Friday, September 30, 2016


Catalog based omnichannel retailers struggle with having inventory in stock and lead times. They must transform their supply chains.


Biggest way to reduce time and inventory waste in manufacturing is international lean logistics. Is Sharp making mistake here?

September 30, 2016 2:00 am JST

Sharp to spin off logistics ops

OSAKA -- Sharp plans to create a separate company to handle its logistics, part of new President Tai Jeng-wu's vision of a leaner, more cost-efficient manufacturer.
A formal decision on the spinoff is expected as soon as this week. Arranging product shipments from factories to distributors, as well as other logistical matters, now falls partly under Osaka-based Sharp's direct management.
Sharp's logistics operations are thought to employ some 100 people. They may be transferred to the new company, which will draw on the global supply chain expertise of Sharp's new majority shareholder, Hon Hai Precision Industry, the Taiwanese contract manufacturer known as Foxconn.
Sharp announced this month the establishment of subsidiary ScienBiziP Japan to manage its patents and other intellectual property. A Foxconn-affiliated consultancy will contribute a portion of the Osaka unit's capital. Here, too, Sharp will rely on its Taiwanese partner's know-how, with a view to eventually managing others' intellectual property as a revenue source. It may take the same profit-oriented approach with the new logistics unit.
Tai, who doubles as a Foxconn executive, told employees in an Aug. 22 message that he aims to narrow the functions under Sharp's direct management in order to concentrate more resources on product development and sales.


Time Compression and Inventory demands of Omnichannel supply chain are reducing roles and needs of wholesalers.  How do middlemen transform?



What seems to be the resulting reaction to state of container line shipping with Hanjin bankruptcy--


Some reality of Supply Chain risk--


Thursday, September 29, 2016


How do you mitigate supply chain risk with container line financial mess, given the alliances, as a result, that limit shipping options?



Importers Preparing for Tougher CBP Enforcement of AD/CV Duty Evasion

Friday, September 30, 2016
Sandler, Travis & Rosenberg Trade Report
Empowered by authorities granted by Congress and spurred by a recent report critical of past efforts, U.S. Customs and Border Protection is moving quickly to implement a new process to combat the evasion of antidumping and countervailing duties. The move is part of a broader CBP focus on improving trade enforcement efforts that has importers scrambling. An Oct. 6 ST&R webinar will review recent developments and how importers can best reduce their potential liability.
Preventing and addressing the evasion of AD/CV duties (e.g., the misrepresentation of country of origin or submission of false shipping and entry documentation) has always been a priority for CBP, but two recent developments have prompted the agency to redouble its efforts. One was the enactment earlier this year of the Enforce and Protect Act as part of the Trade Facilitation and Trade Enforcement Act, which gave CBP a significantly expanded role and the authorities to match. Commissioner R. Gil Kerlikowske has said CBP has had increasing success in identifying and disrupting distribution channels of imported goods that seek to evade AD/CV duties and expects to see an increase in penalty cases as a result of its new authorities. The other development was an August 2016 Government Accountability Report concluding that CBP failed to collect about $2.3 billion in AD/CV duties over the past 15 years and highlighting the problems CBP has faced and continues to face in trying to improve its performance.
CBP recently issued regulations setting out the formal process it will use to act on its new authority under the EAPA to investigate allegations of AD/CV duty evasion. This rule allows any interested party, including competing importers and federal agencies, to submit such allegations and sets a fairly low bar for CBP to launch an investigation. CBP has broad authority to conduct these investigations and can impose initial remedial measures that could interrupt a supply chain in as little as 90 days. Any final determination of evasion may be met with not only AD/CV duties but also other enforcement measures such as civil or criminal investigations.
Many importers are beginning to take steps to avoid getting caught in CBP’s expanded dragnet. ST&R’s Larry Ordet was cited in a recent American Shipper article as saying importers should conduct internal reviews to verify the classification and origin of their goods and would be well-advised to self-disclose to CBP any problems those reviews reveal. Importers also have until Oct. 21 to raise any specific concerns about the investigation process or timeline set out in CBP’s interim regulations.

Wednesday, September 28, 2016


Is this desperate and/or wasteful given foot traffic and e0commerce reality?

