Supply Chain Management and Logistics Blog. Posts are about end-to-end supply chain management and logistics in a time of challenging disruption.
Tom provides leading supply chain management and logistics consulting and advisory assistance based on real-world experience.
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Are you ready for what this may mean to your supply chain--suppliers moving elsewhere and your trade program?
China's trade growth seen falling short of target in 2014
SHANGHAISat Dec 27, 2014 7:31am EST
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Trucks loaded with cargo containers are seen at Ningbo Zhoushan Port, Zhejiang province, December 7, 2014.
Credit: Reuters/Stringer
SHANGHAI (Reuters) - China's trade will grow 3.5 percent in 2014, implying the country will fall short of a current 7.5 percent official growth target, according to a report on the Ministry of Commerce's website that was subsequently revised to remove the numbers.The initial version of the report published on the website on Saturday, which quoted Minister of Commerce Gao Hucheng, was replaced with a new version that had identical wording but with all the numbers and percentages removed.
The Commerce Ministry did not answer calls requesting comment on the reason for the change.
China's trade figures have repeatedly fallen short of expectations in the second half of this year, providing more evidence that China's economy may be facing a sharper slowdown.
Foreign direct investment will amount to $120 billion for the year, the earlier version of Ministry of Commerce report said, in line with official forecasts. The earlier version of the report also said outward non-financial investment from China could also come in around the same level.
That would mark the first time outward flows have pulled even with inward investment flows in China, and would imply a major surge in outward investment in December given that the current accumulated level stands slightly below $90 billion.
The earlier version of the report also predicted that retail sales growth would come in at 12 percent for 2014, in line with the current average growth rate.
In a separate report, the Chinese Academy of Social Sciences predicted that real estate prices in Chinese cities would continue to slide in 2015, with third- and fourth-tier cities hit hardest. But it said the market would have a soft landing as local governments take action to provide further policy support to the market.
Why are so many firms unable and unwilling to pursue
competitive differentiation with supply chain management? They will not change. So they
will miss blue ocean strategy too.
Shake off complacency---shippers, 3pls, and investors. After many years, change is happening and it will expand globally and across industries and markets. Old supply chain management with its practices and providers is dying. New supply chain management is rising. It drives new e-commerce with its immediacy demand by customers. Multichannel will be an expanded arena for both B2B and B2C.
Giant retailers like Walmart and Amazon see groceries as the next frontier in e-commerce, and one food giant is taking the East Coast by storm. CBS News' Vinita Nair took an inside look at the online grocery service showing up at front doors for more than a decade.
At 6 a.m., FreshDirect drivers Ray Talovera and Jonathan Hedgespeth are making their way to New York City's West Side. All the groceries they're delivering were ordered by customers online; everything from paper towels and cases of bottled water to sushi-grade seafood and homemade pastries.
It's all prepped and processed at the company's 300,000-square-foot warehouse in Long Island City, New York. CEO Jason Ackerman co-founded the business 12 years ago.
"Even my own wife said, 'You know, hon, I'm not going to be buying from this because I'm going to pick out my own food,'" Ackerman said. "We had pretty much most people saying this was not something we could accomplish."
Now, he said, those critics have changed their opinion.
From the beginning, Ackerman said he had a different view of what an online grocery business should be. Rather than deliver groceries for an existing supermarket, he built FreshDirect independently, sourcing products directly from farms.
Co-founder David McInerny still visits each vendor. He also leads a team of taste testers who, every morning, sample each of the 600 fruits and vegetables for sale that day.
"They cut them open, they taste them, sometimes they even check sugar levels, appearance, and they rate them on a scale of one to five," McInerny said.
It's a rating system that helps customers buy produce sight-unseen.
Nationwide, groceries are a $700 billion industry, but online sales make up less than 4 percent. Brad Stone, a senior writer for Bloomberg Businessweek, said the move online is the next frontier.
"I think over the next decade, the grocery delivery market really starts to mirror the e-commerce market," Stone said. "Where we just see, it starts small, but we see an increasing percentage of these transactions happening online. "
It's why retailers like Amazon and Walmart are breaking in.
