Category Archives: Retail

There’s More To Risk Than Natural Disasters

As per this recent article in Industry Week on how “manufacturers must brace for global uncertainty and risk”, the following, entirely predictable, events can be just as devastating to an organization’s supply chain if not planned for.

  • Rapid Growth
    What if sales double overnight? Can the supply chain keep up?
  • Facility Expansion / Opening
    Can the organization ramp up supply, staff, and logistics fast enough to maintain productivity levels?
  • Massive Churn in Product Offerings
    If the organization has to continually offer new versions of products, or rapidly expand its product offerings, can the supply chain adapt quickly enough?
  • New Customers that Account for Double-Digit Percentage Volume
    Can the supply chain keep up? Can it provide any new services that will be required at the agreed upon service levels?
  • Substantial Changes in the Supplier Base
    If current suppliers go out of business, can new suppliers be incorporated into the supply chain fast enough? Will new suppliers be able to meet demand? If new suppliers enter the space, will the organization be able to identify them and take advantage of new technologies they offer?
  • New IT Systems
    A failed IT implementation can bring down a multi-billion dollar company. A poor IT implementation can cost millions and stop production in its tracks. It’s rare occurence when an IT system upgrade doesn’t result in at least some downtime. IT system implementations and upgrades need to be planned for carefully.

So, if your Supply Management organization is not yet thinking about risk on a daily basis, maybe it should be.

Three Things Supply Management Should Know About Real Estate

A recent article over on Chief Executive that outlined six questions a CEO needs to ask the Director of Real Estate is a must read for Supply Management. In many companies, real estate flies below the radar, but often accounts for a significant portion of spend, especially when lease terms are factored in. In particular, Supply Management needs to know:

  • What are our aggregate lease obligations?
    In some companies, only payroll, debt, and cost of goods sold obligations will be greater than lease oligations. For some industries, lease costs will be very significant. Consider the example of how a restaurant chain saved 3.38 Million simply by reducing lease costs at only seven locations.
  • What is our key metric for evaluating occupancy costs?
    In some industries, market rate is irrelevant. What is relevant is whether or not the occupancy costs of the location make economic sense for the location based on actual performance. In the retail and restaurant industry, it’s typically the occupancy costs as a percentage of sales that matter — and these should be below a given threshold. For example, when occupancy costs exceed 10% of sales, there is a greater than 50% chance that the location will lose money. However, if occupancy costs are less than 8% of sales, there is less than a 20% chance that the location is losing money.
  • If our rent is too high, what are we doing about it?
    A signed lease should not deter action. In most instances, a landlord has a strong interest in retaining a tenant and the associated rent cheque. A tenant who goes out of business automatically vacates the premises and voids the rent cheque. Even though it can be difficult to engage a landlord in a lease negotiation, there are strategies, and risk averse landlords will often prefer a smaller rent cheque than no rent cheque for an extened period of time.

Retailers Are Struggling with Cost vs. Value

According to a recent article over on the National Retail Federation’s on “officemax petco and half price books weigh in on retail horizons key findings” on Retail’s BIG Blog, retailers will continue to be challenged by balancing the demand for value and keeping prices down. In addition, seventy-six percent of participants said the top supply chain strategic initiative for 2011 is cost reduction/cost containment. This should not be a surprise. It’s the tail end of a lingering recession, thanks to the jobless recovery — and this translates into less dollars in customers’ pockets to spend. Raw material and transportation prices are going up again, and this translates into higher costs. Unless the value is there, customers are not going to spend.

However, this does show the heightened need for next generation sourcing techniques throughout the supply chain. Retailers need to get the right high-value products on their shelves at the right price. Manufacturers need to source the right high quality materials at the right price. Material suppliers have to source the right high-value components at the right price to process the raw materials. And each has to insure that the materials flow up the chain at the right time to minimize inventory and distribution costs. Not easy without systems and processes that keep the modern value chain in sync.

S. 510 Is Days Away From Becoming Law – Is This The End Of The Farmers Market?

I must admit that I have been a little remiss where S510 is concerned. I thought it was just another bill designed to improve labelling and traceability through the supply chain and that its net effect, if passed, would be to simply increase costs for any growers and manufacturers who didn’t already have modern systems in place to document and track every step of the agriculture-based supply chain — from farmer’s field to store shelf.

(I know that most manufacturers don’t have these systems in place, but since the technology has existed for quite some time now, I don’t have a lot of sympathy for them. Given the US crackdown on everything import, export, and supply chain related over the last few years with the threats of terrorism and all the tainted food scandals, there’s no way a food and beverage manufacturer could not claim that they did not know it was coming eventually. Plus, there are quite a number of low-cost SaaS and open-source systems out there that can do the job for a fraction of what a good ERP/MRP would have cost ten years ago when the costs were truly prohibitive.)

