A blog about creating value in your organization through supply chain excellence
by Jim Tompkins, CEO & President, Tompkins International, supply chain consulting

If Customers Find E-Commerce Experiences ‘Uninspiring’, Check Your Supply Chain for Remedies

4936790096_0584c4d6e4_mI 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.

More Resources

Article: Personalized Multichannel Logistics: Moving Beyond Traditional Distribution and Fulfillment Centers

Video: The NEW Demand-Driven Operations

Case Study: Growing E-commerce Company Seeks Distribution and Network Plan

Photo Credit: Michael

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Cosmetics: The Glamour of Great Supply Chain & Logistics Strategy

6800270382_8ce32f0004_n[1]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.

More Resources

3PL Consortium: Benchmarking for Profitable Growth

Video: Fulfillment Centers and E-commerce

5 Steps to Establish Outsourcing Targets

 

Photo Credit: Tasselflower

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Good and Bad News for Luxury Market in China

luxuryThe 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).

Best,

Jim

More Resources

Podcast: E-Commerce in China

Podcast: A Successful China Strategy for Profitable Growth

The Dos and Don’ts of Selling to Customers in China

Photo Credit: epSos.de

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Realism and Final Delivery for Holiday 2013

fragileboxBeing 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?

  1. 26 days between Thanksgiving and Christmas to shop: This is a fact that will only be repeated four times over the next 33 years. It has been widely discussed because it meant this year’s available days to shop were compressed, which forced more people to shop online.
  2. 26 days between Thanksgiving and Christmas to deliver: This is the same fact as #1, but keeping into consideration that the increasing number of online orders reduced the number of days to make these deliveries. I call this the “double-whammy” of the 26-day minimum number of days between Thanksgiving and Christmas.
  3.  Growth of online shopping: Online shopping increased by approximately 10-20% from 2012, depending upon which survey you read. This is not controversial and is broadly accepted. So in addition to #1 and #2, the overall volume of online shopping and home delivery is up.
  4. Retailers’ behavior: Although not as well substantiated, there is a clear sense among consumers that delaying online shopping is a good thing because the availability of great promotions and free shipping became more and more prevalent in 2011 and 2012. Why buy early when it is better to wait and get a better deal? For holiday 2013, retailers did little to dissuade this notion, and many consumers held out to the last minute to shop online. They were playing a waiting game with the big retailers.
  5. Weather: The least clear and predictable of the five big impacts on holiday 2013 final delivery is the weather. It was only nine years ago when an ice storm crippled Memphis and Louisville, resulting in major final delivery problems for Christmas. But it is December, so it would be foolish to not have a contingency plan for holiday 2013.

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:

  1. Peak planning
  2. Contingency planning
  3. Communications

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.

Best,

Jim

 

More Resources

Paper on Final Delivery: A Roadmap – Drivers and Enablers for Moving Ahead of the Competition

Video on Amazon and Walmart: Facing the Titans

Paper on Final Delivery: A Technology Perspective on Omnichannel Retailing

 

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What Is Clear Is Really Clear for Holiday 2013

Holiday-ShoppersThis 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:

  1. While there are reports that November retail sales were good, there are also reports that November retail sales were not so good.
  2. There are reports that consumers are confidently shopping, as well as reports that consumer uncertainty prevails.
  3. Some reports say pent up demand has been unleashed, while other reports say that demand remains constrained.
  4. There are folks downgrading their 2013 retail growth projections, folks leaving their projections unchanged, and folks upgrading their growth projections.
  5. Some people are saying holiday shopping began earlier and will end earlier, while others believe holiday shopping began earlier and will end later.
  6. There are projections that the promotions of holiday 2013 will substantially hurt retail margins, as well as projections that holiday 2013 margins will be strong.

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:

  1. Online sales for the “Big Six” countries (China, France, Germany, Japan, United Kingdom, and United States) are very good.
  2. Online sales for the Big Six continue to be more than 70% of total global online sales.
  3. Growth in online sales in the Big Six continues to be in the double digits.
  4. The growth of online sales for the “Next 14” big countries continues to be in the double digits. These countries are: Argentina, Australia, Belgium, Brazil, Canada, Denmark, Finland, Italy, Netherlands, Norway, Russia, Sweden, South Korea, and Switzerland.
  5. The large global online players continue to get larger.
  6. Online retail sales continue to grow three to four times faster than in-store retail sales.

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!