Along the West Coast, green Amazon Fresh trucks have been making deliveries for seven years. They're now popping up along the East Coast, including Brooklyn and Philadelphia. Amazon charges customers an annual subscription fee of about $99 to deliver their groceries.
In Arkansas, Walmart is testing another model, Walmart Pickup, where customers can drive up to kiosks and get their groceries. And for a fee of $3 to $10, customers in California and Colorado can have a selection of items delivered to their door with Walmart To Go.
FreshDirect also charges a premium, around $6 to $8 per delivery. But for working parents Michael and Holli Rochios the added cost is worth it.
"We've done the calculations a couple of times, and it really is not that big of a difference, but it's a huge cost savings in terms of the time we spend or convenience," Michael said.
Ackerman said to keep that balance between cheaper food that people can access but also covering their heavy overhead, his company created a model to eliminate inefficiencies.
"If you go to a grocery store and the meat counter, all the meat's pre-cut, and everything's laid out because when you go there you want to have this sense that there's this bounty of food," he said. "We only make the food after the food's been sold, so it's fresher, and we reduced our waste."
While FreshDirect is one of the largest online grocers, it's only available in five states along the East Coast. Ackerman said the company would love to expand but not at the expense of quality.
That's why they're constantly monitoring online reviews, even the ones from their toughest critics.
"My wife says she buys from me because she loves the service, not because she's my wife, so I think she would be very honest with me about that," Ackerman said. "She's very satisfied, so I know we're doing something right."
FreshDirect amassed close to $600,000 in New York City parking tickets in the first year alone. They've since mastered the technicalities and continue to be one of the highest-rated online grocers.
Are you considering investing in logistics and/or supply chain management? Are you investing for the right reasons? Are you investing in the right places? Are you investing in what was? Are you investing in what will be? There is a blue ocean for 3PLs and logistics service providers. There is a blue ocean for manufacturers, retailers, and wholesalers with the new supply chain. The new E-commerce and multichannel! The new supply chain paradigm!
Report Identifies Barriers Hindering U.S. Exports to and Investment in India
Wednesday, December 24, 2014
Sandler, Travis & Rosenberg Trade Report
The International Trade Commission has issued a report that finds that Indian policy barriers represent a significant hindrance to U.S. exports to and investment in the South Asian giant. The report features the results of an ITC survey of U.S. firms in selected industries that are currently doing business in India, a quantitative analysis (using economic modeling) of the effects of Indian policy measures on U.S. workers and the U.S. economy, and qualitative research into these effects. It also includes case studies and examples illustrating ways that the policies affect particular companies or industries.
Highlights of the report are as follows.
- the share of U.S. companies substantially adversely affected by restrictive Indian policies rose from 18.8% in 2007 to 26.1% in 2013 (shares for individual sectors in 2013 ranged from 7.7% to 44.1%)
- over 60% of the affected companies have made strategic changes in response to these barriers, most often directing fewer resources to the Indian market
- policies in two areas – tariffs and customs procedures and taxes and financial regulations – have the heaviest effects on U.S. companies (other issues, including investment and intellectual property policies, have large negative effects on specific industries)
- if tariff and investment restrictions were fully eliminated and standards of intellectual property protection were made comparable to U.S. and Western European levels, U.S. exports to India would likely rise by two-thirds and U.S. investment in India would roughly double In a joint statement issued following the release of the report, the chairmen and ranking members of the House Ways and Means and Senate Finance committees referred to the current moment in U.S-India relations as “pivotal.” The lawmakers are hopeful about the possibility of enhanced bilateral trade and investment relations with India but remain concerned about “systemic and continuing market access barriers identified in the ITC’s report that undermine a market-based path to development for India and diminish opportunities for U.S. workers and businesses.”
The ITC is conducting a second investigation of India’s trade and investment practices that is seeking information on India’s policies since the first investigation. The results of this assessment are scheduled to be submitted to Congress by Sept. 24, 2015.
Amazon is doing a one-hour delivery for e-commerce in New York. Too many firms are supply chain indifferent and lack good supply chains to compete in the new e-commerce.
