Creating Supply Chain Excellence
The Tompkins International Blog
By Jim Tompkins
Since 1999, when Alibaba first started their marketplace of Alibaba.com, it has been clear that the Chinese company has a strong passion for the U.S.
With the recent news of Alibaba going public, some are surprised that they selected the New York Stock Exchange (NYSE) over NASDAQ, that the ticker symbol will be “BABA” and in my view, puzzled as to why the date and price of the IPO will involve the numbers “8″ and “9″. None of these things come as a big surprise to me.
A few revealing points to consider on the Alibaba IPO:
And finally, it is fascinating to watch how Alibaba is changing the way supply chains are viewed in the U.S. In my new video, The Alibaba Effect, I discuss these points in more detail. What you will hear is critical and will help you plan your counteroffensive now and lead your company to success in omnichannel.
Photo Credit: Daniel Foster
By Tompkins International Staff
How many of you have heard of Alibaba, the Chinese e-marketplace? Alibaba is the fastest growing e-commerce company in the quickest growing market in the world. CEO Jim Tompkins recently sat down to discuss how Alibaba is changing the way supply chains are viewed in the U.S. Here are the top 6 reasons why you need to watch The Alibaba Effect:
What you will hear in The Alibaba Effect video is critical and has never been discussed in detail from a supply chain perspective. Alibaba is changing the game when it comes to supply chains in the U.S. Watch this video so you can plan your counteroffensive now and lead your company to success in omnichannel.
Photo Credit: epSos .de
By Jim Tompkins
CEO, Tompkins International
Online retail sales in B2C are estimated to grow by nearly 75% by 2018, and today’s B2B sales are more than twice the sales of B2C—and growing faster.
Increasingly, consumer product companies are selling goods online. Specifically, consumer packaged food companies are moving to online retail sales as traditional grocery stores and the Walmarts and Targets of the world transition into private labels. But can these changes affect the real estate industry? Absolutely.
My new article, “From Malls to Click-and-Collect: How Today’s Pace of Change Is Impacting Real Estate,” explores this rapid growth in online ordering and fulfillment and how it is affecting the real estate industry.
Retail stores and malls are experiencing some of the biggest impacts of online sales growth. We see this almost daily with store closing announcements—the biggest being Radio Shack with 1,100 planned store closings for this year. There are also significant effects on distribution and fulfillment as supply chain networks grow substantially more complex due to the sales channel switch from direct to online.
How have you seen the real estate industry impacted by growing online sales? How will your company respond to this pace of change?
By Jim Tompkins
CEO, Tompkins International
The five of us sat around a conference table. My colleague and I were meeting with the CEO, CFO, and Chief Supply Chain Officer (CSCO) from a multichannel fashion and apparel retailer.
The discussion was lively and interactive. We talked about omnichannel, “get local,” and store fulfillment. Just as the CSCO began to make a point on the opportunity to combine distribution and fulfillment, the CFO interrupted the discussion:
“I have not said much in this conversation as the four of you have gotten all excited about e-commerce,” the CFO explained. “To tell you the truth, I don’t think you all know what you are talking about. You guys think the tail should wag the dog. I don’t understand all this discussion about e-commerce, since e-commerce is less than 5% of our sales. What’s the point and why all the discussion?”
My partner and I did not want to push back on the CFO, so we waited for the other two to set the record straight. But to our amazement, the CEO replied: “Wow, yes I guess you are right. E-commerce is only 4.74% of our sales.”
Obviously we could not let the discussion end so far from reality. I had no choice but to speak up.
“I am sure your data is correct with respect to the channel whereby you capture the order,” I said. “For your retail sector, a 4.74% of order capture on e-commerce is typical for a firm with your e-commerce experience. But a common misconception is that the importance of a channel is somehow related to the revenue recorded in that channel.”
The CFO tried to interrupt me at this point, but I continued. I told him today’s reality is that the majority of customers in the store have shopped their merchandise via e-commerce before they come to the store. In fact, the majority of sales that they call “in-store” are sales that were significantly influenced by e-commerce. So we are not talking about the tail wagging the dog. I explained that we are talking about the value they deliver to their customers and therefore their company’s profitable growth by succeeding in omnichannel and in all channels.
Can you guess what happened next? Yup, there was a very awkward pause that seemed to last five whole minutes. (In reality, it was probably only about five seconds.) Finally, the CFO started to speak.
