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Archive for the ‘Supply Chain’ Category

Given that it is Valentine’s Day, it seems appropriate to consider the supply chain for roses. So behold this wonderful graphic from Supply Chain 24/7 (The Logistics of Delivering Fresh Roses In Time for Valentine’s Day, Feb 13).

CHRobinson_Valentine_Rose

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I keep an empty wine bottle from Chateau de La Rivière in my office. It says right on the front label “Mis en bouteille au chateau,” that is, that the wine was bottled at the winery. It turns out that at least in the British wine market bottling at the winery is becoming the exception, not the rule. According to the Financial Times, a large numbers of wines imported into the United Kingdom are now imported in plastic bladders (see the image above) and bottled in the UK (Crate expectations, Jan 31).

In the past few years there has been a huge structural change in how wine is delivered to those who drink it. The UK, for example, is the most important market for one of the world’s most enthusiastic wine exporters, Australia. In 2008, fewer than three in every 10 bottles of Australian wine on British shelves contained wine that had been shipped from Australia in bulk rather than in bottle. Four years later that figure was eight in every 10, and the total amount of wine shipped out of Australia in bulk overtook the volume exported in bottle.

Australia is far from the only country to ship substantial quantities of wine sloshing around in a tank inside a container rather than neatly sealed in bottles. Spain and Italy export far more wine in bulk than any non-European wine producer, and 65 per cent of all South African wine exports were bulk last year. (Chile is an enthusiastic exporter of bulk wine and earns the highest average price per litre for it.) According to the OIV, the global wine statistics-gatherer, the total volume of wine shipped around the world in bulk rose 61 per cent between 2005 and 2012 to represent more than 40 per cent of all exported wine.

So what is driving this rapid conversion from bottle to bulk? (more…)

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Ford has a new version of its F-150 pick up coming out. That per se isn’t all that exciting to me, but everyone says that thus truck is a big deal because of it represents a shift from steel to aluminum. Here is how Dan Neil put it in the Wall Street Journal (Detroit’s Big Three Are Returning to Excellence, Jan 17).

But now, without further eloquence, the news: Ford changed the game this week when it unveiled its aluminum-intensive pickup truck, the 2015 F-150, that is as much as 700 pounds lighter than a comparable steel-bodied vehicle. In an industry that celebrates the power of small numbers and incremental weight savings, 700 pounds is a staggering figure, and it is weight savings that directly and proportionally improves hauling and towing capacity and fuel economy, which are prime metrics in the truck segment.

Wait, Upper West Sider, don’t rush off to the wine column. To the casual observer, the anticipated 3 mpg (20%) increase gained by Ford’s high-tech “light weighting” (a term of art) may seem marginal, but I assure you it is a figure of immediate and national consequence. … By virtue of the hundreds of millions of miles rolled up by the F-series annually, you are looking at the single biggest real-world advance in fuel economy in any vehicle since the Arab oil embargo.

So all that aluminum gives us a game changer — and not just in the realm of fuel economy. Automotive News reports that it has major implications for Ford dealers and their body shops (Ford dealers will gear up to fix new F-150, Feb 3). Ford’s collision marketing manager (that’s just a great job title) says that 80% of repairs on the new F-150 can be done in a standard body shop but that other 20% is going to require special capabilities — in part because aluminum dust reacts badly with steel parts so aluminum work must be kept physically separate from the rest of the shop. All told, a dealer needs to spend 30 to 50 grand in order to be ready for the F-150.

How is Ford going to make that happen? (more…)

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BN-BD558_patent_G_20140117133548Wayne Gretzky once said that one should skate to where the puck is going to be. Clay Christiansen used that as a hook for an HBR article and a management cliché was born. Now it seems that Amazon wants to apply that logic to shipping retail orders (Amazon Wants to Ship Your Package Before You Buy It, Wall Street Journal, Jan 17).

Amazon.com knows you so well it wants to ship your next package before you order it.

The Seattle retailer in December gained a patent for what it calls “anticipatory shipping,” a method to start delivering packages even before customers click “buy.”

The technique could cut delivery time and discourage consumers from visiting physical stores. In the patent document, Amazon says delays between ordering and receiving purchases “may dissuade customers from buying items from online merchants.”

So Amazon says it may box and ship products it expects customers in a specific area will want – based on previous orders and other factors — but haven’t yet ordered. According to the patent, the packages could wait at the shippers’ hubs or on trucks until an order arrives.

The high production value diagram above (from the patent application) shows the various moving parts to be coordinated.

There is, of course, only one question to ask about this: Is anticipatory shipping crazier than planning to deliver packages via drones? (more…)

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The weather in Chicagoland over the last week has been miserable. I have shoveled the walks way too many times and it now feels like we’ve been transported to Hoth. That has gotten me thinking about road salt. That and a New Yorker article on the Atlantic Salt’s operations on Staten Island (The Mountain, Dec 23). The mountain referenced in the article’s title is a giant pile of salt — a third of a mile long and four stories high. It’s big enough to see on Google Earth. Check out the multicolored tarps.

salt

In any event, managing the inventory of road salt is an interesting challenge. (more…)

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What follows Christmas? Returns, of course. This is especially true for on-line retailers who must generally offer more forgiving returns polices than conventional retailers. In Europe, this is a matter of law. In the US, it is often a necessary part of gaining customer trust. But how much do returns cost retailers? According to The Economist, it can be quite a bit (Return to Santa, Dec 21).