Amazon is a leader with e-commerce. This program ups the ante for competitors as to immediacy. And what about those companies who think shipping orders that take many days is e-commerce? And those firms who do not have a well managed supply chain to drive the new supply that is required for the new e-commerce?
Amazon Unveils One-Hour Delivery Service
Program Is for Prime Customers in New York, Includes Over 25,000 Products
ENLARGE
The planned site of Amazon’s store, on 34th Street, will be the a delivery hub for New York City. Keith Bedford for The Wall Street Journal
By
Greg Bensinger And
Greg Bensinger
The Wall Street Journal
Chelsey Dulaney
Chelsey Dulaney
The Wall Street Journal
Amazon.com Inc. rolled out its Prime Now quick-delivery service on Thursday, starting with one zip code in Manhattan.
The service, which promises delivery in as little as an hour in New York between 6 a.m. and midnight, will expand to other cities next year, the company said.
Amazon will charge $7.99 for delivery within an hour, with two-hour delivery being free. More than 25,000 items are eligible under the Prime Now program, which is only available to customers who pay $99 for the annual Prime membership.
The e-commerce giant had been testing the service with bike messengers for at least a few weeks from a building in midtown Manhattan, opposite the Empire State Building. Seattle-based Amazon has leased the entire building, once the site of a department store, for 17 years to house office space as well as merchandise.
The service, first reported by The Wall Street Journal, is relatively simple to use with a mobile device.
After downloading the Amazon Prime Now mobile application, customers can search for the items they need and order them through the app. Amazon then dispatches a bike messenger with the goods to the customer’s door.
Several analysts who tried out the service on Thursday said they got their orders in less than an hour.
Go through various directories and searches concerning 3PLs--in North America, Asia, Europe--you name it. See how few brand and differentiate with supply chain management. They postion themselves to play to a functional role. They do not strongly present the bigger picture of the supply chain. That limits them as to what they do and where they are going.
Does this mean there is a weakness in Alibaba's e-commerce leadership position? Where is Alibaba with the new e-commerce driven by the new supply chain?
Alibaba’s Tmall Global Site Stumbles
Traffic on Shopping Platform for Foreign Brands Lags Behind Other Marketplaces
ENLARGE
U.S.-based Costco is among the foreign companies that sell goods on Alibaba’s Tmall Global platform. Above, a Costco store in Louisville, Ky. Bloomberg News
As it prepared for the world’s largest-ever initial public offering this year, Chinese e-commerce company Alibaba Group Holding Ltd. rolled out a shopping platform it billed a “fast track into China” for foreign brands new to the mainland.
Ten months after its launch, the platform, Tmall Global, is failing to live up to this promise, say brands as well as consultants who track online shopping data, in what could be a black eye for China’s best known Internet company.
Traffic on Tmall Global is a fraction of that on Alibaba’s other marketplaces: The site ranks 311 out of roughly 3,500 in terms of popularity in China, while Alibaba’s Taobao and mainland Tmall sites rank Nos. 2 and 5 respectively, according to data provider Alexa Internet.
Foreign brands on the platform say Alibaba restricts them from buying ads. Some shops are selling only a handful of products each month and are considering leaving the site.
A review of the site for The Wall Street Journal suggests about 70% of the stores are doing “almost no volume,” said Jacob Cooke, chief executive of Web Presence in China, a digital marketing agency. “That platform is really going to damage [Alibaba’s] reputation,” he said.
Alibaba, which established the site in February, said it is committed to “helping international merchants succeed in bringing a presence to China through the platform,” but added that it takes time for brands to grow traffic and build their reputation. Alibaba said it doesn’t comment on third-party data.
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The site’s woes are a sign of the challenges Alibaba faces as it extends its shopping empire to more overseas brands. Alibaba’s marketplaces dominate e-commerce in China, with the company’s six-year-old mainland Tmall site controlling nearly half of China’s business-to-consumer online sales and its biggest shopping site, a virtual bazaar named Taobao, grabbing a 95% share of online sales between Chinese consumers.