Best,
Jim


More Resources

Paper: Personalized Multichannel Logistics

Video: The Right Fulfillment Center for E-Commerce

Video: Amazon and Walmart – Facing the Titans

 

Photo Credit: BenLucier

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Chinese E-tailer Books $5.75 Billion in Sales in One Day. Do We Now Realize How Huge E-commerce is in China?

Nshopping-chinao, 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?

Best,
Jim


More Resources

Podcast  – E-commerce in China

Video – Fulfillment Centers and E-commerce

Video – Amazon and Walmart: Facing the Titans

Photo by epSos.de

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Ship-from-Store: Show Me the Money … and Show me the Customers

shipmentsOkay, so my blog title quotes from the movie Jerry Maguire, which was released over 15 years ago. But I still hear people say it from time to time.

And it’s particularly relevant when talking about the latest concept in customer fulfillment: ship-from-store. What is it? What are the advantages? How is it bringing in revenue?

Retailers and consumer products manufacturers are always looking for new ways to compete with Amazon. And some companies are beginning to take omnichannel strategy to the next level through store fulfillment. One exciting new store fulfillment option–currently adopted by companies such as Walmart, Best Buy and Gap–is to ship directly from the store to the customer.

Why provide ship-from-store capabilities?

  1. Improved delivery time. Delivery to customers is faster, especially for customers further away from distribution centers. Faster delivery leads to higher revenue.
  2. Fewer out-of-stock incidents flagged to customers.
  3. Decreased shipping costs for most customers.
  4. Increased margin due to markdown avoidance.
  5. Reduced need to move/transfer inventory between stores, distribution centers and fulfillment centers.
  6. Lower additional capital expenditures for increasing fulfillment center capacity.
  7. Increased ability to meet peak season online demand.

Overall, store fulfillment is still very much in its infancy. And the loose definition of store fulfillment is making this even more difficult.

Companies with this capability generally fall into two categories; pilots and early production stage. The former aren’t really collecting or reporting reliable revenue and cost numbers. The latter are generally in the process of ramping up to full deployment, as well as evolving through the stages of store fulfillment. These companies typically hesitate to release any performance data due to strategic reasons or comfort factor due to a limited history. So unfortunately, there is not a lot of reliable data available.

What I have seen on the revenue side has generally been expressed as an increase in online sales due to store fulfillment. There have been reported increases ranging from 10-40%, and margin increases are being reported at 1-3% due to markdown avoidance.

I also continue to see evidence of increased store traffic from store fulfillment, but this comes more from click-and-collect.  Likewise, as a result of store fulfillment, we are seeing reports of up to 60% increases in sales to omnichannel customers.

To help accomplish these capabilities and for robust store fulfillment roll out, we are beginning to see a significant trend toward combining distribution centers with fulfillment centers.

If you’re looking for new strategies to better compete in this market, are you ready to put your money where your mouth is? Would you, or do you, use ship-from-store as a fulfillment strategy?

Best Regards,

Jim


More Resources

Video: The Right Fulfillment Center for E-commerce

Video: Amazon and Walmart – Facing the Titans

Whitepaper: Final Delivery – A Roadmap

Photo by deltaMike

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How’s Your Supply Chain ‘Talent’ Looking? New Industry Reports Offer Insight Into Employee Turnover and Retention

sc-talent-reportYou may remember my post in July about where supply chain talent has been and where it may be going. I discussed Tompkins Supply Chain Consortium’s Supply Chain Talent Report, which spotlights many buzz-worthy talent topics such as employee turnover and the effects of organizational events.

One of the highlights of the report is the topic of turnover and retention. Did you know that the cost of replacing an employee (per the Society of Human Resources Management) varies from 50% of their annual salary to 400%? Or that, according to the Pew Research Center, half of twenty-somethings would rather have no job than a job they don’t like.

This is alarming for all employers, but is of particular interest to supply chain organizations. The Consortium report reveals that many supply chain industries are seeing higher turnover, particularly in planning, procurement, and manufacturing due to outsourcing and closures.

While millennials continue to pave a path in the industry, it is interesting that the most successful employees either came from another company or as internal candidates making cross-functional moves.

There is also a struggle in supply chains to find the right talent with specialized skill sets. At the same time, current talent is being lured elsewhere for more money.

Since the original Supply Chain Talent Report was released, the Consortium has published five industry breakout reports, including third-party logistics (3PL), consumer packaged goods manufacturers, retail, industrial manufacturing, and distributors/wholesalers.

Be proactive and discover the strengths and weaknesses for talent in your industry. With employee turnover cost rates potentially reaching 400%, we should all be doing our homework on this topic.