“Yes, e-commerce is very important to our customers,” he said. This statement was followed by another awkward pause before the CSCO rewound the discussion to where it was before the CFO interrupted him.
Thirty minutes later as the CEO was thanking us for coming, he asked my partner and me if we could prepare a proposal to help them develop their omnichannel operations strategy and related supply chain capabilities.
Later, as my partner and I sat in a car on the way back to the airport, we both reflected on what would have happened to the interaction if the CFO’s 4.74% data point was viewed as information, and if the company never began the pursuit of their omnichannel strategy.
We will never know, as we are now scheduling the project kickoff. But it reinforced a good message for all companies to remember: never treat data the same as information.
Article: The Omnichannel Retail Supply Chain
Photo Credit: Tim Reckmann
I don’t know much about filters or “discovery experiences” as they relate to e-commerce, but an article published on RetailWire the other day caught my attention.
In a recent study of shopping experiences on top retail sites, Compare Metrics and the e-tailing group concluded that most participants find their current shopping experiences “uninspiring.”
How can this be? How can purchasing anything one desires from the comfort of his or her couch be uninspiring? And how does this relate to supply chains? It all boils down to the customer experience and how it relates to e-commerce. Innovations that benefit consumers, such as same-day delivery or customized ordering and delivery methods, help personalize customer experience.
Obviously, personalized customer experience is what’s missing here. And it can be remedied by a supply chain that is flexible enough to meet changing customer demands. If you have an inflexible, cookie-cutter supply chain backing your e-commerce efforts, then customer experiences are more likely to be “uninspiring.”
If you have a distribution facility that can only serve one channel, then you will be challenged to effectively meet the needs of today’s multichannel consumers. If your operations are not demand-driven, then you will struggle to keep up in a complex retail environment where customer expectations change as quickly as new technologies take hold.
What are your customers saying about their online shopping experiences? I’d be interested in hearing how your supply chain and fulfillment operations are changing to meet new demands.
Photo Credit: Michael
There’s some real beauty in an optimized supply chain. In a recent Inbound Logistics article, Justine Brown gets it right on the importance of effective supply chain and logistics management for cosmetic companies.
But what makes a supply chain for cosmetics different from any other industry? Most cosmetic products need specialized storage amenities such as temperature controlled environments, and even in some cases, experienced professionals with specific expertise in storing and distributing particular items. Cosmetic products are also sold in a variety of retail streams, which affects packaging for promotions and medical purposes.
Not to mention that consumers want the most popular products right away – and a smooth logistics operation is the key to achieving customer satisfaction in industries such as cosmetics.
Valerie Bonebrake, SVP here at Tompkins International, says it’s essential to know what happens to products when they leave the distribution center. “Cosmetics companies have to understand the process before they can improve it or reduce costs, and that comes down to good information management,” she notes.
I encourage you to read Brown’s column for a full explanation of how cosmetics and related companies need efficient supply chain strategy and logistics in order to get their products to market.
Photo Credit: Tasselflower
The luxury market is on a downturn in China— down to only about 2 percent growth—but that doesn’t mean brands and retailers should forget about doing business in China.
In his new Forbes column, Tompkins International’s Michael Zakkour explains that while the premium luxury market has definitely slowed, it will pick up again soon. Zakkour also believes it may grow even faster in the next 10 years because of the established luxury demographic and the fact that millions more potential buyers are coming online.
But you are probably wondering what spiked this downturn in the first place, aren’t you? There are so many different reasons. For one, online sales growth has surged product values down for many of the previously highly desirable brands. Chinese luxury customers are also focusing on spending their extra income on other items, such as lifestyle products (in addition to products for social status).
I encourage you to read Zakkour’s column, where you will find the full explanation of how the Chinese market has swayed, and also why companies shouldn’t make any major moves to stop conducting business in China. It’s not about jumping ship, but rather reconstructing both your short-term and long-term strategy for growth.
Has this downturn in China affected your company? Has your organization needed to readjust its China strategy? Leave me a comment or let me know on Twitter (@jimtompkins).
Podcast: E-Commerce in China
Photo Credit: epSos.de
Being realistic means being practical and/or pragmatic.
For holiday 2013, there were five really big factors that were going to impact final delivery. And yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013.
Let’s first take a step back. What were the five big factors impacting final delivery?
