Global operations and strategies for companies in industries like retail, consumer products, and food & beverage are becoming more and more important to profitable growth. These emerging markets, particularly in China, provide major opportunities.

Having a China strategy is more important than ever in 2012, as “China for China” production by Western companies is creating great opportunities for companies to grow worldwide.

While there is a lot of buzz for various industries, logistics service providers should also make emerging global markets like that in China a priority this year. A newly published 3PL report showed that both shippers and LSPs see China, India, Brazil and Mexico as the biggest emerging markets for the industry.

Tompkins’ experts agreed in this article on the top priorities for LSPs in 2012 that success in these markets will hinge on having “the right strategy, the right structure, and the right partners” in place.

Though it is a challenge, the rewards for moving into these markets are great for LSPs, even if there isn’t as much buzz in the industry as compared to others out there. Expanded global capabilities are good for both LSPs and shippers to reduce costs while gaining competitive advantage.

See more on other priorities for LSPs in 2012 in this article.

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Jim Tompkins

Photo Credit: FlyingSinger 

A variety of hot issues in the pharmaceutical industry are out there to tackle. But a big one that will continue to see a great deal of discussion, proposals and change in 2012 is the integrity of drugs and medical devices. Anti-counterfeiting, quality control, and security have traditionally been major priorities in this industry. A major part of this effort is track and trace, or an industry-wide effort to capture the pedigree of a drug or medical device from its production onward. Track and trace operations help reduce counterfeiting and other similar issues.

Track and trace initiatives are already making headlines this year in the US. According to the Pharma Times Online, new standards for track and trace in imports, anti-counterfeiting & anti-theft operations, and new best practices are the four main areas are being championed by the US Pharmacopeial Convention (USP).

While there are still disagreements about which standards and best practices are the right ones in this industry, the USP points out there are incentives for companies to come to an agreement. 2012 will be a key year in moving these proposals to becoming the standard for safer products in this industry.

For more on what to expect in the pharmaceutical and medical products industry in 2012, see this list of priorities for the year written by experts at Tompkins.

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Jim Tompkins

Photo Credit:  John Pavelka 

In recent years, the name of the game for consumer products companies was to rebuild and rejuvenate. An uncertain market demanded strategies that allowed for flexibility coupled with profitable growth.

What does 2012 require in terms of strategies in this industry? Consumer products are moving past rebuilding and rejuvenating – and I recommend one more “R” word: Reversing.

Specifically, I mean reverse innovation. The phrase itself sounds like a contradiction, but it’s of particular interest to consumer products companies, which generate innovations for their products perhaps more than any other industry.

Reverse innovation does not refer to going backward. It is the concept of innovating within emerging markets. Companies don’t traditionally look at these emerging markets for innovation. The norm is to innovate in the mature markets, and then allow these innovations to trickle down to emerging markets.

Consumer products companies can learn a lot by reversing this process and going to emerging markets to find innovations. Because of the way that this industry is growing and how more and more companies are moving into emerging markets, reverse innovation has an important place in keeping products fresh and encouraging new ideas.

A major part of the success of a consumer products company is the new product innovations it creates. In 2012, I expect that more consumer products companies will embrace reverse innovation along with the traditional process of innovation for their products.

What else can we expect from this industry in the next year? The experts at Tompkins collected the top strategies for companies in the consumer products industry in 2012, which you can read about here: Top Consumer Product Industry Trends for 2012.

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Jim Tompkins

Photo Credit: epSos.de 

Last year, the footwear and apparel industry dealt with many sudden changes and difficulties, including a spike in cotton prices. In 2012, changes are on the horizon. One development that the experts at Tompkins expect to see is more footwear companies moving into China. This move is not being made specifically to manufacture in China, but to sell to the market within the country itself. There is ample opportunity for Western footwear companies to fill in the gap. This is true especially among luxury brands, which are very popular in China.

However, some expectations for the market are likely to come from a major event this year: The 2012 London Olympics. Big brands in footwear and sports-related apparel are going to be on the world stage at the games, which is a great opportunity for these companies. Of all industries that could be affected, the footwear and apparel industry will see the biggest demand hikes from the games. It will be interesting to see how footwear and apparel companies respond to this unique opportunity in 2012.

For more industry strategies to use in 2012, read the new article by Tompkins experts, “Will 2012 Bring Stability to the Footwear and Apparel Industry?”

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Jim

Photo Credit: Ömer Ünlü 

What isn’t set to change or grow in the food and beverage industry in 2012? For instance, food safety will be a growing concern; more food and beverage companies are moving into the huge market potential of China; and sales of private label products are set to continue with the growth they have experienced over the last few years. 2012 is going to be a big challenge for this industry.

One more area of interest is mergers and acquisitions. This activity will be increasing this year as available cash and financing are becoming more available.

