As technology facilitated by the Internet grows more powerful, supply chain operations are being impacted in new and positive ways.

There is more information available to make a decision about the best location for a warehouse or manufacturing facility. There are new, real-time tools that use simulation and modeling to determine the lowest-cost network possible.

But here’s some irony for you. Although technological advances have greatly impacted our lives and work in many great ways, oddly enough, supply chain network planning is one area in which technology can almost get in the way of developing the best networking plan.

With so many software packages available from a number of vendors, planning a network has never been easier. But oftentimes what I see is companies placing too much emphasis on choosing a software tool versus choosing the best strategy first. The software must fit the strategy to be successful.

Yes, network planning has come a long way since its early days when it seemed like the Wild West – we were all on the frontier of planning a company’s supply chain network. What was guesswork in the past is bolstered by tools and software packages.

But let’s remember – putting strategy before structure is much more important than the many technological tools we have at hand.

What trends are you seeing in network planning? Has your organization reached the transformation phase yet?

For more on the importance of a holistic approach to network planning that puts strategy before structure, read this article: Supply Chain Network Planning Transformed.

Go!Go!Go!

Jim

More Resources

Podcast: Optimizing the Supply Chain with Network Planning

Supply Chain Strategy Solutions

Asia Supply Chain Excellence Report

Lately, business leaders have been asking my advice on preparing for the future. Specifically, they want to know how to best organize their supply chain processes, people and technology to ensure success.

My answer is one long but important term: Organizational Development and Change Management (ODCM).

ODCM is the development of your organization and how you manage change. The way you manage change will impact the success and viability of your business.

Today’s demand-driven supply chains require organization based on demand volatility, risk, and flexibility.

The problem is that many company leaders do not realize that supply chain is no longer about integrating different functions within a company. But with the right perspective on supply chains as a whole – one function impacts another and they are all interrelated – you can prepare your organization to weather future storms.

For more information on ODCM strategies, tune into our latest Tompkins Supply Chaincast, Transforming the Supply Chain Organization for Increased Value Creation, at 2 pm EDT on May 24.

Go!Go!Go!

Jim

Resources

Tompkins Supply Chaincasts

Demand-Driven Supply Chains - Getting It Right For True Value

Photo Credit: Micah Sittig

Sir Issac Newton got it right. We all know, “What goes up, must come down.” But now I ask the question, “At what point, does it come back up – and then go back down again?”

Looks like Newton has a response for that one too: “For every action, there is an equal and opposite reaction.”

This may be true for physics, but do these same principles apply for commodity pricing and availability?

Commodity pricing volatility has become all too common over the past decade, with wild pricing swings. There have also been issues with ensuring ongoing continuity of supply for some commodities, creating complications throughout the supply chain.

An article that we recently published talks about these issues and suggests tactics that supply chains can use to minimize the impact of price fluctuations. Check out the article and let me know what forces you are using to keep your commodity prices inert.

Go!Go!Go!

Jim

Resources

Strategies to Transform Your Supply Chains in 2012 for the Food & Beverage Industry

Supply Chain Trends in Consumer Products

Chain of Uncertainty (Stores Magazine)

The New Rules of Material Handling: How to Design & Implement Adaptable, Flexible Systems (Tompkins Supply Chaincast)

You don’t have to be the CEO of a supply chain consulting firm to see that companies that have built their strategies around the Internet and social media are the ones achieving profitable growth.

The direct-to-consumer market has exploded, and the success of e-commerce companies – such as Amazon and traditional retailers – have left no doubt that consumer buying trends have changed.

Add to that the increasing trend of manufacturers entering the direct market, and we are seeing unprecedented growth. Consequently, these companies are now racing to meet consumer needs. Estimates have put the rise of e-commerce sales in the U.S. at 14% in 2010 and 20% by 2015.

The companies that are seeing this growth – and planning for it – are now asking questions that will strengthen their supply chains and meet consumer requirements.  Some of the questions that I’ve been asked lately include:

• How can I meet the range of product needs of consumers?
• How will my distribution network support a direct-to-consumer model?
• What changes are needed in my supply chain to meet the growing demands?
• Should I fill consumer orders myself or use a logistics partner to support this market?
• What specialized tools and software do I need to be successful in this market, knowing that poor service and complaints can be posted online at lightning speed?

