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Category Archives: Warehousing

Top Supply Chain Challenges for Manufacturing Companies

The variety of products available through a growing number of distribution channels is truly amazing. Competition between brick and mortar and e-commerce retail channels, often within the same company, has led to a proliferation of products and services.

In fact, on a recent trip to a Nike store I explored the NIKEiD program they launched a few years ago that allows customers to customize their footwear. Once configured, your customized shoes are produced and delivered to your house in a matter of a couple of weeks.) I can’t wait to receive my Michigan State themed shoes – GO GREEN, GO WHITE.)

Delivery of ‘make to stock’ products to a home or business is now available within hours of making a purchase. A growing number of connected, smart devices that have the capability to anticipate the need for a product are available for purchase.

Consider the smart refrigerator that orders a gallon of milk based on the quantity of milk in the refrigerator and its average consumption. Consider the smart printer that orders replacement ink cartridges based on amount of ink remaining and an average use rate.

Furthermore, 3-D printers are becoming more common allowing companies and consumers to make their own products on-site. What’s next? Products beamed right into your house. Beam me up Scotty!!

Back to reality, today’s manufacturers face a long list of difficult supply chain challenges including increasing demand variability, inventory proliferation, manufacturing capacity constraints, increasing risks both nature and human based, more environmental compliance regulations, intense global competition, increasing customer expectations and a shortage of talent.

To survive in today’s highly competitive global environment, manufacturers need to piece together the many parts of the supply chain puzzle to lay the foundation for more mature capabilities in the future.

An estimated, 75% of available supply chain data originates from outside the ERP system. Complexity opens risks of miscommunication and disruptions, often from incorrect or incomplete data.

Clean and consistent data is required to harness the power of investments in analytics, digitization, optimization, machine learning, big data and other advanced supply chain capabilities. A supply chain Master Data Management (MDM) solution provides consistent, harmonized, standardized and actively managed data from across the extended supply chain.

Accurate demand forecasts lay the foundation for an effective supply chain. With greater forecast accuracy comes greater predictability ensuring downstream supply chain processes run smoother at less cost.

To be successful at demand planning requires an in-depth knowledge of your business, experience forecasting your products, and an advanced demand planning solution. Demand planning solutions use science to automatically apply a variety of forecasting methods in an unbiased way to create forecasts for all stages of a product’s life cycle.

Manufacturing facilities are pressed by market demand to provide greater product variety and shorter delivery times. Shifting to production lines that are more flexible and closer to customer demand helps produce a greater variety of products with shorter lead times with smaller batch sizes and more frequent change overs.

However, multi-plant sourcing and scheduling increases complexity and the need for enabling technology to develop an integrated plan for both aggregated levels of production and site level production to meet customer orders.

Eliminating excess and obsolete inventory is a priority for many manufacturers. Effective inventory reductions are best achieved by synchronizing demand forecasts, inventory quantities, and supply capacity throughout the extended enterprise. Multi-echelon inventory optimization replaces rules of thumb with science to optimize where and how much inventory should be held across the extended supply chain.

Many manufacturers find it extremely challenging to align supply capacity to variable demand, while meeting corporate objectives. Marketshare can be won or lost based on how well a company predicts and reacts to demand shifts. A well run Integrated Business Planning (IBP) process supported by an advanced IBP solution can mean the difference between success and failure. Companies that take a spreadsheet driven approach spend too much time manipulating data and not enough on value-adding activities.

Manufacturing supply chains have many moving parts, each with their own challenges and potentially conflicting objectives. Only a scalable, interoperable supply chain planning and optimization platform can ensure a company’s supply chain performance is optimized.

Related White Paper

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Solving the Supply Chain Planning Puzzle
Manufacturers today face a long list of tough supply chain challenges. Supply chain teams that rely on a jumble of spreadsheets, enterprise resource planning (ERP) systems, and antiquated supply chain applications risk failure. Keeping data in many different places and systems limits visibility and creates misaligned plans. Download Now!

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Five Steps to Transform Your Consumer Goods Supply Chain

 

Today’s modern supply chains are multi-enterprise, starting with consumers, retailers, distributors; and flowing through an extended network of suppliers, contract manufacturers, and other third parties.

Successfully managing such supply chains requires visibility, planning, and execution across all trading partners.

Here are 5 steps to transform your extended supply chain into a competitive advantage:

1. Look beyond the enterprise and adopt analytics that uses real-time data

While traditional planning applications are restricted to mostly historical data from within the enterprise, current data from the extended supply chain – from retailers or distributors – contains critical information. Use it.

2. Automated algorithms are here to help

Automated algorithms enable the next step in supply chain performance through the systematic analysis of large amounts of data. It, therefore, frees professionals from mundane, low-value activities to focus on more strategic areas such as planning promotions or inventory policy decisions. Leverage technology to do more.

3. Connect logistics to S&OP

Finished goods are planned weeks or even months in advance yet shippers are the last to know, often finding out as orders cross their desks.

As a result, logistics is stuck in reactive mode, scrambling to secure capacity each day. New transportation forecasting algorithms can now predict logistics requirements that are synchronized with S&OP to ensure that everyone executes against the same plan.

4. Create healthy inventory across the entire supply chain

Managing inventory to support the business’ growth requires the simultaneous optimization of all echelons of the extended supply chain.

Removing unproductive inventory across the value chain frees millions in cash to invest in other parts of the business and lowers operating expenses by having the right product in the right place the first time.

5. Better serve customers by accurately sensing demand and connecting it to a timely supply response

Linking real-time demand with a timely supply response allows companies to commit with confidence and profitably capture growth opportunities in today’s volatile markets.

If your company is not already working on leveraging its extended supply chain, the time is now.

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End-to-End Supply Chain Connectivity and Integration
Large, high-profile organizations are leveraging E2open’s unified, end-to-end platform to bring together planning and execution, supported by the application breadth to meet functional requirements and the depth to solve new challenges. Download Now!