However, a more recent trend is that very large companies are splitting up. In 2012, some of the biggest American food companies will divide themselves, according to this Foodprocessing.com article. The companies in question include Kraft Foods Inc. and Sara Lee Corp. This is fairly recent news, and we may see more of these splits as the year continues.

For more on the big challenges we’ll be seeing in the food and beverage industry in 2012, read this new article written by Tompkins Associates experts: Strategies to Transform Your Supply Chains in 2012 for the Food & Beverage Industry.

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Jim Tompkins

Photo Credit: Michael Karshis 

Around the holiday season, many consumers purchase most of their items online due to convenience. The frustration arises when the wrong package is received or delivered late. That’s right…a late package, or a difficult return process: What could be more frustrating for consumers?

Online sales will continue to grow in 2012 and will become a bigger focus for retailers. Therefore, consumer sophistication, consumer behaviors, ease of access, and retailer incentives are all needed to boost online sales, as well as in-store sales.

For retailers this year, the question to ask yourselves is: Are you ready to grow? We know that supply chain organizations have their supply chains finely tuned - especially since retail customer service is not living up to standards - and now is the time to step up to the challenge. 

The key focus is improving customer service and managing processes. For instance, making your website user-friendly will allow for increased purchases and satisfied customers.

Below are some trends and challenges to be on the lookout for in 2012:

• Best practices
• Speed to market
• E-Commerce
• China as a market 
• Demand-driven supply chains

Following these five trends will position retailers to emerge as industry leaders and allow for healthy growth in the retail industry. Preparation will help beat out the competition, so begin strategizing now for profitable growth.

For additional information on retail trends: Is Retail Ready to Accelerate in 2012?

Go!Go!Go!

Jim

Resources

Strategies for Transforming Your Supply Chains in 2012

 

As we ring in the new year and welcome 2012, I have been seeing a lot of talk about ‘predictions’ for supply chains and business in general cropping up. Predicting anything about business in the last few years is a difficult, if not impossible, task.

I think it would be more worthwhile if we would consider what priorities we should have on our lists for the new year (versus guesswork). These priorities should lead to measurable results – instead of hoping for the best, we know we are working toward what’s best.

With this in mind, Tompkins’ experts prepared priority lists for a variety of industries, including consumer products, food & beverage, footwear & apparel, industrial & equipment, LSPs, pharmaceutical  medical products, and retail.

We also produced priorities for two major factors that will affect us a great deal in 2012: Supply chains in China, and what’s going on in merger and acquisition activity.

Visit the “Strategies to Transform Your Supply Chains in 2012” website to see each article for these individual topics – so you can get an idea of what priorities to expect in your industry this year. I am hoping each of us can harness the great potential that this year brings!

http://www.tompkinsinc.com/2012/

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Jim

Photo Credit: aussiegall

This the season of sharing, and I believe it extends to supply chain and business strategy knowledge.

Our supply chain experts are out in the field on a daily basis, spending time with some of the smartest supply chain leaders at leading companies around the world. These long hours with clients give us a lot to talk about in regards to current challenges in inventory, procurement, material handling, sourcing, distribution, transportation, network planning, growth strategies in Asia, and so on.

But it is impossible for us to speak to a larger audience with such a laser focus on clients. This is why we recently developed the Tompkins Supply Chaincasts. Now, our experts can pass along information that you need – sometimes even before you know that you need it.

The most recent webinar, The Latest in S&OP: Demand-Driven Processes, drew a record number of attendees and sparked some lively discussion. We often learn more about the topic from the questions that attendees ask. One question leads to a new area to explore, and we all benefit from the shared knowledge. Click here for a recap of the S&OP Q&A session with our experts.

Here’s list of past Chaincasts that are currently available on-demand:

• Warehouse SMP: Value and Processes - The Webinar for Warehouse Improvement
• The New Rules of Material Handling: How to Design & Implement Adaptable, Flexible Systems
• Bridging the LSP Performance Gap Perception: How Service Providers Can Build a Stronger Relationship with Clients

Upcoming topics include transportation, global trade and risk management, strategic market planning, supply chain assessment, organizational development and change management, network modeling and procurement management.

And in the meantime, if you have a question on any of our topics or a suggestion for a future webinar, just reach out to our experts. Thanks for sharing.

Go!Go!Go!

Jim

More Resources

Supply Chain Excellence Center

Supply Chain Consortium

Once again, I hand over my blog to this guy who kind of looks like me and knows a great deal about benchmarking and supply chains. I sometimes wonder how my parents raised two geniuses? Here is my brother, and the Executive Director of Tompkins Supply Chain Consortium, Bruce Tompkins, with his perspective on demand-driven supply chains.

The concept of a demand-driven process seems clear enough and makes sense to me as an old lean manufacturing and pull system guy. So I’m not going to write another article expounding the virtues of being demand-driven, and I am certainly not going to attempt to tell anyone how to become demand-driven.