Factors #1, #2, and #3 are based on fact, well-known, and non-controversial. These three factors alone were significant challenges for the peak planners at UPS and FedEx. But in addition to the first three factors, #4 (retailer’s behavior) was beyond what peak planners could handle. Additional volume overflowed into the sacred ground of the contingency planners—essentially, the retailers’ behavior pushed UPS and FedEx into their contingency buffer. This could have still allowed for a successful holiday 2013 final delivery if, and only if, the fifth really big factor (the weather) had fully cooperated.
As we all know from Murphy’s Law, going into a peak period with a portion of your contingency plan already consumed and reliant on good weather to not implode, is a great way to ensure that the weather will not cooperate. The bad weather not only hit hard, but it also covered a wide geographical area several days in a row. Peak planners failed and the contingency planners ran out of contingency. The results are still not well known, but essentially it was a failure.
We need to do a better job at three things:
There will be many meetings and numerous articles over the next several weeks about the failure of holiday 2013 final delivery. These meetings and articles will focus on fixing the planning for 2014 and beyond. However, a key point I make in today’s post has to do with realism—the practicality and pragmatism of holiday 2013 communications. The weather became a factor, starting with the winter storm that lasted from December 5-10. Interestingly, this storm was a factor for two reasons. First, many folks who were hit by the storm did not want to go out to shop, so they spent this busy shopping period at home shopping online. The storm also sparked the beginning of the final delivery problems for transportation providers, and they were never truly able to recover.
As if this was not enough, the winter storms of December 19 to 22 hit UPS and FedEx hard for the same two reasons. But here is the worst part: on Sunday, December 22, there were no communications from UPS or FedEx that said they were in trouble. In fact, on December 19 UPS was published in a nine-page spread in Bloomberg Businessweek titled “UPS’s Holiday Shipping Master: They Call Him Mr. Peak.” Of course this is ironic, since by December 19 UPS knew (or should have known) they were in trouble.
I understand the need for better peak planning and better contingency planning, and we will hear more on these topics, but how can folks who claim to deliver “The World on Time” and to “Love Logistics” do such a poor job of communicating their failure to perform, even after it is clear they are failing? Those of us involved in final delivery need to take more control of it so that our customer promise does not disappear in the lack of realism of our final delivery providers.
This is a good week to conduct a mid-term review of holiday 2013. Typically, a week before Christmas, we have some very clear indications of the strength of the holiday. Unfortunately this year we have many things that are not clear.
Here are the top 6 areas I am most unclear about:
So what can we determine with clarity? There is really only one thing, but it can be said in many different ways. The one clear conclusion about holiday 2013 is that online sales are skyrocketing.
We can restructure this statement in several different ways, but it is all very clear:
The good news is that what is clear is really clear about sales this year. Needless to say, online retail this holiday season is on fire!
Photo Credit: BenLucier
No, it’s not a typo. China’s largest online shopping company raked in $5.75 billion in sales in one day. I repeat, one day!
You, me, and many people across the globe are just beginning to pick up our jaws after reading the final figures from China’s “Singles’ Day” shopping blitz on Monday, November 11—the country’s largest annual online shopping megasale that lasts only 24 hours.
Alibaba Group sold $5.75 billion on Monday, breaking the record of 11/11/12 of $3.14 billion. The $5.75 billion translates into 152 million parcels to be delivered today. And Alibaba’s sales don’t even cover all of Monday’s full e-commerce earnings. In its entirety, Singles’ Day brought in approximately $7.1 billion total in sales.
To put that into perspective, last year the U.S. brought in $1.46 billion in Cyber Monday sales.
China’s Singles’ Day, which takes place annually on November 11 (11/11), began years ago as a celebrations for singletons. The day soon evolved into a consumer holiday and became China’s biggest online shopping day of the year, thanks to huge promotions and deep discounts at 50-70% price reductions. Singles’ Day now brings in about 2% of all of China’s online sales for the year.
For e-tailer Alibaba, its online shopping forum “Alipay” boasted more than 402 million unique visitors on Monday. That’s one-third of the entire adult population of China. (I think I need to pick up my jaw again.)
The top items purchased this year were undergarments, diapers, baby formula, mobile phones, and home appliances.
What does this show us? E-commerce in China is on fire. We’re seeing growth rates of nearly 30% per year. The country’s next huge consumer shopping promotion day (Double 12) is December 12, so I’ll definitely be tuned in to see what sales records might be broken next.
What does this mean for global e-commerce? And what can US e-tailers – and retailers in general – learn from this wildly successful promotion?
Photo by epSos.de