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Graph Blockchain Solutions Targets $15.5 Trillion Global Supply Chain Management Logistics Sector

August 23, 2018 · By 24/7 Staff ·

Blockchain Data Management & Global Logistics Market

With globalization and the increased consumption of various products worldwide, efficient supply chain management and the role of freight and logistics has become increasingly complex.

The global logistics market involves all activities of Supply Chain Management (“SCM”), including transportation, warehousing, inventory management, and the flow of information and order processing.

As previously published by Transparency Market Research, this market is estimated to reach US $15.5 Trillion by 2023.

Multi-national global logistics and freight companies such as FedEx, UPS, and Purolator have openly acknowledged their endorsement of blockchain technology, with all three joining the Blockchain in Trucking Alliance (BiTA), noting that it will bring efficiencies to their industry through consistent, transparent and immutable data.

“We’re quite confident that blockchain has big, big implications in the supply chain, transportation, and logistics,” FedEx CEO Frederick Smith said at the Consensus 2018 conference.

On their company’s press release, Linda Weakland, UPS director of enterprise architecture and innovation, said: “Blockchain has multiple applications in the logistics industry, especially related to supply chains, insurance, payments, audits and customs brokerage.”

Tied to global logistics, South Korea has one of the world’s highest e-commerce rates, however, they have lagged in keeping pace with warehouses and distribution centers. As such, as reported by the Wall Street Journal earlier this year, there has been a wave of investment into high-specification logistics projects across the country, both by the South Korean government through incentives and into Korean logistics properties by institutional investors such as the Canada Pension Investment Board.

Graph Blockchain Solutions

With the growth of this sector as a tactical objective, Graph’s foray into the global logistics industry commenced with providing solutions to divisions of Samsung and LG corporations. Both companies are South Korean based multinational conglomerates, known to be the world’s largest manufacturer of mobile phones and smartphones, and the world’s second-largest television manufacturer, respectively.

By participating in the development of technology that could revolutionize logistics for multi-nationals, Graph has secured a solid position with the goal of becoming a leading solution provider in the sector, focusing on building a global logistics eco-system wherein the graph blockchain solution would reduce downtime by providing real-time monitoring, tracking and business intelligence analytics.

This will enable companies to realize cost savings by mitigating delays and minimizing the impact of lost goods due to cargo theft and fraud, while at the same time driving efficiencies across their SCM.

Most recently, building on the company’s new-found presence within the global logistics space, Graph announced a memorandum of understanding with the Korean Trade Organization, KTNET, a Korean government Agency, to develop a blockchain based electronic trade services platform. KTNET affects US $5.57 billion annually in trade and services and links 97,000 customers and trade-related organizations through its trade system. By integrating the benefits of blockchain technology with real-time insights and reporting tools, Graph’s data management platform is part of the continued improvement of trade processes by KTNET, and further establishes Graph’s capabilities to provide viable leading-edge blockchain solutions in the global trade services sector.

“While blockchain data management is commonly viewed as a nascent technology, the increasing demand to address efficiency issues in supply chain management clearly dictates the need for rapid adoption of blockchain solutions such as Graph’s. Our successful partnerships to date show that we are a trusted solutions provider, and granted how big these industries are set to grow, this is just the tip of the iceberg,” says Peter Kim, President and COO of Graph.

About Graph Blockchain Limited

Graph Blockchain is in the process of listing as a public company on the Canadian Securities Exchange, by way of a reverse-takeover, resulting in a pre-financing valuation of approximately $39 Million CAD (click here for more information). Graph was started as a joint venture formed between Datametrex and Bitnine, with the mandate to bring the value of Graph Database technology to the blockchain environment where there is a great need to enhance performance and present the verified and authenticated data in unique ways.

About Datametrex AI Limited

Datametrex AI Limited is a technology-focused company with exposure to four exciting verticals. Big Data, collecting data from the retail point of sales environments. Artificial Intelligence and Machine Learning through its wholly owned subsidiary, Nexalogy. Implementing Blockchain technology for secure Data Transfers through its joint venture company, Graph Blockchain. Industrial scale Cryptocurrency Mining through its wholly owned subsidiary, Ronin Blockchain Corp.

Related Article: UPS Blockchain Patent to Route Packages through International Supply Chains via Multiple Carriers

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In this white paper, you will learn why blockchain platforms vary widely in terms capability, disclosure, confidentiality, anonymity, the cost to use, and speed, and why companies need to leverage more than one blockchain network to realize game-changing business models. Download Now!

Can Blockchain Revolutionize the Supply Chain?

In this white paper Ranjit Notani, One Network CTO examines Blockchain’s powerful potential as well as a major problem and whether and how Blockchains can revolutionize the Supply Chain. Download Now!

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US GDP Q2 Growth Highest in Almost 4 Years

July 27, 2018 · By Joana Taborda

Personal consumption expenditure (PCE) contributed 2.69 percentage points to growth (0.36 percentage points in the first quarter) and rose 4 percent (0.5 percent in the first quarter).

Spending of durable goods rebounded (9.3 percent compared to -2 percent) and rose faster for nondurable goods (4.2 percent compared to 0.1 percent) and services (3.1 percent compared to 1 percent).

Fixed investment added 0.94 percentage points to growth (1.34 percentage points in the first quarter) and increased 5.4 percent (8 percent in the first quarter).

Investment rose less for equipment (3.9 percent compared to 8.5 percent), intellectual property products (8.2 percent compared to 14.1 percent) and structures (13.3 percent compared to 13.9 percent) and continued to fall for residential (-1.1 percent compared to a -3.4 percent).

The contribution from private inventories was negative (-1 percent), compared to +0.27 in the first quarter.

Meanwhile, exports jumped 9.3 percent (3.6 percent in the previous quarter) and imports rose at a much slower pace (0.5 percent compared to 3 percent). As a result, the impact from trade was 1.06 percent, much better than -0.02 percent in the first quarter and the highest contribution since the last three months of 2013.

Government spending and investment added 0.37 percentage points to growth, slightly higher than 0.27 percentage points in the first quarter. It increased 2.1 percent, above 1.5 percent in the previous quarter.