Mall Owners Go on Defensive to Rescue Aéropostale

Landlords’ unusual strategy aims to hold on to tenant’s stores and avoid a liquidation

Aéropostale filed for chapter 11 bankruptcy protection in May and later faced the threat of liquidation. Simon Property Group counts 160 Aéropostale stores and General Growth Properties has 77 in their respective tenant portfolios. ENLARGE
Aéropostale filed for chapter 11 bankruptcy protection in May and later faced the threat of liquidation. Simon Property Group counts 160 Aéropostale stores and General Growth Properties has 77 in their respective tenant portfolios. Photo: Rick Wilking/Reuters
A move by a pair of mall owners to rescue distressed retailer Aéropostale Inc. shows how some landlords are getting more aggressive as they seek to stem a rising tide of vacancies and store closings.
Simon Property Group SPG -0.15 % and General Growth Properties Inc. GGP -0.46 % were part of a consortium that last week won an auction to purchase teen-apparel retailer Aéropostale, an unusual move in which shopping-center landlords stepped in to rescue a tenant to preserve the tenant’s business.
Liquidation and bankruptcies tend to be messy and landlords would rather avoid that at nearly all cost.
—D.J. Busch
The push to take over the struggling retailer comes at a time when changing shopping habits and the growth of e-commerce are eating into traditional retailers’ revenue and in some cases forcing store closures. That, in turn, is weighing on mall operators, forcing some to reconfigure their properties and add other attractions to bring in shoppers.
Simon and General Growth saw value in keeping afloat Aéropostale, which had filed for chapter 11 bankruptcy protection in May and later faced the threat of liquidation. Aéropostale stores potentially generate more than $1 billion in global retail sales, of which more than $800 million is from the U.S., said General Growth Chief Executive Sandeep Mathrani in a news release. Simon counts 160 Aéropostale stores and General Growth has 77 in their respective tenant portfolios.
General Growth and Simon declined to comment about their turnaround strategy for Aéropostale.
Faced with rising vacancies as retailers close their stores amid the increasing popularity of online shopping, landlords are trying to find ways to avoid being left with crumbs, said Tom Mullaney, managing director of restructuring services at real-estate consultancy firm JLL.
But by moving into retailing, Simon and General Growth are stepping out of their comfort zones.
“It’s going to be a very interesting experiment to see if they can operate the retailer successfully,” Mr. Mullaney said.
When retailers file for bankruptcy and are liquidated, landlords are vulnerable to vacancies and undesirable situations where the tenant might stay open for a prolonged period to sell down inventory.
Landlords don’t like to see going-out-of-business-sale signs on the windows and fear being stuck with blighted space, said Thomas Dobrowski, senior managing director of capital markets with real-estate-services firm Newmark Grubb Knight Frank. That restricts the landlord’s ability to find higher-caliber, creditworthy tenants or market the space at higher rents.
“Liquidation and bankruptcies tend to be messy and landlords would rather avoid that at nearly all cost,” said D.J. Busch, an analyst at Green Street Advisers. “That said, we have not seen landlords step in and ‘save’ a distressed retailer as it seems to be the case with Aéropostale. This seems unprecedented.”
Shopping-center landlords have bought out distressed retailers in recent years, but primarily for the real estate they owned rather than to preserve the tenant’s business.
In the early 2000s, retail property landlord Kimco Realty Corp. KIM 0.74 % , along with other lenders, extended financing to discount retail chain Ames Department Stores Inc. with its properties as collateral. Ames eventually folded. In 1995, Steven Roth, CEO of Vornado Realty Trust, bought a controlling interest in ailing discount department store Alexander’s Inc. ALX 0.58 % Alexander was then converted to a real-estate investment trust.
In contrast, the deal by Simon and General Growth seems to be more defensive, with the pair moving in only when it became apparent no other party was going to put in a bid to keep Aéropostale from going out of business.
If the retailer had gone through a liquidation, the landlords would have been left with more than 200 vacant stores, and might only get one-year’s rent or 15% of the remaining lease payment, whichever is greater. But rental leases are typically an unsecured claim and landlords are parked at the bottom of the distribution totem pole behind secured creditors.
Simon and General Growth led a consortium that included Authentic Brands Group, Hilco Merchant Resources and Gordon Brothers Retail Partners to invest $243.3 million for the acquisition, which they say saved thousands of jobs and will keep the brand available in more than 400 stores in the U.S. and Canada.
Leasing agents have said that some mall landlords are agreeable to lower rents for Aéropostale following the bailout. Court documents showed Aéropostale had been operating 623 retail stores.
Write to Esther Fung at


Global Container Volume on Track for Worst Year Since 2009

Flat growth in the beleaguered shipping industry could set off further bankruptcies and possible acquisitions