Best,

Jim

More Resources

Podcast: Company Leaders on Supply Chain Talent and the Effects of the Recession

Survey Indicates High Priorities and Warning Signs for Supply Chain Talent in Industrial Manufacturing

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Transforming Operations to Exceed Retail Customer Expectations

makeupWe talk a lot about the explosion of e-commerce and what this means for retailers.

In more ways than I can count, the pressure is on for retailers and consumer products companies to deliver to customers as fast and efficiently as possible. Many traditional brick-and-mortar stores have evolved into their own “pseudo” fulfillment centers (FCs). As a result, we are seeing businesses offer next- and same-day delivery right out of their storefronts.

These new pseudo FCs create several challenges for companies. They must accommodate more orders at a faster rate. In addition, many companies’ distribution centers (DCs) are not cut out to accommodate such high volumes from a variety of order methods, and they are often keeping inventory at more than one DC or FC.

Bare Escentuals experienced a very similar dilemma. In case you are not familiar with Bare Escentuals, the company has a strong presence in the cosmetics industry and has not stopped growing since its first QVC run nearly 20 years ago. As sales surged, the burgeoning company was eager to consolidate its West Coast DC and a third-party logistics (3PL) facility in Michigan. Click here to learn how Bare Escentuals transformed its operational facilities to put its customers’ expectations at the forefront.

So what’s the ultimate solution to harnessing the power of e-commerce? There isn’t one simple answer, but assessing your network is a key starting point.

Like Bare Escentuals, look at your DCs or FCs. Are they functioning well or could a warehouse management system (WMS) make operations smoother? Would your business fare better if your facilities were consolidated?

Best,

Jim

More Resources

Retail at a Crossroads: Future Hangs in the Balance as Retail Industry Passes Tipping Points

The New Rules of Material Handling in the Distribution Center

Video: The NEW Demand-Driven Operations

Photo Credit: Steven Depolo

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Technology: Creating New Roles Daily for Retail and Consumer Products Supply Chains

easytouseWhile consumer products companies and retailers have experienced their share of changes over time, the rapid transformation we are seeing now has some interesting and unique drivers.

Supply chains and business models are in the hot seat as technology is changing (and will continue to change) everything.

Let’s take a quick look back. The main processes of the end-to-end supply chain are: Design, plan, buy, make, move, store and sell. In the past, consumer products companies had supply chains that did the first three-fourths of this list. Then the retailer’s supply chains did the last fourth. But increasingly, both industries are required to do all of it – the whole end-to-end supply chain.

Why? Because changing customer preferences spring from the use of new technology.

For example, Pew Research recently reported that a third of American adults own a tablet computer. With smartphones – and products being developed such as Google Glass, wearable smartwatches, and even something called a ‘phablet,’ – customers have fresh options to make purchases on the run from a huge selection of products. They can also very easily compare prices.

Of course, customers also want shopping that is convenient. Technology gives them this as well, with home delivery and in-store pick-up that they have come to expect in this age of the Amazon Effect.

Retailers and consumer products will continue to make strides toward an omnichannel presence that gives customers all of these options. One particular sector of consumers is the ‘connected generation,’ 18-34 year-olds who prefer to use payment alternatives and apps to review products and create shopping lists. Read more about how Millennials are shaking up retail and consumer products in this article.

If you are managing supply chains in these industries, how are you handling this major shake-up in the full end-to-end operational model? How do you see the latest technologies impacting your fulfillment and delivery?

Comment below, or send me a tweet (use the tag #talksupplychain).

More Resources

Retail Reflections - Retail Strategy and the Impact of Technology: Keeping Up with the “Connected” Generation

The Amazon Effect

The Amazon Cure

Photo Credit: iphonepics

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NRF Event Stresses Complexity of Supply Chain and Why Retail is at Crossroads

I just returned from the National Retail Federation’s Global Supply Chain Summit in Dallas. Many thanks to NRF for hosting this great event – a lot of new insights and many forward-thinking business leaders.

And I believe that the retail industry is beginning to understand the critical crossroads that they are facing and how huge a role the supply chain plays. In case you missed the summit, I wanted to share this  quick video clip from the keynote address, “Retail at a Crossroads,” and you can access the full presentation at http://www.tompkinsinc.com/events/2013/retail-crossroads-nrf-2013/

You can also watch this short video reviewing NRF’s diverse topics and how they show the complexity of today’s retail supply chains:

More Resources

From NRF’s blog about the event: “With Retail at a Crossroads, Supply Chain Value is Key”

More Retail Resources

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