Category: The Strongest Link in Supply Chain

Biggest Shakeup in Decades Coming to the Shipping Industry with IMO Regulations

July 18th, 2019

According to Reuters, the biggest shakeup in decades is coming to the shipping industry as the IMO regulations go into force in January. Shipping owners have to cut sulfur emissions from 3.5% to .5% which is a reduction of 85%! This means they’ll have to use low-sulfur fuel, install exhaust gas cleaning systems, use expensive liquefied gas or go slower. None of these are nominal costs. And, certainly going more slowly will exacerbate an already problematic situation where customers’ Amazon-like expectations aren’t being met!

 

Analysts think the container industry could incur an extra $10 billion in costs. That isn’t pocket change! It is expected that there could be a 10-20% increase in operating costs in related companies. Twenty five shipping container executives said they plan to pass along costs to customers. The shipping industry is tired of absorbing costs. Are you prepared for the likely impacts of this massive change?

What Should We Consider and/or What Impacts Could Arise?
Are you keeping up on the latest news such as these changing regulations? If not, you must start unless you want to be run over by your competition! For starters, if you are in an industry related to the container and shipping industry (which almost every company has some relation because no one operates completely in isolation), figure out the likely impacts. Should you be doing what some beneficial cargo owners are doing in moving up shipments so that it is less likely you’ll get ‘stuck’ during the holiday season? On the other hand, last year, when the tariffs caused extra imports, rates increased and containers were held up.

If you are a manufacturer, are you re-evaluating sourcing? Perhaps it is time to re-shore and near-shore as the total cost is no longer compelling to source from Asia in most industries and non-commodity products. This is without considering the dramatic difference in lead times, inventory requirements and associated working capital considerations. Don’t just follow the fads. Find an expert and figure out what makes sense for your situation.

Trucking companies are also likely to be negatively impacted. Now, they’ll have increased competition for low sulfur fuel. According to the Reuters article, it could double the price of diesel fuel. Wow! If there ever was a topic related to the resilient supply chain, this could be it!

What are you doing to build flexibility into your supply chain and your organizational design? If you are interested in a resilient supply chain assessment, contact us. You’ll find more information on these types of topics on our resilient supply chain series.



How Customer Service & Retention Directly Impact Profits & Performance

July 12th, 2019

Since I’ve been speaking to CEOs about “Pricing & Profits”, the true impact of customer service and retention is arising as a game changer. Can you create a situation where you make a “forever promise” to your customers? It certainly will directly impact your customers’ perceptions of your value and your bottom line!

The statistics are staggering:

  • According to Bain & Company, increasing customer retention rates by 5% increases profits by 25-95%
  • According to Harvard Business Review, it is anywhere from 5 to 25 times more expensive to acquire a new customer than to keep a current one.
  • According to Salesforce, 74% of people are likely to switch brands if they find the purchasing process too difficult.
  • U.S. consumers are willing to spend 17% more to do business with companies that deliver excellence customer service
  • According to Newvoicemedia.com, after one negative experience, 51% of customers will never do business again with that company.

Do you know how your company is doing?

 

What Should We Consider and/or What Impacts Could Arise?
Clearly, in reviewing the statistics, we should all be ultra vigilant about customer service and the customer experience.

Where do we start? In our experience, our best clients understand their target customers and what is meaningful to them. The customer experience has to start there. It is easy to get carried away with measuring on-time delivery, customer complaints and other metrics but what does that really tell us? Do our customers simply want a reliable delivery estimate and someone to pay attention to ensure success or do they want a tailored, customized customer experience? Are we getting complaints from our unprofitable customers and silence from our best customers, and therefore focusing in on the”20″ of the 80/20 equation? It happens more frequently than you’d think!

Once you know what is meaningful to your key customers, define a way to measure your success in achieving your objective. Perhaps use the net promoter score as it is one simple question that speaks volumes: How likely is it that you would recommend [brand] to a friend or colleague? As you explore why, you’ll find ways to increase the value of your customer experience to your key customers. Certainly, customer service is a critical topic in creating a resilient supply chain. You’ll find more information on these types of topics on our resilient supply chain series.

