Friday, October 31, 2014

Why Shopping at Costco (Too Much) Makes Me Feel So Good

Oct 27 2014

You don’t have to be a heartless entity to win big. Nice folks canfinish first

"I'm tired of hearing about the minimum wage, I really am."--New Jersey Governor Chris Christie.
To me honest, I’m a big fan of wealth. I love to see individuals succeed wildly. I love to see companies succeed. I hate companies that do so as a result of virtual slave labor, which Walmart does right here in America. Hate is perhaps too strong a word; I’m not a hater. Despise.
Walmart makes hundreds of billions of dollars on the backs of its employees. The pay is actually fine, unless employees want to eat, sleep with a roof over their heads and maybe see a doctor once on the while. The latter has just been made more difficult as Walmart cut employee health benefits while hypocritically getting into thehealthcare business.
Walmart has increased stores and profit while they’ve actually cut their workforce. The result was predictable: longer checkout lines, less customer service throughout the store, and overall disarray. Walmart consistently places last among department and discount stores in the American Customer Satisfaction Index and has either tied for or been in last place for the 6 years running. But hey: low, low prices.
Walmart workers labor under the threat of intimidation and retaliation for complaining about working conditions or wages. They work on holidays—they must. Walmart has ingeniously figured out a way to not pay their employees holiday overtime. Employees must wear “uniforms” which, naturally, they can buy at Walmart. How convenient!
Walmart pays their workers such a low-wage that U.S. taxpayers pay an estimated$6.2 billion in public assistance, which includes food stamps, Medicaid and subsidized housing. A single Walmart “cost taxpayers between $904,542 and $1.75 million per year.” According to the Americansfortaxfairness.org, “The company, which is number one on the Fortune 500 in 2013 and number two on the Global 500, had $16 billion in profits last year on revenues of $473 billion. The Walton family, which owns more than 50 percent of Walmart shares, reaps billions in annual dividends from the company. The six Walton heirs are the wealthiest family in America, with a net worth of $148.8 billion. Collectively, these six Waltons have more wealth than 49 million American families combined.
Costco—winning customers over by putting people before profits

Costco, the second largest retailer behind Walmart, is at the other end of the spectrum. Costco is closed on Thanksgiving. And Easter, Memorial Day, Labor Day, Independence Day, and of course, Christmas Day (but not Hanukkah—that’s eight days!) Would they make more money if they were open those days? Of course, but they care more about their employees than their profit. What are they thinking?
Voted the #1 company to work for, Costco has a full spate of employee benefits.Eighty-eight percent of Costco employees have company sponsored health care, for which the company covers 90% of the cost. I can feel the commitment and workplace satisfaction when I need help from their staff. In that way Costco reminds me of Home Depot. Perhaps that’s why their employee turnover rate stands at a paltry 12 percent—unheard of in retailing. Recession in 2009? Costco handed out raises.
Costco doesn’t see its employees as an expense as much as an investment. It’s known for treating employees well. Some say great. The CEO, W. Craig Jelinek, doesn’t create an atmosphere of intimidation, just the opposite. In fact all of the doors at Costco headquarters in Issaquah, Washington, remain open. Colleagues can literally walk up to him and have a conversation.
Costco went public in 1985, and over the years, Wall Street repeatedly asked it to reduce wages and health benefits. They instead boosted them every three years. How has this fairness to its employees affected the bottom line? The stock price hasdoubled since 2009.
Will this kind of success send a message to businesses in this country that treating your employees with kindness, fairness and dignity and allowing them to make a living for their families makes good business sense?
It will if you shop at Costco instead of Walmart.
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Cash-Strapped Americans Are An Ominous Threat To Retailers

  • OCT. 30, 2014, 2:05 PM
Wal-Mart shopperReuters

Americans aren't shopping like they used to. 
Low-income and middle class retailers including Wal-Mart, JCPenney, Target, Macy's, and Family Dollar have reported disappointing earnings this year. 
Executives at these retailers say that Americans are increasingly unwilling to spend money on discretionary items, despite modest gains in the job market. 
"Low-end and middle-income retailers are still suffering because people are buying so close to need," Brian Yarbrough, consumer analyst at Edward Jones, told Business Insider. "In the past, retailers could depend on people spending a little more." 
The Federal Reserve Board reports that all groups of consumers had a lower mean income in 2013 than they did in 2007. Mean wealth also declined for all the groups. 
Yarbrough said that even fluctuations in the weather can make a big difference for retailers, like JCPenney, which recently said that unseasonably warm weather was hurting sales of its fall fashion assortments. 
"Today's consumer is waking up when its 35 degrees and realizing it's time to buy long sleeves or a winter coat," Yarbrough said. "They're not going to spend the money before they absolutely have to."
Macy's CEO Terry Lundgren has said that customer malaise is hurting his business. 
"The consumer has not bounced back with the confidence that we were all looking for," Lundgren said at the Goldman Sachs Annual Retail Conference, weeks after the company reported sluggish second-quarter sales. 
Lundgren also said he doesn't expect things to get better in time for the holiday season. 
"The performance I think we had in the second quarter, and we expect to have in the second half, is going to be a continuation of what we’ve been able to do over the last several years — and that is to capture market share and get the most out of the consumers that are in our stores," he said. 
macy's black fridayKim Bhasin / Business InsiderMacy's CEO Terry Lundgren has said that consumers aren't recovering.

