Creating Supply Chain Excellence

The Tompkins International Blog

The Future of Omnichannel Retail Supply Chain

May 5, 2016

By Tompkins International StaffOmnichannel Retail Supply Chain

During recent select interviews with Target, Home Depot, Birchbox, Marks & Spencer, John Lewis, DSW, and Tompkins International, eft(eyefortransport) has gained insight into how retail organizations are tackling six key themes dominating the retail supply chains of today. The resulting interviews and commentaries offer incredible insight into the state of strategic decision-making within today’s retail organizations. These insights can be found in the white paper, The Future of Omnichannel Retail Supply Chain.

The six key themes discussed throughout the white paper are: Creating a Consumer-Driver Supply Chain, Supplier and 3PL Partnerships, The Redesign and Rethinking of Stores and Warehouses, Cross-Functional Collaboration and Change Management, Modern Inventory Visibility, Demand Forecasting, Fulfillment and Replenishment, and The Alignment Between Business and Technology.

Jim Tompkins, CEO, Tompkins International, discusses the importance of a consumer-driven supply chain in terms of the biggest threats and opportunities to retailers today. “I’m not sure that the retailers get the level of disruption or the level of transformation that’s taking place in the workplace. Obviously they see some of it because they’re very smart people but they’re so busy executing and so busy following what they’ve done for years, I’m not sure they get the store versus eCommerce thing. There’s two-day delivery to same-day, there’s movement from the laptop to the mobile, the movement of delivery from hub and spoke to get-local and on and on. The level of transformation and disruption that’s taking place is just phenomenal, so I don’t think retailers are putting that all together and understanding: things are really different, we need to conduct ourselves differently. So I think that’s the biggest threat – that they just keep doing what they’ve done and not understanding that it’s a whole different game.”

Tompkins continues to explain that, “It depends a lot on where the retailers are, but if you’re a store-based retailer, the largest opportunity is to leverage that store base for a true understanding of omnichannel. If we’re talking about the eCommerce side of an omnichannel business or we’re talking about a pure eComm play, we need to talk about the speed of delivery. There’s a huge opportunity to improve. What we have are a few major players that have set the bar where we’re talking about same-day delivery. Amazon today is serving 80 million Americans with same-day delivery, so us working with clients to help them get a network that provides two-day delivery is not there. There’s a huge opportunity. And then there’s a huge opportunity for having a much broader selection. So we need to go way beyond the confines of the selection we’ve had in the store and expand that by a factor of ten to give our customers what they really want. That’s what customer centricity means, ensuring that customers get the breadth of product that they want. So omnichannel, speed of delivery, customer centricity, selection, those are the opportunities today. And unfortunately, retailers need to work on several of those. They can’t just do one of those well because there are different perspectives and they need to make sure they really do well on all of those.”

To further understand strategies regarding speed of delivery, customer centricity, and product selection watch, The Titans: Alibaba, Amazon, and Walmart: Game Changing Strategies: Time For You To Respond!, throughout the video Tompkins explains the importance of the Titans’ supply chains and why businesses must respond to, Alibaba, Amazon, and Walmart through creating a competitive supply chain. 

The white paper and video are intended to serve as a cross-retailer benchmark allowing you to walk away with some concrete strategies for shaping your retail supply chain to meet today’s omnichannel pressures.

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5 Common Mistakes in Fulfillment Center & Distribution Center Design

April 28, 2016

By Thompson BrockmannDistribution Center Design
Partner, Tompkins International

The common adage that management is both art and science is a truism.  This adage serves as a way of indicating a rather complex reality involving management. Management is a science in that there are known facts and reasoning involved that produces dependable results. Management is also an art in that it requires high levels of creativity in order to steer results more favorably.  It works with emotions and the interplay between individuals.

In the same way, management of Distribution and Fulfillment Centers design can be considered both an art and a science.  The design management process requires great amounts of both fact driven requirements development and creative process and system design to deliver the most desirable and beneficial solution for order fulfillment.  The art and science is to properly assess, size, and design the system to ensure that benefits are maximized and the correct technology application is fit to the operation.

The following five points are common mistakes to avoid in order to ensuring the best results.