That is a job for your supply chain team and some technology folks to figure out.

But this does not stop me from sharing my ideas (this runs in my family, by the way). Like most processes and solutions, demand-driven requires a toolset that is company-specific.

I have been thinking about this recently and would like to share a real-life experience that occurred this past weekend. The experience has cemented in my mind and explains what demand-driven can mean to a company. 

I’ll give you the short version: Over the weekend, I was traveling with some folks to a nearby city. Although we weren’t going very far, we were not familiar with the territory. But, luckily, my companions had a GPS device to help navigate in and around town.

Without the GPS to keep us on track and continuously let us know how we were progressing, we would have wasted considerable time, energy and money getting to our intended location. 

The GPS acted like a demand sensing tool, providing us with real-time information when we accidentally got off track and giving us very helpful tips about the road ahead. At that point, a light blub went off and it occurred to me just how much being demand-driven is like navigating with a GPS device.

Of course, there are many kinds of GPS devices: some new and state-of-the-art, some old and slow, and some look a lot like a map. So it is important to choose your demand-driven GPS wisely. And it follows that you should choose your demand-driven supply chain experts wisely.

How do you view demand-driven in your company’s supply chain? Are you there yet?

Bruce
 

More Resources 

Banish Forecasting Errors, Overstocks, and High Logistics Costs with the Magic Wand of Supply Chain Transformation

Register to View the Tompkins Supply Chaincast On-Demand: The Latest in S&OP: Demand-Driven Processes

Photo Credit: Amy Guth

Supply Chain Intelligence (SCI) is a relatively new term. It was created to help people like me understand the relationship between the three B’s: Business Intelligence (BI), Business Analytics (BA) and Benchmarking. 

It is portrayed as the addition of external performance metrics to a BI/BA framework. But if you are like me, this is only marginally helpful in understanding how these components come together to strengthen a supply chain.  So, let’s break this down a bit and take it a piece at a time.

BI has a goal of connecting data from different systems and repositories across the supply network to all users to help spot potential problems and /or opportunities. 

BA takes BI one step further by making extensive use of advanced analysis and decision making techniques to support a sense and response framework.  SCI, then is the combination of BI/BA and supply chain benchmarks.  It offers the power of BI/BA with the ability to compare performance to external metrics. 

Pretty cool!  While I’m sensing, analyzing, responding and executing changes across my supply network, I can also be comparing my metrics against best-in-class benchmark metrics to see where and by how much I need to improve my performance.       

At this point, you may be asking, “Where does SCI drive value in the supply chain?” Well, the answer depends on the characteristics of your supply chain. Generally, SCI:

• Lowers transportation costs
• Improves carrier performance
• Identifies sources of material cost variance
• Reduces lead times
• Pinpoints out-of-compliance shipments
• Identifies inventory excesses and shortages across the global network
• Optimizes safety stock – quantity and placement
• Decreases total end-to-end supply chain costs
• Improves supply / demand balancing
• Helps balance customer cost versus service tradeoffs 

The real leaders in supply chain performance are working with BI/BA tools now to improve their execution.  Adding benchmark metrics to the equation brings capabilities to a new level, and this is explored in more depth in the new Supply Chain Consortium Report, Supply Chain Intelligence - The Power of Combining Analytics with Benchmarks.

Does your company have SI? How do you see this new intelligence benefiting your business strategy?

Go!Go!Go!

Jim

More Resources

More Supply Chain Benchmarking and Best Practices Resources

Learn more about the Tompkins Supply Chain Consortium

Learn more about Supply Chain Intelligence

I have asked Bill Loftis, a supply chain and transportation operations expert who recently joined Tompkins Associates, to talk to us about horizontal collaboration once again. He has conducted a number of development and implementation initiatives for clients involving collaboration for improved distribution and transportation. Take it away, Bill!  

In my last post, “Horizontal Collaboration: It’s Back on the Front Burner,” I explained how collaboration has returned to the forefront for progressive shippers.

Today, I want to discuss a particular solution – collaborative distribution.  This solution is particularly compelling for several reasons. 

First, the focus is on service. The idea is to flow products nearly every day to eliminate stock-outs, for the larger purpose of increasing revenue and improving competitive position.  Operating this product flow in response to the actual market (versus forecasting) can be achieved by demand-driven supply chain processes.

Second, collaborative distribution converts a significant amount of truckload mileage into intermodal, so it has a unique sustainability advantage over conventional solutions. 

This is why I have been pushing the collaborative distribution concept recently and will continue to do so.    

But you might be wondering, how is it possible to flow products daily and also use intermodal service?  Three key concepts create this scenario:

1. Combine volumes of multiple shippers to provide high shipping volumes (collaboration).
2.  Create a separate collaborative network and locate DCs close to the customer (in addition to the conventional dedicated network). 
3.  Regularly, consistently move replenishment products that should flow on the collaborative network informed by demand-driven decisions that reflect the market in real-time  – More erratic product flows should be on a dedicated network.