The company is pushing to bring more overseas brands to its sites. In its IPO prospectus, Alibaba promotes Tmall Global as a way for foreign companies to “benefit from the exposure to the hundreds of millions of visitors” on its platforms, even without a mainland business license, a requirement for listing on Tmall proper. Between February and December, the new platform attracted nearly 5,400 brands.
To sign up on Tmall Global, merchants pay an annual fee of $5,000 to $10,000, along with a $25,000 refundable deposit. Generally, merchants also pay Alibaba 3% to 6% commissions on each sale.
New Zealand health-care products maker Xtend-Life Natural Products began selling its multivitamins and skin-care products on Tmall Global in late September, allocating about 50,000 New Zealand dollars (US$39,000) for first-year marketing. To boost traffic, co-founder Warren Matthews also offered discounts on Nov. 11, China’s version of Cyber Monday.
“The results so far have been disappointing—we’re currently doing a tenth of what we had expected,” Mr. Matthews said. “You need more like $250,000 a year to market your products to make serious headway,” he said, citing feedback from e-commerce consultants.
In the past month, Xtend-Life’s sales—through a shop run by New Zealand Post, the country’s mail-delivery service—include 11 bottles of its Multi-Xtra multivitamins and a box of its Zupafood Greenz nutritional supplement.
The New Zealand Post Tmall Global shop records significant sales on promotional days such as Nov. 11, said Asia marketing director Vallen Han.
ENLARGE
“There are a number of issues right now,” said Mr. Matthews. “Unless we can get them resolved, we may even have to consider pulling out.”
Some brands have experienced early success. Costco Wholesale Corp. , the second-largest U.S. retailer after Wal-Mart Stores Inc., had a “good outcome” on Tmall Global after a launch in October, Alibaba said. For instance, the retailer sells more than 15,000 tubs of mixed nuts and about 6,000 bottles of Cetaphil moisturizing lotion monthly, according to its Tmall site.
Costco declined to comment.
In a written statement before the October launch, the company said it entered Chinese e-commerce because of “tremendous growth opportunities.”
Still, fewer Chinese shoppers go to the site than to Alibaba’s other shopping platforms, in part because products might cost more and take weeks—rather than days—to be delivered because those goods are often shipped from outside China, analysts say.
Alibaba said it has warehouses for Tmall Global merchants to ship goods into China in bulk, which could shorten delivery times and cut shipping costs.
Yuen Wong, one of the founders of X2C-Fashion, an online seller of watches and clothes on Tmall Global, said shops also face restrictions on buying ads, which could hurt sales and lead to less prominent placement for the stores’ products in search results.
Web Presence in China’s analysis for The Wall Street Journal shows that searches on Alibaba’s Taobao and mainland Tmall platforms for 65 products, including goods as diverse as men’s sweaters and printer toner, yield no Tmall Global stores in the top 110 search results, suggesting merchants on this site lack visibility.
Alibaba said it made a “business decision” not to offer paid advertising to Tmall Global merchants now, but merchants can boost visibility by advertising on third-party sites that link back to the platform. Alibaba is also working on ways to make it easier for shoppers to find Tmall Global merchants and their products, said a spokeswoman.
Mr. Wong said his store is doing “better than expected” even without paid advertising, because he sells well-known brands and enlists bloggers to write about the shop.
Alibaba said it has also created business-development teams to help shops expand their e-commerce business and build their brands. The e-commerce company said it has tightened policies to “elevate the requirements and standards for entering Tmall Global.”
Recently, Alibaba has been notifying people that listing on the platform is invitation-only, consultants said.
Alibaba said the platform has always been invitation-only to “maintain quality and standards.”
Logistics outsourcing is based on low cost bids. Does this create an underlying weakness? What happens when costs cannot be lowered enough? What happens when service becomes the key factor, such as with the new supply chain?
Amazon continues to be among the leaders with the new e-commerce driven by the new supply chain. This is another step to answering the immediacy need of customers. How many firms will recognize this, and how many will do nothing of substance to change?
Can Chinese companies practice the new supply chain management that creates competitive differentiation--both with customers in China and for export? Or will they just use various logistics functions to handle a series of transactions? Will they develop a blue ocean strategy using the new supply chain?
Neiman Marcus merged its store and e-commerce teams last year, and CEO Karen Katz tells Fortune it is improving customer service and inventory management.