GDP growth figures for the previous years were revised due to comprehensive updates of the National Income and Product Accounts (NIPAs), which are carried out about every five years.

The updates incorporate newly available and more comprehensive source data, as well as improved estimation methodologies. The GDP growth for 2017 was revised slightly lower to 2.2 percent from 2.3 percent.

Related: Tariffs Present Different Supply Chain Challenges for Shippers

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Seven Steps to Export Success

This new white paper from Purolator International, “Seven Steps to Export Success: Top Considerations before reaching out to International Markets,” provides an overview of these and other critical export issues. Download Now!

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Solutions for university export control and compliance officers, legal counsel and research administrators. Download Now!

Source: https://tradingeconomics.com/united-states/gdp-growth

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C.H. Robinson CEO John Wiehoff Talks Transportation Trends

April 27, 2018 · By 24/7 Staff ·
John Wiehoff, CEO of C.H. Robinson, is one of the keynote speakers for the Connections 2018 supply chain conference, which will take place June 25-27 at the Greenbrier Resort in West Virginia.

He recently spoke with SMC³, which has served as one of the 3PL’s long-time partners, about emerging technologies in the industry, unique supply chain opportunities, and how C.H. Robinson uses technology to optimize its business.

What are some of the major trends you’re currently seeing in the LTL marketplace?
Demand for LTL is higher than we’ve seen it in nearly 10 years. This shift is an especially significant change when paired with supply changes. Both manufacturing and e-commerce are extremely strong right now, and both have close ties to LTL.

Online orders are driving smaller shipments to the LTL space, not just in the final-mile area. Smaller orders are becoming more common for the middle mile – from one distribution center to another.

LTL capacity is tight because carriers have not added a significant amount of equipment to their fleets in recent years. But even if there was an influx of tractors, there aren’t enough drivers available.

Historically, the driver shortages that affected the truckload market remained mostly out of the LTL space, but even that is changing. Growth in other sectors that have a shared labor force with truck drivers means more LTL drivers are leaving for options that are more lucrative.

As LTL carriers look to be more productive, we are seeing them place a large emphasis on optimizing their networks. With the data, analytics, and tools like dimensionalizers available to them, LTL carriers are paying more attention to accepting the right freight in the right lanes at the right time. More isn’t absolutely better anymore.

How has the ELD mandate impacted the domestic transportation market?
Drivers are reaching their hours of service in shorter timeframes, especially given the tight capacity. Organized and efficient loading/unloading times will become even more important. Reducing driver wait time at either the origin or destination can have a significant impact in a driver’s hours of service.

Both carriers and shippers may rely more heavily on 3PLs. A 3PL can help identify and solve capacity shortages, handle potential rate increases and address other issues from the mandate.

John Wiehoff, CEO of C.H. Robinson

How does C.H. Robinson use new technology to optimize its business, and are there any emerging technologies that will be game changers for the supply chain industry?
We are using technology to reinvent what it means to be a leading 3PL for this industry, our customers, and carriers.

Our technology offering is at the center of what we do and is embedded in our services and solutions every day.

You can see the importance technology has within C.H. Robinson by the number of IT staff and investments we have made and continue to make – we’ve added more than 800 IT staff and invested over $1B in the last decade.

As our business grows – now to more than 120,000 customers who worked with us on more than 19 million global shipments last year – we increasingly rely on technology.

Technology backed by data is critical to the success of our business. As one of the largest 3PLs, we have arguably more first-party data than anyone else in the industry. But, that data doesn’t matter if we don’t use it to our and our customers’ (shippers and carriers) advantage.

That’s why we are continuing to invest in and build tools that leverage the amount of data we have available to us.

The Connections 2018 supply chain conference is perfectly positioned at the midpoint of the year, giving speakers a chance, to sum up, the first half of 2018. What themes have defined the first half of the year, and what will define the transportation market during the second half?
For the first half of the year, we saw efficiencies in utilizing capacity, as truckload utilization climbed to more than 95 percent, according to FTR Transportation Intelligence. At the same time, new trucks increasingly entered the market to replace retiring trucks.

For the second half, these factors will combine for a focus on hyper-efficiency and the most effective use of capacity. We’ll be able to see if the strong truck sales of the first half of the year will add capacity or primarily serve as replacement capacity. We’ll also be able to put our finger on the real effects of ELD.

How can shippers and 3PLs better position themselves to take advantage of supply chain opportunities in the marketplace?
As supply chains grow in both size and complexity, transportation management technology will be an important way for 3PLs to help shippers gain a competitive advantage and exceed their customers’ expectations. That’s why we are invested in delivering and implementing flexible, efficient and integrated technology solutions that connect all aspects of the supply chain.

Read: Transportation Management Systems Market 2018

It is not so much what changes are coming to the industry; it’s more important to focus on what the innovative supply chain of the future will look like and recognize that it will take people, processes, and technology to bring positive change.

Digitalization of supply chains is our opportunity to continue bringing technology to our customers and their supply chains that make them smarter and more efficient. The technology we are able to bring today and into the future has to go beyond freight matching to encompass the complexities of today’s and tomorrow’s supply chains.

An algorithm can do amazing things, but when a truck gets delayed or a delivery window changes, people are still able to provide the most effective solution.

To hear more from John Wiehoff and other industry experts, sign up today for the three-day supply chain conference Connections 2018 to learn about emerging trends, current challenges and new innovations in the supply chain.

Register here by April 30 to take advantage of early-bird pricing.

Raise Your Supply Chain IQ
Connections 2018 | June 25 – 27 | The Greenbrier, WV

Why Attend Connections 2018

To REGISTER for SMC³’s Connections 2018, visit www.smc3connections.com

Related Article: SMC³ Announces Connections 2018 Speaker Lineup

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Why eShipping Selected the SMC³ Platform for Transactional LTL API Connectivity New!
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Building a Digital Supply Chain Ready for the Future

Complaints from frustrated customers were mounting at a major US retailer.

More than 20% said they could not find the company’s branded products in shops because items were out of stock.