Stacked containers sit among gantry cranes at the Port of Singapore on Sept. 15. ENLARGE
Stacked containers sit among gantry cranes at the Port of Singapore on Sept. 15. Photo: Bloomberg News
Global container volumes are on track for zero growth this year, which would mark the sector’s worst performance since the 2009 economic crisis and a sure catalyst for further bankruptcies and possible acquisitions in the beleaguered shipping industry, shipping executives said.
Freight rates, the predominant source of income for shipping companies, fell 20% in the benchmark Asia to Europe trade route this week compared with last week to $767 per container.
Rates have mostly stayed well below $1,000 since the start of the year and operators say anything below $1,400 is unsustainable.
They aren’t expected to turn around soon. China’s Golden Week holiday starts at the beginning of October, marking the slow season for operators as many Chinese factories cut production levels after an output frenzy in the summer months when western importers stack up products for the year-end holidays.
“The industry faces its worst year since the Lehman Brothers collapse,” said Jonathan Roach, an analyst at London based Braemar ACM Shipbroking. “Demand is around zero and any moves to increase freight rates will likely fail.”
Hanjin Shipping Co. , South Korea’s biggest operator and the world’s seventh largest in terms of capacity, filed for bankruptcy protection last month and is under court order to sell its own ships and returning chartered ships to their owners.
Container operators, which move everything from clothes and shoes to electronics and furniture, are burdened by 30% more capacity in the water than demand.
Many are fighting for survival as freight rates barely cover fuel costs.
China’s slowing growth is considered the main cause of the industry’s problems. The economy of the world’s biggest exporter grew 6.7% in the second quarter, far less than the double-digit growth figures of past years, as it tries to transform its growth model from heavy industry and construction to services and consumption.
The economies of two major importers—the U.S. and the eurozone—expanded 1.2% and 0.3%, respectively in the second quarter.
“Global growth is just stumbling along and this has had a profound impact on shipping,” said Basil Karatzas, a U.S. based maritime adviser. “Operators are bleeding money and if demand doesn’t pick up they could either go belly up or swallowed by bigger players.”
Most of the 20 biggest container lines, including A.P. Møller-Mærsk A/S’s Maersk Line, were deeply in the red in the second quarter and analysts expect them to report a collective $8 billion to $10 billion in losses for the full year.
Shipping analysts say any operator with less than 5% global share of the container shipping market may be taken over by bigger players or be confined to regional trades.
Only four companies among the world’s top 20 have more than 5% global share of that market. They include Maersk, Swiss-based Mediterranean Shipping Co., France’s CMA CGM and China’s Cosco Container Lines.
Soren Skou, chief executive of Danish conglomerate A.P. Møller-Mærsk said in an interview that Maersk Line, the group’s shipping unit and the world’s biggest container operator, is looking to buy smaller competitors “because many carriers haven’t made money for years and that can’t be sustainable in the long run.”
Shipping executives say the Japanese container trio of Kawasaki Kisen Kaisha Ltd. , Mitsui O.S.K. Lines Ltd. and Nippon Yusen Kaisha Ltd. along with Hong Kong-based Orient Overseas Container Line Ltd. and Taiwan’s Yang Ming Marine Transport Corp. will likely be in the crosshairs of bigger players.
The crisis has hit some of the biggest banks financing shipowners. Royal Bank of Scotland Group PLC, one of the world’s premier shipping banks, said last week that it will be closing down its shipping business after failing to sell its portfolio.
Other banks, including Germany’s HSH Nordbank AG, Norddeutsche Landesbank Girozentrale, and Bremer Landesbank have been struggling with billions of dollars in non-performing shipping loans over the past few years.
Write to Costas Paris at


Is it omnichannel or making customers go into stores? Are they really prioritizing on bricks over clicks?  Does this approach deliver the customer experience?


