Tag Archive: outsourcing

Ideas to Fill Peak Capacity Periods

February 27th, 2019

As we toured several e-commerce facilities such as UPS and Amazon, it became obvious that the sheer volume during peak season presents a huge dilemma. For example, UPS goes from 250-300 containers per night to 450 during peak season. Now that is quite a surge! Amazon has similar surges and stated facts such as 68 million orders on Cyber Monday.

Peak season occurs in other industries, as well. For example, building products companies tend to have a summer season since there are more issues to navigate in winter conditions. Since working with a large number of these companies, we’ve seen it range from a low of around 10-20% surge to almost 70% of the year’s volume sold during the summer. That can definitely be a challenge to navigate!

In this case, we are talking about labor but the same issues relate to machine capacity, storage capacity, transportation capacity and many others. We find that this area alone can achieve a significant return on investment as companies better align demand with supply. In fact, in 80% of our clients, these types of programs do the best job of achieving bold customer promises and profits simultaneously.

We have found several ideas to fill peak capacity periods. Of course, there is no one formula for success.  Each company has unique circumstances that require different solutions. However, a few ways to meet peak capacity include:

  1.  Hiring temporary workers for the peak season – of course, this strategy sounds like an easy win. If only it were that easy! UPS starts hiring seasonal workers prior to the holiday season in order to provide training. In 2018, they expected to bring on 100,000 seasonal workers. Over the last 3 years, 35% were hired into a full-time role after the peak season, creating an interesting enticement. Since every e-commerce related business needs seasonal workers, you need to provide some sort of benefit or enticement to fill these positions.
  1.  Overtime – of course, this is commonly used throughout manufacturing and logistics organizations. We’ve seen many aerospace firms running at high rates of overtime for many months, even years, in a row. It can be a tricky issue as employees become accustomed to higher paychecks, and the costs add up. On the other hand, people get tired and can get less productive and want a break. Counter-intuitively, it can also be the better financial decision given the learning curves associated with complex manufacturing roles. Of course, the answer is, “It depends”.
  1.  Hiring people with developmental disabilities – as our Inland Empire Economic Partnership leadership regional academy toured Goodwill and we have worked with clients such as Oparc, we have learned that people with development disabilities can be an ideal solution to fill peak capacity.  Thanks to Oparc for their research statistics: 1 in 7 people have intellectual or developmental disability, yet, only 19% participate in the labor force, leaving a significant opportunity to supplement the labor force. Studies show that these folks rate higher in reliability, productivity and loyalty. For example, a DuPont study showed that 90% of employees with Disabilities rated average or better on job performance. According to Walgreens, disabled employees had 40% lower accident rate, 67% lower medical treatment costs and 78% lower overall costs associated with accidents. And, Marriott shows a 6% turnover rate vs. 52% overall. It is worth checking this option out! Please contact us for a referral.
  1.  Partnering with companies with counter cyclical peak seasons – again, have you thought about partnering with strange bedfellows? Why couldn’t an e-commerce company with a winter peak season collaborate with a company in the building products industry with a summer season? In a way, the 3PLs follow this model. Having counter cyclical clients is an important aspect of maintaining a strong workforce as a 3PL.
  1. Outsourcing – one of the advantages of outsourcing and overflow capacity is that you can use it when you need it. Of course, you’ll pay a premium but it can still provide maximum value in several cases and meet the peak season requirements.
  1. Leveraging your extended supply chain – you never know what collaboration might make sense with your suppliers, customers and other supply chain partners until you ask. Explore the possibilities.

One thing is definitely true. You will not succeed during peak season if you wait until it hits to address your capacity shortfalls. Be clear on your strategy and make sure to build it into your plans. It isn’t all about peak season. Perhaps off-peak is “the time” to upgrade your infrastructure such as your ERP system, your business processes and to explore your customer collaboration opportunities. If you’d like an expert to weigh in on your plans, contact us.

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Considerations to Evaluate Your Business Model for 2018

January 11th, 2018

Do you Evaluate Your Business Model?
Most of us are so busy on a daily basis we don’t have time to think about our business models.  It is the rare client that questions their business model, let alone continually modifies it for success.  Do you question your business model on a yearly basis?

Why is it Important?
There are many reasons to re-evaluate your business models on a frequent basis.  How many of these impact your company?  

  1.  The global economy – Well, if you don’t see constant movement and change in the global economy – which is impacted by countless numbers of events and triggers, some predictable, some uncontrollable (such as the California fires and related impacts) and some multi-faceted and complex – we can’t imagine what bubble you are living in (and sometimes wish we could join you!).
  2.  Demographics Are you thinking about how the baby boomers are impacting your company?  No matter what you think, they are the largest generation ever and will have a profound impact.  Have you thought about what it means?
  3.  Social mores (customs and manners) – What is society thinking and how will it impact your company and personal career?  Do you think we are going back to dressing up in the work place or wearing jeans in a casual environment?  It was just a few years ago that virtual teams was the hot topic but millennials seem to enjoy engagement.  Speaking of millennials, do you think the environment and sustainability are important?  You bet!
  4.  Technology – Have you thought about the changing nature of technology, the latest trends and what is likely to impact your company?  Technology has the ability to obsolete entire industries if you have your head under a rock.  It also has the potential to provide an enabler to success if you keep your eye out.
  5.  Globalization – Not only are our devices connected (internet of things) but our countries are connected in ways you might never think about or take into consideration.  Certainly, currency differences are relatively easy to understand, although not to predict.  Yet, there are vast numbers of connections between countries, economies, politics, natural resources and much more.  Have you thought about what is changing in the globalization landscape?  For example, ten years ago, no one was fired for outsourcing to China (whether it made any sense or not).  What is going on today?  Near-sourcing is certainly a more relevant trend but only when considered in the global view.