The problem was that efforts to improve service disrupted the company’s low-cost distribution model.

It had the right infrastructure but lacked the digital tools necessary to increase supply chain reliability.

Moving quickly, the leadership team invested in digital tools to obtain real-time data, shorten replenishment cycle times, optimize deliveries and predict future demand.

As data streamed in from stores the minute shoppers purchased goods, the company rapidly restocked hot-selling items to capture sales that it previously had lost.

The shift cut retail cycle times by 20%, to four days, generating a 0.5% increase in sales (see Figure 1 below).

And that was just the first wave of improvement.

Over the next 24 months, the company aims to reduce the time needed to fill store orders to two days, for a 60% total reduction in retail cycle time.

Companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting costs up to 30%.

Just as important are the options that digital technologies provide to develop new business models and new strategies.

For instance, leading-edge companies such as Adidas are deploying 3D printing to move some production closer to customers, offering greater product customization and shorter lead times.

Despite those advantages, many companies are struggling to keep pace with an onslaught of digital trends that are disrupting traditional supply chain management, slashing response times and raising customers’ expectations.

The speed of change is overwhelming, especially for those that are not digital natives.

Seventy percent of executives expect digital innovation to have a significant impact on their supply chains during the next five years, according to a recent Bain survey, up from just 63% in 2016.

Building a Digital Supply Chain Ready for the Future
One of the biggest challenges is building a comprehensive view of how performance standards are changing and what customers really want. Without that knowledge, companies risk being outmaneuvered.

Bain research shows more than one-third of CEOs are overly confident about the ability of their supply chains to anticipate swings in demand (see Figure 2).

And the risks of being blindsided are big: higher operating costs from expensive last-minute orders, a pileup of excess inventory, missed revenue opportunities and lost sales from ineffective new product rollouts.

Building a Digital Supply Chain Ready for the Future

Four Steps to a Digital Supply Chain

A good place to start when shaping a digital strategy is understanding the industry context and the company’s starting point. For example, many companies start with customized legacy IT systems. Replacing these with the latest off-the-shelf digital tools can generate new revenue, improve responsiveness, increase efficiencies and reduce the total cost of ownership for IT systems.

Leading companies develop the culture, data analytics, and IT systems to support their digital strategy and business objectives. They pursue specific goals with near-term value while adopting a clear view of their digital destination. And they remain ready to pivot as their industry evolves.

1. What’s my Ideal Future State?

The key to building supply chains that will be competitive in 5 or even 10 years is anticipating change. Leaders evaluate where the industry is going and identify the supply chain capabilities they need to get there.

True, anticipating change is a strategic leap into the future. But most leadership teams can gauge what their business may look like in 3, 5 and 10 years. The 3-year vision is likely to be more concrete, while the 5-year and 10-year visions will be more conceptual. For many retailers and consumer products companies, for instance, it is clear that e-commerce has raised consumer expectations and that traditional retail distribution and replenishment models are unable to meet the needs of their customers who are demanding shorter lead times.

Successful companies avoid incremental moves by envisioning just how extreme the future might look. For example, what would happen if the entire business moved from high margin to low margin or if it shifted from standard products to custom products? These scenarios can help supply chain teams identify what the company would need to do differently and what new capabilities any such changes would demand.

2. Spot the Gaps

Figuring out the ideal future state for a supply chain allows leadership teams to identify missing capabilities and start building them. In our experience, companies that make the right short-term investments to improve supply chain performance generate significant savings to fund long-term investments.

A leading specialty retailer put that technique to good use when an aging supply chain created problems for its direct-to-customer business. The company had underinvested in its supply chain for years, and its basic infrastructure was in poor shape. As a result, service was far inferior to that of digital-savvy competitors. More than 15% of the company’s orders arrived later than promised, and customer loyalty was eroding rapidly.

The leadership team realized it needed to replace more than half of its aging distribution centers with several high-performing ones, but it couldn’t afford to make the entire investment at once. It started instead with the five largest distribution centers, investing in digital tools and establishing best-in-class distribution processes.

The initial pilot improved service levels by 20% while decreasing costs by 20%. The company now expects to turn around its performance in these facilities within nine months, resolving many of its late-delivery problems and its reputation for poor service. Over the next three years, the leadership team plans to close additional gaps, cutting supply chain costs by 20% to 30%. Achieving that goal will create a war chest to fund future investments.

3. Design Options to Close the Gaps

Leading companies create a portfolio of near-term and longer-term options to help them close the gaps between their current supply chain and the future ideal state. For example, they may consider outsourcing elements of the supply chain to minimize the complexity of serving certain businesses or segments. Alternatively, they may consider closing multiple gaps through one common IT platform supporting multiple businesses, with additional specialized capabilities specific to certain business units supplementing this core shared system.

A national food manufacturer for groceries and convenience stores used this approach to turn around declining sales. The company’s core problem was matching demand with its manufacturing plan. It lacked information about which products were selling quickly and which ones were sitting on the shelf. As a result, it was slow to produce and replace out-of-stock items. That led retailers to shrink the shelf space they allotted to the company – a vicious circle that was eroding sales.

The company contemplated several options to improve its ability to meet consumer demand. Investing in better forecasting tools and processes could improve accuracy but would not eliminate all uncertainties. Advanced manufacturing technology could reduce its cycle time, but the company would still need to forecast item sales. The leadership team decided to invest in digital tools to connect the salesforce and delivery team with central planning and manufacturing. The new system identified products that were selling nearly in real time, giving both teams greater visibility into store demand. That, in turn, helped it manufacture the right products to quickly fill empty store shelves and increase sales.

4. Build a Balanced Roadmap

One challenge for leadership teams contemplating a supply chain upgrade is identifying near-term steps that will help pay for future innovations. Successful companies build a short-term roadmap with concrete initiatives that will start delivering benefits quickly and provide flexibility in reaching long-term supply chain goals.

One global technology company faced enormous supply chain challenges when it suddenly had to support five new multibillion-dollar businesses. The shift was part of a new market strategy to accelerate growth, but it wreaked havoc on the company’s highly customized supply chain.