Return rates can be alarmingly high: for some online retailers up to half of everything they sell comes back. Studies find that just handling each returned item costs online sellers between $6 and $18, and that is before the losses from items that are returned in unsaleable condition. …

A new study by Christian Schulze of the Frankfurt School of Finance and Management seeks to put some hard numbers on the scale of the serial-returner problem. Mr Schulze studied 5.9m transactions in Germany, involving 166,000 customers, for a large European online retailer. He looked only at those who had bought at least five items over a five-year period, and found that 5% of them sent back more than 80% of the things they had bought; and that 1% of customers sent back at least 90% of their purchases. Without the cost of returns, the retailer’s profits would be almost 50% higher, the study found.

But is this necessarily a bad business? (more…)

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Christmas is just a couple of days away and that means that UPS and other shippers are rushing to get every package and gift to its final destination. Just how much work does that take? Quite a bit. Businessweek reports that UPS starts planing for its peak season in the previous January (UPS’s Holiday Shipping Master: They Call Him Mr. Peak, Dec 19).

(more…)

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Have you finished your Christmas shopping yet? You apparently are not alone in procrastinating.  Shoppers are buying later and that is causing problems for firms trying to make sure they can get the right items to the right markets. Take, for example, toy maker Lego (Predicting Holiday Sales Poses Issues for Lego, Dec 13, Wall Street Journal).

The Christmas shopping season is getting trickier to navigate as buyers are waiting longer to purchase holiday gifts, Lego’s chief financial officer said Friday, and the trend is creating a need to get more immediate buying data from retailers, particularly in the U.S. …

In a telephone interview, John Goodwin said “this year is going to be the greatest stress test we have ever had.” While a late Thanksgiving contributes to the stress, “people are pushing off their gift buying later and later into their calendars.” …

[A]ccurately tracking buying patterns during the December shopping rush is of critical importance to a company such as Lego, which holds out as long as possible to package its bricks for shipping to individual markets. Many of Lego’s basic bricks are the same, but buyer tastes rapidly change, Mr. Goodwin said. So the company waits to decide what volumes of specific play sets to assemble.

“It increases the importance of getting very good data, so we can supply the retailers with the right products at the right time. We have to be as close to the ultimate purchase as possible in order to respond…nobody wants a disappointed child on Christmas.”

(more…)

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We have had several stories over the last couple years about retailers using inventories at their stores to fill web orders. At one time or another, there have been stories about Nordstrom, Wal-Mart and Macy’s all treating that big box at the mall as a warehouse. Now the Wall Street Journal reports that even more chains — including Sears and Office Deport  – are hopping on the bandwagon (Retailers Turn Store Clerks Into Web Shippers, Dec 9). You can here the reporter discussing her findings here:

It is not surprising that more retailers are going this way. They are all facing pressure from on-line competitors and finding some way to utilize their existing physical network is appealing. If nothing else, I suspect that everyone in the C-suite wants to be able to tell the board they are trying something.

But how can you set up this up quickly? You need to develop a system that updates inventories in real time while dispatching staff to fetch what has been ordered and scheduling the shipper to pick stuff up. Nordstrom is often identified as the first mover on this. The New York Times reports that it took them a couple of years to get it set up. How can a Johnny-come-lately ramp this up quickly? By working with UPS and FedEx.

UPS and FedEx Corp. which were critical to helping launch the e-commerce boom, are now eager to help traditional retailers deal with it. They have engineered new strategies for jockeying inventory across the country to avoid overstocks and markdowns and to keep customers from defecting to Amazon, a big problem last year. The strategy is also important this holiday season as clothing retailers are threatened with heavy inventories.

UPS says it is working with about 40 retailers on implementing these strategies—about double the number a year ago. FedEx said these partnerships helped boost revenue in its ground delivery business 11% in its fiscal first quarter. Both forecast record holiday-season deliveries: UPS with 34 million packages on Dec. 16 and FedEx with 22 million packages on Cyber Monday.

In the case of Sears, UPS provided software that shows shipment statuses of all orders across the entire system. It also sends tracking numbers.

(more…)

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So how much does it cost to make a hamburger — in Nigeria? Turns out, it costs more than you might realize (Burgers Face a Tough Slog in Africa, Dec 10, Wall Street Journal).

MK-CI493_AFBURG_G_20131210160305

This is the breakdown for a Johnny Rockets burger and some of the numbers might seem out of whack — Why should iceberg (!) lettuce costly nearly five times as much in Africa as New Jersey? The answer is simple: It’s imported. Why import lettuce? Because the local supply chains are simply not sophisticated enough to support the quick service business.

But that quest is straining a supply chain that is short on the refrigerated trucks and warehouses needed to keep patties and vegetable toppings fresh. And in many places, Africans are consuming beef at a faster clip than cattle ranchers can deliver new cows, meaning beef prices keep climbing. That is testing the limits of what the continent’s young urbanites can afford.

And this is not just about Africa. (more…)

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