However, after reading this recent piece by Sam Osborn over the VBS.TV blog, I’m a little worried. Sam is calling it “The Most Dangerous Bill In The History of America”, and if he’s right, he’s not far off.

According to the post, the basics of the bill grant the FDA supreme authority over every seed that will eventually grow into an American food-stuff and the supremacy of this power stretches to the inspection of growing, harvesting, sorting, and storage operations, minimum standards related to fertilizer use nutrients, hygiene, packaging, temperature controls, animal encroachment, etc. And the bill calls for the inspection of any purveyor of food, ranging from a farm corp beast like Perdue to your Aunt Maye who sells blackberry jam at the town fair. This would literally put farmer’s markets and most organic food producers out of business.

And it gets worse, according to Dr. Shiv Chopra, S.510 would preclude the public’s right to grow, own, trade, transport, share, feed and eat each and every food that nature makes. It will be unconstitutional and contrary to natural law. (Source: The World Prophecy)

And the bill, dubbed the Food Safety Act, passed the House of Representatives on December 21 with a 215-144 vote. All that’s left is for President Obama to sign it into law. Is this the end of the organic supply chain?

Intelligent Sourcing through Intesource

Founded in 1999, Intesource is another player in the e-Sourcing / e-Negotiation space, but one with a bit of a twist. Whereas most SaaS providers are trying to sell you the all-powerful self-service fluffy magic box cloud solution, Intesource is still focussed on providing a full-service offering. Specifically, while you are given full access to the platform, their sourcing experts, who have conducted tens of thousands of events for hundreds of companies with a combined supply base that consists of over 10,000 companies, handle all of the event details for you which frees your organization to focus on high-level strategy and analysis. (Of course, if you need guidance in that respect, their sourcing experts are willing to work with you to identify the categories that are likely to generate the greatest ROI.) This approach has proved very successful for them and their customer base, and they typically drive an ROI of 10x for their clients within one year.

In addition to their sourcing expertise, they also have the ability to deliver a customized platform, as they built their entire solution in-house. This customization can go beyond just look and feel and include integration to external systems or new functionality and customized workflows based on organizational processes and best practices.

Platform-wise, they have a fully featured e-Negotiation platform with extensive RFX, Auction, Supplier Information Management (SIM), and document/contract management capabilities, which integrates with Microsoft Sharepoint for those who want a (collaborative) contract and document authoring solution in addition to the ability to track contracts and associated meta-data. And while the platform is not multi-lingual, it is multi-currency and they are integrated with multiple currency exchange data feeds. As a result, up-to-date currency conversions are always available.

With respect to e-Negotiation, or the RFX and Auction component, a buyer can use a templated workflow, capture as much cost and supplier information as they need to, and iterate through as many rounds as required. Plus, there are thousands of templates available to choose from for just about every category imaginable, built up by the Intesource sourcing team over the last decade as they captured the knowledge and best practices that materialized from the tens of thousands of events they ran, many with the global sourcing teams of some of the largest food, beverage, and retail companies in North America (which are the verticals they have particular expertise in). These templates contain complete workflows, customized RFIs, and customized bid templates with all of the relevant cost components. This allows bids to be broken down into unit cost, transport cost, duties & tariffs, utilization costs, warranty costs, etc. And, of course, the auction functionality is full featured and permits suppliers to be ranked against each item, group, or total award; the auction to be automatically extended based on last bid time; and bids to require a minimum decrement.

With respect to Supplier Information Management (SIM), you can capture all of the basic overview, classification, financial, product, service, and catalogue information associated with a company and augment it with feeds from D&B that include risk indicators and MWBE information. You can augment this with your own categories and fields of interest, and collect the data with the built in RFI capabilities. You can also get current marketing pricing on a wide range of commodities, as they have integrated data feeds from over 160 market exchanges.

The document / contract management module is a straight-forward repository- based solution that lets you manage as many documents, and as many kinds of documents, as you want with meta-data indexing and search. Creation capabilities are available through Sharepoint integration.

Based on their extensive workflow capabilities, which supports the hundreds of customized templates that are available across hundreds of categories, they have built a solid e-Sourcing Project Management Module that allows you to not only track your progress, but build your own customized workflows and category templates which can capture a significant amount of detailed information with respect to each task.

Finally, Intesource has an extensive SaaS interface for the supplier as well as the buyer, where the home-page dashboard — which shows current events, previous events, offered awards, accepted awards, pending tasks, etc. — can be customized for each supplier as well as the buyer.

Share This on Linked In