 

 



The Amazon Effect is Still Going Strong!

July 1st, 2019

The Amazon Effect remains top of mind with CEOs. Whether they compete directly (which is less than 1% with my clients), supply or distribute for Amazon (which is a slightly higher percentage) or are just impacted by the Amazon Effect, it is a major source of concern and/or opportunity. Have you thought about what Amazon is doing lately and how it might impact your business? Better yet, have you thought about becoming the disruptor?

Here are a few of the latest headlines about Amazon (all in the last few days):

  1. Kohl’s will accept Amazon returns across the board starting in July – The pilot programs in Los Angeles, Chicago and Milwaukee have been successful. Kohl’s and Amazon see this as a win-win.
  2. Amazon announced that one-day free shipping will be the standard for Prime members – It is very hard to go backwards once you get accustomed to a new level of service. All organizations watch out!
  3. Amazon is interested in buying Boost from T-Mobile and Sprint – There is no telling what Amazon is thinking of disrupting next.
  4. Amazon seems to be saying it isn’t a retailer – It appears as though the threat of Amazon purging thousands of smaller vendors from its core business is coming true. Stay tuned…
  5. Amazon makes a big splash in the travel industry – In India, Amazon will offer flight booking services.

Amazon gets a ridiculous number of headlines. In the interim, one of the last Sears stores in Phoenix had a massive closeout sale recently. Sears used to be the Amazon of the times 50 years ago but lost its way with a few strategic missteps and lack of innovation. Waiting around for Amazon to determine your course is not a wise move. Instead, think proactively about your strategic advantage and how you’ll get out in front of the crowd.

Think about what Amazon and other competitors do not do well.  Find a way to capitalize on these opportunities. Of course, you’ll have to adhere to the new model of doing business – rapid deliveries with short lead times and high tech opportunities.  Find what is unique to you and your product or service and drive differentiation in your market segment.

We find that there is significant change occurring across the board. Perhaps the reason some companies are vertically integrating is to do what Amazon cannot do completely at this point: take control over the complete supply chain. Amazon seems to be pursuing this strategy as well when it comes to transportation infrastructure although last mile delivery is quite the challenge. If you’d like to get an assessment of your business and profit opportunities as it relates to the Amazon Effect, please contact us.

 

Did you like this article?  Continue reading on this topic:

UGG Founder, the Amazon Effect in Healthcare & Why Demand is Key

The Resilient Supply Chain: What If You Sell More?

 

2019 Predictions Document

Find out how pricing relates to 2019’s predictions. If you missed our 2019 Predictions Document, download yours here:

 

 

Do You Have a Resilient Supply Chain?

Do you have a resilient supply chain? In today’s disruption-intensive business environment, a resilient supply chain is a “must”!

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Why Supplier Management is More Important Than You Think

June 17th, 2019

Supplier management has been a theme this week. I taught a CSCP (certified supply chain professional) class session about supplier relationship management and SRM software recently. An attendee had a great example of the impact of poor quality.  Her company was sending an entire container load of product back to Asia with defective parts.  This was bound to have negative impacts on the customer. After all, they were already delayed.  Now, they were spending another month on the water to start over again. That led us to discussions on backup suppliers.

Next, I spent quite a bit of time on webinars and calls one day talking about the critical importance of supplier lead time, reliability, safety stock, lot size and how these factors impact our ability to maximize service, profit and cash flow. And, I presented to APICS Ventura on “The Resilient Supply Chain” We had intriguing discussions on the trends of vertical integration, supplier consolidation, allocation of key materials (and how consumer products are gaining priority access with the leftovers being allocated to industrial companies), the impact of tariffs on sourcing, and several more topics.

The bottom line of each of these discussions is that proactive management of suppliers is of ever-increasing importance in today’s Amazon impacted business environment. If you don’t have what you need, when you need it, where you need it, in good quality, and within cost guidelines, you are likely to lose vs. your competition. And, this includes last minute changes! Do you consider your supplier your partner or someone to negotiate with and gain an advantage over?

