Tag Archive: disruption

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!

 

 



The Amazon Effect is Driving Dramatic Disruption

February 26th, 2018

Supply Chain Briefing

On February 15th, I participated on a panel discussion with Dan Vest, co-owner of Midpoint Bearing, BJ Patterson, CEO of Pacific Mountain Logistics and Jon Burgess, panel facilitator and VP of RedFusion Media at the Manufacturers Council of the Inland Empire’s Manufacturers Summit.  We had a great discussion about the disruption Amazon has caused in manufacturing and logistics circles.  

In looking at the Amazon Effect as a metaphor, manufacturers and distributors must respond to elevated customer expectations, rapid delivery requests, 24/7 service, and much more.  It is certainly driving massive changes throughout.  

For example, smaller e-commerce type orders are considered the norm which drives the need for quick and flexible changeovers, shipping flow changes (instead of pallets, there is a need for eaches), dramatic transportation and logistics disruption (consider how to ship eaches to multiple ship points vs. traditional truckloads to one ship point) and more.  Dan and BJ gave examples of how significantly Amazon is disrupting their businesses on a daily basis.  

Have you thought about how to raise the bar to stay competitive with the significant disruption flowing through the industry?

What Should We Consider and/or What Impacts Could Arise?
As I responded when Jon asked whether there are any other disruptors to think about in addition to Amazon: Definitely!  Sears was the Amazon disruptor several years back and lately all the news relates to whether they’ll make it at all.  No one was thinking about Amazon as a serious player 20 years ago.  It is wise to always be thinking about the next disruptor and how to successfully navigate your business.

This seems like a tall order – how to identify disruptors and figure out how to respond.  Instead of spending time to figure out the next disruptor, stay on top of the latest trends, companies, and economies impacting your business.  You’ll see them coming!  

Stay agile, hire and develop the best talent and keep an eye to the future.

 



Logistics Innovation – Where is it Going?

November 10th, 2017

The global logistics industry will grow from its current hefty size of $8 trillion to $23 trillion by 2023 – what a sharp contrast!  Have you thought about how to be viable with these massive shifts going on?  If not, you sure should as it is coming and will just pass you by.

 

Key Aspects in Upcoming Logistics Innovation
What is noteworthy in logistics innovation?  Several keys to success include:

  1. Interestingly, blockchain arose again.  It could completely change the landscape, so it’s worth paying attention.
  2. Next generation technology and machine learning – there is more and more discussion on this topic everyday.  This gets into artificial intelligence, as well.   
  3. Autonomous vehicles – last we heard, it will be here by 2020.  Time flies – undoubtedly, it will be here before we realize it.  There is vast opportunity to address a critical component of speed in the supply chain – keep trucks moving more frequently to deliver goods more quickly in a safe and automated way with minimal human intervention.  It isn’t all theory; there are road tests being performed in Southern California in conjunction with governmental entities.
  4. Capacity aggravation / visibility – there is a large potential for this topic.  One example is in reviewing large amounts of data for carriers.  Convoy has built an app to match trucking companies with shippers that need to move freight.  The speaker talked about how they could even tell which trucker might be interested in a particular route or to get home for a special occasion.  Very interesting!

Disruption and Progress
There is vast disruption with emerging technologies in this rapidly growing $8 trillion dollar industry.  Perhaps we should pay attention.

 



Amazon Is Going to Australia!

May 24th, 2017

Amazon has announced plans to go to Australia in a big way — of course! This has many Australian retailers unnerved while simultaneously providing Amazon with a new beachhead for its global distribution network. And, it appears as though Amazon might have a supportive regulatory environment for testing deliveries via autonomous drones and road deliveries since there are vast remote areas for potential deliveries. It certainly seems like Amazon is a company to watch…

Amazon expands to Australia

I asked my Australian consulting colleagues about this announcement, and their response was “Bring it on!”. Retail prices have been higher for quite a while and so it should definitely stir the pot. According to the Wall Street Journal and a Citigroup Inc. analyst, Amazon’s sales could grow 8 fold medium-term in Australia — definitely not pocket change. Undoubtedly, it will be interesting to see how this unfolds.

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

As we have said repeatedly, we live in a global business environment and so we must stay abreast of trending factors. Amazon’s strategy to gain a beachhead in Australia is noteworthy. Additionally, their continued focus in looking for ways to test drones and other technologies keeps innovation as a priority. And, certainly not to be overlooked, their ability to create disruption remains alive.

Disruptions are becoming part of the new normal. The key is to be aware of potential disruptions and incorporate them into your strategic discussions. What happens if Amazon becomes a player in the UPS and Fed Ex world? Once drone deliveries are proven, how will that change the landscape?

And, from the other viewpoint, ask your team — what disruptions might you initiate? Push the envelope a bit and think outside of the box. In my experience, the only way to pursue this path successfully is to start by creating a culture of innovation in your company. Have you thought about how to do that?

 



Why Care About Supply Chain Risk?

November 12th, 2013
Businesses face many hurdles—some we can control and others we cannot. How we manage risk is what determines our success.

Businesses face many hurdles—some we can control and others we cannot. How we manage risk is what determines our success.

As this topic came up frequently at the APICS 2013 conference and has affected almost every one of my clients in the last year in some manner, I thought it would be good to think about why we should care:

1. Natural disasters – Heard of any earthquakes, tornadoes, volcanoes or hurricanes?  One of the companies I worked for was one of the only buildings not destroyed in a few miles square area during a hurricane – as fortunate as it was, the facility couldn’t function for a while as no one could get in or out (unless via a helicopter).

2. Political unrest – Certainly, we hear about political unrest, danger areas, fly at your own risk zones, etc. every day.  Since there are very few companies who have been able to trace back their entire supply chain, it’s very likely something in your supply chain will be affected sooner than you think.

3. Labor unrest – Even if you are lucky enough not to be affected by political unrest or natural disaster, how likely is it you’ll avoid labor unrest as well?  Strikes occur in manufacturers, ports, transportation providers, distribution centers, etc.  Just ask the folks dependent on the LA ports during the last strike…

4. Theft – For my research for a recent webinar I led on the most common incidences of fraud that COO’s should be aware of, I gained a new appreciation for how often theft occurs inside companies.  That is nothing in comparison to what can happen in today’s extended supply chains!

5. Security – The advantage of technology is that it can be leveraged to drive business results with minimal resources and effort.  The disadvantage is that the more dependent on technology, the more risk that a disruption or outage will directly impact your business.

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