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Amazon Fears Driving Supplier Price Concessions at Costco

March 29th, 2018

Amazon continues to wreak havoc on supply chains worldwide.  A client that does not compete directly with Amazon forwarded an article on Costco’s new price pressures on suppliers in response to Amazon concerns.  She said that these types of industry moves were creating disruption and price pressure in her industry, even though unrelated to consumer products.  Thus, we better pay attention!

 

According to an analyst at Stifel Nicolaus, Costco’s remarks were the first time a retailer in their coverage has explicitly admitted exacting price concessions from suppliers. That is a BIG deal!  Costco’s CFO has said the brands need to come down in price because they are losing market share. Between these savings from the brands and some Costco savings, consumers are seeing significant savings. Actually, this seems to be right on. I used to buy my Mom’s Starbucks coffee through Amazon until Costco started to carry it. They will put it on promotion once in a while at a great price vs. Amazon and other retailers. My Mom stocked up! Are you thinking about these impacts?

What Should We Consider and/or What Impacts Could Arise?
The article talks about impacts on consumer giants such as P&G and Nestle.  Clearly, these suppliers will be looking for options to increase margin. They are likely to try to pass it on to their suppliers, ask for internal improvement ideas and the like. Are you in the consumer products supply chain? Are you thinking about innovations and improvements to propose?

However, even if in an unrelated industry (such as our client), you are likely to experience impacts.  How will you respond to customer requests based on perceptions created by the Amazon Effect? Have you thought about how to suggest alternatives to reducing price?  On the other hand, are you meeting with your suppliers to discuss win-win strategies to proactive address these industry trends?

No matter your industry, are you considering innovations, automation and technology to reduce costs to remain competitive?  Why not be in front of this wave so that you can be the market leader in your niche instead of racing to catch up? It always puts you in a worse position!

 

 



Hello Dolly and Turning the Mundane into Magnificent

March 25th, 2018

I had the opportunity to catch Bernadette Peters and Victor Garber in Hello Dolly on Broadway while in New York, and it was fabulous!  Bernadette is “made for the part” (although I see the perfect fit for Bette Midler as well). Imagine how a musical that debuted in 1964 with FOUR Broadway revivals and international success remains wildly popular…..  

 

 

Hello Dolly certainly turned the mundane into the magnificent!  A strong-willed matchmaker and widower (Dolly) travels to Yonkers to find a wife for an ordinary yet half-a-millionaire local merchant (Mr. Vandergelder), and adventures ensue.  Actually, all the previously ordinary people surrounding the miserly Mr. Vandergelder get swept up into Dolly’s adventures. Great fun!

One tip to implement this week:
Are you turning the mundane into the magnificent?  Why lead a humdrum existence on a daily basis? Instead, search for opportunities to turn your everyday interactions into exciting and profitable opportunities!  Profitable doesn’t have to mean financial returns; consider your engagement and interest in what you do on a daily basis – don’t you think where you spend 8 hours a day (or more!) should be interesting?!?  Why not consider your customer as well – if you can deliver extra value and create a happy customer, isn’t that a profitable experience for you?

Executives and owners, search for ways to empower and engage your employees.  That alone will dramatically improve their interest in performing daily job functions.  Do you put thought into this? What could be more important for retention in an age of a significant skills gap shortage?

NO MATTER your position, DON’T let go of your responsibility for turning the mundane into magnificent.  It is yours alone. Look for ways to bring new ideas to the table. Be creative. Ask your colleagues to participate in finding ways to make the work more interesting – and impactful.  Pick just one item and move it forward. No matter how far it moves forward, you are closer to magnificent.

Dolly never gave up. Instead, she came up with a new idea – or scheme. What about you?

 



Case in Point – Are You Starting the New Year with Clarity?

March 22nd, 2018

As consultants, when we first start talking with clients at least 80% lack crisp clarity.  Often, this alone is a large cause of their under-performance or limitation vs. full potential.  Thus, why not take quick stock of your clarity of direction for 2018 as we head into working day #1?

It can be quite simple.  Forget about all the buzz words such as lean manufacturing, predictive analytics, SIOP (sales, inventory & operations planning), artificial intelligence and the like.  Although you know we talk about some of these as powerful concepts, they are JUST tools. Instead, think about where you are going and what you need to accomplish in 2018.

Start with what should be relatively simple – where are you going?  Hopefully you’ve thought about strategy. Remember, strategy is no longer a topic to address every 2-5 years.  Successful leaders think of it as a strategic sprint that has to be re-evaluated (rapidly yet effectively) at least once a year.  Of course, this leads to topics such as understanding your market, customers, and business differentiators, and so start with these topics at a minimum.

