Tag Archive: distributors

The Sheer Relevance & Impact of Transportation (A Billion Here, a Billion There)

November 24th, 2018

Recently, I attended Mobility 21, the Southern California transportation coalition, and it reminded me of the sheer relevance of transportation.  No manufacturer can operate without transportation: distributors are out of business without trucks dropping off and picking up, healthcare would stop functioning and our frequent Amazon orders would be a thing of the past.  In essence, everything would come to a grinding halt!     

Certainly, trucks are what we typically think about when it comes to transportation.  They account for $722 billion in freight flows with Canada and Mexico, for example. Whereas rail still accounts for $174 billion (not pocket change).  The ports are our gateway to the rest of the world (and the Los Angeles ports alone bring in 40% of the U.S. volume). Air carries an impressive number of packages especially with the rise of e-commerce. UPS and FedEx are expanding at amazing rates, especially at Ontario airport, the hub of e-commerce activity.  For example, during the 2017 peak season, this region of UPS alone processed 13.1 million packages!

At Mobility 21, there were some interesting statistics throw out:

  • AAA has 60,000 service calls per day
  • Transportation has a $700 billion dollar economic impact on Southern California and accounts for 1/3 of the jobs in Southern CA!  
  • 350 billion miles each year are driven in California
  • The number of trucks is expected to go from 1.8 trillion to 3.9+ trillion by 2045
  • And the list goes on….

What Should We Consider and/or What Impacts Could Arise?
At a minimum, why not take a step back to think about your transportation network?  What does it look like? How do you receive materials and products? Do you use the ports?  Air? Rail? Undoubtedly, you use trucks! How expansive is your network? Are there many players involved?  Since it could cause your operations to cease, it makes sense to find out!

Next, think about what you’d like your transportation network to deliver.  Do your customers expect rapid deliveries and “above and beyond” service? If so, who is your partner in ensuring this occurs?  

Your transportation partners are your last face to your customer. And, in today’s marketplace, there is a significant demand and challenges your transportation partners must navigate.  If you plan to be successful, you must stay on top of your transportation network and partners. Are you attractive to them? Perhaps we better think about that further….



Will Robots Pay Back?

January 13th, 2018

Supply Chain Briefing

I attended a compelling ProVisors presentation for manufacturers and distributors on the latest trends in technology for manufacturing.  Our presenter, Craig Young, discussed the latest advances in technology and what manufacturers should be thinking about to succeed in the New Year.  Robots were front and center in the discussion.

Robots in the workplace

Automation Advancements
Fully automated packaging lines should be quite popular with a typical 1-2 year payback – and that is prior to thinking about a vast array of non-financial advantages.  

Next up on the robots front is automatic storage and retrieval systems – although a longer payback of typically 5 years, they can bring a host of advantages and increase competitiveness.  

And, last but not least, we discussed laser guided vehicles with a typical 10-20 year payback with different advantages.   

What Should We Consider and/or What Impacts Could Arise?
Clearly, throwing robots at every problem is like Maslow’s hammer and the nail quote (if all you have is a hammer, everything looks like a nail).  Don’t do it!!  However, obviously, from the opposite perspective, there is something quite compelling about robots to achieve manufacturing objectives – profitable and scalable growth.  

Robots aren’t new.  I clearly remember a colleague at one of my jobs from 25 years ago when I was in planning/ purchasing/ inventory at Santa Fe Plastics (a plastic injection molding operation that produced consumer products like the jars for face cream) who spent 70% of his time working on a robot.  There were clear cut advantages, even way back then!   

Although a lot of executives think about robots from an automation and cost savings perspective, there are more important advantages such as keeping up with growth, replacing people as they retire (since it is a tough market to find good manufacturing resources), 24/7 focus and more.  

One of my current clients designed a robot that works around-the-clock.  Since putting the robot in place, they are able to keep up with customer requirements, have precise quality control and have maintained their long-term, high-skilled resources on first shift.  A definite win!  Others have brought manufacturing back to the U.S. – and even to California.

Everything in Perspective
Remember, robots shouldn’t be viewed as a hammer.  Think about what you need to accomplish and evaluate robots as one tool/solution to a business issue.  We are in the age of the customer experience.  Will robots help or hurt you with this endeavor?  Depending on your specific situation, it could go either way.  Think before jumping.

 



Holiday Parties & Diversity

December 13th, 2017

I participated with several holiday parties recently – and have a few more planned.  That is a nice benefit of leading and participating in so many groups.  The pictures below are from my APICS Inland Empire chapter holiday mixer and member appreciation event.  Thanks to Susan Brunasso for pictures!  What strikes me is the diversity of our APICS group – we range from students, supply chain professionals (such as planners, buyers, operations managers), executives/ business owners (thanks to Dan & C.C. Vest, Don Brithinee, Brian Reed, Kar Shanmugam and more for their great support), trusted advisors to manufacturers and distributors, sponsors (thanks Maggie Watson), Board members and more.  