Neiman Marcus is a glamorous name known for $10,000 designer evening gowns and luxury department stores displaying thousands of pieces of valuable art.
Yet the 107-year-old retailer has turned to something quite less sexy to stay chic in a 21st century way: a major organizational change this year to how its stores and e-commerce teams interact. The goal is to make fuller use of all the technology—from inventory management to shopping apps—it has already introduced and it plans to.
With customers now moving seamlessly between stores and e-commerce when they shop, Neiman’s way of managing its overall business has to reflect that. So Neiman redrew its org chart in April, when it announced it was merging the planning and buying teams at its stores business with their counterparts at its direct-to-consumer business (e-commerce and catalog), a radical change for a company where they had operated separately for as long as anyone could remember.
Two months ago, it launched a Shazam-like visual search-and-purchase mobile app called “Snap. Find. Shop” that captures an image taken by a customer of something she sees out in public and likes, and shows her similar products available on Neiman’s website. It also introduced the “MyNM” dashboard on its website in October, a big step in Neiman’s efforts to offer personalized shopping tools on a smartphone.
And in recent years, Neiman has equipped itself with the ability to use merchandise from stores to fill online orders, and vice versa, and has given each of its 41 locations the ability to use another store’s inventory in case of an out-of-stock. (Associates have always been able to call a nearby store to see if they had a product, but they couldn’t place an order online, or quickly see which store or distribution center company-wide might have the item.)
But this kind of progress on the tech front is of limited value if the e-commerce and stores teams don’t work in a fully co-ordinated manner. So Neiman made the risky bet that its teams would play nice for the greater good. Company executives say that while it is a work in progress, it is already paying off after only eight months in the form of rising customer satisfaction scores and more efficient, profitable use of inventory
“We recognized that for our future, and for the way the customer was now shopping, we had to have one point of view,” Neiman Marcus President and CEO Karen Katz told Fortune in an exclusive interview this week in her office above Neiman’s downtown Dallas store. “All roads lead back to the customer.”
The goal has been to make sure Neiman’s assortment online and in-stores were in sync, so they didn’t become two brands in a shopper’s mind, and to have a solid handle on inventory across the company. That way a customer, whether in a store, or on a phone or on a computer, can buy any item in any part of Neiman’s business, reducing the risking of leaving empty-handed or abandoning an online shopping cart.
Neiman is no laggard in the world of e-commerce. On the contrary: it gets 25% of its nearly $5 billion in annual revenue from direct sales, primarily e-commerce, a much higher percentage than Nordstrom JWN-0.54%, Bloomingdale’s (a unit of Macy’s M-2.31%) or Saks (a unit of Hudson’s Bay Co), thanks to its long history of operating a catalog business that made e-commerce easier to get off the ground in 1999. (Its first catalog was published in 1939, when it first sent a magazine-size holiday catalog.) Last quarter, Neiman’s comparable sales rose 5.5%, besting its rivals.
But Katz, who ran Neiman’s online business soon after it launched in 1999, knows the company can’t rest on its laurels. The company is in the midst of a $100 million upgrade to its computer systems, called NMG1 internally, the single largest capital expenditure in Neiman’s history. The company this year also added two tech savvy directors to its board: Starbucks Chief Digital Officer Adam Brotman, and Vivek Gundotra, formerly a senior Google GOOG1.03% executive.
This big push comes at a time the competition is also raising its game: Nordstrom, which is spending $1.2 billion on tech over five years and seen by many as the best in class among department stores in terms of retail tech, and Bloomingdale’s, are each testing smart fitting rooms. Other retailers, high-end and low, are rushing to make their stores able to do double time as e-commerce distribution centers. In fact, one of the first things J.C. Penney JCP-3.09% CEO Mike Ullman did in 2013 when he returned to save the company after the disastrous Ron Johnson era, was to re-integrate the buying teams for jcp.com and the stores, a move that quickly put online sales on the path to recovery. Focus on the Neiman brand, not the channel
Katz, CEO since 2010 and at the company since the 1980’s, first started discussing changing the organizational structure with Jim Gold, Neiman’s chief merchant, and John Koryl, whose portfolio includes overseeing store operations and e-commerce, about two years ago. To some degree, the old structure meant stores and e-commerce could be in competition with each other, meaning Katz had to proceed carefully to get them aligned, as she says they are now. She also didn’t want to damage the well-oiled machine that had built the largest luxury e-commerce business in the world.