Neiman Marcus focuses on omnichannel improvements

Lindy Rawlinson says personalization has been a big focus for the luxury retail chain.
Matt Lindner
When it comes to delivering a quality omnichannel experience for luxury retail chain Neiman Marcus, “seamless” doesn’t mean “exactly the same” across all channels.
“There’s differences between the channels both in how the customer interacts with them and why,” says Lindy Rawlinson, senior vice president of customer experience at Neiman Marcus. “Ultimately for us, it’s about how we capitalize on those differences and making sure we remove any barriers for those customers.”
Rawlinson spoke about Neiman Marcus’s omnichannel strategy at the Women’s Wear Daily Digital Forum in New York on Thursday. As a luxury retailer, Rawlinson says Neiman Marcus is focused on providing the “white-glove” treatment online that shoppers have come to expect in stores. For example, Neiman Marcus has made a major push to personalize its online shopping and digital marketing efforts.
“Personalizing the experience for customers both on the website and in the store is a pillar of our customer experience,” she says. “As a customer searches, as a customer interacts with the site, it gets a little bit smarter.”
Neiman Marcus recently unveiled a new personalization feature on its website that centers  around a shopper’s size preferences.
For  example, a customer who shops online for shoes and during every site visit searches for size  7 or 7.5, will show shoes at nearby stores available in those  sizes, she says.
Neiman Marcus, No. 36 in the Internet Retailer 2016 Top 500 Guide, also has unveiled other personalization features aimed at customizing online shopping for its customers.
Recent innovations include a “Memory Mirror,”  which is a mirror located in Neiman Marcus stores that allow shoppers to record a 360-degree video of themselves trying on multiple items and then save the video to the retailer’s mobile app so they can compare how those items look and either buy them online or in store later.
Neiman Marcus also launched a feature called “Snap Find Shop”, wherein shoppers can take a picture of clothing or accessories that they see and then see if the retailer’s app or mobile site  sells theexact product or a similarproduct. Neiman Marcus also has equipped associates in its 42 stores with iPhones outfitted with apps that provide more information about a customer’s shopping history. The app also allows store associates to find items online that may be out of stock in a store.
“We can ship any of our products from any of our stores,” Rawlinson says. “It’s one pool of inventory. Customers can shop online and pick up an item in store, and if we don’t have an item in that individual store, we can ship the item to that store so they can pick it up and try it on.”

Neiman Marcus has enjoyed steady online sales growth over the past three years, growing to $1.338 billion in 2015, up 29.9% from $1.030 billion in 2013, according to
Rawlinson says making it easy and pleasant to shop at Neiman Marcus, regardless of the channel, means she and her team are listen to  customers and try to stay one step ahead to solve problems before they start.
“As we think about new [omnichannel] features, a lot of it goes back to understanding the customer and what’s happening, whether that’s in direct conversations, usability, and where do we see those opportunities to assist and make it easier or provide something different that you might not even ask for,” she says.

Tuesday, September 27, 2016


Will Amazon compete with UPS and FedEx?  Amazon has competitive advantage with understanding of supply chain management.  They may meet customer requirements instead of having customers choose what their offerings.  Will shippers move to Amazon after FedEx and UPS rate increases and dimension pricing moves?  Have the two been heavy-handed with their e-commerce golden goose?


Amazon’s Newest Ambition: Competing Directly With UPS and FedEx

To constrain rising shipping costs, the online giant is building its own delivery operation, setting up a clash with its shipping partners

