Tag Archive: suppliers

Walmart & Costco Moving Towards Farmer-to-Shopping Cart Strategies

May 1st, 2019

 

Walmart & Costco Moving Towards Farmer-to-Shopping Cart Strategies

The squeeze continues. During my Aerospace & Defense speech recently on the Resilient Supply Chain, the concept of vertical integration arose as Boeing and Airbus are expanding and squeezing the middle in a noteworthy fashion. Similarly, according to Journal Star Walmart and Costco are moving to eliminate the middle man by moving towards farmer-to-shopping cart strategies.

Walmart started bottling milk in its new Indiana facility. This move eliminated Dean Foods and their 100 dairy farmers and replaced them with 30 farmers and cooperatives. Walmart is controlling the entire supply chain from farm to shopping cart including transportation, a vertical integration strategy rarely seen to this extent and scale in agriculture. Similarly, Costco established a chicken farm to grow, slaughter and distribute chickens in Nebraska, eliminating suppliers like Tyson Foods and Pilgrim’s Pride. Both of these initiatives could create significant disruption as well as opportunity.

Are you staying comfortable, waiting to be disrupted or taking the proactive approach to create disruption?

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

Getting to the top and/or to a comfortable position and riding the wave isn’t a viable strategy if you wish to be around for the long-term. Stay up-to-speed on what is going on with your industry, competitors, customers, suppliers, region and more. Don’t hide your head in the sand. Instead, choose to take the realistic yet optimistic view and turn it into reality.

In addition, start looking at how to build an agile and resilient end-to-end supply chain. There is no telling when your supply chain might be squeezed or something will change. The more agile and resilient you become, the more successful you’ll be! If you’d like some tips for managing disruption, take a look at our resilient supply chain series.



The Resilient Supply Chain: Cross-Organizational Collaboration

January 4th, 2019

I’ve been coordinating a process involving several disparate players, ranging from multiple educational institutions who are not aligned with one another, government players (with many differing goals) and business partners (with a completely different set of needs).  Although there are others, these 3 core groups are more than enough!

Success will only come to those who find common ground with collaboration.  If collaboration was as easy as simple communication, everyone would do it. We would probably have a lot more happy customers and more profits to share with investors, employees and for reinvestment and giving back.

What should we think about if this is the outcome we wish to create?

  1.  Look for the win-win-win –  If someone wins and someone else loses, it isn’t a successful collaboration.  If you think hard enough, there is usually a way to turn a situation into more of a win-win-win with some shared give-and-take.
  2.  Think about positioning –  If your idea is presented in isolation, it has a much greater chance at failing than if it is presented in light of the bigger picture. Why is it important?  How can each person play a role? Does each person know how he/she fits in and provides value?
  3.  Value diversity – Each time I think “I don’t want to be on this person’s team because he/she is annoying or won’t add value”, I find that I am completely wrong (luckily these are just thoughts, not actions).  The best ideas come from the most unlikely places.  And, interesting suggestions that can lead to “big” ideas typically come from someone who is quite opposite and thinking about the situation from a different perspective.
  4.  Recognize progress of the team –  Who doesn’t want to be recognized with a pat on the back as progress is made?  The key to collaboration is not to say positive things about collaboration and then reward individual performance.  Instead, reward team progress, even if that progress is simply gaining an understanding of how much they do not agree with each other yet are willing to listen.  
  5.  Consensus isn’t needed – As much as collaboration can achieve dramatically better results than each superhero individual thinking on his/her own, consensus is overrated.  Set the expectations upfront of how collaboration works. Feedback and input is expected. Discussion and debate participation is mandatory. But consensus isn’t required for every decision.  Otherwise, you might get there eventually but your competition will be LONG gone. More importantly, determine how to collaborate and make decisions upfront.decisions

The importance of collaboration comes up more frequently than almost any other topic.  Since executives are collaborating with customers, suppliers, trusted advisors, other supply chain partners and even competitors, there is just no room for poor collaborators.  

If you’ll notice, many disruptors collaborate with strange partners. Perhaps this core skill is a key ingredient to success…. Or, think of it another way, how will anything get done without it?

 



What’s Next in the Supply Chain?

August 10th, 2018

Our most successful clients always ask “What’s next?” as they want to stay ahead of the curve.  It is quite clear that staying on top of current trends and what is expected down-the-road is essential to successfully navigating your business to scalable, profitable growth.

For example, if you think your industry might develop a new way of servicing customers, you need to attack it quickly as you afford to be left in the dust.  Clearly, providing an exceptional customer experience is important but so is developing this new service method in a scalable, profitable way. It will be much harder if behind the eight ball. Are you thinking about what is next?

