Category: Eagle Eye

The Resilient Supply Chain: Global Trade Unrest

September 30th, 2018

In today’s Amazonian environment, the customer experience is of paramount importance.      Nothing else matters if the customer isn’t happy. Thus, all the conversations going on about trade really just come back to the customer.  What is the best way to service your customers?

 

 

In manufacturing circles, there are many elements converging to strengthen manufacturing in the United States:

  • There are lots and lots of customers in the U.S. and they all want products and services delivered rapidly (making it less conducive to producing half way around the world).
  • Customers change their minds frequently and last minute changes aren’t conducive to long transit times.
  • The new tax law has made the tax rates much more comparative to other nations.  
  • Deregulation has definitely made manufacturers more on par with other nations.
  • Technology improvements have made it more cost effective to produce in the U.S.

Globally Interconnected
Even though manufacturing is surging in the U.S., we live in a globally interconnected world.  Very few, if any, clients source 100% of all materials within the U.S. If you go to suppliers twice removed, you’ll definitely be in global territory.  Thus, global trade remains a key issue.

Tariffs
In logistics circles, there is a lot of concern about the impacts of tariffs on global trade.  Will customers still bring in the same level of imports? If not, how will that impact the ports, distribution centers and transportation?  

Interesting that it hasn’t slowed down yet. The ports are having a record breaking year. We’ve seen price increases start to occur as they are passed on to the next person in the supply chain.  However, the question remains – is this good or bad? And will it substantially change the supply chain in any way?

Global Trade
Certainly there are a lot of heated discussions surrounding global trade.  We have clients who are positively impacted because it just makes them more competitive and on par with the rest of their industry.  And we have clients who are up in arms because their raw material prices are increasing and they are concerned about how to pass it on to their customers.  Will this put them at a disadvantage vs. a competitor who doesn’t source from overseas? Or does it just even the playing field?

Strategic Questions and Decisions
Strategic decisions are beginning to be impacted as well.  For example, Ford decided to not produce a new small car in China.  With the 25% import tariffs, it no longer made financial sense. A few clients are thinking about whether to expand into Mexico and the U.S.  There is uncertainty with NAFTA . However, the experts believe something will carry forward. Perhaps with a resilient supply chain, the key is to not guess and focus on your customer.  If your customers are in the U.S., Mexico is closer to the U.S. than China. That is a fact that won’t change. One thing is definite – things will continue to change and evolve.

Have you built resiliency into your supply chain so you can successfully navigate ever changing business conditions?



Gaining New Ideas to Increase Business Value

August 8th, 2018

Every executive we work with is interested in increasing the value of the business.  Whether a small closely-held business with an owner who might want to sell the business or exit with an ESOP, a private-equity backed company aiming to achieve the ideal exit strategy per the private equity agreement or a large, complex organization working to increase shareholder value, increasing the value of the business remains a unanimous top priority.

Understanding this objective is quite different from fulfilling it.  There is a reason the most successful businesses have teams of people rather than one person who has to come up with every idea – it is certainly more sustainable!  

So, how can we encourage these ideas? Here are several ways that we’ve seen success achieved consistently over 25+ years in both the corporate and the consulting world with manufacturers and distributors.

  1. Engage your employees – Definitely one of the “easier said than done” items; however, it is also one of the most consistently successful.  As the Gallop polls show, those companies with a higher percentage of engaged employees significantly outperform the rest.
  2. Involve your customers – Who can better than your customers to generate ideas that will ensure a superior customer experience while increasing the value of the company?  Don’t just go to your top 10 customers in volume. Think about your long-term customers. It can also be worth it to collaborate with customers on the brink of being an unprofitable and prompt ideas to turn it around or end the relationship on a “good note”.  You never know what might happen. We’ve seen dramatic turnarounds, just as often as we’ve seen the rest of the company improve when getting rid of the “rotten apple customer”.
  3. Collaborate with your suppliers – Aside from your customers, who else might have a substantial impact on your performance?  Your suppliers! If you can devise new win-win approaches together, imagine the possibilities.  For example, when I was a VP of Operations and Supply Chain for a mid-market manufacturer, we collaborated with suppliers to develop a new material so that we could reduce our usage (increasing our profit) and provide a benefit to our customers (better performance/ higher value for them).  We became a closer partner with our supplier and grew each of our businesses and profits while enhancing the value to our mutual customer. A win-win-win.
  4. Ask colleagues outside of your area of expertise – Just because your colleague is in a different function doesn’t mean he/she won’t have a great idea.  Take the time to explain an important project to related colleagues outside of the project or your area of expertise.   Ask for their thoughts, watch-outs and the like. You never know where the next great idea will come from.
  5. Consult with experts / advisors – Attend trade association meetings.  Dig into industry journals. Ask questions of LinkedIn groups. Pursue alumni colleagues.  Consult with an advisor, consultant or financial expert. Join a peer group.  

There is no doubt that the most successful executives utilize all of these techniques to make sure they generate a seemingly never-ending stream of ideas to increase the value of their business.  Set aside time on a daily, weekly and monthly basis to priorities these activities.  Do not expect an immediate payoff.  However, if you are consistent, you’ll find success one day down-the-road.  After all, it may only that one idea to make a significant impact!

 



Should I Move?

July 9th, 2018

Our clients frequently call with questions such as:

  1.  Should we renew our lease?
  2.  Should we move to a lower cost area?
  3.  Should we move to a lower cost state?
  4.  What considerations should we think about when evaluating our manufacturing and logistics network?
  5.  Should we outsource?

