Tag Archive: Journal of Commerce

Amazon Disrupts Again

April 5th, 2019

According to Bloomberg, Amazon disrupts again. They have abruptly stopped selling products from their wholesalers and are instead encouraging suppliers to sell on their marketplace, transferring the purchasing, storing and shipping of products to the supplier. The marketplace business is already estimated at $250 billion in value which is more than double the online retail business. They also pulled volume from some suppliers less than $10 million annually. If you are in either of these positions, this could be a substantial disruption especially with no notice!

According to the Journal of Commerce, Amazon is also disrupting container shipping with its increased use of its ocean forwarding arm. For example, with its non-vessel-operating common carrier (NVO), Amazon is gaining greater control over its internal supply chain but the key is whether it is thinking about building a supply chain platform.

Amazon isn’t the only disruptor. Are you proactively thinking about navigating disruption?

What Should We Consider and/or What Impacts Could Arise?
Hardly a day goes by without some sort of disruption, natural disaster or other event such as the Boeing 737 Max concerns. There is no way you can be prepared for every potential issue that will arise. With that said, it is remiss not to consider the most likely and relevant risks. Do you have a process to incorporate these into your strategy and execution plans on a frequent basis? Gone are the days of the 5 year strategy, updated once a year. Business is moving at a much quicker speed!

In addition, start looking at how to build an agile and resilient end-to-end supply chain. Start internally. Are your people prepared for the daily, weekly and monthly changes most likely to impact your business? Do they have backup plans? Or will it take a lengthy approval process to get a critical decision made to navigate disruption? Don’t just assume you are covered. Go and find out. If you’d like some tips for managing disruption, take a look at our resilient supply chain series.

 



The Resilient Supply Chain: Can You Get Trucks?

October 3rd, 2018

Are you able to find trucks?  This is quickly becoming a major question that needs to be answered.  Every driver has at least 12 options. Why will he/she take your load?  Are you attractive to carriers? That is the key question. After all, you can carry inventory so you are responsive (assuming you planned well and have the right inventory at the right place at the right time) but if you cannot deliver, it was all for naught.

According to the Journal of Commerce, truck rates are up in the low double digits half way through the year.  And, they are expected to go up to 15% before slowing down to 7-10% increase in 2019.  However, these rate hikes are quite the shock to businesses. Many clients are tell us that there are times they cannot find a truck, whether they pay 15% more or not. What are you doing to ensure you have a resilient supply chain?

Here are a few questions to ponder:

  • Do you view your carriers as partners or vendors? – Undoubtedly, if you view them as vendors, you probably aren’t delivering on-time or are paying double or triple the going rates.  
  • Do you have a backup carrier? – I learned this lesson from the Director of Purchasing who worked with me at PaperPak.  He kept a backup supply of our critical material so that if anything went wrong in the supply chain, he could “turn it on”.  This meant we were paying higher prices on an ongoing basis to keep this backup supply. Naturally, our board members were not happy about the increased cost.  However, he was “right on”.  Eventually there was a strike at the ports and our supply was delayed. Because we had been bringing in backup supply all along, we were able to turn up the production and cover our needs seamlessly.  Do you have a backup in place you are confident will be there when you need them?
  • Are you proactively partnering with your carriers? – When supply chain challenges arise, do you proactively collaborate with your carriers to resolve the issues?  Are you willing to think outside the box and try new and innovative ideas?
  • Are you an attractive customer? – How you treat people will either make or break success.  People tend to do business with people they know, like and trust. Are you finding ways to improve your customers’ conditions?  Remember you cannot just decide to become attractive when you need your suppliers. It is a way of doing business.
  • Do you need trucks at all?– Perhaps it’s time to re-think your strategy.  Should you consider rail, air or another method?  Can you partner with your customers or suppliers in a new way?  How about collaborating with competitors? Or, you could consider insourcing vs. outsourcing. 

Think outside the box and start early.  Waiting until there is an issue is no time to think about resolving one. 

It seems such a basic element to have trucks where you need them and when you need them.  Yet it often isn’t viewed as a priority.  Why not take stock of where you stand and put some thought into your path forward?

You’ll be more likely to meet and exceed your customers’ expectations with this proactive approach to supply chain resiliency.

 



Imports & Exports: Which Companies Dominate and What are the Related Impacts?

June 28th, 2018

 

According to the Journal of Commerce, the U.S. imported double the amount of its exports (measured in TEU). In 2017, imports increased 6% whereas exports increased 1%.  This is quite an accomplishment since China (the top market for U.S. exports) announced an importation ban last year that cut across the various types of the top U.S. export, waste.

 

  

So, who do you think was at the top of the import list?  
Walmart!

The Details
The largest segment of import is retail at 3.5 million TEU.  The next largest segment is foodstuffs at 700,000 TEU.  This is quickly followed by household goods around 645,000 TEU, conglomerate at 606,000 and auto parts and automobiles at 453,000.

On the other hand, the top exporter is America Chung Nam (largest exporter of recycled paper).  Thus, the largest segment in export is recyclables at 1.1 million TEU, followed by agricultural goods at 630,000 TEU, paper and forest products at 521,000 TEU and chemicals at 310,000.  

