From merchandising and demand to warehouse and logistics, factories gear up for the December holidays.
We will start with what happens in July and August, knowing from a process perspective that we should start with Demand.
However, it seems more interesting to think about what is happening ‘right now’ (or any other time there are volatile conditions).
This article is designed to provide an across-supply-chain ‘checklist’ of practices and actionable suggestions to tune your supply chain for better performance, no matter what the season.
Summer may be the vacation time for many in North America and the EU, but factories making electronics and consumer products are working around the clock for the busy seasons to come—from fall merchandise and back-to-school (a global schedule) all the way through the big-gifting December.
Although we like to talk about Just-in-Time and demand-driven (a relative term, anyway), in fact, for consumer electronics, games, apparel, toys and so many other products, ‘The Season’ is approaching rapidly.
The volatile economy and new focus on geo-risks are changing the way many companies procure products.
Examples:
Financing at Various Stages of the Supply Chain
The Factory Checklist:
Many strides have been made in supplier management in the last decade due to the web. But there still is much to improve. Fair pricing, transparency in processes, compliance, and risk management will remain priorities for professionals involved in sourcing and procurement. Volatility and high-demand seasons require a sharp focus on terms and flexible relationships—not just on price.
The Supply-Management Checklist:
Migration to the Outsourced Virtual Enterprise Creates Advantages and Risks
As the temperate rises to 97 degrees outside and over 100 degrees inside, the warehouse fills to capacity. As companies contemplate inventory purchases, they need to sift through information on the state of the supply chain as it stands ready for the increase in consumer spending. Forecasting weather (a shaky topic at best) and other risks that drive up inventory holding positions, logistics speed and costs, customer demand variability, and surge-real-estate capacity as required should be underway in preparing for this most busy season.
The Warehouse Checklist:
1. Warehouse space:
2. Rethink your warehouse design:
3. Update your WMS:
SaaS/ On-Demand Adoption by Sector 2004
A growing, yet challenging, element of supply chain, transportation is the essential glue of global trade. And with many companies facing rate increases, looking at solutions and services in new ways is critical. Energy pricing, demand, and capacity vary from year to year. And shippers and customers want a lot more visibility during the often long journey to the store (or direct to the home).
The Transportation Checklist:
1. Give the TMS providers a new look—many more services are included in what they do now.
2. Review/revise logistics networks.
3. Global Sourcing
4. Take a look at your carrier spend and contracts.
With prices rising (again), you may be headed for some losses if you don’t have a great relationship and price in place.
Technology You will Evaluate and/or Purchase (2012)
TMS Leads in Purchase Plans for 2012
Consumer goods and electronics supply chains have some of the most volatile pricing—they are sensitive on both sides—supply costs on the one hand, and consumer demand on the other. And within the supply chain, there are the methods and trade promotions (TPM) used to enhance the brand and secure shelf space to draw shoppers. This is one of the most dynamic and changing areas due to social networking and mobile shopping. Pricing, Mobile, Social, and TPM all need to be on your checklist.
Promotions account for about a 10% to 20% lift in sales. Yet the cost of creating them is increasing, with up to 50% of marketing expense coming from the manufacturer. Somewhere in those stats is your company. Are you one of the companies with low marketing expense and high lift, or are you the one with the 50% marketing expense and small lift? Our research showed that in tier-one companies, 25% of all promotions fail to achieve their goals.
And in SMBs the statistics grow to 84%. But we also learned that most companies actually don’t know if these TPM investments even work, since there are no real systems to track them. In addition, the attitude of many manufacturers is that retailers extract these fees for no subsequent service, such as the actual execution of the promotion (advertising, displays).
In spite of these issues, the practice of trade promotions will increase. (So we might as well learn to do it well.) Companies that are clever about managing promotions are seeing a return on their investments in terms of increases in market and margins, sales, customer loyalty, and price (that’s right, increase in prices). Precision in practices can ensure that marketing programs are targeted to the right audiences to achieve growth.
The Pricing and Promotions Checklist:
1. Make it a Process
2. Automate It
The scale of these activities is just too broad and too deep (detailed) to manage without a system. And spreadsheets, though useful, don’t connect the community—from the manufacturer through the channel—to monitor the process. (Spreadsheets can’t tell you about the end-customers, either.) Settlement is a huge value ‘eroder’—if you don’t have systems to track your shipments, you can end up giving huge concessions back to the retailer
So much information falls through the cracks that companies are mostly guessing about what is working—and we include profit, not just lift, as a mark of success. It seems that with so much money at stake, investing in solutions and process improvements would be a small investment with some truly important returns.
