Tag Archive: suppliers

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!

 

 



Big Grocery Chains Ramping Up Pressure on Food Suppliers

January 23rd, 2018

According to a Wall Street Journal article, Kroger (#2 grocery chain in the U.S.) and Walmart are ramping up pressures on food suppliers.  There is too much lost money due to shortages!  Thus, the industry is waking up to the critical importance of on-time delivery and customer service especially as they compete with on-line retailers like Amazon.  

Kroger is fining suppliers $500 per order that is more than 2 days late to any of its 42 stores.  That can certainly add up!  And, Walmart is charging 3% for late deliveries.  This could prove transformative.  

What is Your Delivery Performance?

How is your company performing in terms of delivery?   No matter the industry, delivery performance is having a significant impact on scalable, profitable growth – or lack thereof.  My best clients are paying close attention and finding ways to get ahead of this curve.

What Should We Consider and/or What Impacts Could Arise?
Let’s start at the beginning.  Do you know what levels of service you provide to your customers?  Is it the same level to your A customers as well as your C customers?  Find out.  

On-time-in-full (OTIF) is rapidly becoming the standard for measuring this performance.  If you don’t have a metric, just start with this one as a base.  Or, worst case, start with whatever you can measure rapidly – and evolve over time.  Of course, service alone won’t cut it.  Lead times and other factors enter the equation….

Staying Competitive
Clearly, if you are not high performing in the food and beverage industry (and consumer products in general), you will not stay viable anymore.  Amazon will be happy to fill the gap.  However, since I work with small and medium, family-owned manufacturing companies to  private-equity backed firms and large multi-billion dollar enterprises across a wide variety of manufacturing and logistics industries, it is quite clear that food and beverage is not alone!  

Have you been tested yet?



Manufacturing is at a Peak!

December 29th, 2017

Supply Chain Briefing

According to an Industry Week article, manufacturing is at its all-time PEAK!  Not only is it FAR from dead but it is at the highest point in history.  By every measure of industrial production, the U.S. is at record levels.  We are more than twice as high as we were in 1979 when we were at the peak in employment.  

No matter what measure is used, manufacturing is at the top of its game.  Inflation adjusted manufacturing GDP will peak in the 4th quarter of 2017.  Any way you slice it, manufacturing is strong.  Are you thinking about how to leverage this strength?

What Should We Consider and/or What Impacts Could Arise?
Manufacturing isn’t showing signs of slowing down.  In fact, with the recent tax law passage, it could get an additional boost.  Of course, the strong companies are automating and finding ways to provide exceptional customer experiences.   

There is vast potential for growth and success.  

  • Are you working with the strongest suppliers?  
  • If so, do you know how much of their capacity you use?  
  • If they continue to grow, will you continue to receive the same level of service?  
  • Are they continually automating?  
  • Do you have secondary suppliers?  

Remain Competitive and Gain Your Edge
Just because manufacturing is growing, this is by no means a time to rest.  To remain competitive and gain an edge with customers, you need to stay abreast of the latest technologies.  

  • Do you understand your customer expectations?  
  • Are you thinking about what they’ll need one, two and three years from now?  

The most successful companies are definitely thinking AND doing something about it!



Is Apple Moving Design In-House?

December 15th, 2017

According to an Industry Week article, Apple is considering designing chips in-house.  The Japanese Nikkei said that Apple could replace as much as 50% of the power management chips that go into iPhones with its own design.  That could be a dramatic change!

Supply Chain Impact to Component Vendors
Apple has developed its own processors for years but has recently increased its focus on the in-house design of components. There have been recent changes in supply chain (recent acquisitions have reduced the number of chipmakers).  Could this be a change in strategic direction or a response to a changing supply chain or something else?  No matter the reason and whether it will come true, the question is whether you would be aware of this change if you were in a related industry or dependent on suppliers related to this potential change.

What Should We Consider and/or What Impacts Could Arise?
Of course, if Apple moves design in-house, it will impact the current supplier (Dialog); however, it doesn’t stop there.  The suppliers who supply Dialog should be thinking about the impacts and how they can redeploy resources.  It begs the question of the level of diversification of your customer base.  Has this been a priority?  Is there a way you could turn part of this situation into a positive, whether you are Dialog or a related company?

Think About Potential Changes in Your Industry
Even if you are unrelated to any of these companies and impacted parties, it pays to be thinking about potential changes in your industry.

  • Are you in lock step with your customers and suppliers?
  • Do you know what is on their minds?
  • Do they know what you are thinking?
  • Could it be of benefit to brainstorm markets, products, and more with supply chain partners?
  • Do you have relationships within your industry that could alert you to key trends or do you attend important trade events?
  • At a minimum, what are you doing to ensure you are not surprised?

If your strategy includes keeping your eye on industry and customer change and your ear to the ground, you most likely will see the change coming so that you can steer the right course.  If not, now if the time to get started.



Keep a Strategic Eye

December 8th, 2017

observation

 

The verdict is in – those executives that keep a continual eye on strategy outperform the rest.

Certainly, after spending a week in Fiji thinking about strategy, I am focused on the power of keeping a strategic eye at all times.  It is undoubtedly what our most successful clients do. We have learned to keep an eye on what “works” across organization sizes, industry types, and more. 

Recently, we were in a final project review meeting with a large, complex organization’s CEO, and he continually kept an eye on strategy. As much as he appreciated the tactical results, the strategic conversation was top of mind. It was a night and day difference to another client review meeting we participated in recently. There is no doubt which organization would make the better investment – not just in terms of cash but also in terms of referrals of resources. Top talent is attracted to top talent with an eye to the future.

We also met with a potential client recently who is vastly smaller in size than both of the above examples yet he had an eye to strategy and was willing to invest in the “right” talent to ensure his strategy translated into reality. This conversation engaged our interest in collaborating with him because we know the focus would be on outcomes that tie to strategy instead of deliverables that might have no relation to a result.

Are you engaging your employees, customers, suppliers and trusted advisers with an eye to strategy?