Amazon is building more warehouses, like the one shown here In Inglewood, Calif.
Amazon is building more warehouses, like the one shown here In Inglewood, Calif. Photo: Emily Berl for The Wall Street Journal
Just before the morning rush hour on a recent Thursday, a brigade of vans rolled up to a low-slung warehouse near Los Angeles International Airport.
Workers in bright green vests crammed some 150 packages into each truck before the fleet headed through the urban sprawl to customers’ doorsteps.
This logistical dance wasn’t performed by United Parcel Service Inc., FedEx Corp. or the U.S. Postal Service, all longtime carriers for the online-retail giant. It was part of an operation by Inc. itself, which is laying the groundwork for its own shipping business in a brazen challenge to America’s freight titans.
Tackling the delivery business, Amazon executives publicly say, is a logical way to add delivery capacity—particularly during the peak Christmas season. But interviews with nearly two dozen current and former Amazon managers and business partners indicate the retailer has grander ambitions than it has publicly acknowledged.
Amazon’s goal, these people say, is to one day haul and deliver packages for itself as well as other retailers and consumers—potentially upending the traditional relationship between seller and sender.
Some executives refer to the initiative as “Consume the City,” a nod to the company’s plans to build a massive delivery network that could eventually compete with such partners as UPS, according to people familiar the matter.
Executives at the freight giants are skeptical, and so are analysts and logistics experts. They say it would be difficult and costly to build a domestic delivery network to rival the big U.S. players, especially after the failed multibillion-dollar attempt by Deutsche Post AG ’s DHL Express in the 2000s.
Memphis-based FedEx says it is spending more than $5 billion annually on expansion and upgrades; UPS says it shells out in excess of $2.5 billion. The two companies have managed to blanket the world with a total of roughly 4,000 hubs and other facilities to sort tens of millions of packages a day. Combined, they operate more than 1,000 planes and 200,000 vehicles to deliver packages to doors.
“The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic,” says FedEx CFO Alan Graf. “We’ve been at this for 40 years.”
Atlanta-based UPS has played down any competitive threat. On a conference call with analysts, Chief Commercial Officer Alan Gershenhorn said UPS’s network would be “very difficult to match.”
In an emailed statement, an Amazon spokesman said “we are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.”
Inside the company, executives describe, in the words of one senior official, how Amazon “is building a full-service logistics and transportation network effectively from the ground up.”
Amazon’s push into the shipping sector reflects a willingness among today’s powerful tech companies to defy the traditional constraints of business and leap into new ones.
The company, which started out as an online bookseller, has gained credibility as a producer of TV programs and big-screen movies. Amazon Web Services, which provides data servers to big companies, is now its fastest-growing division with at least $10 billion in sales expected this year.
After leaving one of Amazon's fulfillment centers, packages travel a circuitous route--often via FedEx and UPS--to their final destinations.Photos: Associated Press; Getty Images; Bloomberg News
Now the stage is set for Amazon to move against the partners that have helped power much of its success so far. Shipping costs as a percentage of sales have risen every year since 2009. Last year, Amazon spent $11.5 billion on shipping, or 10.8% of sales, compared with 7.5% in 2010. Total revenue for the year was $107 billion.
The company could save $1.1 billion annually if it stopped using UPS and FedEx, according to Citigroup Inc. analysts. Keeping packages under its own control just over longer distances could save Amazon around $3 or more on a typical delivery, the analysts say. The average cost to ship a package via UPS or FedEx is $7.81, they estimate.
Amazon currently delivers its own packages from roughly 70 facilities in 21 states, having built most of them in the past two years, according to data from supply-chain consultancy MWPVL International Inc. Today, 44% of the U.S. populace is within 20 miles of an Amazon facility, compared with 5% in 2010, according to investment bank Piper Jaffray.
All of this helps to explain why Amazon wants more control over its delivery chain—from factories in China through U.S. ports to sprawling suburban warehouses and neighborhood package-sorting centers. It hopes to offer more delivery times, including hours not available from traditional carriers, say people familiar with the plan. The cost of such a system isn’t known.
To help oversee its delivery projects, Amazon this summer brought back Uber Technologies Inc. executive Tim Collins as a vice president of global logistics. Mr. Collins spent 16 years at Amazon, helping to lead the retailer’s European operations, before leaving the company in late 2014 to join Uber.
Amazon has also recruited dozens of UPS and FedEx executives and hundreds of other UPS workers in recent years, say people familiar with the matter.
The company is buying long-haul truck trailers to ship by ground, building delivery drones to conquer the sky and looking to manage shipping by sea. In August, it showed off the first in a fleet of 40 Boeing 767-300s it is leasing for its branded Prime Air logistics service.
In Seattle, boxes were stacked near a Boeing 767 Amazon ‘Prime Air’ cargo plane.
In Seattle, boxes were stacked near a Boeing 767 Amazon ‘Prime Air’ cargo plane. Photo: Ted S. Warren/Associated Press
Stitching together a full-fledged logistics network could give Amazon a piece of a world-wide delivery market that, according to financial services firm Robert W. Baird, generates roughly $400 billion in annual revenue.
It could also damage its relationships with UPS and FedEx. Amazon contributes around $1 billion to UPS’s revenue, according to people familiar with the matter. Perhaps more important, the retail giant’s heft helps both UPS and FedEx to be more cost effective by allowing drivers to drop off more packages in the same areas. If Amazon pulls too much business from the delivery giants, the carriers could respond by eliminating certain volume discounts.
Amazon already has pushed out some smaller parcel carriers. In the past two years, it has parted ways with or started reducing package volumes at several local and regional delivery partners, according to people familiar with the matter.
Currently, Amazon is focused on solving the riddle of the so-called last mile—the final and most expensive leg of a package’s journey to the doorstep.
To make last-mile deliveries profitable, logistics experts say, companies need shorter drives and more packages per stop. Amazon, they say, doesn’t yet have enough consumer deliveries to hit this threshold.
The company is conducting its trials in large cities such as Los Angeles, Chicago and Miami. Those places have a high density of members who belong to Amazon’s $99-per-year Prime unlimited shipping program. Gnarled traffic in those cities—especially in Los Angeles—also tests drivers’ mettle and speediness.
As part of its efforts, Amazon is making some deliveries using only trucks and infrastructure it oversees, people familiar with the matter say.
The retailer also has begun distributing boxes and packaging materials to a small number of Los Angeles customers so they, too, can use Amazon as a delivery service, the people say. The test helps ensure Amazon’s trucks aren’t empty when they return to warehouses and give customers more incentive to keep ordering from Amazon.
Amazon embarked in earnest on building its own last-mile network after UPS failed to bring orders to customers in time for Christmas in 2013, costing Amazon millions of dollars in refunds, according to people familiar with the matter. That holiday season, Amazon overwhelmed UPS and other carriers after it failed to accurately forecast its delivery needs, prompting chaos at sorting centers.
Since then, Amazon has more than doubled the number of warehouses in the U.S. to more than 180, according to MWPVL. That includes more than 70 local delivery stations and Prime Now hubs within reach of nearly every major metropolitan area. In many of those areas, Amazon can deliver merchandise in as little as one hour after receiving an order.
Amazon-branded vans are increasingly turning up in big cities like Los Angeles.
Amazon-branded vans are increasingly turning up in big cities like Los Angeles. Photo: Emily Berl for The Wall Street Journal
Just a few years ago, if an Amazon Prime customer in Atlanta ordered a $13 set of beer glasses only available from California, Amazon would load that order, with others, onto a tractor trailer and haul it to the closest UPS air hub. Next, a plane might ferry it to Louisville, Ky., and load it onto another flight bound for Atlanta. Then the package would be trucked to the nearest delivery center, sorted a final time and delivered by a UPS van. Such a journey could wipe out any profit for Amazon.
The company now aims to do more of the steering. If those glasses aren’t in stock at a fulfillment center near Atlanta, it could fly them there in its own planes and then pay the Postal Service to ship them a shorter distance. Or, contract drivers could make final delivery.
Amazon has flirted with delivery by Uber drivers and newspaper carriers. It has experimented with a program known as “I Have Space,” stashing inventory in warehouses owned by other companies.
A more established program called Flex hires so-called citizen-couriers, who work as freelance delivery people to pick up packages from warehouses using an Amazon app. It has expanded to nearly 30 metropolitan areas in the last year. Drivers can earn up to $25 an hour in two-hour shifts making deliveries, according to Amazon’s website.
Some Amazon executives believe that the on-demand contract driver model, which passes along fuel and insurance costs, could eventually become an important part of the company’s network.
Meanwhile, Amazon’s last-mile effort has become particularly visible in San Francisco’s relatively compact confines. Just two years ago, workers loaded rented delivery vans with packages from a modified trailer in a parking lot beside Candlestick Park, the former football stadium. Today, hundreds of Amazon-branded white trucks, dispatched from a giant warehouse near the airport, troll the city’s winding streets—even on Sundays.
Write to Greg Bensinger at and Laura Stevens at


