About a year ago, we had a post on Amazon Lockers — the Seattle firm’s attempt to solve recurring last mile problems. Customers could have their purchases delivered to a secure, nearby location. No need to sign for a package; no need to worry about someone walking off with your box. You just need to enter a code to pop open the locker that has your stuff.
But there is an obvious complication here: Those lockers have to go somewhere. Amazon’s plan was not to buy real estate but to plant them in existing retail locations. But which stores would benefit from hosting Amazon lockers? That is the question that a recent Businessweek article examines (Do Amazon’s Lockers Help Retailers? Depends on What They Sell, Sep 20).
The incentive for any business hosting an Amazon locker isn’t the monthly stipend the online retailer pays—”not even worth it,” says the manager of a Manhattan copy shop—but the lure of higher store traffic given the online retailer’s enormous sales volume and the gazillions of brown boxes sent across the nation each day.
Amazon has the lockers in nine large metro areas and touts the delivery option as a customer convenience for the many people who can’t reliably get their online purchases at work or at home. For a bricks-and-mortar business, the idea is that people coming to collect their Amazon purchases will buy other stuff on their way out the door.
So do people buy other stuff? (more…)
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A few months ago we had a post about how shipping containers have impacted supply chains and global trade. Today we have a longer piece from Nautilus on the history of shipping containers as well as some current trends in global shipping (The Box That Built the Modern World, Jul 25). I have three take aways from reading the article. First, everyone should read The Box by Marc Levinson because (a) it’s a good book and (b) it seems that no one can write about containerized shipping without more-or-less admitting that Mr. Levinson saved them a lot of effort in researching the topic.
The second point is that the article provides a nice illustration of how slapping stuff in containers can dramatically drive down shipping costs.
To get a sense of how the system works, imagine one of the containers aboard the Hong Kong Express, which is owned by German shipping giant Hapag-Lloyd. Asked to trace a product through a typical container voyage, Hapag-Lloyd spokesman Rainer Horn suggests a T-shirt sewn at a factory near Beijing, the kind you might buy at H&M.
Tagged, folded, and boxed, the T-shirt would be “stuffed” into a container with 33,999 identical shirts at the factory. Once sealed with a plastic tag and listed on a computerized manifest, the merchandise could pass through nearly three dozen steps before arriving at a discount clothing retailer’s distribution center near Munich. There’s the trucker who moves the box to a waiting ship in Xinjiang, the feeder ship that moves it to Singapore to be loaded onto a bigger Europe-bound freighter, the crane operator in Hamburg, customs officials, train engineers, and more.
Yet the container’s uniformity smooths each step of the way. Trucks and trains are fitted to haul the identical boxes; cranes are designed to lift the same thing over and over. The total time in transit for a typical box from a Chinese factory to a customer in Europe might be as little as 35 days. Cost per shirt? “Less than one U.S. cent,” Horn says. “It doesn’t matter anymore where you produce something now, because transport costs aren’t important.”
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Posted in eCommerce, Focus, Logistics, Operations Strategy, Supply Chain, tagged Amazon, eCommerce, Logistics, Operations Strategy, Supply Chain, Wal-Mart on June 26, 2013 |
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How should Wal-Mart fill web orders? That seems like a straightforward question. And, given that Wal-Mart sold over $7 billion of stuff on the web last year, you would think they would have figured that out by now. Still as the Wall Street Journal tells it, the retail giant is still working through how best to fill orders (Wal-Mart’s E-Stumble With Amazon, Jun 19).
E-commerce at Wal-Mart is run as a distinct business, with its own headquarters, CEO and merchants who buy items specifically for the website. Every year, executives would start a “five-year planning exercise, but the plans were never executed and management would say the sales weren’t there to justify the investment capital,” says a former online-division executive. “Even now e-commerce is a rounding error in the U.S. market.” Wal-Mart said it expects $10 billion in online sales this year, which would amount to about 2% of its $469 billion in annual revenue.