Earlier this year, Family Dollar CEO Howard Levine said that economic conditions were worsening for his shoppers. 
"The low-end consumer has not benefited in this recovery at all; in fact I think (they) have slipped further back," Levine said. 
Even Wal-Mart is acknowledging that its customers are becoming choosier about how they spend.  
Wal-Mart CEO Doug McMillon recently told investors that the brand has a renewed focus on offering the cheapest products. 
"Price matters to our customers and it always will," McMillon said. "As a company, being a low cost operator is in our DNA. This will never change and we will be the price leader, across a broad assortment, everywhere we operate."
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3PL Consulting Can Drive Down Transportation Costs, Improve Service

Shippers everywhere face the perpetual question: What’s the best way to get our products to customers efficiently and at the best cost? By Mark Wagner



0 


Efficiency, Safety Improvements Hallmark of Food Manufacturer’s…


An international producer of healthy, convenient and affordable foods was struggling to maintain an efficient, cost-effective supply chain. The third-party logistics (3PL) provider…

October 28, 2014
Numerous factors affect this answer. From cost and service, to carrier relationships and capacity constraints, the factors themselves are a moving target as the market fluctuates with varying and more-sophisticated consumer demand.
Small and midsize shippers are particularly hard pressed to answer definitively, as resource and financial limitations can derail progress toward transportation optimization.
Therefore, the practical goal of reducing costs and improving service often ends up just out of reach.
Which raises more questions:
  • What are the existing cost-reducing approaches? How effective are they?
  • Where are the gaps?
  • If traditional approaches continue to fall short, what new options are there?
Two areas that shippers try to leverage are mode selection and freight consolidation. Within each, shippers rely on tried-and-true methods to reduce costs. Some methods work, some need work.
Let’s look at the current landscape, starting with mode selection.
Mode Selection
For a common starting point, mode selection is defined as “the operational process of selecting the lowest cost transportation mode to service shipments on a daily basis while considering service.”
Among the primary modes in the small and midsize shipping world (parcel, less-than-truckload (LTL), one-way truckload (TL), private fleet truckload and intermodal/container), LTL is a lower-cost option, but presents some of the biggest issues and risks. Transits depend on the network of terminals that a given carrier operates. With more touch points, the LTL mode limits service times and can have consequences related to claims.
Although LTL carriers offer numerous advantages (cost savings over hiring an entire truck and trailer for an exclusive shipment, better rates than parcel carriers), it’s wise to examine which mode is best for your particular shipment.
Freight Consolidation
Freight consolidation is the operational process for reducing transportation costs by combining smaller shipments into larger ones to benefit from shifting to a lower cost transportation mode.
Usually, transportation costs decrease as shipment sizes increase to the point of efficiently utilizing transportation modes that can cost effectively service larger shipments.
To illustrate this, the cost per pound for parcel is usually the highest, followed in order by LTL, truckload, and intermodal/container.
Shippers employ three techniques to leverage freight consolidation:
  • Time Consolidation—Holding freight for a set time to accumulate the largest shipment possible for mode selection while also considering service.
  • LTL to Multistop Truckload—Combining multiple direct LTL shipments into a multistop truckload if there is potential to reduce costs while meeting service requirements.
  • LTL to Pool Distribution Network—Converting multiple direct LTL shipments into a blended mode that utilizes both LTL and truckload services, along with a consolidation location to reduce costs. For an inbound pool distribution network, multiple LTL shipments are redirected and shipped via LTL to a location for consolidation into truckload shipments, which are delivered to a common destination.
The big-picture view of mode selection and freight consolidation shows a range of traditional approaches shippers employ to generate savings.
Some shippers leverage internal resources to manually create shipping plans. The savings generated, though, are often offset by inefficient processes and the lack of technology.
To capitalize on their own resources, some shippers invest in TMS optimization technology. The rub, though, is that many shippers lack volumes to justify the expense in the technology and training required to maintain it.
Also, because transportation is typically not their core competency, shippers risk investing in the wrong technology. As a result, they underutilize it and add unanticipated costs to already burdened budgets.
Outsourcing transportation management to third-party logistics (3PL) providers remains a viable option for shippers with sufficient freight volumes and optimization potential to offset the expense. This route increases the likelihood of higher-quality solutions, but the investment might exceed any savings realized.
Clearly, these approaches have benefits. But the drawbacks expose a three-way battle: service vs. cost vs. efficiency.
For many shippers, there is another alternative that alleviates this battle and improves the value they’re seeking from a transportation-management strategy.
Taking a New Road
Freight can be viewed as a simple game: Pick up the freight, haul it, deliver it.
Fortunately, the flexible rules of this “game” allow shippers to develop more than one strategy.
To maximize a mode selection and freight consolidation strategy, hiring a 3PL provider as a supply chain advisor and unbiased partner to create shipping plans is a creative alternative.
These advisors use the latest technology and deploy top transportation-optimization professionals to create customized shipping plans.
And because they gain in-depth knowledge of shippers’ transportation networks through the load planning and optimization process, advisors can also identify other improvement opportunities.
Partnering with an advisor on a consultative basis doesn’t require investing in the overhead associated with expensive technology and talent needed to utilize these tools.
This relationship produces benefits beyond the numbers, as shippers can redistribute resources in areas such as purchasing.
Time Is on Your Side
As a shipper, you know the one thing that would make your life easier—time.
Seems as if you’re always up against the clock, and getting shipments off your dock and delivered to customers is of utmost importance.
And that’s the proper focus.
But time doesn’t stand still, and finding those elusive hours to execute the transportation strategy—Are your dollars well spent, or is your transportation budget being eroded by poor mode selection and freight consolidation? Does your manual process for creating shipping plans really save money, or is it time to consider optimization technology?—is nearly impossible.
That’s where partnering with the right advisor can pay off. With the expertise to navigate today’s unpredictable marketplace, advisors can develop the right strategy to maximize your transportation dollar, lowering costs, and improving service.
Changing the “been there, done that” formula to an approach in which a supply chain advisor guides you to a tailored solution that yields the benefits of tactical freight optimization is critical to not only maximizing your investment but also improving your overall supply chain performance.
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THREE QUESTIONS PEOPLE ARE AFRAID TO ASK….

