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Archive for the ‘Supply Chain’ Category

Have you ever ordered a couch or arm-chair and waited an interminable amount of time for delivery? The usual reason why getting upholstered furniture often takes forever is the fabric. From the manufacturer’s point of view, the fabric is expensive, which would be tolerable if one could count on it moving through the process quickly. However, in the furniture world, you can’t count on that. Above a certain price point, nearly every manufacturer competes on offering lots of variety. Once you pick out a couch that’s the right size and sufficiently comfy, you get handed a book of fabric samples with literally hundreds of choices. Some — indeed, most — of those options are destined to be low runners, rarely chosen options that will appeal to only a very few customers. That creates problems for the manufacturer. Holding all of those options in inventory may just be too costly. A manufacturer may hold some of the more popular variants in inventory, but for the more esoteric choices, they will wait to order the fabric after getting an order for a couch.

But what if you could print the desired pattern for the couch on site?

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This should not surprise you at all: Christmas is a big deal for Lego. According to the Financial Times, half of the company’s sales come in the month or so before the holiday (Lego makes push to avoid disappointments of Christmas past, Dec 22). But how do they gear up for that big peak in sales? Check out the video below:

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As we have posted about before, retailers using store inventory to fulfill on-line orders is a thing. It is also a thing that raises an interesting question: At what level of store inventory should a retailer stop using store inventory to fulfill on-line orders? That is, should everything be available first-come, first served or should some store inventory be held back only for those customer that wander into the store? According to the Chicago Tribune, different chains are following different strategies on this (With Hatchimals scarce, who gets dibs — online shoppers, or those in the store?, Dec 13).

Target ships online orders from 1,000 of its stores, up from 460 last year. To avoid empty shelves, Target will turn off the order pickup or ship-from-store option on some items when a store’s stockpile falls below a certain threshold, said Target spokesman Eddie Baeb. Stores that ship also get extra inventory.

An online customer likely doesn’t care which store or warehouse handles their purchase. The shopper already walking the aisles does. Exactly how many items Target holds back depends on the product and how quickly it typically sells. …

Other retailers, like Toys R Us, don’t try to guess how many items to hold back for in-store customers.

Even on Christmas Eve, the retailer doesn’t bump back online orders to help procrastinating brick-and-mortar holiday shoppers. Purchases, whatever the format, are first-come, first-served, said Toys R Us spokeswoman Jessica Offerjost.

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It’s the end of the year so it is clearly time to see what is up with how retailers are handling holiday logistics. A useful starting point is this graphic from the Wall Street Journal (As Web Sales Spike, Retailers Scramble to Ship From Stores, Dec 1).

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This shows how Toys R Us fulfills its web orders. And, yes, that says that over 40% of the web sales were fulfilled from stores. (To put that total in perspective, the company’s revenue last year was $11.8 billion.) (more…)

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It’s not every day that you see a video about supply chain contracting, so I cannot resist posting about it:

The video comes from Vox and they have an article that goes with it (The hidden war over grocery shelf space, Nov 22). That article, in turn, was at least partially inspired by a report written for the Center for Science in the Public Interest (Rigged: Supermarket Shelves for Sale, Sep 28, 2016).

The contract in question is a slotting allowance. Slotting allowances are paid by food manufacturers to retailers in order to get items onto shelves. The money is paid upfront and often varies with the number of stock keeping units (SKUs) introduced and the number of stores in which the products will be stocked. The term comes from the act of creating a space — i.e., a slot — for an item in a warehouse or on a store shelf. The origin story is that retailers at some point started demanding that vendors compensate them for the costs they incur in helping launch new products (which often fail). The reality is that the money involved is now significantly higher than the cost of rearranging products. In effect, retailers are selling off their real estate.

So are slotting allowances good or bad for markets and customers?

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There is a good chance that the last time you bought something on Amazon’s website, it wasn’t actually sold by Amazon. It instead came from an independent merchant, and Amazon just handled the logistics of getting the item to you. That arrangement has an implication that I never considered until a recent Wall Street Journal article (Amazon Prods Its Sellers to Free Up Warehouse Space, Nov 4): By inviting in the additional sellers, Amazon is giving up control of just what is in its fulfillment centers. If a merchant wants to sell miscellaneous crap, that is their business. At the same time, however, that miscellanea potentially ties up space that Amazon needs — or at least could use more profitably on other items. This is particularly true as we head into the holiday season when Amazon should reasonably expect business to be booming.

What is a poor e-commerce giant to do?

How about a little surge pricing? (more…)

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We all like simple solutions. Tired after work, your teenagers have friends over, and everyone’s getting hungry? Just order pizzas and the problem is solved. But how complicated is it to get pizzas to customers? Is there much room for innovation in this market?

The answer, apparently, is yes. The NPR blog The Salt had a feature on a Silicon Valley start up Zume that aims to use robot and specialized equipment to cut the time and cost to make and deliver pizzas (Our Robot Overlords Are Now Delivering Pizza, And Cooking It On The Go, Sep 29).  This video shows how Zume (which should not be confused with a failed media player) works.

Here is the key point from The Salt article:

Here’s how it works. A customer places an order on the app. Inside the Zume factory, a team of mostly robots assembles the 14-inch pies, each of which gets loaded par-baked — or partially baked — into its own oven.

Whether the truck has five pies or 56, it needs just one human worker — to drive, slice and deliver to your doorstep.

“She doesn’t have to think about when to turn the ovens on, whether to turn the ovens off,” Collins says. “She doesn’t have to think about what route to take or [whom] to go to first. All of that is driven off of our algorithm.” …

The driver then parks, cuts the pie with a special blade and delivers it piping hot.

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