“If you have separate teams making those decisions, they’re going to do what’s best for them. If you look at it holistically, you’re going to do what’s best for the customer and for our financials, so there are more intelligent decisions being made about where to place the inventory,” said Gold, a 17-year company veteran (and a former CEO of Bergdorf Goodman, which Neiman owns). While the individual online and store buyers remain specialized, Gold and the managers reporting to him make sure the efforts are coordinated.
The better financials Gold speaks of come in the form of a lower risk of stores mistakenly ordering too much inventory, which hurts margins. (While Neiman’s Last Call 30-store outlet chain was long a way for the retailer to clear unsold merchandise form the department store, increasingly the assortment there is specifically made for that chain, making accurate inventory planning at the department stores even more crucial now.)
Neiman’s re-organization, which formalizes what other retailers are doing ad hoc, reflects the fact that digital commerce is more and more important to getting customers stores, crucial at a time almost all retailers are grappling with slower store traffic trends.
“We need to both optimize the traffic we do get, and bring the stores to the customers,” said Koryl, a former eBay EBAY-0.68% and Williams-Sonoma WSM-0.42% executive, who joined Neiman in 2011. Some 40% of product returns are done in stores rather than shipped back to a distribution center, giving Neiman another of way of getting customers in the door, and hopefully continue shopping. But that would wreak havoc with planning if the stores and the web division still kept to their own silos.
Ultimately, technology for Neiman is about more than prosaic considerations such as inventory planning. It’s also about providing that high-touch service customers expect when shelling out thousands on a designer dress or a winter coat, but adapted to today’s habits.
Neiman Marcus, which rose to prominence a century ago by understanding what an advantage personal service was, gave each of its 5,000 sales people Apple AAPL-0.77% iPhones three and a half years ago. With those devices, they can text customers to let them know that a handbag or pair of shoes by a favorite designer has arrived in store, or just send an e-mail to check in after a purchase to see if the customer still likes what she bought. The iPhone is essentially a 21st-century version of the little black book associates at high-end stores have long kept, with their best customers’ phone numbers and notes about their tastes.
“For what we want to accomplish in the future, we have to be able to view everything from the eyes of the customer,” Katz said. “We are now focused on the brand, not the channel.”
Transpacific container carriers are announcing another general rate increase in mid-January, just days after a recommended $1,000-per-FEU rate hike went into effect. The Transpacific Stabilization Agreement, a discussion agreement container lines, said that effective Jan. 15, its 15 member lines are recommending a $600-per-FEU general rate increase for all origin and destination points, along with the reinstatement of a $400-per-FEU peak season surcharge in anticipation of a possible pre-Lunar New Year cargo surge. The announcement comes just days after a Dec. 15 general rate increase of $1,000 per FEU that was recommended by the TSA earlier this month. Last Friday, Freight Investor Services noted that Shanghai to U.S. West Coast spot container freight rates — as estimated by panelists for the Shanghai Shipping Exchange’s Shanghai Container Freight Index — jumped 24 percent or $434 to reach $2,259 per FEU in advance of the Dec. 15 general rate increase. Rates to Europe were up even more sharply — 88 percent or $634 — to $1,353 per TEU. Freight Investor Services said all eyes will be on this week’s SCFI to see how much of the increases can be maintained prior to the usually quiet period around Christmas, when it said rate movements tend to be minimal. TSA executive administrator Brian Conrad said the general rate increase “is part of an ongoing effort by TSA lines to reverse erosion brought about by short-term rates in the Asia-U.S. freight market.” The peak season surcharge, he added, “reflects sustained cargo demand growth heading into the Lunar New Year period, when many Asian factories close for a week, producing surges in traffic immediately before and after.”