Thus, we thought it would be prudent to address some questions and themes that should be evaluated from a strategic point-of-view when discussing supply chain network assessments.  

Let’s start by saying that our top clients begin THINKING about these topics several years in advance. Similar to selling a business, it isn’t the best plan to evaluate whether to renew a lease at the last minute or to be forced into a particular partner or location because you started preparing “too late”.   

Instead, why not think ahead….

  1.  Where are your customers?  – As much as we all want to reduce costs especially in today’s Amazonian environment, we also need to remember that customers expect rapid deliveries, change their mind frequently (and expect agility) and desire easy returns.  Thus, where are you located in comparison to your customers?
  2. What are your customers’ expectations?  – Lead times. Personalized service.  Return policies. Vendor managed inventory.  Future forecasts. What will they expect a year from now?  Are you already planning for these needs?
  3.  Where are your suppliers?  – Similar to your customers, it is important to consider where your suppliers are located as well.  Do you receive product from the ports? If so, what volume is related to the ports?
  4.  What access do you have to people? – We evaluated Nevada for one of our clients. However, when we talked with local contacts to estimate building / lease costs, we also discovered that as low as the overhead might be, freight aside, there were no people.  Tesla had absorbed them all and there were requests to supply people from Southern CA to support current workloads. People can certainly be relevant!
  5.  What type of freight partners/ rates are in place? –  No matter how close you might be to your customer, freight can add up – and, more importantly, delays to your customer are VERY costly (lost business, charge backs from customers such as Walmart, ill will and more).  Just because you have carriers with your current situation, it does NOT mean that will be true with your new situation. Freight is tight and rates are going up! And, remember last mile considerations are complex. Last mile. Last minute!
  6. What type of transportation network is required to support your business?  – In addition to freight considerations, will you need to think about parcel, rail, ocean freight, and other modes of transportation?  Or should you be considering these options?
  7.  What inventory levels are built into your network?  – Inventory = cash tied up.  

There is quite a bit more to think about than solely a cost cutting exercise.  Most clients call due to concerns about cost – as important as cost is, taking the strategic / high-level view can ensure your service, total cost (including hidden costs) and cash flow are maximized.  

Have you started thinking ahead?  If you are interested in our newly upgraded service offering in response to the Amazon Effect of warehousing/ supply chain network assessments, contact us.



Collaboration in the Supply Chain

May 31st, 2018

To succeed in today’s Amazonian environment, we must keep strange bedfellows.  We just love the Amazon example of innovation – partnering with the U.S. Postal service – known as one of the least-innovative organizations out there.  But it works! Who ever thought you’d see a U.S. postal service mail truck delivering on Sunday for Amazon?

cross-functional teams

 

At the Southern California E-Commerce and Logistics Summit, there were several intriguing collaborations:  

  1.  Union Pacific and BNSF Railway – Although there was a healthy competition over resources (not surprisingly since both are experiencing a skills gap), there was also much collaboration over issues.
  2.  The AQMD and Staunch Opponents of Indirect Sourcing – Although there is little compromise in the widespread concern over indirect sourcing, there were panelists who are working to bridge the gap.
  3.  Political leaders and Business Owners – Working together for progress, even with the distractions and disruptions that occur on a daily basis.
  4.  Amazon and their Latest Partner – Doesn’t it seem like there is a new intriguing partner announced every week.  Kohl’s could be considered a foe but partners for win-win results but it is ‘old news’.  Recently, Amazon announced another competitor partnership with Best Buy. Who will be next?  Are you thinking about how to partner with competitors?
  5.  Technology companies and all others – In the era of data and technology, people like Google, Microsoft and Apple are collaborating with everyone – car companies, IoT devices and machinery manufacturers, systems providers and many more.  

Are you taking a hard look at your collaborations and partners?  Perhaps take a more innovative approach to what you might have “assigned” to procurement last year, so you’ll be around next year.

 



Have You Thought of Crossing Borders Lately?

March 15th, 2018

There was an export panel at the Manufacturers’  Council of the Inland Empire 7th Annual Summit, and it brings to light the vast opportunity of export.  Additionally, I had a lunch with a top international attorney and an international research expert recently, and it opened my eyes further on the topic of export.  Why do we always think about import but forget to export?

Less than 1% of America’s 30 million companies export and less than 39% of US manufacturers export.  Of those that export, 58% export to only 1 country. Why? What is going on? In the same breath, the statistics show that  Made in the USA is a compelling proposition and there is VAST opportunity to sell products in other countries. You don’t even have to go far with Canada and Mexico at our borders.  

According to a study published by the Institute for International Economics, U.S. companies that export not only grow faster, but are nearly 8.5 percent less likely to go out of business than non-exporting companies. Are we not interested in profit????  This panel has found success in export.

 

 

For example, Kusum Kavia, president of Combustion Associates discussed the success her company has had in exporting to Africa as well as many other countries.  They were featured in the cover story in Global Trade Magazine as well as recognized by President Obama at a US-Africa Leaders Summit. She credits many collaboration partners in this success such as the Export-Import Bank and trade specialists at the US Department of Commerce.

Another Inland Empire manufacturer and APICS-IE supporter, Roy Paulson, president of Paulson Manufacturing has achieved great success with exports.  They have grown rapidly and significantly through export, and he has served on the president’s export council.  Why not get a boost to your sales revenues while providing value in other countries?

There is also far-reaching support for global logistics, banking and exchange rates and much more.  Why not look into whether your products might be of interest to other global markets? You might just discover a goldmine!