Management had to make sure that the new supply chain could enable an array of new business models and balance their competing demands. That meant investing in basic IT capabilities and supporting new cross-functional business processes. For example, if the salesforce agreed to customize a product for a client, the supply chain would need to be able to validate the custom configuration with design, track the lead time of internal and external parts, follow this custom product through delivery, and forecast the resulting revenue and cost.

The leadership team’s roadmap met all these competing needs while generating quick wins and providing flexibility to accommodate future capabilities and evolving technologies. By shifting existing priorities, the roadmap helped the company fund the complex program with only a modest increase in spending beyond its baseline.

 

At the Next Executive Team Meeting

Companies eager to start down the path toward a digital supply chain can begin by debating three questions at the next executive team meeting.

  • What will our business look like in five years, and what supply chain capabilities do we need?
  • How could digital tools help us create powerful new business models?
  • What two or three high-value digital moves should we get started on?

The answers to those questions will provide valuable context for shaping a supply chain that will be competitive for years to come. Successful companies set the direction for the journey and remain nimble. Flexibility and adaptability are more important than precision.

After all, market conditions will change, and new competitors will emerge. Tomorrow’s winners will be those that can turn disruption into opportunity.

About the Authors
Sam Israelit and Peter Hanbury are partners with Bain & Company in the San Francisco office. Rodrigo Mayo is a partner with Bain in the Mexico City office. Thomas Kwasniok is a Bain partner in the firm’s London office.

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Game Over as Bankrupt Toys ‘R’ Us Files for Liquidation and Begins US & UK Store Closures

Toys R Us, the toy superstore chain that became a dream factory for kids nationwide, said in a U.S Bankruptcy Court filing early Thursday that it must liquidate, a move that will likely lead to the closure of all its stores and sale of remaining merchandise.

As reported by Reuters, the closure is a blow to generations of consumers and hundreds of toy makers that sold their products at the chain’s U.S. stores, including Barbie-maker Mattel Inc, board game company Hasbro Inc and other vendors like Lego.

“This is a profoundly sad day for us as well as the millions of kids and families who we have served for the past 70 years,” Chief Executive Officer Dave Brandon said.

With shoppers flocking to Amazon.com Inc and children choosing electronic gadgets over toys, Toys ‘R’ Us has struggled to boost sales and service debt following a $6.6 billion leveraged buyout by private equity firms in 2005.

Toys ‘R’ Us said on Thursday it is seeking approval to liquidate inventory in its 735 U.S. stores, which debtors anticipate will close by the end of this year.

It is in talks to sell 200 of those stores as part of a deal to sell its 80-odd stores in Canada.

For its operations in Asia and Central Europe, including Germany, Austria, and Switzerland, the company will pursue a reorganization and sale process. The already announced administration of its UK business will continue, the company said.

The wind-down follows a bruising holiday season when the company failed to stay competitive and sales came in well below projections. The quarter accounts for 40 percent of its annual net sales.

Toys ‘R’ Us’ creditors said in a court filing that Target Corp, Walmart Inc and Amazon pricing toys at low-margins and a greater-than-expected decline in toy and gift card sales following its bankruptcy filing in September led to the weak performance in the quarter.

“Even during recent store closeouts, Toys R Us failed to create any sense of excitement,” said Neil Saunders, managing director of retail research firm GlobalData Retail. “Its so-called heavy discounts remained well above the standard prices of many rivals.”

Toys R Us Store Closures

Wayne, New Jersey-based Toys ‘R’ Us was already in the process of closing one-fifth of its stores as part of an attempt to emerge from one of the largest ever bankruptcies by a specialty retailer.

In September, when the company operated more than 1,600 stores globally, with roughly 800 stores outside the United States, it got court permission to borrow more than $2 billion to start paying suppliers.

But efforts to keep the business going collapsed after lenders decided that in the absence of a clear reorganization plan, they could recover more in a liquidation by closing stores and raising money from merchandise sales.

The company’s troubles mirror those of other mall-based retailers in the United States that have shut stores and fired employees in a bid to stay relevant.

More than 8,000 U.S. retail stores closed in 2017, roughly double the average annual store closures in the previous decade, according to data from the International Council of Shopping Centers.

The disappearance of Toys ‘R’ Us leaves a void for hundreds of toy makers that relied on the chain as a top customer alongside Walmart and Target.

7 Retail Management Lessons You Can Learn from Toys ‘R’ Us

While the final reason for the closures may be the debt – the truth of the matter is that Toys ‘R’ Us landed in this predicament for many reasons. Their poor performance, which led to their not being able to afford their debt, can be attributed to many things.

For small and medium-sized businesses, there are several lessons that can be gleaned from the Toys ‘R’ Us shutdowns.

Here are a few other ways, detailed by Kris Hiiemaa of Erply, why Toys R Us contributed to its current condition:

1. They closed down the main store at Times Square

In 2015, the company closed its flagship location in Times Square, without having a new location in mind for the new flagship. This location was more than just another location for the chain – it was a tourist attraction. The giant Empire State Building built of LEGO pieces in the store, as well as the indoor ferris wheel featuring the company’s logo, were frequently photographed by tourists and visitors from all over the world. The reason for shutting down this location was, reportedly, inability to afford the rent at the location any longer.

The problem here is two-fold. First, Toys ‘R’ Us closed down what was their most popular attraction for shoppers. Second, they didn’t reopen that store in any other nearby location. Instead, they simply retired the flagship and let other locations in Brooklyn, Queens, and Union Square take over the retail duties of this store. When you have an attraction that visitors flock to, be sure you have a backup plan if you must move or close down that attraction.

2. They treated their stores like warehouses, rather than experience shops for kids

The biggest reason that the Times Square location was so loved by guests was that it was more than just a warehouse to go to for shopping purposes. It was an experience, with something unique that really made visiting worthwhile. Giving consumers an additional reason to walk through the doors, beyond just buying a product, is essential for building a brand.

