Supply chain is all about getting the right product to the right place, on time and for the lowest cost. If you missed this year’s Council for Supply Chain Management Professionals’ (CSCMP) annual conference in San Diego, below is a brief recap of the focus areas and the lessons we took home.
Howard Schultz, CEO of Starbucks, was the opening keynote speaker on day 1. Mr. Schultz very quickly emphasized the importance of the supply chain in any company. “I would say unequivocally that you cannot scale a company of any kind today without having the expertise, the skill base, of a world-class supply chain organization,” he said. He also focused a lot of attention on company culture stating that “culture trumps strategy” and “if you have a good strategy and you’ve got a great culture, more often than not, I think the strategy is going to be executed well.” However, he stated a great strategy and poor culture will lead to poor results.
There was plenty of focus on omni-channel distribution challenges, strategies and opportunities during and between the educational sessions. There were many interesting opinions, stats and metrics presented.
Here are a few compelling insights.
Retailers that don’t invest in omni-channel will lose 10.4 % of their business according to Forrester.
Major changes in logistics networks are needed to support omni-channel customer demands. Inventory, labor, space, transportation, technology, organization, and finance all must be re-thought to support new speed and flexibility requirements.
“Logistics is a differentiated component of the product” – Art Mesher, former CEO Descartes Systems, 2008 CSCMP Distinguished Service Award.
Day 2 started with a keynote presentation by Dave Clark, Senior VP of Worldwide Operations & Customer Service Amazon Fulfillment. After watching a brief video on Amazon, Dave walked through the launch of their Prime Now one-hour delivery service. Amazon launched their first Prime Now from concept to first order delivery in 111 days. This included finding warehouse space, which needed to be centrally located to the downtown area they were servicing, building out the space which was completely empty and filling it with 20,000 SKU’s. Their target was 90 days but I don’t think anyone would consider this a failure. Dave discussed the Amazon culture and some of the methodologies they utilize. 3 core ideas – 1. Work backwards from the customer. 2. Focus on single threaded leaders. 3. One way vs. Two way doors. All with emphasis on how companies should rethink their implementation model. Decide Fast = Reduce Risk.
I spent most of my time on the Transportation Education tracts since this is typically a strong focus at CSCMP and my area of expertise. The big topics were driver/capacity shortages, companies need to be more carrier friendly, gaining preferred shipper status, increasing transportation costs, use of technology and how omni-channel distribution is impacting transportation with smaller more frequent deliveries. Below is an overview from the 24th Annual Trends in Transportation and Logistics by University of TN, GA College, Coyote Logistics and Project 44. I was not surprised by the decrease in overall on-time service from the prior year.
- Stagnant business performance coupled with tight capacity in most transportation modes has created an increased need for shippers to leverage their transportation spend.
- An increasing percentage of the transportation budget is being spent on direct from plant to consumer shipments; for many companies the transportation budget must cover this and 6 other channels of distribution.
- Technology continues to be underutilized by companies in managing transportation and distribution.
- Service performance has reached record lows with no indication that the bottom has been reached.
- Shippers and carriers must redefine the way they collectively manage transportation in order to survive and thrive–the forces driving the evolution of this critical function.
This study did not focus on a quickly growing section of transportation costs driven by the proliferation of omni-channel returns. Returns of web orders shipped for free and returned for free will continue to erode margin (see more on this topic from the WSJ). Returns can be taken back to a store, sent to a DC or even back to a manufacturer. There are additional issues with return besides shipping costs. The product must be QA inspected to ensure it was not damaged, worn, etc. It may need to be repackaged and retagged.
The supply chain is becoming ever more complex, especially in retail. Companies need to move from using descriptive analytics to predictive and ultimately prescriptive analytics to remain competitive. It has become apparent that supply chains rely more than ever on technology, innovation, and people. Those who do not leverage technology, embrace innovation and focus on their people will be left behind.