Takes narrow view with transport. This is good supply chain action by Walmart to deal with omnichannel retail demands.

Walmart Shrinks Delivery Window; Turns Up Pressure on Suppliers

The requirements for being a supplier of Wal-Mart Stores Inc. just keep getting tougher.

In the Be-Careful-What-You-Wish-For Department, suppliers lucky enough to be represented on Walmart's shelves are constantly being asked to cut their prices while ramping up service.
The latest demand comes in the form of a tightening of shipping windows, from four days to two. At the same time, Walmart is upping its delivery compliance requirement for North American suppliers from 90 percent to 95 percent. The changes take effect in February of 2017.
Walmart’s delivery compliance standards were first announced in 2010, setting a “must arrive by date” (MABD) for all merchandise from suppliers, who were given six months to comply. Current guidelines allow for delivery two days early or one day late, creating a four-day window. If a supplier misses that period 10 percent or more of the time, it’s charged 3 percent of its quarterly invoice.
That amount can be a “massive hit” for suppliers, says Andrew Lynch, co-founder and president of Zipline Logistics. Soon, though, they’ll find it even tougher to comply with the MABD. Delivery will be permitted on the scheduled date or a day early – but not a single day late.
A reliance on pricey express services isn’t the answer. Instead, says Lynch, suppliers will have to get their internal houses in order. They’ll need to bring together sourcing and production teams in order to ensure tighter coordination between manufacturing and logistics. In addition, they’ll have to reach out to carriers to establish reasonable expectations of transit time.
Having aligned operations internally as well as with logistics providers, suppliers should then approach Walmart and figure out a MABD that makes sense for them. Despite its reputation for dictating terms, the mega-retailer is willing to work with suppliers to come up with reasonable delivery dates, Lynch says. But once the deadlines are set, there will be little room for error.
In certain cases, transportation costs are likely to rise, but can be controlled to some extent. The relatively small number of suppliers that ship to Walmart in full truckloads will mostly be unaffected. But others, especially those utilizing less-than-truckload (LTL) services, will have to take special care to manage their logistics expense.
LTL pricing for low-margin snack foods, for example, “can be just impossible,” says Lynch. Carriers in that sector aren’t likely to hit Walmart’s MABDs with any consistency. For such orders, the answer could lie in a rejection of LTL in favor of consolidation. In Lynch’s view, combining three or four drop shipments to multiple retailers is “far and away” the most efficient technique for balancing service requirements with the need for cost control.
By bringing together orders with multiple shippers and destinations, carriers can achieve better utilization of their trailers, then spread the cost of transportation across a greater number of accounts, Lynch explains. In theory, at least, they would pass a portion of those savings on to the shipper, while still adhering to Walmart’s stricter delivery targets.
The new mandate will affect more than transportation arrangements. One Zipline client selling into Walmart plans to shift production of some items from Texas to Ohio, setting the stage for a more efficient delivery network serving all of its retailer accounts, Lynch says.
He believes suppliers should view the Walmart mandate as an opportunity to take a hard look at their current supply chains, and put themselves “in a better position to succeed down the line.” By reworking existing deals with carriers and other logistics providers, they could even lower their cost per unit.
For a company selling to Walmart or other big-box retailer, it never gets easier. Still, the benefits of the relationship can far outweigh the cost, if the supplier is willing to explore opportunities for continuous improvement.