As Wal-Mart’s online orders grew, it turned to makeshift spaces carved out of store-serving distribution centers and third-party warehouse operators to help handle the load. The extra layer added to its costs. Wal-Mart’s online shipping can cost $5 to $7 per parcel, while Amazon averages $3 to $4 per parcel, analysts say—a big difference considering some of Wal-Mart’s popular purchases are low-cost items like $10 packs of underwear.
As the quotes make clear, this is all about how to match Amazon so Wal-Mart remains relevant as more transactions move on-line. To put the challenge in perspective, check out this graphic of Amazon’s distribution network.
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Have you ever thought about shipping containers? If you are like most people, you probably haven’t. But they are a remarkable accomplishment. They greatly simplify loading ships so longshoremen no longer need to manipulate odd-sized shipments. Throw in that they can be used across different modes of transportation so goods can be put on a train then a boat and then a truck without being unpacked and you have real game changer. As the chart below shows (from The humble hero, The Economist, May 18), the productivity gains they enable are remarkable.
So shipping containers have made shipping a lot cheaper, which should make longer supply chains more affordable. But are containers really responsible for the growth in global trade? That is, containerized shipping has risen dramatically over the last several decades but that period has also seen a significant reduction in trade barriers. Could it be that lower tariffs and such are what really drives trade while containers are, if you will, just along for the ride? (more…)
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The Wall Street Journal had a pair of recent article that touch on how the business of schlepping goods from Point A to Point B has been evolving in the US market. The first deals with the booming business of railroads. The major US railroads have been on a spending boom (Boom Times on the Tracks: Rail Capacity, Spending Soar, Mar 26). See the graph at right.
Just where has that money been going? To expanding track, enlarging tunnels, replacing bridges, and adding locomotives and cars. The emphasis has, in part, been on increasing the speed and reliability of trains in serving customers such as UPS.
In the past decade, though, under pressure from customers like UPS, trains have become more dependable. UPS “trained us in what it means to perform to their very high standards,” says Mr. Rose at BNSF. “I’m sure there were many times they were very frustrated.”
“I don’t know if we’re the largest customer [of the railroads] but I would tell you we’re certainly the most demanding,” says Ken Buenker, a vice president in UPS’s Corporate Transportation Group. UPS’s goal is an on-time arrival rate of 99.5%, he says. “So think about how much you risk with a train.” One breakdown could delay many deliveries.
Railroads used technology and strategy to tackle such problems. They used sensors to detect mechanical issues before they caused delays. They developed their own version of the airline “hub and spoke system” and organized shipments in trains all bound for the same destination. The latter move eliminated the time- and labor-wasting stops to break trains apart and reset them. It also paved the way for longer and speedier itineraries. Railroads “are always talking about efficiency and speed,” says Mr. Buenker. “The velocity of the network is really key for them.”
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Right now, same day delivery is one of the hottest topics in e-commerce with multiple firms experimenting with different ways of fulfilling on-line orders tout suite. See this Wired graphic-fest for a summary of what different firms are trying.
Then there is this.
Wal-Mart Stores Inc is considering a radical plan to have store customers deliver packages to online buyers, a new twist on speedier delivery services that the company hopes will enable it to better compete with Amazon.com Inc. …
“I see a path to where this is crowd-sourced,” Joel Anderson, chief executive of Walmart.com in the United States, said in a recent interview with Reuters.
Wal-Mart has millions of customers visiting its stores each week. Some of these shoppers could tell the retailer where they live and sign up to drop off packages for online customers who live on their route back home, Anderson explained.
Wal-Mart would offer a discount on the customers’ shopping bill, effectively covering the cost of their gas in return for the delivery of packages, he added.
(Wal-Mart may get customers to deliver packages to online buyers, Reuters, Mar 28)
The article describes this as being at the “brain-storming stage” and I must admit that I don’t know where that lands on Woody Allen’s notion-concept-idea spectrum. Indeed, it strikes me as being something of an elaborate April Fools’ joke.
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As the New York Times tells it, supply chains are changing (New Hubs Arise to Serve ‘Just in Case’ Distribution, Feb 12).
Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management. …
Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ, CoStar’s director of industrial research. Since the 1990s, just-in-time has made sense for many companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production.
This model also reduced transportation costs, because goods would be shipped only as necessary. By combining the just-in-case with just-in-time strategy, Mr. Circ said, companies are trying to strike a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost.”
I’ve been trying to think what I should say about this article for several weeks. I have felt conflicted because, on the one hand, it hits on some interesting points. On the other hand, it also leads with one of my pet peeves of business reporting. Specifically, it links any change in inventory management to some failure of just-in-time management. However, I am not convinced that is actually a good description of what is going on here.
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If a major firm opened a new facility in an otherwise depressed area, that would be good news, right? An article in the Financial Times suggests that there may be some caveats on that conclusion in the modern economy (Amazon unpacked, Feb 8). The firm in question is Amazon and the location is Rugeley, Staffordshire, in the West Midlands region of England. As the article tells it, the town was once a booming coal mining center but has steadily been on the skids since the mine closed in 1990. Hence, there was much excitement when Amazon announced it was opening a fulfillment center in 2011. Amazon also brought modern management techniques to Rugeley with kaizen events and gemba walks.
How has all that played out for the workforce?
What did the people of Rugeley make of all this? For many, it has been a culture shock. “The feedback we’re getting is it’s like being in a slave camp,” said Brian Garner, the dapper chairman of the Lea Hall Miners Welfare Centre and Social Club, still a popular drinking spot. …
Others found the pressure intense. Several former workers said the handheld computers, which look like clunky scientific calculators with handles and big screens, gave them a real-time indication of whether they were running behind or ahead of their target and by how much. Managers could also send text messages to these devices to tell workers to speed up, they said. “People were constantly warned about talking to one another by the management, who were keen to eliminate any form of time-wasting,” one former worker added.
The former shop-floor manager and another worker described a strict “three strikes and release” discipline system – “release” being a euphemism for getting sacked. In the early days, people were “released” frequently and with little warning or explanation, workers said. A very large number were laid off after the first busy Christmas period, some of whom had assumed their jobs would be permanent. Chris Martin says his job lasted less than a week after he took a day off for blisters and returned to find the night shift he was on had been abruptly cancelled.
It is this job insecurity that has most disappointed Glenn Watson at the district council. “Our definition of a good employer is someone who takes on people and provides them with sustainable employment week in week out, not somebody who takes on workers one week and gets rid of them the next,” he said. The council had understood Amazon would use the first 12 months to gradually build up its own workforce, transferring agency staff on to its payroll, but by last autumn Watson thought there were still only about 200 Amazon employees, with the rest of the workers supplied by Randstad and two smaller agencies. One young man strolling out of the warehouse last September said he was still an agency worker, even though he had been there since the site opened.
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How late can you delay Christmas shopping? If you are content to shop in physical stores, you can push things right to the bitter end. There is nothing but self-esteem keeping you from stopping at the Wal-Mart on the way to midnight mass.
Of course, if you like the selection and convenience of shopping on-line, things are a little tougher. Delivery takes time. Sure you can order a present right up till Christmas eve but there is no way it will be there for Christmas morning. On-line retailers, consequently, need to announce deadlines before which they can commit to getting you the goods before the big day.
If you stop for a moment, you will realize that this implies two things. First, whatever cutoff is announced is going to affect the demand the retailer sees. In particular, this is going to cause a spike in the last hour or so as procrastinators rush to get their shopping done. Second, hours are going to count, so if one retailer can stretch out the window for ordering — even a little bit — it will have a competitive advantage.
These observations are the central point in a Wall Street Journal article about GSI Commerce (Web Retailers Scrap for Last-Hour Sales, Dec 19). GSI is a division of eBay that provides fulfillment services for the likes of Aéropostale and Estée Lauder. They have set out to squeeze as much time as possible out of their operations so customers can order as late as possible. This year they are letting customers order as late as 11:00 PM Eastern time on December 22nd. It’s not exactly Christmas eve ordering, but it is eight hours later than Amazon.
So how have they done this?
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