What Should We Consider and/or What Impacts Could Arise?
It is NOT all about cost. Of course, the hot topic on executives’ minds is how to achieve scaleable growth, so profit and cost are important topics.  Yet, smart executives realize it is quite easy to sacrifice the future by saving pennies in the present. Similar to the mistakes made several years ago when it didn’t matter whether it made cost-sense or not (ie. Boards were demanding outsourcing regardless of the financials), many Boards are demanding supplier concessions without looking at the extended supply chain impacts. Instead, stick up for looking at total cost and taking the value viewpoint! Of course, this means you’ll be focused on costs but it won’t be your sole focus.

We talked about several scenarios where you had to invest financially upfront in order to achieve longer-term success. For example, we talked about keeping a more expensive backup supplier and giving them 20% of the volume. Boards and private equity backers weren’t too happy with the extra cost yet this risk mitigation technique saved the day on more than one occasion. When the material went on allocation, the main supplier struggled or the ports/transportation infrastructure broke down, those who planned for the inevitable bump in the road had uninterrupted supply from the backup supplier and satisfied customers while the competition fell further behind. Are you thinking about your suppliers like a cost or a partner?  You’ll find more information on these types of topics on our resilient supply chain series.

 



Language & Why Quality Is Lost in Translation

June 14th, 2019

I recently returned from a trip to Europe and it highlighted why language and positioning matters. Of course, when visiting Sicily, Sorrento, Prague and Bruges, different languages and dialects were spoken.  However, my comments about language and positioning relate to English. On a day tour in Prague, we had an extremely knowledgeable guide who wanted to tell us everything she knew. We could understand her English.  However, she was opinionated about where we should stand when listening, whether we could stray to take pictures, and whether we could ask questions if she hadn’t told us what she thought we should know. She didn’t position her language in the interests of her customer, so it really wasn’t as enjoyable as other tours where the guides clearly didn’t have the same level of experience and expertise.

I bring this up – because I still was glad I went on the day trip – however, this same topic has arisen multiple times in business in the last several days. In one project update call, the project manager presented important information. Yet, the way he presented it made it seem like the world might be coming to an end, even though it was FAR from reality and not his intention. It could have had drastic unintended consequences if we hadn’t spoken up to re-position.

In another client meeting, the group was talking about relevant details but all the CEO heard was blah, blah, blah because he wanted the bottom line – what those details meant. Of course, he wanted to know that the details were reviewed but the lengthy and wandering explanations made him feel uncomfortable in the conclusion (perhaps we protest too much) instead of confident. The details were intended to provide evidence to support, yet it backfired similarly to the guide’s endless stream of facts instead of focusing on the highlights that were relevant to the customer. Instead, speaking with confidence and conveying that details were considered (without going into detail), highlighting the bottom line result would have done the trick. I can’t tell you how many valuable superstars in clients are overlooked because they don’t know how to use language and convey their ideas successfully!

One tip to implement this week:
As someone who started out horrendously in presenting and positioning, I can tell you with confidence that it is a learned skill. Start wherever you are and make a new effort to improve. Don’t worry about perfection.  It is DEFINITELY overrated. Just strive for improvement on a daily basis. According to my consulting mentor ,Alan Weiss, if you improve by 1% a day, in 70 days you are twice as good. If you think about it, that is really quick!

Start by positioning what you say in the best interest of your audience,not in the light of what you assume is in their best interest. This alone can be revolutionary!

When I was a VP of Operations, I couldn’t understand why a plant manager, who reported to me,  seemed to believe what she said.  It was obviously untrue.  It’s wasn’t until my best friend in an unrelated field explained that people believe their own perceptions and they don’t have to match reality. I was thinking from my point-of-view instead of hers.

How many times have you used arguments to gain approval, funding or resources/support that you would use vs. those that would appeal to your audience? More than we’d like to admit I’d guess!