One of the best examples of this is Disney’s retail locations, which are located all over the country. These stores are not just simple retail stores but have fully interactive experiences for kids. Most of these locations have a movie area where kids can sit and watch Disney releases while parents shop nearby; a dress-up area with mirrors, a “clubhouse” area, and more. These experience-based additions to the stores make it impossible for kids to resist, which makes it more likely that parents will be in the store longer – and thus, will spend more money. By treating every Toys ‘R’ Us location like a basic retail location, instead of creating an experience to draw kids and adults in, the chain missed a vital opportunity.

Toys ‘R’ Us CEO Dave Brandon has said that plans for the future of the company include adding more experiences to the stores that remain open, such as toy demonstrations and other fun activities.

3. They couldn’t compete with Amazon in logistics

If you are going to treat your business like a warehouse, rather than an experience, then you have to focus on competing with the world’s leading warehouse for just about everything: Amazon. While Toys ‘R’ Us’ failure cannot be totally blamed on Amazon, it’s hard to ignore the way this mega-corporation has changed online shopping. If companies can’t compete with the amazing selection, super-fast shipping, and low prices on Amazon, then they are definitely not going to perform as well.

For many businesses, the problem isn’t necessarily in how much stock they carry, but in getting it to the store or the customer in a timely manner. Managing multiple warehouses and tons of product lines is much easier when you have a POS system that automatically tracks every item in your system. This allows you to give customers accurate estimates in arrival times for products, and also helps you better predict need, so that you can eliminate how often customers are forced to wait on the product in the first place.

One thing that Toys ‘R’ Us CEO Brandon mentioned in plans to revamp the chain is a push for making stores more accessible in smaller towns. That could be one way to compete against Amazon; audiences that haven’t been able to reach your store before may appreciate the ability to see a product in person before buying.

4. Their presentation was hectic, leading to poor customer service

Any customer who had ever shopped in a Toys ‘R’ Us before could report feeling overwhelmed when walking into one of their locations. With too many different products arranged in messy displays, most of the chain’s stores could be described as hectic. This not only led to customers feeling unwelcome but also made for poor customer service. When inventory is all over the place, not neatly or stylishly displayed, and frequently in a jumble, it is hard to help customers find what they are looking for.

This is one of the biggest lessons that any small or medium-sized business can take from the Toys ‘R’ Us debacle. In many cases, limiting the variety of your in-store inventory, and making sure it is displayed in organized and stylish ways, can be more inviting than having all your inventory out in view. Additionally, giving employees access to inventory in a mobile POS system can ensure that they are better equipped to offer great customer service.

CEO Brandon mentioned that Toys ‘R’ Us stores will begin carrying fewer products in the future to cut back on this problem, which would also help simplify operations and customer service.

5. Their inventory management wasn’t well-planned or executed

Something that Toys ‘R’ Us could have benefited from was a better inventory management system. Customers frequently reported that the newest products being advertised weren’t available – in fact, there was an iconic Christmas movie made about toy stores running out of the latest and greatest toys that closely mirrored many people’s real-life experience with Toys ‘R’ Us. By not having great inventory management and poor attention to detail when ordering stock, many of the stores left customers no choice but to head to Amazon or other online retailers to find things they wanted.

The lesson here? If you are a niche retailer, it is your job to carry the most popular items in that niche. You need to know what your customers want, and when they want it. A great inventory management system for planning and executing restocks is vital for keeping your business operating smoothly. A system like Erply can help you learn your customers’ buying habits, predict what types of products will be selling when, and automatically handle orders for you so that you don’t run out of popular items during crucial sale time periods.

6. They didn’t carry original products

One of the biggest reasons that Toys ‘R’ Us struggles to compete against the likes of Amazon and Wal-Mart is that they don’t carry any exclusive product lines. Their products are the same products that you can find at other big chain retailers, and often at more savings and in more convenient ways. Customers can get the same products online without having to venture into stores where they can’t be sure that the product will even be in stock.

The lesson here? Stores must give customers a specific reason to visit them over shopping elsewhere. It isn’t enough to offer a good selection of products, great customer service, or even an experience-based sales strategy. Stores need an exclusive line of products, whether they are house products or an agreement to exclusively sell a third-party product. This ensures that customers must come to you because they can’t get what you offer anywhere else.

7. They lacked a modern strategy for customer engagement

Finally, Toys ‘R’ Us lacked an engagement strategy when it came to their customers. Customer engagement means building and nurturing relationships with customers to promote brand loyalty. Without it, customers feel no connection to the company, and that gives them even fewer reasons to return. Today’s modern customer expects to connect with a brand online (via social media and email); through loyalty programs; through personalized content; and more.

A better loyalty program and a bigger focus on engaging through the Babies ‘R’ Us registry program are two of the things that CEO Brandon said the chain would be doing in the future to improve in this area.

For small businesses, the message here is very clear: engaging with current customers to nurture long-lasting loyalty is vital to the success of a company. A strong online presence and a focus on keeping customers engaged after a sale will both be a big part of keeping a business afloat. This is why it’s important to collect customer data at the point of sale. Information like a customer’s name, birthday, what they tend to buy, what social media they prefer to use – can all help you to better connect with them in the future. A POS system that gathers some of this information at each transaction can help you build a customer database that you can use for valuable information when building your engagement strategy.

Source: ERPLY

 

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Amazon Begins Grocery Delivery from Whole Foods Market

Amazon and Whole Foods Market announced the introduction of free two-hour delivery of natural and organic products from Whole Foods Market through Prime Now, with plans to expand across the U.S. in 2018.

Starting yesterday, Prime customers in neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach can shop through Prime Now for bestselling items including fresh produce, high-quality meat and seafood, everyday staples and other locally sourced items from Whole Foods Market.

John Mackey, Whole Foods Market co-founder and CEO

“We are happy to bring our customers the convenience of free two-hour delivery”John Mackey, Whole Foods Market co-founder and CEO

Customers can start shopping from Whole Foods Market selection at www.primenow.com or by using the Prime Now app available on Android and iOS devices.