Monday, September 26, 2016


Integrated technology is a key element of the New Supply Chain for omnichannel retail. Read LTD's white paper at


Target continues to shake up e-commerce execs. Sign of direction or lack of direction?

Target shakes up online leadership with eye on rivals

By Nandita Bose | CHICAGO
CHICAGO Target Corp (TGT.N) said on Friday its chief digital officer has left the company amid a company overhaul of its e-commerce operations to boost online sales and better compete with larger rivals such as Inc (AMZN.O).Target said Jason Goldberger, who had been with the company for four years, will leave immediately. His role will be split between Chief Information Officer Mike McNamara and Chief Merchandising Officer Mike Tritton.
McNamara will be responsible for the website and digital strategy and Tritton will take over the pricing and promotional functions of the job.
"Taking this body of work in a new direction will help advance our efforts in these key areas during a pivotal time for Target," Chief Executive Brian Cornell said in a statement.
Goldberger's departure is the second high-profile exit at Target in less than a month. Chief Marketing Officer Jeff Jones left the company last month and joined Uber Technologies Inc [UBER.UL].
The leadership shake up at Target comes as its rivals gear up to better compete with Amazon. Wal-Mart Stores Inc (WMT.N) last month splashed out over $3 billion to acquire e-commerce startup
Target's online sales contribute about 3 percent to its overall revenue. Recognizing the need to boost growth, the Minneapolis-based retailer spent $1.4 billion in 2015 to improve its e-commerce business.
Target also said it will spend $1.8 billion this year and $2 billion a year starting in 2017 to improve its e-commerce operations.
Target's online revenue grew 31 percent in 2015, below the 40 percent growth Chief Executive Brain Cornell promised investors. For the second quarter, online sales grew 16 percent, a deceleration from 23 percent in the first quarter.
Brick-and-mortar sales have also suffered, with Target reporting its first quarterly drop in comparable sales in two years during the second quarter. The company lowered its forecast for the rest of the year, saying it expects sales to be flat to down 2 percent in the two remaining quarters.
(Reporting by Nandita Bose in Chicago; Editing by Sandra Maler and Alan Crosby)


September 21, 2016, 3:08 PM

Global 1000 spotlight: The promise of cross-border e-commerce

Selling to consumers outside a retailer’s home market can be complicated. Data in Internet Retailer’s recently released Global 1000 shows that merchants are more likely to tackle those obstacles if cross-border web selling presents a clear opportunity.
Lead Photo
Online retail transactions that cross borders are on the rise.
In China, for example, increasingly affluent middle-class consumers are taking advantage of relaxed import rules to buy more from foreign brands and retailers via the web.
Chinese consumers and companies purchased 206.38 billion yuan ($31.96 billion) worth of overseas products online in 2015, up 60% from 2014, according to a report from Chinese research firm Analysys and web-only retailer
Consumers accounted for 31.3% of those web sales, or about $10 billion, compared with 22.5% in 2012, the report says. The rest were purchases by businesses.
The same is true in India, as free shipping and secure payment methods are driving more Indian consumers to shop from international e-retailers. A December 2015 report by PayPal Holdings Inc. and U.K. research firm Ipsos MORI revealed that India is one of the fastest-growing nations when it comes to cross-border e-commerce. India’s online cross-border spending will jump 78.0% in 2016 to 976 billion rupees ($14.61 billion) from an estimated 547 billion rupees ($8.21 billion) in 2015, the firms project.
However, cross-border e-commerce is complicated. Challenges include navigating customs fees, managing delivery in each market, and cultural and language differences.
According to data gathered for Internet Retailer’s recently released Global 1000, which ranks the 1,000 largest online retailers in the world and analyzes regional, global and market-specific e-commerce trends, retailers are more likely to tackle those obstacles if cross-border web selling presents a clear opportunity.

