Can We Go Back to the Start?

If you watched the Grammy Awards this year, you may have seen a rather unusual commercial from Chipotle. The 2-minute spot was the 18-year-old company’s first national ad. Ever. It got its start on YouTube where it currently has more than 5 million views. During the spot, a farmer questions the industrialization of his industry and attempts to return to the simple farming life. He gets a little help from a retailer who has the same notion.

The commercial made we wonder about the business of logistics and if we could rewind the supply chain. With all of our technological advances, our real-time expectations, and just-in-time orders, is it possible? Our manufacturing and distribution models were created to provide better access to the goods we need, but in the chase to be better, faster, and more efficient, did we ever stop to consider if our industry was heading in the right direction?

Maybe going back to the start isn’t realistic for distribution. Customer expectation levels are too high, margins are too small and delivery windows are too narrow. But perhaps the increasing awareness that the supply chain is a vital contributor to the success of a product will allow manufacturers, 3PLs and retailers to work together more closely to create a system that is better for everyone.

Personal Logisticians

The holiday season is, in general, a busy time of year for most of us.  As I talked with people who were in line with me on Black Friday while watching others furiously trying to cross items off their holiday gift lists, I saw the future of our industry.

Frugal purchasing, free shipping, overnight delivery, on-line tracking…I’m used to hearing from our clients, but this season I’m hearing them more frequently outside of the office.

Maybe it’s the perfect storm of economic uncertainty, strong logistics marketing campaigns, and the ease of e-commerce, but more and more I’m seeing personal logisticians: consumers armed with knowledge, a credit card and a smartphone (or tablet!) who demand the best deal served up with timely (low- or no-cost) shipping.

And they’re getting it.

Retailers, both on-line and in-store are scrambling to accommodate them, and so, in turn, will the distribution industry.  Google is reportedly already working with retailers for a 1-day delivery service to battle Amazon’s Prime program.  UPS ‘My Choice’ allows users to reschedule and re-route deliveries.  If this convenience is available in consumers’ personal lives, you can bet they’ll expect the same level of service in their business lives.

Is your distribution supply chain ready to meet this challenge?

Think Different.

Innovator. Entrepreneur. Visionary. Each accurately describes Steve Jobs, the legendary Apple founder who recently succumbed to pancreatic cancer. Although he possessed a number of excellent qualities, the one I most admired was his ability to “think different.” More than just a slick ad campaign that helped propel Apple to the top of our collective pop-culture consciousness, it seemed to be his way of life. It allowed him the freedom to challenge generally accepted “truths” about products, services and operations and replace them with ones that were more vibrant, more efficient, more intuitive.

Can we follow Steve’s example and challenge the status quo? In the distribution industry, there are indications that we’re heading in the right direction. The Hershey Company-Ferraro Group collaboration—marking the first supply-chain merger by competing manufacturers—and the exploration of alternative-fuel trucks to make transportation greener are two stellar examples of innovative solutions to existing challenges that defy traditional supply chain management operations.

Thanks, Steve, for reminding us that thinking different can change the world.

Reminder: People Run the Supply Chain

As the U.S. economy continues to struggle and unemployment remains high, our industry has focused on cost cutting through automation. Technology has undoubtedly helped us move more products more quickly and less expensively than ever before, but have we focused so much on automation and technology that we’ve neglected to identify how they affect the people in our supply chain?

I’m a distribution guy, so I’m the first to admit that technology provides visibility into our operations that makes my life much easier. A single report can tell me exactly where a specific load for any one of our customers is located in real time. What it doesn’t tell me is how our people in the distribution center hustled to get the trailer loaded, even after a forklift problem, so that the driver didn’t miss his delivery window. Or how the driver’s skills helped her avoid an accident that would have destroyed the customer’s product. If I just look at that report, I miss the most important aspect of our business: the dedication of our people. When things go wrong (as they inevitably do), technology will only get us so far.

Is our industry fast paced? Absolutely. Do we need to utilize the technology available to be more efficient, more cost effective and more competitive? Of course. But if we pursue those options exclusively, with little regard for the people running our operations, we’ve failed. Because at the end of the day, it’s the efforts of the people in the supply chain that get the product to its destination.

