Tag Archive: Amazon effect

Warehousing Strategies for Success

July 12th, 2018

The Amazon Effect is creating elevated levels of stress in the warehousing and distribution world. The key question is how to provide immediate deliveries, customized service, easy returns, and more for a reduced cost – a very good question indeed!

A few considerations to ponder:

  •  Storage capacity -What is your storage capacity?  How does that compare with your requirements?  And how can you maximize what you can store in your warehouse?
  • Flow – Are you running in circles around your warehouse to support your customers?  Similar to a manufacturing environment, flow can be an essential ingredient to warehousing success – or not.
  • Productivity – Have you automated what makes sense and will increase your speed/ throughput? If it doesn’t improve speed (and accuracy) to your customers, is it really more productive?  Similarly, is outsourcing truly more productive?
  • Equipment – What equipment is built into your warehousing strategy?  Would an upgrade provide a return on investment?
  • Data – Are you using predictive analytics and data analysis to make informed decisions to stay ahead of your competition?
  • WMS tools – Whether “poor man’s” or sophisticated, do you have a way to pick, put away and sort efficiently?
  • Inventory – Don’t ever forget inventory.  Without having the right product in the right place at the right time at the lowest system-wide inventory (and potentially end-to-end supply chain network inventory), what else will matter?

We have yet to come across a warehousing or distribution client that didn’t have at least a 20% improvement opportunity.  Have you looked into your opportunities lately?  Most likely your competition is!

If you need help thinking through your warehousing and distribution strategy, contact us.

 



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.



The Amazon Effect Remains Hot

April 20th, 2018

Our marketing guru asked whether we should start talking about other topics aside from the Amazon Effect since there are a vast number of key topics occurring in manufacturing and distribution, and she wondered if it was becoming stale (and it’s her job to make us look at timely as possible). The answer came in from all angles – conference leaders continue to request this topic, news reporters continue to ask about it (including the Wall Street Journal in a recent conversation) and everyone is STILL talking about it.

For example, when the Ontario Chamber CEO mentioned this topic for Good Morning Ontario, it drew the largest audience to date!  Our Amazon Effect: Pass or Play: the New Sales & Distribution Game and How it Affect Manufacturers panel at the Manufacturers Summit was packed.  It was fun to participate with two heavyweights, BJ Patterson and Dan Vest talking about this hot topic.  Here is a short snippet from that panel:

                             

 Why is the Amazon Effect so compelling?

  1. We are in the year of the customer – According to the 2018 predictions by the Tech Girl in the Press Enterprise, the customer was a common theme.  You don’t have to read the paper to figure that out; just look around you. Every client talks about elevated customer expectations, stemming from Amazon-like offerings.  Even my Mom’s expectations have been raised significantly – 2 day deliveries are a bit slow in her mind now.
  2. Innovation trumps all – Amazon is constantly innovating and trying new ideas.  Testing drones, delivering food, leveraging technology (with their e-commerce site, in their warehouses and more), and even the classics such as Amazon Prime (one of the most successful subscription services). Are you innovating?
  3. Collaborating with strange bedfellows – From the start, we have been fascinated with Amazon’s collaboration strategies.  Starting with an entity known for the opposite of innovation, the U.S. Postal Service – Amazon has been partnering with them to provide deliveries. Did you ever think you’d see a U.S. Postal truck delivering on a Sunday? Whatever you think about the recent news on this topic, it is an interesting choice for a partner.  It has not stopped there. They are partnering with Kohl’s and Whole Foods – the Whole Foods CEO spoke at the APICS International conference (after the purchase) on the collaboration, etc.
  4.  Sheer size and impact – Amazon is bigger than most brick and mortar retailers put together.  As of Dec 2016, Amazon’s market value exceed Walmart, Target, Best Buy, Macy’s, Kohl’s, JC Penney, Nordstrom and Sears put together.  Currently their market value is $681 billion. In February, Amazon surpassed Microsoft for the first time. Thus, it is worth paying attention.

Are you paying attention to the Amazon effect?  You should be! If you’d like help in positioning your organization for success in today’s Amazonian environment and the year of the customer, contact us.

 

 



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!

 

 



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.