by LORA CECERE on OCTOBER 29, 2014 · 0 COMMENTS
Groupthink is a psychological phenomenon that occurs within a group of people in which there is a desire for harmony within the group, but the result is an irrational or dysfunctional outcome.  Wikipedia
You know the drill. The meeting is on everyone’s calendar. It has been set up by the CEO or a board member’s assistant months in advance. The room is big, the PowerPoint deck is large, and the coffee cups are arranged in neat rows on the counter of the side of the room. There is an abundance of pastries flowing from the basket, and the stage is set for an impactful meeting. Even though things seem to be going well (all of the meeting details are well-executed and the speaker is giving an energized presentation), the room is eerily quiet. The speaker is speaking, the beautiful slides move quickly at the front of the room, but the audience is not engaged.
In my travels, I attend these meetings frequently. They are precipitated by a strategic relationship between a consulting company and the executive team. The consulting team pitches a theme—vision of supply chain best practices, big data analytics, or demand-driven value networks—to the executive team, and a new project is initiated. The first step in the journey is a kick-off meeting. The second step is usually a large implementation of a technology project—Enterprise Resource Planning, Customer Relationship Planning or Analytics. I feel that the industry is engaged in ‘Group Think’. No one in this meeting is going to ask tough questions. The board has not set up the team for success. Here are the three questions that I would like people to ask:
Table 1. Comparison of Results for Best of Breed Solution Providers to ERP Expansionists in Supply Chain Planning
Question 1: What drives a successful implementation of supply chain planning?  Supply chain planning is now in its fourth decade. The first evolution of technologies were built by best-of-breed solution vendors. These solutions were usually implemented by the technology provider by consultants with specialized skill sets. The promise was the delivery of a decision support system that would allow the organization to optimize the relationships between cash, cost, and customer service against the strategy.
The second-generation of solutions were built and marketed by Enterprise Resource Planning technology companies like SAP and Oracle. The promise of these solutions was that an ‘integrated planning solution with ERP would deliver greater value’. (This solution is termed the ERP Expansionist in Table 1.) This new solution was favored by the Information Technology (IT) organization. By purchasing planning and transactional systems for a common vendor, they had one throat to choke and they were familiar with the architectural elements. It was also the preference of the consulting partners because the projects were longer, more costly and better aligned with the consulting model. But, did it add more value? The answer is no. As shown in Table 1, the movement to adopt “integrated ERP and Supply Chain Planning software from an ERP vendor” moved the industry backward. Ironically, the solutions implemented by the consultants, as contrasted to those implemented by the technology vendors, also produced less desirable results.
How do I know this?  The results in Table 1 come from a nine-month research project of 120 respondents representing 183 instances of demand and supply planning. (The average company has more than one instance of both.) In the study, the respondents were asked to rate time to Return on Investment, and satisfaction. We also correlated the results to balance sheet performance. What do we find? Best-of-breed solutions have a higher Return on Investment and are quicker to implement. They also have higher satisfaction rates. The highest satisfaction comes when the technology vendor implements the solution. It is significantly different at a 90% level of confidence. In the data, we can also see that the implementations from the ERP Expansionists have significant gaps—requiring more planners, longer times to plan, and greater difficulties getting to data.
Why does this happen? Leadership teams struggle with the trade-offs between cash, cost and customer service. As a result, supply chain planning is often a targeted project when the strategic consulting partners talk to their clients at a board level. The strategic consulting partners are respected in these relationships and seldom questioned, and the stage is set. In parallel, there is a low-level of trust for the best-of-breed technology vendors. Many are very sales-driven and difficult to work with. The market was overhyped at an early stage and trust eroded. Would the board deliberately select a system that takes longer to implement, with a lower Return on Investment, requiring more ongoing labor and producing lower results? Of course not. But, the industry is in a groupthink. No one is having a fact-based discussion. This is how we see our role.
