to the environment they are placed in. So the 3d printer can print the flat surface that eventually curls up on the edges to become a phone case when you drop it into water! Or basically other stuff like that…you get the idea.
Friday, August 16, 2013
Reuters reports on Aug 15, “Wal-Mart Stores Inc (WMT.N) reported a surprise decline in quarterly same-store sales in the United States, its biggest market, after shoppers came in less often because higher taxes and gasoline prices were leaving them with less spending money. The world's largest retailer also cut its revenue and profit forecasts for its fiscal year, raising concerns about retail spending as the all-important holiday season nears. It cited weak results from the United States, as well as …..”
However the U.S. Department of commerce numbers tell a different story. Who is losing steam, economy or Wal-Mart?
Monday, August 12, 2013
We all might have done it some time or the other. There is nothing illegal about it. It has been said that it is killing retailers. (It probably is, at least the weaker ones). Here is how Wikipedia puts it, “Showrooming is the practice of examining merchandise in a traditional brick and mortar retail store without purchasing it, but then shopping online to find a lower price for the same item.” But change happens. And this change is definitely putting a lot of (pricing) pressure on retailers. How are retailer coping?
Wednesday, August 7, 2013
Do you remember when you used to go to your neighborhood music store and spend hours listening to the new albums before buying a couple of CDs on your way home? Yeah, it is history now! Technology changed the physical CDs to mere bits. You still love your music, you still sample new albums, you still buy it, just not the same way as you used to. And that also changed the music industry’s supply chain: It made it obsolete. With additive manufacturing techniques, more supply chains may be on their way out.
Wednesday, May 29, 2013
Why does one group of retailers outperform the S&P 500 by 23% over the last 22 months, while a second group lags behind, beating the S&P by only 9% during a period of rapid escalation of retail stock prices? Jeff Bailey of Y-charts says that the critical difference is that the former group has relatively low exposure to Amazon. Jeff quotes work by William Blair & Co. analysts. Now that it has been positively quantified, what do you do if you are a retailer with a substantial overlap with what Amazon sells?
Thursday, May 16, 2013
That would be 289.77 billion dollars, 1500 suppliers and 84 launches in 2011! These are the estimates from a cool info-graphic produced by the Florida Institute of Technology on the subject of Space Supply Chain. Interestingly, it also notes that “logistician” employment is projected to grow by 26% and that is a full 14% faster than the average for all occupations from 2010 to 2020.
Tuesday, May 14, 2013
It is amazing how businesses forget the very basics, like who their customers are. But DEE GILL on Y-Charts makes that case for J.C. Penney and it is rather convincing. In 2010, J.C. Penney fired their longtime CEO Myron Ullman to bring in Ron Johnson, then the head of Apple's retailing operations. Ron Johnson did what had made him successful at Apple: Crisper ads, bright stores, and fresh merchandise. But after a short 17 months on the job J.C. Penney board decided to fire Ron. Reason: Lack of results, retail sales were down by 25 percent and the stock had lost half of its value. What went wrong?
Thursday, March 28, 2013
The Home Depot started in 1979 with their first store in Atlanta. Within seven years in 1986, it hit the $1 billion-mark in sales which grew to $20 billion in 1997. During this span of 12 years, it had an average annual growth in sales of 119% that made them the fastest expanding home renovation retailer. The brand was built on low-prices and the trade-specialists in the stores to support the DIY audience who needed help in finishing their home improvement projects. Then the founders left and the new CEO focused on profitability above all else - almost running the company into the ground before the board decided to replace him. Now Wal-Mart’s laser sharp focus on costs is raising similar questions: Have they gone too far?
Monday, February 25, 2013
Amazon’s corporate mission says it for the most part: “We seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators.” Three out of their four constituencies are non-consumer. Unlike other retailers, Amazon has been investing very heavily in the back-end logistics and fulfillment technology (Kiva Systems, warehouses totaling almost 50 million sqft) in addition to their intense focus on enterprise technologies (AWS, Amazon Web Services now hosting SAP) and consumer devices (Kindle) and technology (IVONA). But almost everybody thinks of Amazon as a retailer and keeps comparing them to other retailers. Is that fair?
Monday, February 18, 2013
So how exactly do you become the number 1 innovative company of the year while manufacturing something as dull and drab as shoes? Simple: By making them not dull or drab. Shoe manufacturers are not what you would be looking for in the top innovator’s list, but Nike is there – at the very top of the most innovative companies of 2013 by Fast Company. Their secret: Continuously reinventing themselves and their business model through disruptive thinking, says Austin Carr, the author of the source article.