Once you have clarity of where you are going, the hard part starts – turning your strategy into reality.  You cannot be the only person with clarity for the New Year if you want to be successful. Is your executive team on board?  Are they communicating in alignment as of the first day of the New Year? In today’s Amazon-impacted environment, unless your leadership team is in lock step with clarity of direction early on, you’ll be left in the dust.  After all, if customers expect delivery same-day and powerful customer experiences, they aren’t expecting to wait for you to get your act together after returning from vacation.

Take a quick audit of your strategic clarity, fill any gaps and look for opportunities to fast-track progress.  Let me know how it goes.



Manufacturing Expands at the Fastest Rate in 14 Years

March 21st, 2018

Supply Chain Briefing

According to ISM (Institute of Supply Management), manufacturing expanded more than it has in 14 years in February – it is on fire!  Improving global economies and firm business investment are fueling this expansion. The factory index climbed to 60.8 from 59.1. Export orders are also up from 62.8 from 59.8 which is the fourth consecutive improvement and the longest stretch in six years.  Are you taking advantage of this manufacturing boom? How can you? Coincidentally a recent article was on exports – perhaps that is one area of opportunity? It appears to be for the vast majority of U.S. companies.

 

What Should We Consider and/or What Impacts Could Arise?

Let’s start by taking a look at your latest trends.  Has your volume increased? If not, why not? Are you in an industry that has been negatively impacted?  How do you perform vs. your competition? Most likely, you are growing. Do you know how your growth compares with the industry’s growth?  Could you be growing more quickly? Perhaps it would just take a small tweak….

If you are set up to be agile and are positioned to grow, you are likely to grow faster than your competitors.  In today’s Amazon-impacted marketplace, no matter your industry, if you cannot deliver on-time and within the expected time frame (which is quicker and quicker with each passing month), you will lose the order to your competition.  Even in contract-oriented industries, you have to be alert. Not only might you lose the order, you could lose the next contract.

Are your manufacturing facility and supply chain ready for growth?  Have you provided your suppliers with updated forecasts? Are they able to keep up?  Do you and your extended supply chain have the staffing, training programs, equipment, cash, and more in place?  If you aren’t sure, find out!



Technologies of Disruption & E-Commerce

March 19th, 2018

I participated on the Amazon Effect: Play or Pass Panel at the Manufacturers’ Council of the Inland Empire’s Manufacturing Summit.  B.J. Patterson, Dan Vest and I had an interesting discussion about the technologies of disruption.  Certainly Amazon has led the way with several of these….

For example, e-commerce directly correlates to Amazon.  Who doesn’t want to order 1 toothbrush or 1 can of carpet cleaner at a time and expects it to arrive within 24-48 hours?  It appears as though we all do! Yet we don’t think about what it takes behind the scenes to make this happen.

For example, the panel mentioned several challenges:

  1.  Short manufacturing lead times – since we need whatever the customer needs within a short period of time after the customer thinks of it, manufacturers are also impacted.  We must have quick lead times, customize on the fly and be on the lookout for changing customer expectations and perceptions.
  2.  Warehouses and 3PL’s – It is definitely different to ship 1 each instead of 1 pallet or even 1 case.  In fact, it is so different that warehouses that support both types of business typically need to set up two separate warehousing operations, whether in separate buildings or segregated in the same building.  There is also quite a bit of technology and automation needed to operate successfully.
  3.  Transportation cost – A tough one!  If a truck, train or plane delivers 1 each or 1 pallet, it still costs the same amount of gas, drivers, maintenance etc.  Since you cannot ship 1 each by itself, it takes up far more space per each when boxed up individually than that same each does in a pack, case or pallet.  Further, if you have enough freight going in the same direction, of course you can combine freight but with last-minute needs, it can prove quite the challenge outside of the metro areas.  
  4.  Last mile – Even in a metro area, how do you get to the last mile (to each consumer)?  This is where Amazon has partnered with people like the US postal service since they are “in the business of delivering the last mile”.
  5.  E-commerce systems – Customers expect to be able to receive 24/7 service via interactive websites customized to them.  Sometimes, they also expect personal service to accompany the on-line tools. What’s involved in getting your catalog on-line, pricing loaded and systems in place is far from a no-brainer.
  6.  Cost impacts – there was quite a bit of discussion on the panel about the margin pressures created by this Amazon Effect.  What can we do to counteract these margin pressures? Dare we say we circle right back to innovation?

And the list could go on and on…..  

Are you thinking about what seemingly unrelated topics like the Amazon Effect might mean for your business even if you don’t supply consumers?  The impacts can be far-reaching and significant.