Category Archives: Market Intelligence
What’s the Future of Just In Time for Consumer?
It’s the holiday season, which means retail is in overdrive. This means on-line retail is in overdrive, and this means shipping is in overdrive.
Shipping which relies on postal services or private carriers. Postal services which are in dire straits and which are getting costlier by the year and private carriers which are also getting costlier. The USPS recently announced yet another round of price increases for 2017, just six months after it raised prices almost 10% (which followed price increases barely six months before).
Costs just keep increasing, and it’s hurting small retailers who can’t negotiate Amazon and eBay bulk shipping rates (and offer free shipping @ 35 or low cost shipping on individual orders). People aren’t going to pay a $20 shipping fee to ship a $10 product. And they’re not going to buy from retailers where this is the case.
So, we’re entering the age where the Amazons and their ilk are going to do in the online world what the Walmarts and their ilk did in the offline world — kill the little guy unless the little guy falls in line. Prepare to see even more Amazon and e-Bay storefronts popping, piggy-backing off the already in place infrastructure in exchange for a small piece of the profit. And prepare to see the closure of even more independent storefronts that wanted to compete without having to give a cut to the new digital mafia, as they just won’t be able to compete.
This means that sales will centralize, but shipping rates won’t necessarily standardize. The Amazon resellers also use the Amazon warehouses will be able to take advantage of the lowest shipping rates, and the rest, like the e-Bay storefronts, will be subject to reduced rates, but not the Amazon warehouse rates. And these rates will keep increasing as fuel goes up, labour goes up, and the carrier rates go up even more. Stores were invented for a reason — it’s much more cost effective to ship a pallet to one location than 100 items to 100 locations. Even with route optimization, right turns only, last-leg optimization with the local post, and so on — package delivery costs can only go so low. As long as a human is involved.
This says that the future of just in time for the average, cash-strapped consumer, is likely one of two futures. The past where physical stores regain their supremacy. Or the pre-SkyNet future where drones rule the skies.
However, the best future for just in time consumer delivery might be one where the old mail order model is modernized for the e-Commerce world. Back in the day, if you were in a rural community or small town, and you wanted something from a big box store (like Sears) you’d go to a local mail-order outlet where you would hand over some money (which could just be a deposit or the entire amount) to order something from a catalogue. Then, a few weeks later, you’d go back to pick it up. Amazon has revived this with the Amazon locker where you can get faster delivery and pick up by agreeing to pick up at a nearby locker, which is essentially a digitized bus locker system where you scan a code which opens a locker with your package.
The best future is one where a third party opens a lock location that can be rented by any online merchant that wants to use a locker for delivery where carriers offer lower rates to ship to the locker location. It would require at least USPS to agree to offer lower rates to ship to a locker location, which would require a large number of locker locations for the locker owner to negotiate better rates. This means that, in the short term, for this concept to take off, Amazon will have to go heavy into it, offer not only faster shipping but significantly lower shipping rates to get them to take off, and then offer these rates to their resellers at cost, or a loss, to get everyone using them. But it would then be able to capitalize on yet another revenue stream, as it could allow third party non-Amazon storefronts to ship to these locations for a small fee, and get an even bigger footprint in the physical world — which would allow it to create Amazon stores with “best sellers”, the same way Apple was able to create Apple Stores.
In summary, the future of just in time for consumer is still a bit cloudy, but it should be a hybrid locker / storefront model where costs can stay down, but customer satisfaction can stay high. Thoughts?
For Most Organizations, Ain’t Nothing Wrong With Being White & Nerdy …
In a recent post over on Procurement World, the procurement dynamo asks if the Kraljic Matrix [is] Actually Becoming Obsolete? He notes that since Kraljic published his classic article 33 years ago, world trade has quadrupled, globalization has exploded, and Procurement is operating in a much faster, bolder, world than it was in 1983.
In this brave new world, Procurement has to manage ethical supply chains and practice good Corporate Social Responsibility, or its CPO could be personally convicted of criminal charges and end up behind bars. (While this is a great place for many sociopathic CEOs, it’s not where ethical and hard working CPOs deserve to be.)
the procurement dynamo notes that, in some ways, the Kraljic matrix still works well. The heart of the Kraljic matrix, segmentation into manageable buckets that can be addressed with consistent strategies, is still valid, but the degree of segmentation needs to be much deeper now than it used to be. However, even the concept of a 3-d Rubik’s cube doesn’t quite capture the level of segmentation required in today’s supply chain.
It used to be supply risk and financial risk was enough. Now there is information risk, sustainability risk, compliance risk, ethical risk. That’s significantly more than a cube can handle. (We’re at a six-dimensional hypercube, and we’re just starting.) That’s why we have to adopt Value Based Sourcing and replace TCO (Total Cost of Ownership) with TVM (Total Value Management), which is the root of all value models.
This is challenging, as the procurement dynamo points out, but not impossible, especially for the White & Nerdy. It doesn’t matter if they look like they are still in the 80’s, insist on riding segways down the hall, or shout blasphemies in Klingon while trying to solve the problem. As long as the problems get solved, which only the IQ and TQ-savvy white & nerdy can do, that’s the way forward.