  • Putting Structure Before Strategy: FC/DC designs processes often start with an emphasis on solving the known issues.  (e.g.  The need to increase E-Comm orders capacity to accommodate sales increasing at a rate of XX% annually).  Due to today’s dynamic business environments, a short-sighted design process will often be dated by start-up and go-live.  By placing strategy before structure, better alignment of operations and business strategies will be achieved.  Identification of the capabilities needed to achieve the desired growth, service levels, and margin must be done up front.
  • Letting implementation Schedule Dictate the Design: The race to meet often predetermined or often arbitrarily set deadlines leads to shortcuts and workarounds that will likely impact the success of the operation throughout its lifespan.  The costs of implementing short-term stop gap measures should be weighed against the long term consequences of not extending the schedule to allow for designing and implementing the correct solution.
  • Short Cutting Dock Requirements: Dock space is often the first area to be cut when facility real estate becomes a limited resource.  While dock staging and processing tend to act like a gas, filling the available space, it is important to not overcompensate and short cut dock space.  Congested docks lead to errors, which will filter through and compound and product moves through the entire operations.  In addition, dock space can be design such that it is flexible and can meet the needs of multiple processes through operational seasonality.
  • Dictating the Preferred Automation Levels: Automation within a Distribution or Fulfillment Center should be designed to meet the needs of the operation and business strategies.  Do not let the desire to automate or simplify drive the design.  Multiple levels of automation should be considered such that the equipment delivers the best return on investment, while remaining flexible enough to provide a long term solution.  Including qualitative considerations such as cycle time, service levels, and required support are necessary to reach a fully informed go-forward solution.
  • Overlooking the Benefits of a Material Handling Equipment Execution System: For real control of warehouse operations, you need a flexible, integrated control system to provide visibility into your warehouse operations and supply chain.  A robust MHE execution system will extend operational management capabilities beyond the abilities of the typical WMS by providing a seamless flow of data between the warehouse floor level and facility, creating real-time reports on operational history, equipment status and even peak order seasons.  This ensures that the investment in equipment is fully leveraged to maximize its benefit throughout its lifespan.

Through our 35 plus years of facility design and implementation, our distribution consulting staff has honed both the art and the science required.  We have visited thousands of warehouses and observed both, the good and the bad. We know how to get the best results for your design.

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Yahoo Sets April 11 Deadline to Submit Preliminary Bids: Amazing Merger and Acquisition (M&A) Story Begins

April 19, 2016

By Jim TompkinsYahoo Bid
CEO, Tompkins International

UPDATE – APRIL 19, 2016

Due to the lack of Yahoo cooperation with potential bidders and the lack of available information about Yahoo many companies are running from the Yahoo Yard Sale. The bidders appear to have a lack in confidence in the information that is available and are frustrated by their limited access to obtain answers to questions to gain confidence. If this is a battle between Yahoo management, members of the Yahoo board, Starboard Value and/or the various advisors to the Yahoo Yard Sale is not clear. But, what is clear is, at this point, is the number of bidders is far less than the 40 anticipated last week.In addition, all of the interesting players (Alibaba, Softbank, Facebook, Google, Microsoft) seem to have stepped back from participating in building upon the Yahoo eCommerce assets and who remains at the Yard Sale are firms interested in the Yahoo advertising business (The Daily Mail),the Yahoo news and media business (Verizon) and private equity firms. So, what I anticipated being a huge eCommerce play, could become a few spinoffs and the continuation of the Yahoo saga.

Stay tuned.


On April 11, 2016 many of the most prominent global companies will begin the pursuit of buying all or portions of Yahoo. The Yahoo merger and acquisition advisors have asked 40 firms to submit preliminary bids due April 11th describing what assets they would like to buy and at what price.  

The battle for Yahoo will be the most interesting merger and acquisition story of all time. I believe this to be true because:

  1. Background of the participants
  2. Motivations of the participants
  3. The current status of Yahoo

BACKGROUND OF THE PARTICIPANTS

The players included in Figure 1 are obviously very significant players, along with 35 more who are in the hunt.

Consider the 10 relationships that begin to tell the background story of this merger and acquisition pursuit:

  • Link A: Marissa Mayer became the 20th employee hired at Google in 1999. She was promoted, becoming the Vice President of Google Product Search. In 2012 she moved on to become the President and CEO of Yahoo.
  • Link B: Sheryl Sandberg joined Google in 2001 as the Vice President of Global Online Sales and Operations. She left in 2008 to become the COO of Facebook.
  • Link C:  Nikesh Arora joined Google in 2004 as the Senior Vice President and Chief Business Officer. He left in 2014 to become the President and COO of Softbank.
  • Link D: Softbank is the largest stock holder of Yahoo Japan.
  • Link E: Softbank owns an even larger stake in Alibaba and frequently co-invests with Alibaba.
  • Link F: Jerry Yang, Co-Founder of Yahoo, led an early Yahoo investment in Alibaba. Today a major portion of Yahoo’s value comes from their investment in Alibaba stock.
  • Link G: In 2006 Yahoo tried to buy Facebook as did Google, Microsoft, and others.
  • Link H: Microsoft was an early investor in Facebook. Microsoft became Facebook’s first advertising partner.
  • Link I: Microsoft has tried to buy Yahoo several times, getting the most press for their $44 billion offer in 2008.
  • Link J: In 2015 Alibaba and Microsoft made strange bedfellows as they worked together to fight a very important problem to both firms: piracy.