Table 2. Characteristics of those Satisfied with Supply Chain Planning
Q2: Who does supply chain planning well? What can we learn? As shown in table 2, the companies that are the most satisfied with planning are smaller organizations with 15 or less planners and without high item complexity.
To drive maximizing the value of planning, organizations need to be aligned against an operating strategy. Companies adopt planning to optimize the organization’s response from the customer’s customer to the supplier’s supplier. The supply chain planning cannot be effective if implemented by a supply chain function that is focused only on customer service, logistics and distribution. It requires the support of the organization to optimize the response for the end-to-end value chain that crosses functions.
What can we learn from this table, and the research? A successful supply chain planning implementation is about more than technology. The implementation of decision support tools needs to be a way of life. Planners need time to plan, and the organization needs to be aligned against a shared vision or operating plan. It cannot be about the optimization of vertical silos within the organization. This leads to a sub-optimal response.
The second thing that I learned from the research is that we do not have good solutions for large organizations in the market today. If you have a large number of planners and high item complexity, you are at risk. This I think leads us to the Third act of Planning.  In the third act, I believe that the technologies are very different from those in the first three decades of evolution. In the Third Act, I believe that the processes and technologies are redesigned outside-in from the channel back to the enterprise. I think that it is a new world of cognitive learning, rules-based ontologies, concurrent optimization, and B2B Networks based on canonical infrastructures with many-to-many data models. These new technologies are evolving. (I will write more on this in my next blog post.)
Q3: How do I become demand-driven? Data surrounds the company. The data in the channel is changing faster than the company can adopt processes and technologies to use it. It is piling up on the doorsteps of most major companies. Some may be used by the digital marketing teams for marketing purposes, but the average company does not know how to use it. They struggle to listen to and interpret market signals. It is ironic that there has never been a time in history where customer data is more available, and the demand higher for companies to operate a customer-centric value network to sense and respond to true demand, but the solutions to use the data are evolving. Today, they do not exist.
Most consultants and technologists are guilty of bait and switch. The discussion is on becoming demand-driven, but the recommended solution is a traditional approach. When the pretty slides are over, the consultant submits a project plan to implement the traditional forecasting, order management and supply planning that does not sense market demand and translate it into usable outcomes. The audience listening to these presentations does not have the courage to raise their hands and ask the question, “How do you define demand-driven value networks?” and then follow with the question of, “Can the traditional technologies really help us to become demand driven?” The consultants are incented to recommend the solutions that they are familiar with in implementing. Most know very little about the true definition of demand driven.
Tomorrow, I get to deliver this message to a large manufacturing client. I am speaking at their global kick-off. I am going to encourage them to not be guilt of industry groupthink. In this blog, I hope that I push you too. I want you to raise your hand and question the status quo. And, if you do not have the courage to do it directly, share the research and ask your leadership team to give me a call. I answer all emails and phone calls. I want to change the dialogue. It is tough for me to see that nine out of ten companies are stuck, and not making progress, at the intersection of operating margin and inventory turns. I grow weary of all of the consultant presentations of how supply chains can reduce inventory without looking at the form and function of inventory and the real needs for inventory to be a buffer of demand and supply volatility.
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