Clearly our women are above (looking festive I might add) and our men below (although Susan always inserts me into the photos too).

And our UCR students (mainly) are below since our CSUSB student is featured above with the men.

One tip to implement this week:
Have you thought about the diversity of your employees, work groups, trade associations and more?  

There are many ways to think about diversity.  In terms of APICS, I was talking about the wide variety of roles and responsibilities that rallied around increasing value for manufacturers and distributors (although because Susan took photos of different groups, I unintentionally also spoke to gender).  

We gain value from diverse perspectives, ranging from the fresh ideas (often provided by students) to “what works” to the latest technologies.  I didn’t even mention that we have some technology experts on our Board as well!

I find that creating diversity doesn’t require rules and regulations.  In fact, forced diversity can harm organizations! Instead, valuing different ideas, solutions, points-of-view and more creates the environment for diversity. Undoubtedly, we achieve a FAR greater value for our members with a more complete view.  We definitely shoot to make 1+1+1 = 33, and our diverse group of experts achieves this objective.  

Are you valuing fresh perspectives (even if not in line with your own)?  

 



What Should Manufacturers Be Thinking with Potential Tax Changes?

December 11th, 2017

There has certainly been a lot of conversation about the potential tax law changes!

 Michael Kouyoumdjian, managing shareholder of RP&B CPAs, did a great job of going through the potential changes and impacts to manufacturers and distributors in a discussion with trusted advisers who work with them everyday.  Of course the issue is that there is no way to know what will happen.  But, if we look at what is most likely to occur (that is part of the House and Senate bills), we can start thinking about down-the-line impacts.

 

 

Decreasing Tax Rates and Accelerating Expenses
The bottom line is that the tax rates for manufacturers and distributors will go down overall.  It has passed as a flat tax of 20% thus far.  However, it certainly has the potential to creep up.  It also appears that there will be an increase in the ability to expense asset purchases.  Of course, as one would expect, there are exceptions and offsets that will change this simplistic picture but these trends appear likely.  Are you thinking about what impacts these likely changes will have on your business?

What Should We Consider and/or What Impacts Could Arise?
As Michael said (and I completely concur), we should never run our businesses based on tax consequences. Instead, we should make good business decisions.  That doesn’t mean we shouldn’t be thinking about likely impacts so that we are ready to take advantage of opportunities and redeploy resources as makes sense to maximize growth and profitability.  As a general rule, it is likely businesses will increase their investments, so let’s start there.

Investing in Automation
Since there is also a BIG push on automation and robotics to maximize performance to increase profitability and locate manufacturing closer to the customer, it seems likely that one of the areas of investment will be in automation equipment.  Additionally, in order to maximize performance, we are seeing additional investment in systems and technologies to increase efficiencies, automate processes and collaborate with supply chain partners.  Thus, ERP, CRM, MRP, barcoding, artificial intelligence, IoT, and data analytics are likely to continue to surge in terms of interest and investment.  Also, if businesses can minimize the labor component and locate manufacturing closer to the customer, it wouldn’t be surprising if we saw an increase in re-shoring and U.S. manufacturing.  What will that do to your supply base, workforce etc.?

Have you begun planning for the impact of tax changes?



Walmart Raising the Supply Chain Metrics Bar

August 11th, 2017

One of my clients forwarded this Business Insider article about Walmart’s supply chain metrics. Walmart is not only requiring an increase in OTIF (on-time-in-full) delivery performance but it also will charge penalties for suppliers that don’t live up to the metric! Creating an efficient supply chain is critical for Walmart, so they are taking this proactive stance. This is prevalent throughout our manufacturing and distribution clients – regardless of industry.

OTIF

Time is ticking – do you know your OTIF score?


For example, in aerospace, there are very similar supply chain metrics and penalties. If we want to grow our businesses, we must develop excellence throughout our supply chain. Just think, there is no way to deliver on-time if our carriers aren’t on-time. There is no way for our carriers and shipping departments to meet their goals if manufacturing isn’t on time. And, there is no way for manufacturing to produce on-time if our suppliers aren’t on-time…and so on.

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

First, if this type of supply chain metric isn’t on your customers’ scorecards, you can expect it will be there in the future. Don’t wait until it is a request – be proactive.  And, if you already receive these types of scorecards from your customers whether or not they are passing on penalties, pay attention. Whether you become a value-added partner and grow the business together will depend on how well you perform. OTIF is becoming “the metric” for measuring on-time delivery performance.  

With that said, I’ve found that being proactive with your customers on the details of this metric can be beneficial as well. For example, if you shipped product on-time but there was a delay in your customer’s receiving department, most customers will adjust the score. With dollars and partnership status at stake, this can be crucial.  

Of course, find out how well you are performing. Dig into the metric calculation and, most importantly, the root causes for your successes and failures. I bet you’ll find a wealth of information in what is most important for you to raise the bar with your supply chain performance overall. Make it visible so that your team knows how well they are performing in your customers’ eyes. Encourage ideas and suggestions for improvement and watch those OTIF scores rise!   

 

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