What is projected this year?  It appears to be shaping up to be the strongest international and domestic demand conditions in at least a half-decade.  It isn’t all rosy though.  There are plenty of concerns about tariffs and a tight trucking market. According to Wolfe Research, shippers expect a 5.2% increase in truckload rates and a 3.4% bump in less-than-truckload rates.  These are the highest expectations in the history of Wolfe’s survey.

What Should We Consider and/or What Impacts Could Arise?
Well, clearly growth and volume are robust (just like in manufacturing).  However, there is plenty of concern about potential disruptors (such as Amazon) and volatility.  Thus, we must stay on top of trends and likely impacts – and focus on agility. Are you able to respond rapidly to changing market conditions or will you be left in the dust?

We can expect freight challenges.  How significant is freight to your bottom line?  For example, when I was a VP of Operations for an absorbent healthcare products manufacturer (adult diapers, hospital underpads), freight was a BIG concern.  Although our product wasn’t heavy, it was definitely bulky. Thus, we focused a lot of attention on how to collaborate with customers and transportation partners on innovative programs. We invested efforts into product and packaging redesign that would reduce the size of the boxes while meeting/ exceeding customer expectations and more.  Aside from cost, tight transportation capacity might translate into late deliveries.

Do you have transportation partners or vendors? Perhaps you better take a more strategic view….

 



E-Commerce Drives Industrial Space to New Heights

June 21st, 2018

Supply Chain Briefing

According to the Journal of Commerce, e-commerce is driving industrial space rents to new heights.  Our clients are definitely experiencing the same dilemma! There has been a 12.1% increase in rental rates since 2017, and the L.A. / Long Beach area has the lowest vacancy rate in the U.S. of 1.2%.  Ridiculously, the average price in L.A. was 60%+ higher than the U.S. average in the first quarter! And, stranger yet, e-commerce is driving class B space (not as desirable) to be snatched up. It is becoming the new class A!  Even Class C (even less desirable) is starting to sell like hotcakes.

Are you prepared for these Amazonian type disruptions?

 

What Should We Consider and/or What Impacts Could Arise?
First, are you thinking about the disruptors most likely to impact you?  For example, almost every manufacturer and distributor is certainly impacted by Amazon’s rapid delivery expectation.  Have you thought about what your customers expect from you? How about what is required to satisfy – or delight – them?  Undoubtedly, the bar has been raised.

Speed is a more apparent Amazon-related outcome.  Don’t stop there. In order to support rapid deliveries, what will be needed now?  Six months from now? A year from now? Currently, it has made proximity to the ports and customers of utmost importance.  What other impacts have arisen? In this case, e-commerce has changed our shipping and transportation expectations dramatically and permanently – we expect to receive only exactly what we need (whether 1 box or 1 piece) when we need it.  

This has created the need for e-commerce fulfillment operations.  Where would you prefer to locate your operation? Most likely as close to customers and your supply base as possible.  In this case, it means rates are going through the roof – if you can even get them. What can you do to proactively set up your supply chain to support these likely impacts?  And, are you building these estimates into your projections? How will you make effective decisions – can you bring your suppply chain into the process further?

Don’t delay any further….

 



Top Importers & Exporters… E-Commerce Impacts

June 2nd, 2017

According to the Journal of Commerce, the top importers were impacted by e-commerce and that trend is expected to continue. Imports grew by 8% last year (2.2 million TEU) whereas exports grew by 3% (just under a million TEU). The rankings are showing signs of a shakeup with the surge in e-commerce and Amazon. In 2016, Walmart rated #1, Target #2 and then Home Depot and Lowe’s as #3 and 4.

e-commerce

For example, the retail industry woes are highlighted by Sears and Walmart. Sears sales slid by almost 10% whereas Macy’s slid almost 4% and Payless filed for Chapter 11 protection (all top 100 importers) while Amazon increased 27%. Last year, e-commerce accounted for 8.1% of retail sales and it’s expected to increase by 10% by 2022. Walmart fared a bit better but spent several billions to purchase JET.com. And, Target is also testing next day deliveries. Small orders delivered rapidly is the future!

Not to leave exporters out of the mix, as a matter of interest, the top exported product is wastepaper with beef products also high on the list. 5 of the top 6 relate to paper and packaging such as Koch Industries with the holdout being an animal feed/grain exporter.

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

Clearly, we must pay attention to what our customers are communicating — they want small orders more frequently — with rapid deliveries. How will we accomplish this goal? We can certainly outsource the capability or, if we see it as a strategic aspect of the business going forward, perhaps we should think about how to incorporate into our strategic capabilities.

From a sales and customer perspective, start looking at e-commerce capabilities. 24/7 access is a must with the ease of doing business built into the process. You’ll need to integrate into your ERP system or find a way to work collaboratively from a process and systems perspective one way or another to maintain high service levels at reasonable efficiency levels.

From a warehousing perspective, handling e-commerce is quite opposite of handling pallets and bulk shipments. Think about them as two separate warehousing functions. There is quite a bit of automated equipment and technology that can help you automate and increase efficiency. But don’t just jump in and sink. Start researching, ask experts and build a plan. There is no time to waste!