Whatever your business model, it’s important to take time to evaluate and assess so that you are ahead, not behind the curve. Where are you?



Collaborating on Economic Forecasts

April 17th, 2017

I met with the Claremont McKenna team that puts together the Inland Empire economic forecast last week. They are well known in the Inland Empire for being on the forefront of the economics forecast and finding ways to bring unique insights into the process. Therefore, they were interested in what I see in terms of outsourcing, nearsourcing, insourcing and other key trends in manufacturing.

economic trends

Economic factors can have a significant impact on your business. I learned quite a lot about this from my Director of Purchasing when I was a VP of Operations many years ago. It was simply amazing — and impressive — all of the economic considerations he assessed on a daily basis to stay on top of supply base trends and potential trends. And, that was just one aspect of the end-to-end supply chain. It is worth taking a few moments to think about economics….

One tip to implement this week:

Since economics can have a dramatic impact on our business, it is worthwhile to pay attention — at a minimum. Attend sessions on economics trends, read economic updates, and dig into the key factors that are most likely to impact your business.

Start by just identifying a few economic factors that are important to your business. Find sources to track progress of those factors — internet sites, trade associations, customers or suppliers, etc. Collaborate with your supply chain partners. Participate with local universities. The bottom line is to stay on top of the trends and be proactive as you see changes.

 

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”

 



Trump and Trade

January 31st, 2017

Well, you’d have to be living under a rock to have not heard all the controversy about Trump and trade. Tariffs, restrictions and general chaos….

Currently, the U.S. trades significant volumes with China, Mexico and a whole host of other countries as we live in a global economy. For example, in looking up trade balances with China for 2016, the U.S. exported $104,149 (in millions) and imported $423,431 (in millions). Thus, what is all this hoopla about and what should supply chain leaders be thinking?

global trade

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

Although it is easy to get caught up in all the emotion and politics, the bottom line is that we aren’t going to flip the import/export numbers with China (as an example). Will it change in some respect? Of course; it would regardless. Will the trade figures change substantially this year? No. Will companies re-evaluate their insourcing, near-sourcing and outsourcing decisions as costs change with tariff adjustments? Yes.

We are headed into volatile times; however, this is not abnormal in supply chain circles. Who can predict hurricanes? No one. Yet hurricanes and natural disasters affect the supply chain every day. Those who are successful will find a way to adjust with changing times and will become more agile in their responsiveness to changing circumstances. And they will figure out what is most important to their business and focus solely on those factors while building agility into the rest.

What is most likely to occur is that Trump will re-evaluate trade deals and re-negotiate. If we took a step back and looked at our trade agreements, what makes sense? How can we keep businesses flowing yet improve the deal? If you are interested in getting in front of the curve, consider these factors for just those areas most critical to your success.

 



70% of Manufacturing Execs Say Near-Sourcing Will Increase

January 26th, 2017
near-sourcing and insourcing

70% of manufacturing executives state near-sourcing will increase according to LMA Consulting Group Research.

Lisa Anderson MBA, CSCP, president of LMA Consulting Group, conducted a proprietary research study to better understand outsourcing, near-sourcing and insourcing trends for U. S.-based manufacturers. Pending further analysis, Anderson reports on a preliminary finding that shows that 70% of responding executives expect near-sourcing to increase within the next five years. Survey data was collected from August to October 2016, and the U. S. presidential election may have an impact on this trend toward near-sourcing.

“I’ve seen that manufacturers were already considering insourcing to the U.S. and near-sourcing options to Mexico and other closely located countries because of the Amazon effect – the need for rapid response to customer needs. Thus, the industry was already moving in that direction prior to the U.S. presidential election. However, since tariffs are likely to increase and bad publicity could easily occur, the impact will probably steer some of those companies towards the U.S. instead of Mexico.

“In addition to the Amazon effect, I’ve witnessed a number of companies who poorly planned their outsourcing and off-shoring efforts,” shares Lisa Anderson. “They now have experience and data to make better decisions. Since the total cost of importing non-commodity products from Asia is equalizing with what can be achieved in the U.S. or Mexico, near-sourcing becomes a no-brainer when the customer and cash impacts are added to the cost equation. It is also far easier and more successful to communicate and manage when manufacturing is closer to the markets served.”

This is the third major research study conducted by LMA Consulting Group which included a Skills Gap Study and The Amazon Effect research project. With an uptick in manufacturing and continued concerns of the lack of skilled resources to fill new manufacturing jobs, Anderson is initiating a new Skills Gap Survey to assess the necessary skillsets for manufacturing positions. The data will be used to uncover new issues as well as compare and contrast results from 2013. Take the survey here or copy and paste this link into your browser http://ow.ly/pMcw308apzo.

To receive the final report or participate in an Anderson-led webinar on outsourcing, near-sourcing and insourcing, enroll here or cut and paste this link into your browser http://ow.ly/7kF8308agJQ.