These are some tough questions for supply chains and business leaders. But I am convinced that the time to act is now, before the market opportunities pass your company by.

What action is your company taking to embrace this market trend? Are there any questions that we can answer for you?

Jim

More Resources

China's Consumer Products Markets: Understanding the Changing Chinese Consumer

25 Ways to Lower Inventory Costs

What's So Special About Direct to Consumer Distribution Center Implementations?

Luxury Retail and Smaller Store Footprints on the Rise

Remember that old expression, “Not for all the tea in China?” Well, China's well-known tea market has a new competitor: The country's consumers are cultivating a growing taste for coffee, according to recent news reports. 

Coffee sales in China were up 20 percent in 2011 over the previous year, and coffee shops are becoming more popular places to socialize.

The general consumer market in China – from automobiles to makeup to really any consumer good you can think of – is growing at a rapid pace. At a recent parliamentary session, China's Premier Wen Jiabao said that his first priority for 2012 is expanding consumer demand through policies that encourage consumption.

These are not the most intriguing things I have heard about China’s consumer market lately, however. Steve Ganster, with Tompkins International’s Shanghai-based office, and Bruce Tompkins of The Supply Chain Consortium, just released a podcast about consumers in China that provides amazing insights and knowledge. It’s available here:

http://www.tompkinsinc.com/industries/consumer-products/consumer-products-podcast.asp

Listen to the podcast audio or read the text transcript to find out:

• Who is the "female prestige consumer" in China and what does she buy?
• What motivates someone in China to buy something, from essential goods to luxury products?
• How can the infrastructure keep up with more and more new stores popping up?
• What does this growing consumer market mean for supply chains?

GoGoGo!

Jim

Photo Credit: Dyobmit

While the early days of e-commerce were mainly limited to books and computers, the selection of items for sale on the Web has now become endless.

What can’t you buy online these days? (Don’t answer that, because I really wouldn’t want to know!) E-commerce is certainly fulfilling its mission to electronically exchange goods and services with no barriers of time or distance.

Take Amazon, for example. The e-commerce giant sets the tempo of the online industry with low costs, convenience and customer service. Not to mention the widest variety of products on earth. The company even has an 18 percent e-commerce market share in the United States that is expected to increase to 33 percent by 2016.

One of the key reasons Amazon is so successful – it minimizes shipping costs by performing a competitive bid with parcel carriers to obtain the best possible discounts and service levels. Obviously, Amazon has a number of distribution, shipping, procurement, tax and other incentives that smaller companies would be hard pressed to duplicate.

Other e-commerce organizations who wish to gain market share must continue to focus on reducing costs, provide a broad assortment of products, and maintain very high levels of customer service.

What does the future of e-commerce look like?

• By 2015, e-commerce is expected to be worth $1.4 trillion of business worldwide.
• Online sales (globally) are predicted to top out at 20% of all sales in the next few years. 
• Lines will continue to blur between retailing and e-tailing, with technology advancements leading to greater digital influence on all sales. We call this blend of technology and retail “omnichannel” (which I will cover in a later post).
• More companies will use a fulfillment and distribution strategy with large picking areas, often picking directly out of case storage and optimizing pick paths. 

What are some steps that your company is taking to gain an advantage with e-commerce? Please leave a comment and let’s keep learning about this evolution together.  

Go!Go!Go!

Jim

Resources

Keeping Up With the E-Giants

Case Study: Retail Launches New E-commerce Channel

Photo Credit: Phil and Pam

As a child, I used to enjoy brain teasers. Here’s one that I learned around the age of 9 or 10.

Say that you have four chains and each chain has three links in it. And, although it is difficult to cut the links, you wish to make a single loop with all 12 links. What is the fewest number of cuts you must make to accomplish this task? The answer, of course, is three cuts.

The irony here is not lost on me – I did not realize at the time that “chains” in this simple riddle (in terms of “supply chains”) would go on to be my career and often my obsession!

You may be wondering why I am reminiscing about brain teasers. Well, SupplyChainBrain recently published its Annual Resource Guide & Executive Yearbook, and it’s packed with valuable insights that I thought I would tease your brains with today.  