With our definition of the supply chain from creation to customer, there are countless topics to be thinking about when it comes to What’s Next:

  • New Products and Services: What new products and services will your customers want?  We have found that most customers (just like most of our clients) might not know yet.  You better be thinking about it and prompting ideas!
  • Suppliers: What new materials, components and supplies will you need to improve performance at a lower cost? (These win-win successes require innovation and collaboration.)
  • Transportation: What’s next in transportation?  Think of the relevance – from suppliers to manufacturers, from manufacturers to manufacturers, from manufacturers to distributors, from distributors to end customers, from one facility to another facility, and so on.
  • Technology:  What’s next in technology as it connects each of these people along with equipment, and much more (think IoT) with data and information flows.  We find that this often-times can be the bottleneck to achieving scalability.
  • Manufacturing:  What’s next in manufacturing?  Even if you aren’t thinking about using 3D printing, you should be considering the impacts if your competition, your suppliers, your customers and more start using this additive manufacturing capability.  It is likely to impact every step of the supply chain. What else is likely to happen in your industry?
  • Distribution:  What’s next in distribution?  In your industry, what is essential?  To think about distribution, you must think about your customers’ needs.  You also should be thinking about the rest of your supply chain. For example, if 3D printing takes off, it changes the distribution model.  If e-commerce continues to be important, your entire setup would change if you are more traditional currently. Do customers want you to take over worrying about what to stock and where to stock it?  Perhaps you should suggest taking on VMI/ replenishment.
  • Customers: What’s next with your customers?  How about your customers’ customers? Are you even talking with your customers’ customers?  Do you understand the industry trends throughout your chain? If you aren’t getting out of your office with an internal focus, you won’t.  Who have you called lately? Who have you visited? Do you ask questions? Attend conferences?
  • People:  What’s next with your colleagues and partners?   Nothing else will be achievable if you don’t have the best people on the team.  It wasn’t that long ago we thought virtual meetings were a big deal. Now they occur daily.  (Remember, illennials often-times like coming into the office for the community – and prefer the Google-like environment.)

Thinking about what’s next can distinguish you from your competition.  Eventually, a decision will arise that requires this knowledge. If thinking of the future is part of your daily culture, you’ll pass by the rest!

 



Have You Heard Horror Stories about ERP?

April 25th, 2018

enterprise resource planningSince we are known in ERP circles, it is a topic that comes up in conversation frequently.  Recently, at an Executive Forums meeting, one member talked about a situation he knew about where the company lost half its sales after a failed ERP implementation, and they ended up reverting back to their old system.  Can you imagine? The unfortunate thing is this is not uncommon although it is a more dramatic example.

ERP isn’t bad.  It is essential in achieving scalable, profitable growth although sometimes it can seem bad and have just horrible results.  

Similarly, no particular ERP system is bad; although some are definitely better for your particular situation and growth plans than others. We cringe when we hear about the plans of potential clients who were sold ‘ice to eskimos’ by ERP suppliers.  The challenge is that an ERP system can sound like a significant financial investment and so clients are tempted to not add cost by hiring an expert to assist with the process. However, since it is as significant as it is, when it goes bad, it extrapolates into many times the initial investment with unhappy customers, added cost and more.  Thus, it is no wonder clients stick with a ‘dead ERP’ longer than they should in many cases, which limits their ability to grow – and certainly achieve scalable, profitable growth.

All hope is not lost!  Here are a few things to consider when evaluating ERP and whether you should think about upgrading:  

  1.  Can you support your growth plans two years out? –  ERP isn’t something you slam in place unless you want to experience the horrific stories.  Start two years out. If you will be limiting your ability to grow profitably, it is time. It could be that you are on a system like QuickBooks, or you expect M&A activity or a potential sale, or you have a highly customized system or one that isn’t supportable two years down-the-line.
  2.  Forget about bells & whistles (cool items ERP suppliers show you) and evaluate a short list of critical success factors for your business –  This is #1 to success in evaluating ERP systems.  These critical success factors are items relevant to your profit drivers, maximizing the customer experience, unique to your industry/company, etc.  Once you identify them, tie them to functionality.
  3.  Consider your partners carefully – Although selecting the best system for your situation is cornerstone to getting the appropriate foundation on your house, if you have the wrong partner, you might as well hang up your hat.  The perfect software with the lowest cost proposal from a weaker partner will quickly surpass your highest cost proposal with a so-so partner and double it from there – at a minimum. Selecting ERP partners is quite similar to selecting any good partner – be aware you’ll be happily collaborating or stuck with them for quite a long time.

All businesses will go through ERP upgrades at least once or twice every 10-20 years (if done well, more if not).  Why not pay attention to how to make one of the most significant investments pay off?

 



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!