Yahoo Sets April 11 Deadline to Submit Preliminary Bids

Figure 1 – Some of the interesting relationships surrounding the YAHOO M&A.

In addition, companies being mentioned as potential suitors for Yahoo include major players, all of whom have some interesting history with Yahoo: Apple, AT&T, Comcast, IAC/InerActive, KK&R, Starboard Value, Time, TPG, Verizon, Vista Equity, Walt Disney, and more than 20 others.

MOTIVATIONS OF THE PARTICIPANTS

The motivations of the five firms in Figure 1 include:

  1. Softbank and Alibaba: obtain Yahoo’s core business at a very favorable price due to stock ownership by Yahoo in Yahoo Japan and Alibaba
  2. Google and Microsoft: obtain Yahoo’s search business plus the Yahoo core business
  3. Facebook: Facebook’s WhatsApp can help Yahoo’s retail business grow just as Tencent’s WeChat business helped JD.com’s retail business grow, plus the Yahoo core business

Mentioned in all three of the above points is Yahoo’s core business. Why is this significant? Well, approximately 1 billion people turn to Yahoo’s core business every month and 60% of this is mobile.

The other over 30 companies considering a Yahoo merger and acquisition play, the reasons vary. It can be argued how the lack of focus has hurt Yahoo, but it is clear that at the heart of Yahoo there are very valuable advertising revenues, undervalued assets, and a huge audience.

CURRENT STATUS

Yahoo’s position of selling off the company began last fall when the IRS rejected the Yahoo tax-free request on the spinoff of Alibaba stock. Since then Yahoo has been under siege. Consider the following:

  • December 2015 – Starboard Value pressured Yahoo to sell their core businesses.
  • January 2016 – Yahoo began cost cutting activities, closing offices in Mexico and Argentina.
  • February 2016 – Yahoo reported $4.4 billion in losses during the 4th Further, cost cutting measures took place including, elimination of 15% of the workforce, selling patents, selling real estate, and closing additional offices. The businesses that closed included Yahoo Games, Yahoo TV, Yahoo Food, and Yahoo Labs. Then the Board began looking at selling Yahoo’s core businesses.
  • March 2016 – Starboard Value, who has been successful at replacing entire boards, presented a proposal for a new Yahoo Board. Starboard Value raised questions about the sincerity of the standing Yahoo Board to sell its core businesses.
  • April 2016 – The process of evaluating the sale of core businesses began.

It will be very interesting to watch this deal unfold over the next year. A deal is anticipated to take place this summer. Watching how the businesses unfold will be amazing. I anticipate the outcome of these events to have major impacts on eCommerce in the United States and crossborder.  It will also create major transformations in supply chain logistics.

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Sales and Operations (S&OP) Planning – Initial Steps to Success

April 14, 2016

By Brewster SmithSales and Operations Planning (S&OP)
Project Manager, Tompkins International

Sales and Operations Planning (S&OP) is a fundamental process that all retail, manufacturing and consumer products companies should have in place. Surprisingly, many companies do not have a process to formally balance product supply with product demand. Many articles and books have already been written on the technical steps which outline a successful S&OP program.  These resources describe the nuances of product rationalization, demand forecasting, supply forecasting, S&OP “True Up” and executive review. The reality is, if you have a supply/demand imbalance problem that requires immediate attention you probably don’t have any time to read. The good news is that commencing an effective S&OP program is achievable without a large investment in new technology or talent.

In his book Good to Great Jim Collins writes about the key characteristics of 11 companies that significantly outperformed the S&P 500 during a 15 year time frame. One characteristic of these companies is that they follow a principle described as “First Who Then What.” In other words, getting the right people involved and putting those people in the right positions is more important than what you are going to do strategically or operationally. Therefore, if you have been charged with developing a S&OP capability, a critical first step is to identify director level personnel from Sales, Marketing, Manufacturing, Purchasing, Finance and Supply Chain to participate in this process. You will need to engage each of your targeted team members to describe the initiative, gain their buy in and get a 3-4 hour time commitment each quarter.