Inventory & Transportation Challenges

Note what I am describing here is a completely different network. That’s what makes it a different and better strategic solution. Dedicated (single company) networks are the default standard in America today, and when cost-optimized to as few DCs as possible (which everyone in practice does), dedicated networks present tremendous cost versus service challenges in inventory and transportation. 

The inventory challenge is created because the economic order quantity is a full truckload, meaning for most customers, delivery frequencies are weekly or often much longer.  This creates tension between the costs versus service: You can either compromise on cost by shipping LTL, or suffer stock-outs on selected items when waiting for the next truckload consolidation.  Not pretty.

Long haul trucking is the transportation challenge. Service-minded shippers are constantly trying to improve service (retailers demand 98% on-time, but shippers only average 94%). In this fragmented space, there is only so much one can do. 

The reality is, for a large CPG manufacturer to achieve 98%, its rates will increase a few points at a cost increase of millions per year.  So they don’t do it, service is less than desired, and stock-outs persist.  This unpredictable supply base is inherent in long haul trucking and is a defining attribute of a cost-optimized dedicated network, made worse in capacity-constrained or high-fuel markets.      

So how is a collaborative network different?  Begin by envisioning what a collaborative network looks like: with DCs placed close to the customer (within 150 miles).

Given high volumes of co-mingling multiple shippers, the economic order quantity (EOQ) and delivery system changes.  With multiple shippers on the same delivery, a shipper’s EOQ becomes a pallet, rather than a truck.  With daily deliveries within 150 miles, this is no longer a long haul network, it is a dedicated shuttle network, similar to outbound retail transportation where 98%+ on-time is standard.  Collaborative networks eliminate the inventory and transportation constraints of dedicated networks. 

The Real Reason for Collaborative Networks

Imagine ... reducing your economic order quantity from a full truckload to a single pallet, and eliminating long haul trucking from your delivery system.  This can happen with collaborative distribution.  My message today is that collaborative networks are superior because they shed these constraints. 

There is much more to discuss (the intermodal advantage, how costs are reduced, how to implement these ideas), which will come in later posts.  But let’s close on the most compelling point:  with such difficulty, why pursue this? 

My opinion:  It’s about service, increasing competitive advantage, and adding value by increasing sales.  It’s not about cutting another penny, but about driving sales. 

To help make my point, I would encourage you to read Steve Demming’s recent contribution on Forbes.com where he says:  “Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further.”  He suggests the one reason why this happens: “It’s more difficult to add value than to cut costs.” 

Lasting companies add value.  I suggest that logisticians should aspire to this more difficult but smarter path of creating solutions that increase sales.  I believe this is the way of collaborative networks:  more difficult, yes, but also smarter and better.

Thanks for reading, and let me know your thoughts on this topic.    

Procurement certainly has come a long way.

The simple definition of “procure” that everyone knows is “to obtain, buy or acquire.” A more complicated definition would be something such as “obtaining goods and services from requisition to receipt and approval of invoice payment.”

Today, procurement (as “BUY”) plays a crucial role in all aspects of the supply chain mega processes of PLAN – BUY – MAKE – MOVE – STORE – SELL/DELIVER.

The new Tompkins Supply Chain Consortium report, Leading Procurement Practices: Trends of the New Procurement Organization, notes that procurement is shifting from tactical to more strategic activities.

In the past, procurement was very much a transaction-oriented process, whereas today it is a strategic initiative process. The shift from tactical to strategic can be attributed to procurement activities such as market knowledge, supply base management, risk management, and supplier selection, However, the core functions of strategic sourcing, purchasing, procurement IT and supplier relationship management are also still highly important.

Procurement is beginning to add value to the company through strategic alliances and advanced competitive analysis. And as the function gains ground, supply chains are demanding more skilled procurement professionals.

Some of the best and brightest are currently seeking careers in the procurement field, and they need to understand how to be effective in today’s complex supply chain environment.

Organizations are looking for broader experience in procurement due to increased globalization. This includes advanced relationship building and multilingual skills. Even professional societies are providing certification to enhance the skills of the professional workforce.

The Consortium report also indicated that the number of colleges with supply chain and procurement degrees is on the rise. So, I think it is safe to say that involvement in procurement is higher and will continue to advance further into supply chains.

What is your company’s current take on procurement? Is the evolving nature of procurement affecting how you hire staff?

Resources

Hot Topic Report: Leading Procurement Practices: Trends of the New Procurement Organization

Article: Procurement Process Improvements Can Lead to Increased Shareholder Value

Case Study: Procurement Assessment  

The Buy Process: Asia Supply Chain Excellence