MBAs, for those of you who are hard of hearing … you have to put Procurement first!
We told you last Friday that whether or not you were 100% convinced, you have to put Procurement first. Hopefully some of you listened, but I’m sure some of you didn’t. Even though the seventh rule of acquisition is that you should always keep your ears open.
We will again start by reminding you that your organization depends on goods and services provided to it by suppliers. Those goods you sell come from somewhere, and even if the goods are made in house, the components and raw materials will come from suppliers. The days where a company was vertically integrated down to the raw material extraction and production are lone gone (and it’s all your fault — you started the outsourcing and “right”-sizing craze, and now you get to live with the consequences).
And the individuals selling those goods and services are your brethren (from another school) who have the same training, follow the same rules, and never forget the the one hundred and eighty first rule of acquisition that says that not even dishonesty can tarnish the shine of profit. They use the same tactics you do and sell the sizzle, not the steak, as per the one hundred and fifty third rule, and if that’s not enough, they’ll use the one hundred and sixty eighth rule and whisper their way to success.
And only Procurement understands this. They are trained to look past the sizzle, tune out the whispers, and look for the shadiness behind every corner. Procurement knows that, by default, satisfaction is not guaranteed (as per the nineteenth rule of acquisition) and that sales people live by the thirty ninth rule and don’t tell customers more than they need to know.
Like you, your MBA brethren trying to sell into your organization are trying to figure out how to learn the customer’s weaknesses, so that you can better take advantage of him (as per the eighty seventh rule). If you don’t want your profits to become their profits, you better make sure they only deal with someone that is tight lipped and won’t give away the farm … like a hard-hitting Procurement Professional. Plus, if they came from Engineering, you give your organization a bit of an advantage. Your brethren know to beware of the scientist’s greed for knowledge, as per the seventy ninth rule, and sometimes an Engineer can catch them off guard.
Who else besides Procurement knows that as far as MBAs are concerned, MBAs are not responsible for the gullibility of others (the sixty ninth rule) and that they will never give up because faith moves mountains … of inventory (as per the one hundred and fourth rule). And only Procurement lives by the rules that only fools pay retail (which is the one hundred and forty first rule) and that you should know your enemies … but do business with them always (as per the the one hundred and seventy seventh rule).
MBAs, If You’re Still Not 100% Convinced You Have to Put Procurement First …
… we’re going to make it even clearer in today’s post.
Let’s start by reminding you that your organization depends on goods and services provided it to by suppliers — suppliers who have also invested heavily in sales and marketing, and sales especially, in an effort to make sure they gouge as much cash out of you as they can. They’re always on the hunt to find those organizations with the least educated, experienced, and supported buyers that they can take the most advantage of while you are focused on marketing, sales, and revenue increase. And the more successful you are at fattening the revenue stream, the more successful they feel they can be. After all, they know the Rules of Acquisition as well as you do, and they are going to apply them to your fullest.
Those MBAs selling to your organization live by the first rule of acquisition which says once you have their money, you never give it back, so you better do all that you can to make sure you hand over no more than you need to, because even if you have what looks like an iron-clad contract that says you handed over too much, good luck recovering any funds without spending additional funds to get the lawyers involved. That will quickly wipe out any recovery you might realize. This means that you need to support Procurement in strategic sourcing to identify deals with value, support Procurement in their efforts to negotiate solid contracts, and support Procurement in their efforts to implement best-in-class e-Procurement software with m-way invoice match that insures that an invoice is not allowed to be placed in the payment queue unless the goods have been received and the invoices amount matches the contract or purchase order amount without an executive override that leaves a full, unalterable, irrevocable audit trail.
A properly supported Procurement department is in the best position to ensure that the third rule of acquisition is enforced. Their job is to make sure you never spend more for an acquisition than you have to . Similarly, as they are often charged with risk management, they are naturally in tune with the eight rule of acquisition, small print leads to large risk and are not likely to accept seller paper unless it has been thoroughly vetted by legal, even if it means that Engineering or Manufacturing or Marketing have to wait a little longer for their goods or services.
Plus, a great Procurement organization knows the eleventh rule of acquisition by heart, even if it’s free, you can always buy it cheaper. They know that every initial quote has a considerable margin built in, any value add that is “free” is included in that margin, and that if it really is “free”, it’s probably not worth anything, and the reason it’s free might just be because it would cost the seller more to pay someone to take it away or haul it to the recycling depot than give it to a customer as a “thank you” for the deal, on the condition the customer pays to have it shipped.
You know deep down the tenth rule of acquisition is the truest of all the rules. Greed is eternal and your suppliers are as greedy as you are, so while you’re out there doing what you do and living by the second rule of acquisition, the best deal is the one that makes the most profit, you need someone minding the fort making sure that deal is not undermined by a an even more cunning supplier. Remember the sixty-sixth rule of acquisition, someone’s always got a better sense for business, and only Procurement stands in the way of them getting the better of you.