- Stop Talking About Cutting Costs and Start Talking About Increasing Revenue: The stereotypical supply chain manager prides themselves on cutting costs. They talk about taking inventory out, moving to cheaper modes of transportation, consolidating warehouses or, God forbid, outsourcing to get cheaper labor.
What they don't talk about is "How can I make the supply chain better to get products to the customer faster so we can drive sales". Yet, this is the question they should be asking and this is the question the Amazon supply chain managers think about every day. If you want to know what a "cost centric" supply chain looks like, look no further than Sears. They are cutting costs right out of business. - Get Supply Chain Managers Closer to The Sales Force: If your supply chain managers are not on the road with sales people periodically, meeting with customers and listening to the nuances of what they want, you are not a customer centric supply chain. I have met a lot of supply chain leaders who say they are customer centric and then I ask them to name (by name, not company) 5 customers who are in a position to buy their product (not the logistics people of the customer company but the actual customer) and they almost never can do it.
Also, if you are selling to an intermediary (i.e., MFG selling to retailer) don't forget the ultimate customer is the consumer not the intermediary. The intermediary is only going to buy your product if the consumer is pulling it through the channel. Because of this, you have to understand the real needs of the consumer. - Velocity is a Weapon: Customers and consumers want speed. When supply chain managers cut costs that is generally a euphemism for cutting speed. It generally means, buffering inventory, slower transportation modes, conducting mode shifts by "trapping freight" and building truckloads etc. Make no mistake, these are all revenue and sales killers. Speed wins!
- Look to the Future: Don't build your supply chain for today! Look to the future. What will customers and consumers want in the future and ensure your supply chain can flex to the future. This is one of Amazon's super secret sauces. 10 years ago who would have believed people would pay $100 per year to get access to 2 day or next day delivery? The only company that did was Amazon which left others far behind - in some cases so far behind they can never catch up.
- Listen to the Language Your Company Uses and Change it!: Here is what I mean: When Amazon discusses customer service they say, "2 day delivery". When others discuss it (and I have heard a lot of retailers say this) they say "next day shipping". Notice the nuance here? Amazon's statement is customer centric - when will the customer receive it. The other statement is internally focused - when will I ship it. This is a critical difference and it highlights the issue.
Thursday, August 10, 2017
If Your Supply Chain is Not Customer Centric - You Are Dead
My previous post discussed why Amazon is killing the retail market. My thesis is simple and it has nothing to do with Amazon being a financial juggernaut. It was not always that way so we have to ask ourselves how they arrived where they are today. The reason: Customer Centricity. Amazon bills themselves as ..."The Earth's Most Customer Centric Company". They are passionate about the customer. So, what are the supply chain implications:
Of course costs cannot be ignored and you have to do this in the most efficient manner possible but my point is that a growing company, with great customer centricity, can drive more revenue. You cannot cut costs fast enough to overcome lower and lower sales (see Sears for a case study).
Bottom line: BE CUSTOMER - CENTRIC!
Amazon Mission Statement: "Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
Monday, July 31, 2017
Amazon Doesn't Kill Businesses - Ignoring Customer Needs Does
I am going to formulate a more detailed post on this tonight and I think this is a topic needing coverage. It is all about how Amazon got where they are.
The central point: Don't blame Amazon for killing retail. Amazon was and still is insanely focused on the customer which causes them to innovate around CUSTOMER needs and not internal politics.
While other companies are trying to figure out how to cut out value for the customer to improve costs, Amazon figured out what will "wow" the customer and then figured out how to do this at an acceptable cost.
If others would get maniacal about serving the customer, they could compete. The funny thing is most won't do it.
Saturday, July 29, 2017
The Week in Review - ELDs, Amazon (again), Foxconn, Border Adjustment Tax - Dead, and Drivers
Another week down in 2017 and amazingly just a few more weeks before those in the retail supply chain will be going crazy getting ready for black Friday. A lot of topics to discuss from this week so let's get going:
- Foxconn - Beside being a great job growth engine what does this really mean for those in the supply chain? As you probably heard, Foxconn, the mammoth supplier for Apple and other electronics companies has decided to put a large plant in SE Wisconsin. This will clearly generate jobs, will bring sub suppliers to the region and will make the drive from Chicago to Milwaukee a nightmare given the number of trucks that will move from the Chicago intermodal yards North.
But, the real finding here is that the cost of production in the US is starting to come in balance with the equation of foreign manufacturing. The "equation of foreign manufacturing" includes the following components: Cost of MFG + Cost to move to port + cost of ocean / air + Cost to move from Port inland + GLOBAL GEOPOLITICAL RISK + SPEED + INVENTORY CARRYING COST. The last few I have capitalized because these are normally considered "soft costs" (and therefore get ignored by many at their own peril).
More will come and the "heartland" of America is where they will go due to transportation and now labor costs. If you are a cartage company and haul boxes out of the Chicago rail yards, this is a happy day for you! - The Border Adjustment Tax is Dead - This was sold and designed to adjust the cost of goods coming over the borders to be roughly equal to the cost of manufacturing in the US. It was to penalize those companies who move out of the US for the purpose of evading items such as labor laws, environmental laws etc. When it was first proposed the stocks of those supply chain companies benefiting from cross border activity tanked. Well, as they say, if you wait long enough good things will come. The border adjustment tax is dead. If you make your money moving products across borders and from the ports your money is safe.
- ELDs are Dead, No They are Alive, No They Are Dead... This continues to be a back and forth. For the the life of me, I cannot understand why the industry is against this as it will level the playing field between those who cheat and break the law and those who try to run a lawful company. But, alas, it appears a lot of people are against it. Despite 21 Congressman co-sponsoring a bill to delay the mandate for one year, the prevailing wisdom this week is the delay is dead and ELDS will go in as mandated.
- Amazon Files Patent for Underwater Warehouses - I am going to leave this alone and just say nothing amazes me anymore. I will need to have a lot more thought about this and conversation before I fully understand why you would want to put stuff underwater. Is land that expensive? Are the rich going to start moving to offshore locations which will need to be serviced from the sea? Who knows.
- Drivers - Hire Felons? - My guess is when you first saw this you figured I had lost my mind and this is the craziest thing you have heard of. I now ask you to take your emotion hat off and put on your thinking cap. Forget the social arguments, the fact is we have millions of non violent felons in this country who are no longer incarcerated. There is a shortage of almost 200K drivers. The solution seems like a match made in heaven. That courier driver you had who just delivered a package to your door? Today, he could absolutely be a prior felon. Why not allow a non violent felon deliver to a warehouse dock?
A lot going on in logistics and I will be writing shortly about the growth of silicon valley's influence in the logistics and supply chain world. Just as Detroit has learned their "center of gravity" is moving West, so too is the supply chain industry.
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