1. What’s the most effective way to minimize volatility on supply chains? Hint: Use the power of “DD.” See the answer here.
2. What’s replacing spreadsheet reporting in transportation management and “intelligently” integrating transportation with inventory? Learn the answer here.
3. What’s the best way to synchronize movement of order components across the DC? Hint, it takes control.
4. Which process has evolved from manufacturing conflict resolution in the late 1980s to a “SOPer” overall supply and demand balancing strategy today?
   Read the answer here.

Thanks for playing, and feel free to throw a few supply chain brain teasers my way.

Go!Go!Go!

Jim
 

Resources 

Supply Chain Excellence Center

Tompkins Supply Chaincasts – complimentary webinars 

Photo Credit: Creative Tools

In my mind, there is a clear relationship between the concept of demand-driven and successfully managing risk in the supply chain. Is this relationship negative or positive? Let’s weigh the pros and cons.

On the positive side, demand-driven processes operate with real-time (or near real-time) data. This responsive data greatly reduces the time it takes for a supply issue to move upstream, as well as alerting the rest of the supply chain that there is an issue. In turn, this allows the supply chain to react quicker and potentially solve supply problems before they become real risks to the network.

For example, if a supplier’s plant catches on fire, it may take weeks for it to get back up to speed. This is a situation in which demand-driven would allow a company to act quickly and avert substantial risk to the supply chain.

You can also make the assumption that if you are demand-driven, then you have, at a minimum, evaluated the flexibility of your supply chain. Flexibility can take the form of product, process, procurement and operations (primarily capacity).  

The greater the flexibility in your supply chain, the better you will be able to manage risk associated with more minor, short-term disruptions. Of course, large-scale and major disruptions (such as a Tsunami) will still wreck havoc on your supply chain if adequate contingency plans are not already in place.

On the negative side, you could assume that demand-driven processes afford a company the opportunity to operate with fewer inventory buffers, and if not managed well, can put you at a higher risk of disruption. However, even the timeliest information will not help ease the problem if there is limited inventory to cover supply chain disruptions.

Certainly, demand-driven is not a complete panacea for supply chain risk. But if executed along with a flexible supply network and solid contingency plans, demand-driven can be one of the best paths to risk reduction.

So what are your thoughts on strategies to reduce supply chain risk? Do you see how demand-driven, risk and flexibility are all connected?

Go!Go!Go!

Jim

Resources

Demand-Driven Supply Chains - Getting It Right For True Value

The Ten Steps to Demand Driven Supply Chains

Photo Credit: Robert Couse-Baker

Once again, I turn my blog over to Bruce Tompkins, my brother and the Executive Director of Tompkins Supply Chain Consortium. With St. Patrick’s Day coming up in a few weeks, he’s been thinking green. But he tells me it’s a different kind of green.

My initial intent here was to do some research and identify just a few top performance indicators that signify how “green” an operation is – four or five at the most.

With my previous work in sustainability, I thought I could easily create this short list. What I didn’t realize was that my research would lead to a couple of websites where everything environmental would be located and performance indicators would be abundant.

I found many, many resources that have lots of detailed information and a wide range of performance indicators.

One of the key points I learned is that measuring environmental performance requires a look at all different areas of an organization – materials, energy, water, emissions, effluents and waste, products and services and many other topics.

So I decided to identify a Top 10 list of environmental performance indicators.

This was a long way from where my original vision started, but I hope it provides you with some metric areas to think about when reviewing sustainability in your company.

My top 10 sustainability indicators are:

1. Percentage of materials used that are recycled input materials
2. Direct energy consumption by primary energy sources per unit of output
3. Energy saved due to conservation and efficiency improvements
4. Percentage of water recycled and reused
5. Total direct and indirect greenhouse gas emissions by weight
6. Emissions of ozone-depleting substances by weight
7. Nitric oxide (NO), sulfuric oxide (SO), and other significant air emissions by type and weight
8. Total water discharged by quality and destination
9. Total weight of waste by type and disposal method
10. Percentage of products sold and their packaging materials that are reclaimed by category 

If your organization can honestly say that you are measuring performance in each of the areas identified in the Top 10, then you are well ahead of the pack.