The Supply Chain’s X Factor

Growing up in the trucking industry, I’ve always been a bit preoccupied with transportation. Now it looks like the rest of the industry is, too.

As Peter Bradley’s recent DC Velocity article, “The New Dynamics of Site Selection” points out, transportation and its related costs have become, in many instances, the deciding factor in site selection. It’s no longer enough to have a well-equipped facility with the right price per square foot; now you better find a perfect location with rail and highway access points within an economical proximity to major markets. Not too much to ask for, right?

I jest, but as the industry continues to adjust to the changing market, this type of “holistic logistics” thinking is becoming more common. But we still need a way to move product from location A to B (and often C, D and E as well). We continue to develop better technology, streamlined processes and tighter networks to offset the rising cost of transportation. Will we ever be able to decrease the price tag associated with the movement of product? Will alternative fuel sources make transportation more efficient and cost effective? Or is it transportation’s fate to be the largest cost center in the supply chain?

Cost Cutting in the Retail World

A recent article in the Wall Street Journal (At Supervalu, Cost Cuts are in the Bag) fascinated me both as a business person as well as a logistics professional. It described the extensive research, training and implementation of a cost-cutting program by Supervalu Inc. (operator of Albertsons, Acme Markets and Jewel-Osco stores). The targeted cost center? Shopping bags.

According to the article, plastic shopping bags cost approximately $0.02 each; paper about $0.05 each.  Since 2008, Supervalu has initiated a company-wide bag use study; instituted a new training program for baggers; and created a 41-question bagging quiz, all in an effort to reduce or (better yet) eliminate the use of bags. Estimated company savings for 2009: $4-6 million. Estimated company revenue for fiscal 2010: $40.6 billion.

"We're in a very competitive industry. Anything we can do to lower our expenses will help us keep our prices as fair as possible," says Supervalu spokesman Mike Siemienas.

Not long after I read this article, a customer asked me if it’s fair for customers to expect its 3PLs to keep driving down costs. I thought of the $0.02 bags and the time and effort spent on Supervalu’s program, and answered that 3PLs should be just as proactive as their customers. It’s our responsibility as partners to be innovative and leverage resources to reduce costs. Isn’t that what a customer expects from its own team?

The Global Supply Chain vs. Mother Nature

I’ve seen my share of bad weather: floods, snowstorms, even the occasional tornado. As a native Northeasterner, I do my best to roll with Mother Nature’s punches. Although it has brought some scheduling challenges in my personal life (my kids had more snow days this year than I had during my entire school career), it’s the upheaval in my professional life that causes me to lose sleep at night.

I worry about our drivers who bravely face the weather to make our delivery deadlines; our warehouse people who work late hours to ensure loads are ready to roll even when forecasts look bad; our customers who partner with us to ensure their product gets to its destination on time and in one piece.

As I look forward to spring, I can’t help but think about how this winter’s severe weather patterns—and the tsunami in Japan—have caused logistical challenges. Mother Nature has demonstrated her might and highlighted the fragility of our global supply chain operations.

As demand continues to increase, weather patterns and natural disasters both far and near will continue to affect efficient supply chain execution in the first, middle and last 500 miles. How will the logistics industry respond to Mother Nature’s efforts to thwart our global supply chains?

The NFL: A Modern Day Logistics Master?

I am happy to classify myself as an NFL football fan. As I watched this year’s Big Game, I was, like many people, caught up in the all the hoopla that surrounds the league’s biggest event: the commercials, the half-time spectacle, and, yes, even the game itself. Although I love the game, I believe the real value of the NFL is in its logistics practices.

What can we learn about logistics from the NFL? Plenty, if you ask me.

Let’s talk about product distribution. I’m old enough to remember the days when a person’s favorite team was dictated largely by their geography. As television became a fixture in American life, the NFL saw the perfect vehicle to distribute their product. Now, with premium digital and cable packages, I can see my team whether I live near the stadium or across the country. Clearly, identifying and utilizing the best distribution method has been a boon for the NFL.