That’s the case in Canada, where the big U.S. market next door beckons, and where all 11 Global 1000 merchants based in Canada ship to the U.S. The common language, English, facilitates such sales, as do the relatively relaxed trade regulations between the U.S. and Canada.
Selling abroad is a lot less common in Japan, Brazil and Spain, however. And, despite the vast volume of goods being produced in Chinese factories, of the 192 Global 1000 retailers based in China, only 28% take orders and ship to online shoppers in foreign markets—the most common destinations being Taiwan, Hong Kong, the U.S. and Australia.

In comparison, more than 72% of the top U.S. e-retailers ship to foreign markets. Canada is by far the most common destination for foreign shipments of U.S. goods, with other Western European nations and Australia also popular. Of the 268 top U.S. e-retailers that ship internationally, 161 or roughly 60%, ship to China.Of all 371 U.S.-based merchants ranked in the Global 1000, 43% sell to Chinese consumers. Of all American merchants ranked in the Global 1000, 49.7% sell to consumers abroad.

For more information on the Global 1000, click here.


Risk mitigation, planning, and the Hanjin mess.


Sunday, September 25, 2016


For Sears and Kmart, it just gets worse

Kmart is closing 64 stores nationally. The only one affected in Pennsylvania, New Jersey, and Delaware is in Pennsylvania’s Mifflin County.
And now, Kmart.
The troubled retailer announced this week that it was closing 64 stores nationally. Liquidations began Thursday.
While only one store will be affected in the Pennsylvania/New Jersey/Delaware region - in far-off Mifflin County, Pa. - the news is more of the same for struggling retailers amid online shopping's encroachment.
Several, including Sports Authority and Pacific Sunwear of California, have recently filed for bankruptcy, and profitable retailers are closing underperforming stores.
But in the case of Kmart - which has about 900 stores nationally and is a subsidiary of Sears Holdings Corp. - the value retailer and its sister Sears are up against much bigger challenges, say retail experts.
These problems, they say, are vastly different from those faced by retail giants like Macy's Corp. that have a lot of capital, generate high revenue, and will have a vast footprint despite closures.
"Sears and Kmart absolutely cannot be competitive," said national retail consultant Howard Davidowitz of Davidowitz & Associates in New York City. "Every quarter, every month, they are burning through a ton of cash. The only way they can survive is to keep closing stores. They are on their way to disappearing."
Phoenix-based consultant Jeff Green, who works with national retailers on long-term growth strategies, said discounters such as Target and Walmart have brand distinctions - Walmart is price-driven, whereas Target is a mix of quality and price. Kmart, he said, does not have any "defining difference" that separates it from its competitors.
In perhaps the week's most striking contrast, Target, Macy's, and others announced plans to hire tens of thousands of seasonal workers for the holiday season as Kmart faced layoffs.
But Kmart's staffers aren't the only casualties. A Credit Suisse report this year estimated that more than 37,000 retail workers nationally will lose their jobs by the end of this year as brick-and-mortar stores close.
That figure is more than double the retail-industry layoffs last year, and the most the sector has seen in the last eight years, according to analyst Michael Exstein, who wrote the Credit Suisse report.
As recently as April 20, Sears Holdings announced it was shutting 80 stores, including 68 Kmarts and 10 Sears stores. This week's cuts come on top of those.
"We are making the difficult, but necessary decision to close some additional Kmart stores and a couple of Sears stores," Chris Brathwaite, a spokesman for Sears Holdings, said Friday in an email. "On Friday, Sept. 16, we informed associates at these impacted stores of the closures. These were separate from the announcement we made earlier this year."
In August, Macy's announced it would pare 100 stores in early 2017, on top of 38 that it closed this spring.
Experts say that the internet has changed consumer buying habits, and that with the decrease in foot traffic at shopping centers, retailers don't need as many stores.
Online sales made up 7.3 percent of retail sales in 2015 but are growing, according to the Commerce Department. Digital sales are expected to double in six years. 215-854-4184 @SuzParmley