“We’re happy to bring our customers the convenience of free two-hour delivery through Prime Now and access to thousands of natural and organic groceries and locally sourced favorites,” said John Mackey, Whole Foods Market co-founder and CEO.

“Together, we have already lowered prices on many items, and this offering makes Prime customers’ lives even easier.”

Prime customers can shop thousands of items across fresh and organic produce, bakery, dairy, meat and seafood, floral and everyday staples from Whole Foods Market available for free two-hour delivery.

Select alcohol is also available for delivery to customers. Prime members receive two-hour delivery for free and ultra-fast delivery within one hour for $7.99 on orders of $35 or more.

Delivery from Whole Foods Market through Prime Now is available daily from 8 a.m. to 10 p.m.

Customers can visit www.primenow.com or download the Prime Now app to enter their zip code to see if they are in the delivery area.

As reported by Bloomberg, about 7 percent of U.S. households bought groceries online last year, according to NPD Group.

Read: Growing Ecommerce Grocery Channel Will Accelerate Adoption of Meal Kit Delivery Services

Most of those – about three-quarters – get their orders delivered to their door; the rest pick it up at the store. NPD Group said it expects online grocery shopping to grow quickly, especially among young adults, who are more comfortable shopping online. And grocery chains don’t want to miss out when that happens.

Walmart, the country’s largest grocer, is making it easier for customers to order groceries online and pick them up at the store.

Target bought grocery-delivery company Shipt late last year. Kroger, the largest traditional supermarket chain, has been promoting store pickup for online orders and doing trials of home delivery.

Amazon isn’t saying where delivery will expand, but its Prime Now service is in more than 30 cities, including Chicago, Milwaukee, and San Diego.

The announcement gives Amazon yet another way to get groceries to customer’s doorsteps.

Related: Amazon Reportedly Focusing on Expanding its Delivery Trial Offering Threatening FedEx & UPS

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Are Robots Going to Replace People in the Warehouse?

Robots obviously are becoming quite popular if you read anything on the internet or any news about robotic technology.

But in warehouse automation, the five areas that I would see most popular, most common, that you’re hearing the most about, about applications of robotic technology is one, speed; two, accuracy.

When you combine the two, as you’re seeing especially on E-commerce, a tremendous growth in the number of orders, in the amount of volume that is being pushed out by DC centers.

This focus on including robotics, I think two main areas are the speed of the ability to pick an order and fill an order, and then two, the accuracy level.

You also have a reliability factor. Robots are always there, every day. They don’t call in sick. They can work 24 hours a day, and that lends itself obviously to a fear factor.

Are robots going to replace people in the workforce?

There is an issue of availability of labor, so robots are becoming very popular because they fill a void that exists right now in the warehouse environment.

Especially when the Christmas season rolls around and warehouses are looking to increase their employee base by as much as five or tenfold sometimes, they can’t find that workforce.

You’re seeing robotic technology that can work in conjunction with laborers. They call them cobots.

You’ve got robot technology that can supplement a travel application.

They’re replacing or at least providing a more efficient picking process so that the robots can take over the travel.

They can travel to and from the picking and the shipping consolidation area.

The fifth one would be the cost really. Robots are becoming a very good economical alternative or supplement to consider improving the warehouse automation.

Better Together: Humans and Robots in the Warehouse

It’s not hard to find headlines touting a “robots taking over the workplace” narrative, like this recent article in the Wall Street Journal, “Robots Are Replacing Workers Where You Shop,” or this one from CNN Money: “Robots Could Wipe Out Another 6 Million Retail Jobs.” Before declaring a protest on all robots, however, it’s important to hear another perspective that doesn’t get as much press.

An article that appeared earlier this year in the Houston Chronicle read, “In Houston, Amazon’s Robots Mean More Work for Humans, Not Less.” The article went on to state that Amazon expects to hire 2,500 full-time employees to staff its massive warehouse – more than double the number of jobs it announced the prior year at the outset of the project.

Amazon isn’t the only company finding common ground for humans and robots in its warehouses. Earlier this year in Tennessee, DHL began testing robots to assist its pickers in order fulfillment. Rather than pushing a bin or cart, the robots work alongside workers, helping them pick out medical devices that need to be shipped quickly. Third-party logistics provider Quiet Logistics Inc., which fulfills online orders for retailers like Bonobos and Zara, uses the same type of mobile robots in one of its warehouses to support its employees.

Robot + Human Collaboration = Cobot

Unlike the doomsday narrative of robots taking over the workplace, savvy companies are creating synergistic scenarios where robots perform repetitive, simple job tasks and human laborers focus on tasks that require deeper thinking and strategizing. The new term for this collaboration, “cobot,” allows each type of worker to focus on the tasks they do best. For example, some robots can be used to guide workers to the items that need to be picked or routed through the warehouse to the workers who need to pack and ship them.

According to Barclay’s research, the cobot market will be worth $3.1 billion by 2020. The affordability of the technology is playing a big part in its adoption, too. Barclay’s research found that pricing for collaborative robots is steadily dropping by 3% to 5% a year. With an average price in 2015 of $28,000, the expected price of a cobot in 2025 will be around $17,500.

Another plus for cobots is that they don’t require a pricey extensive network of conveyor belts and automation systems. Collaborative robots can be especially useful for handling surges in sales that happen around the holidays when it can be difficult to find extra workers. “It’s not meant to replace human labor, but you can get greater throughput with the same size workforce,” said John Santagate, an analyst with IDC Manufacturing Insights.

The Future Of Cobots: Brain-Computer Interfaces

Aside from lower prices and higher adoption rates, there’s another interesting cobot trend worth keeping an eye on, which is the ability for human workers to control machines with nothing more than their thoughts.

The key to this remarkable technology is a wearable device that measures brain activity and translates it into a language a computer can understand. Researchers at MIT are already hard at work on developing what’s being called brain-computer interfaces (BCIs). They’re even claiming they’ve been able to achieve up to 20% robotic performance improvement by enabling robots to adapt to users’ thought commands.

While these claims feel more like something from a Sci-Fi movie, it’s nice to know that even if a robot can’t read your mind, it can still improve workplace productivity by working collaboratively with laborers rather than working against them.