How about merchandise? Officially licensed NFL products—from apparel to video games—are a billion dollar industry. Strict licensing agreements have made “official” products a must-have for “real” fans. The availability of these products in licensed retailers and online stores have allowed the NFL to execute a streamlined distribution method while maximizing supply chain efficiency.

Customer service? Although the NFL can’t guarantee my team will get to the Big Game, they’ve adjusted their strategy to ensure I will want to watch all season long. This is great news for their customers: fans and advertisers. Monday Night Football is a staple in the Fall TV line-up and was a homerun for advertisers throughout the 2010-11 season. Thursday night games—including the season opener and Thanksgiving—have become de rigueur for those who can’t wait until the weekend for their football fix.Player outreach programs and league-sponsored charity events have helped create fans from people who don’t even watch football. Is your logistics team taking cues from your customer needs and creating fans with its service tactics?

With the possibility of a strike looming, we can add labor relations to the list of commonalities. While it remains to be seen whether the League will score a touchdown on this one, I for one will be watching the plays carefully and seeing what I can learn from them.

Distribution is the Key to Great Customer Service

Following a season of online shopping and multiple trips to the grocery store and the mall, I had no problem determining the focus of my first post of the New Year: customer service. As many of us can attest, it comes in varying degrees and is dependent upon a multitude of factors. But what does it mean in terms of distribution?

Online
I placed an order with Zappos.com for a holiday gift. I requested no expedited delivery options, as I had placed the order weeks in advance and was content with the site’s 5-7 day estimated delivery date. To my surprise, the package was on my doorstep the very next day. As a customer, I was very pleased that Zappos had exceeded my expectations. As a logistician, I was impressed with the speed of the delivery and the streamlined relationship between the order and the shipment processes.

At the Grocery Store
Seafood is a must at my holiday gatherings, so I went to Wegmans grocery store to pick up scallops and lobster tails. Apparently this was the best day to purchase seafood because by the time I arrived at the store, most of the inventory was gone. The seafood department manager assured me they were getting another delivery that night and that he would personally pull my order from the new stock if I would return tomorrow morning. Sure enough, by 10 a.m. the next day, my order was waiting. If the manager had not been confident in his order and his delivery schedule, I would’ve gone to another store in search of my seafood.

In the Store
Despite careful list building and gift consideration, I had to make an exchange. I had purchased a video game online at Target.com and had ordered the wrong one. The easiest method, according to the website, was to return it to my local store and purchase the correct item which was in-stock at that location (also according to the website). Although I was hesitant that this was indeed the "easiest" method, I was pleasantly surprised. Not only was the return a breeze, but the right game was available just as the site predicted. Inventory transparency has clearly simplified such transactions, helping retailers increase sales and customer loyalty.

Overall, I was delighted with the distribution services I experienced this holiday season. Is your supply chain delighting your customers?

 

 

 

 

Defining Supply Chain Flexibility: The Search Continues

As we begin to close the books on 2010, one major topic of discussion that will likely follow us into 2011 (and beyond) is supply chain flexibility. Volatile market conditions have made historical forecasting more difficult and less accurate, especially in consumer-driven retail environments. Our more complex, global supply chain configurations often compound the situation and make flexibility seem ever more elusive.

So what is a flexible supply chain? Is it simply the ability to adjust supply to demand in the shortest amount of time for the lowest cost? Although each of us undoubtedly has his/her own definition of flexibility, I believe some of the best supply chains share a few common characteristics:

1. Direction – Know what you want from your supply chain and have someone (or a team) who can communicate it to all of your partners and monitor progress. When circumstances change—and they always do—you’ll be better positioned to implement a new plan.
2. Common Goals – If your supply chain partners don’t know your success priorities or KPIs (lower transportation costs, leaner inventories, customer satisfaction), you may never realize them.
3. Collaboration – The supply chain that works together is rewarded together! Sharing information, ideas and innovation among strategic partners makes it easier to cost-effectively respond to market changes and proactively determine new strategies.
4. Technology – When used correctly, this powerful tool has helped supply chains circle the globe in record time with laser-like accuracy. Investing in technology (and updating/maintaining it) is vital to the speed and precision of your supply chain.

What’s your definition of supply chain flexibility? What  would you add to my list of flexible supply chain characteristics?