Ecommerce as shipping orders received from a website is not enough; it is not sustainable now. E-commerce is another channel for multichannel sales. Like any sales venue, it requires differentiation to avoid commoditization. The new ecommerce, driven by the new supply chain, creates competitive differentiation and meets customers' immediacy needs.
Mega retailers battle to survive as e-commerce booms in China
By Adam Jourdan
SHANGHAIFri Dec 12, 2014 5:39am EST
SHANGHAI Dec 12 (Reuters) - It took China's biggest retailchain Suning all last year to generate sales of about $17 billion. Last month, e-commerce giant Alibaba saw sales worth more than half that amount pass through its Tmall website in just one day.Big retailers like Suning Commerce Group Co Ltd and foreign rivals Wal-Mart Stores Inc and Best Buy Co Inc are struggling to attract customers to their traditional stores in China, where online shopping is booming.
"The trend is definitely towards e-commerce because that's where the consumers are," said Frank Lavin, CEO of Export Now, which helps global firms launch their business in China.
"The 'big box' model here is already crowded. You need to invest a lot and be here on a large scale to make it work."
"The 'big box' model here is already crowded. You need to invest a lot and be here on a large scale to make it work."
This month, Best Buy sold its Chinese business, which had struggled to fend off local rivals.
Other firms have also complained that operating in China has become more challenging. This week, Wal-Mart said it had found pricing discrepancies on its China books, which reportedly were made to make its retail business look better at a time when transactions were slowing and unsold inventory was piling up.
French hypermarket operator Carrefour SA has also reported weak China sales.
One of the main challenges facing retail chains is the shopping habits of Chinese consumers.
Most prefer the convenience, and often lower prices, offered by online shopping and when it comes to food, many people would rather go to local grocers than big supermarkets. Showrooming, or visiting a physical store to check out an item and then buying it online, is also common.
"I usually go to offline stores to check the real products, then I will go online to compare the price and services of different online stores," said Lena Chen, 31, a university professor in Shanghai.
"That means I rarely buy in stores such as Suning or Best Buy, though they do help me decide what to buy," she said.
Traditional retailers have taken note.
Sun Art Retail Group Ltd, China's largest hypermarket operator, launched an online store this year and said its e-commerce business would help drive future sales.
Suning and rival Gome Electrical Appliances Holding Ltd are also trying to boost online sales to help revive profit growth.
The competition between traditional retailers, as well as their e-commerce rivals, means firms spend more on marketing and discounts, giving those with the deepest pockets an advantage.
Alibaba, which recently raised a record $25 billion in an initial public offering, saw more than $9 billion of trade on its online Tmall platform on its annual "Singles Day" shopping event last month, while JD.com Inc, China's second largest e-commerce firm, said revenues rose 61 percent to $4.73 billion in the third quarter of the year.
"E-commerce just amplifies competition and some players in the consumer space will get squeezed out," said Torsten Stocker, Hong Kong-based partner at consultancy firm A.T. Kearney. (Additional reporting by SHANGHAI newsroom; Editing by Miral Fahmy)
There is a new e-commerce / multichannel that meets the immediacy needs of customers. The new e-commerce is driven by the new supply chain.
A handful of companies are now implementing the new e-commerce. These firms understand that customers want delivery of their orders within 48 hours of order placement. This is both good business and a blue ocean opportunity. They are meeting supply chain issues using their own solutions, instead of using the standard options and providers.
The new supply chain is very different from the traditional, monolithic supply chain used by many manufactuers, retailers, and wholesalers-- New Supply Chain Management for Blue Ocean New E-Commerce / Multichannel
Are segmented by channel
Are defined by integrated process
Are measured by performance and service
Focus on customers
Focus on delivery
Focus on product positioning and availability
Deliver orders complete, accurate, and on-time
Utilize integrated suply chain execution technology across the supply chain
3PLs and Logistics Service Providerss need to wake up to the new supply chain. Or they will be left behind as shippers move on without them and as new providers step up to the challenge and opportunity.
All thus is a blue ocean opportunity for certain 3PLs and logistics service providers. These select 3PLs and LSPs may be in business now and redefine themselves with a new strategy. Or they may develop as new providers who understand the new supply chain and lead. The blue ocean is not for those 3PLs who do not want to change and like to compete in a commodity service with little or no competitive differentiation. It is for the bold and creative who want to lead and not be part of the herd.