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Maersk IBM Form Joint Venture Applying Blockchain to Improve Global Trade & Digitize Supply Chain

Traditional cross-border shipping processes usually involve manually transporting and verifying paper documents for each shipment.

IBM and Maersk are forming a joint venture to use blockchain technology to make global trade more efficient, transparent and secure.

The aim of the new company will be to offer a jointly developed global trade digitization platform built on open standards and designed for use by the entire global shipping ecosystem.

It will address the need to provide more transparency and simplicity in the movement of goods across borders and trading zones.

The cost and size of the world’s trading ecosystems continue to grow in complexity.

More than $4 trillion in goods are shipped each year, and more than 80 percent of the goods consumers use daily are carried by the ocean shipping industry.

The maximum cost of the required trade documentation to process and administer many of these goods is estimated to reach one-fifth of the actual physical transportation costs.

According to The World Economic Forum, by reducing barriers within the international supply chain, global trade could increase by nearly 15 percent, boosting economies and creating jobs.

The attributes of blockchain technology are ideally suited to large networks of disparate partners. A distributed ledger technology, blockchain establishes a shared, immutable record of all the transactions that take place within a network and then enables permissioned parties access to trusted data in real time.

By applying the technology to digitize global trade processes, a new form of command and consent can be introduced into the flow of information, empowering multiple trading partners to collaborate and establishing a single shared view of a transaction without compromising details, privacy or confidentiality.

Maersk, a global leader in container logistics, and IBM, a leading provider of blockchain, supply chain visibility and interoperability solutions for the enterprise, will use blockchain technology to power the new platform, as well as employ other cloud-based open source technologies including artificial intelligence (AI), IoT and analytics, delivered via IBM Services, in order to help companies move and track goods digitally across international borders.

Manufacturers, shipping lines, freight forwarders, port and terminal operators and customs authorities can all benefit from these new technologies -and ultimately consumers.

“This new company marks a milestone in our strategic efforts to drive the digitization of global trade. The potential from offering a neutral, open digital platform for safe and easy ways of exchanging information is huge, and all players across the supply chain stand to benefit,” said Vincent Clerc, chief commercial officer at Maersk and future chairman of the board of the new joint venture.

“By joining our knowledge of trade with IBM’s capabilities in blockchain and enterprise technology, we are confident this new company can make a real difference in shaping the future of global trade.”

IBM’s blockchain platform is enabling hundreds of clients and thousands of developers to build and scale active networks across complex use cases, including cross-border payments, supply chains, and digital identification.

“The major advances IBM has made in blockchain have shown that the technology can foster new business models and play an important role in how the world works by building smarter businesses,” said Bridget van Kralingen, senior vice president, IBM Global Industries, Solutions and Blockchain.

“Our joint venture with Maersk means we can now speed adoption of this exciting technology with the millions of organizations who play vital roles in one of the most complex and important networks in the world, the global supply chain. We believe blockchain will now emerge in this market as the leading way companies seize new untapped economic opportunities.”

Read: Blockchain will be the killer app for supply chain management in 2018

IBM and Maersk began a collaboration in June 2016 to build new blockchain- and cloud-based technologies. Since then, multiple parties have piloted the platform including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands, U.S. Customs and Border Protection.

The joint venture will now enable IBM and Maersk to commercialize and scale their solutions to a broader group of global corporations, many of whom have already expressed interest in the capabilities and are exploring ways to use the new platform, including General Motors and Procter and Gamble to streamline the complex supply chains they operate; and freight forwarder and logistics company, Agility Logistics, to provide improved customer services including customs clearance brokerage.

Additional customs and government authorities, including Singapore Customs and Peruvian Customs, will explore collaborating with the platform to facilitate trade flows and enhance supply chain security. The global terminal operators APM Terminals and PSA International will use the platform to enrich port collaboration and improve terminal planning.

With support from Guangdong Inspection and Quarantine Bureau by connecting to its Global Quality Traceability System for import and export goods, the platform can also link users to important trade corridors in and out of China.

To address the specific needs of the industry, Maersk and IBM are establishing an advisory board of industry experts to help further shape the platform and services, provide guidance and feedback on important industry factors, and drive open standards.

Michael J. White, former president of Maersk Line in North America, CEO of the new company

Maersk and IBM have named Michael J. White, former president of Maersk Line in North America, as CEO of the new company. He commented;

“Today, a vast amount of resources are wasted due to inefficient and error-prone manual processes. The pilots confirmed our expectations that, across the industry, there is considerable demand for efficiency gains and opportunities coming from streamlining and standardizing information flows using digital solutions. Our ambition is to apply these learnings to establish a fully open platform whereby all players in the global supply chain can participate and extract significant value. We look forward to further expanding our ecosystem of partners as we progress toward a global solution.”

The new company initially plans to commercialize two core capabilities aimed at digitizing the global supply chain from end-to-end:

  • A shipping information pipeline will provide end-to-end supply chain visibility to enable all actors involved in managing a supply chain to securely and seamlessly exchange information about shipment events in real time.
  • Paperless Trade will digitize and automate paperwork filings by enabling end-users to securely submit, validate and approve documents across organizational boundaries, ultimately helping to reduce the time and cost of clearance and cargo movement. Blockchain-based smart contracts ensure all required approvals are in place, helping speed up approvals and reducing mistakes.

Upon regulatory clearance, solutions from the joint venture are expected to become available within six months.

The new company will be headquartered in the New York metropolitan area.

The platform is built on IBM Blockchain technology, which is provided through the IBM Cloud and powered by Hyperledger Fabric 1.0, a blockchain framework and one of the Hyperledger projects hosted by the Linux Foundation.

For more information about the joint venture read: Digitizing Global Trade with Maersk and IBM

Maersk and IBM Launch Digital Joint Venture

Maersk and IBM Launch Digital Joint Venture

A new joint venture company which Maersk and IBM intend to create is the first open platform of significant scale for sharing information and developing digital products related to trade. Read the Story

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