3. Make it Mobile and Social
Today’s consumer is on the web and on the smart phone to locate and learn about products: where they can find them and what they should pay. Engaging in your customer’s mode of access is critical if you want to be top-most when the customer is searching and shopping. (More below on social.)
4. Organize Price for Profit
“The whole reason that sales and marketing departments exist is to accentuate differentiation, escape commodity price pressure, and create profitable deals,” says Dave Taber of David Taber +Associates. (So promotions should have some brains, yes?)
But at the core of the game is pricing, which is generally an abysmal effort, lacking process and structure. Today’s pricing is really costing and negotiation in most companies. It’s not that marketing does not attempt to determine a market price, but many companies lack consistent analyses of customer segments before matching products and value to that segment and deriving the price.
Most often, of course, the mechanism becomes mapping competitors or sitting with channel partners/retailers to set an item’s price. Once the product leaves the manufacturer’s shipping dock, price is no longer under their control.
Organizations and Process Elements in Pricing
We recommend rethinking how you integrate the various processes in order to gain a clearer understanding of pricing (see above image). Aligning efforts can make a significant difference in understanding your markets and creating pricing consistent with your brand and corporate performance goals.
Tweets and tubes are interesting, but they are not particularly effective in creating commerce. Although virtually every company has a ‘follow me’ button on their home page, actively engaging the customer is critical since there is so much competition. The challenge is to get social engagement working for you in order to understand your customer base in a much richer way and engage them to create interest, gain information, increase sales, and, hopefully, achieve customer lifetime loyalty.
Social Networking Checklist:
The Social Side of Supply Chain Management
Mobile is here—so learn to use it well. Your digital movements are part of the public record, more or less. And many consumers grant permission to collect location and other data in order to gain access to location-based services or information about products, services, events and promotions. Where is the closest Starbucks? I am not feeling well; I wonder if there is a Doc-in-a-Box nearby? Where is there a good place to get a veggie pizza?
From the provider’s side, mobile data is highly valuable: it will be the ultimate source of data to create new customer and constituent models. Mobile data is highly valuable because it elicits a dynamic response from people on the go. Where they are located now can feed a real-time-capability execution system—and signal for more buses, food, or a real-time promotion to bring people into your establishment. (Dense populations on the move after a public event can be a source of business.)
The point is that engaging the constituents in the way they want to be engaged—multi-channel engagement if you will—will generally produce richer data that can be used to expand your business model insights to improve your services and products.
It might be five golden rings for retailers that are using a variety of mobile methods to connect with customers—QR, LBS, RFID, NFC and Mobile Scanning. Crowds, swarms, phones, location-based ‘attractors,’ mobile searching, collaborating, shopping, and advertising are on the rise. But enterprise will need to sort through all this data to determine what techniques are best, based on their customer preferences and use cases.
People are not just checking out stores and promo codes; they are transacting. So this is not just a search and advertising channel but a serious technology for B2B and B2C. Channel upon channel, opportunity exists here to get product, price and promotion-related information through mobile networks, phone apps, content providers and social networks.
The Mobile, LBS and Auto-ID Checklist:
Though the full use of these technologies is somewhat experimental in some enterprises, the technology is not.
8 Wireless & Mobility Trends Taking Us Closer to Greater Supply Chain Visibility
Part of the challenge is pulling all this data together in a construct that can be analyzed. Users are virtually buried in data—from traditional CRM systems, as well as website marketing automation systems and now social networking and mobile data.
Analytics Checklist:
Related: The Crucial Role of Applying Analytics in Your Supply Chain & Operations Strategies
Always listed as the biggest challenge for Demand Management is planning for big events—new product introductions or high-purchasing seasons.
With increasing competition and price volatility, simply getting the correct quantities on the shelves is insufficient. Will you make money now and in the future? Demand really needs to look at all the components we discussed above: Who is the customer? What is the right channel to find them? What is the right price point—fair and yet profitable for us? How can I maximize my turns and keep my logistics costs down?
Good demand management is the key to addressing the above. Success here is about chipping away the layers—it won’t happen in one pass with a new system.
The Demand Management Checklist:
Amazingly, large and small companies often face the same issues. But insight into what makes your market tick can help you prioritize your investments to improve business planning and operations.
Learn to love data. For high SKU-count businesses, or long lead time and complex chains, the profit is in the numbers. A grudging attitude towards data management will not work in your favor. Those who see good data and systems as their advantage perform better.
Source: ChainLink Research