I’ll also bet you have a thing or two that you could add to this list. If you do, please leave a comment, and we can make this a running list on how to be greener in your operations.

Bruce Tompkins

Resources

Supply Chain Sustainability Excellence Center

Tompkins International Partner, American Energy

Waste and Recycling Sustainability: Ideas for Reducing Your Company's Impact on the Environment, a Supply Chain Consortium Report

As a friend of mine recently quipped, “This process allows your customers to do the talking and your inventory to do the walking.” She was referring to demand-driven supply chains (DDSCs).

This is not a fad. DDSC is a transformational strategy because it changes the way organizations think about the marketplace – replenishment, promotion management, markdowns, and so on, for the end-to-end supply chain. Demand-driven supply chains offer a way to get ahead of the competition by reducing inventory, satisfying customers, and taking care of your organization’s bottom line.

To prove my point about demand-driven, let me share an article with you that I read a couple weeks ago in Supermarket News, POS Drives Replenishment in Food Lion Test.

To summarize, Food Lion is working with is vendors, such as PepsiCo, to “replenish its distribution centers (DCs) and stores by offering them visibility into current and expected consumer demand as reflected by store-level inventory and sales.”

According to the article, “the results of the pilot were ‘staggering.’ Food Lion’s DC inventory was reduced between 12% and 27%, DC out-of-stocks were cut between 21% and 77% and store out-of-stocks were trimmed by 20%.”

Wow, the numbers speak for themselves. Why keep your capital held up in inventory?

It may require some upfront expenses to get your supply chain operating with demand-driven processes, but in the end you will see fewer headaches and higher profitability, along with better visibility for your end-to-end supply chain.

If you would like to get a fundamental grasp on demand-driven, download this new paper, Demand-Driven Supply Chains: Getting It Right For True Value.

Need further evidence? Look at the success of Apple, P&G, Amazon, Cisco Systems, and IBM – all have begun to recognize the opportunity that DDSC provides.

They have changed their operations strategies to focus heavily on demand-driven opportunities and transformed their processes, people, and technologies to execute in superior ways.

Is your supply chain demand-driven? If so, what benefits are you seeing? If you are moving in that direction, what tips can you offer other companies?

Go!Go!Go!

Jim

Resources

Demand-Driven Supply Chains: Getting It Right For True Value                               

Principles and Benefits of Demand-Driven Supply Chains

Photo Credit: jimmyharris

Celebrations recently came to a close for the Chinese New Year. The Year of the Dragon has begun, making it a good time to reflect on what’s ahead for the country.

In China, 2012 will be a year of keeping economic growth steady, as well as employment. Trade is expected to continue to soften, just as it did in 2011. Western companies should anticipate some level of currency fluctuation as well.

Change in the political scene is also likely in China, as the country transitions later this year to new leadership when both the president and the premier step down from their party posts. Various policies in business taxation, intended to stimulate growth in some areas, will occur in 2012.

But what do these expectations mean in terms of profitable growth strategies for Western companies looking to move operations into China?

Michael Zakkour, who writes the China Business Blog and Podcast and is a Principal at Technomic Asia (a Tompkins International company), posted in his blog that China needs to continue to be the main focus of strategy for profitable growth.

Zakkour noted that one major adjustment to strategy for Western companies moving into China is the increased need to send the “A” game to the country. A typical move for Western companies is to try innovation and ideas in their home markets, then move them later into China as an afterthought. This includes people, processes and technology.

 To be competitive, Western companies must move the innovative people, processes and technology into China at the same time as markets in the West, or even as the first market entry point.

For more tips on market entry into China, see Zakkour’s entire post at http://www.technomicasia.com/blog/2012/02/08/top-8-trends-in-china-for-2012/

Is your company in China? If so, what are you seeing now and what changes do you expect throughout the year?  Be glad to compare notes.

Go!Go!Go!

Jim

More Resources 

Asia Supply Chain Excellence

Asia Supply Chain Excellence Report - January 2012

Photo Credit: L2F1 

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.

GoGoGo!

Jim Tompkins

Photo Credit: epSos.de