Your first meeting should be scheduled shortly after you assemble a team of committed participants. After you introduce the history, scope and purpose of the initiative, your functional experts should each have 20 minutes to describe their processes as they relate to developing the supply or demand plan. For example, Sales and Marketing should provide an overview of how products are rationalized each quarter and how they establish the demand forecast for the various product groups. Purchasing and Manufacturing should provide an overview of how they build their supply/production plans to accommodate the Sales and Marketing demand plan. Supply Chain should describe how they plan and manage warehouse space and transportation assets to accommodate both the supply and demand plans. Finance should provide an overview of how each of the above mentioned areas impact the financial objectives of the company (e.g. Revenue targets, COGS management) and existing debt covenants (e.g. Targeted inventory levels.)  Each group should be asked to specify if/how they communicate with the other functional groups and their number one “pain point” in the supply/demand planning process. As the conversation of this first meeting unfolds, you may find, for example, that Purchasing builds the supply plan without any reference to the demand forecast. Moreover, Sales and Marketing may build a demand plan without understanding the Supply Chain or Manufacturing constraints. You may also discover that each of these functional areas have conflicting financial incentives which are counterintuitive to an effective enterprise S&OP.

As you plan the agenda for your next S&OP meeting and assign action items to your team members, the process will seem like a lot of additional work and new meetings. Over time, the reality is that S&OP will reduce the work and number of meetings originally caused by missed shipments, cancelled orders, capacity problems and ad hoc problem solving. 

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What Brands and Retailers Need To Know About China Adjusting eCommerce Tax for Cross Border Purchases

April 6, 2016

By Tompkins International StaffChina Adjusting eCommerce Tax for Cross Border Purchases

China has implemented new rules regarding taxation on imported goods sold online. The central tenet of the change is a standard 11.9% tax added to the price of purchase in the form of value-added and consumption taxes with a 30% discount. For obvious reasons, changes to any tax system rarely come without a bit of negative scrutiny. In the past few days we have heard from some that these moves could hurt eCommerce – but will it?

The short answer is, no. eCommerce and cross border eCommerce sales will continue to grow exponentially in China. 

What does this all mean for foreign retailers and brands?

The Chinese government is supportive of the growth of cross border commerce and eCommerce in general. In fact, economic growth through consumption is a central tenet of the new 13th 5 year plan. China’s government has taken several steps to make it easier for consumers to buy overseas goods online, including streamlining the customs process for small orders and eliminating the sales tax and cutting the customs duty tax on specific items.

The new system will benefit sellers of products for which the duty is high, such as cosmetics, which are normally hit with a 50% duty tax. However, other items, for which the duty is low, will be modestly more expensive for Chinese consumers to purchase from foreign websites or China based flagship stores on sites like Tmall and JD.com This seems very technical, but really, it is a simplified approach to taxing eCommerce goods in China. This is not much different from how U.S. States have implemented sales tax on eCommerce where previously there was none.

For example, under existing tax rules a Chinese consumer who buys a sweater for $50 on a foreign eCommerce site pays a fee of $10 (20% duty on a $50 purchase), whereas under the new rules he would pay only $5.95 (no duty, but a sales tax of 11.9%.) However, a consumer buying $30 of milk today would pay no duty or sales tax (the duty would be $3, 10% of $30, but that is waived because no fee is charged if the duty is below 50 Yuan ($7.65)), whereas under the new rules she would pay $3.57 (no duty, but a sales tax of 11.9%.)

Demand for most cross border goods is inelastic and the new taxes are simply the result of the Chinese government recognizing that they can make more tax revenue with little impact on cross border eCommerce.

“While it is true that under many circumstances higher taxes can have a cooling effect on demand that is not the case here. Chinese consumers are more than willing to pay premium prices for the trust, quality, and reliability that foreign goods deliver. The new tax will have minimal effect on demand,” says Tompkins International Vice President, China, Michael Zakkour. “There will be some industries that benefit greatly, like cosmetics and body care. In the case of food and beverage, there was no tax, and it is not unreasonable for the Government to implement one.” 

In general some industries will have a slightly negative impact, will not be impacted. China’s growing middle-class is willing to pay more for quality. They are becoming less price-sensitive regarding important products that improve daily lives.

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  • All of the information in this blog is the result of Tompkins International's research of public information. There is no information presented that comes from any proprietary source. Tompkins International does not discuss information about their clients unless that information has been published.