Think about the most difficult and messy invoices there are to finance and you will find opportunities and solutions waiting to happen.
I thought about four verticals that present invoices where there could be some serious dilution due to the nature of their services offered. They are:
Freight and Logistics – Logistics has one of the highest percentages of invoices that are never paid. Financiers and banks like dealing with clean, high quality invoices.
Healthcare – Total health expenditure is huge. In 2012, health-care spending was $2.8 trillion in the United States. If you have ever dealt with billing, payables etc. you know it’s not the strong point of hospitals. Most hospitals do not have a lot of cash on hand.
Legal – law firms are tasked with ensuring the delivery of accurate client billing, which means being able to justify hours on invoices raised and related client expenses. Bottomline Technologies has a solution here called Legal-X.
Construction – this is an industry that is notorious for use of contractors and sub-contractors with hefty delays in payments. It’s the “you don’t get yours till I get mine” philosophy of payment.
Developing early pay solutions in these verticals is not easy. There are a number of initiatives I discussed in prior posts. Hap-Xsaw an opportunity to service the healthcare sector with an electronic payment system that serves the same function of the P-card without going through the card networks. There are numerous vendors providing freight audit and payment processing services, but only recently have some of these vendors looked to add early payment capabilities.
The point is that these solutions tend to be very specific and require strong domain knowledge. Take construction as an example. General Contractors are not normally known for being tech savvy when it comes to managing projects. But source to pay solutions exist (at least partially) to help in the search for subcontractors and suppliers, sending bid invitations, distributing project documents as well as tracking bid responses and issuing project change information. Adding invoicing claims management, and early pay solutions is the evolutionary step.
I believe we will continue to see vertical solutions that solve pain points.
- See more at: http://spendmatters.com/tfmatters/going-after-verticals-with-supply-chain-finance-healthcare-legal-construction-and-freight/#sthash.0YJd0LPK.dpuf
There is a new e-commerce / multichannel that meets the immediacy needs of customers. The new e-commerce/multichannel is driven by the new supply chain. The new ecommerce will expand to other countries in the world. The new supply chain will expand to other industries and markets. Right now, a handful of companies are implementing the new e-commerce. And they are meeting the transport/delivery issue using their own solutions, instead of using the standard transport options and carriers. 3PL and logistics service providers need to wake up to the new supply chain. Or they will be left behind as shippers move on without them and as new providers step up to the challenge and opportunity. All this is a blue ocean strategy for retailers, wholesalers, and manufacturers. It is also a blue ocean for 3PLs and other logistics service providers.
Multichannel and e-commerce leave out parts of the standard organization silos and fiefdoms--especially sales. And segmentation can avoid the silos and deal with customers as a process, not as a series of transactions handled by functions. That is a leaner company and one focused on customers.
Hewlett Packard produces half of its laptops in the giant central Chinese city of Chongqing. One of the first movers in the Go West initiative, the computer and electronics company churns out 60,000 motherboards a day.
Getting the computers to the global markets from a city more than 2,000 miles inland is a challenge. The Yangtze River is dry half the year and heavily congested the rest of it. Many forwarders opt to truck their containers around the Three Gorges Dam rather than fight for space at the dam locks.
Where once HP’s products would automatically fly in freighters, they have become cheaper to produce and sell and no longer require transport by air. However, the laptops, motherboards and other computer components from HP, Foxconn and Acer are part of a global supply chain that requires on-time replenishment, ruling out sea transport from China to Europe.
A third transport option is starting to gain ground among electronics shippers in China and the forwarders that handle that cargo –– rail.
HP now stacks up to 50 containers on a block train that travels from Chongqing to the German city of Duisburg, a journey of 6,800 miles. It was one of up to three trains a week that leave for Germany on a route known as the New Silk Way that was developed by Kazakhstan Railways (KTZ).
Relations between Kazakhstan and China are at presidential level and Chinese President Xi Jinping was on hand to welcome the HP train into Duisburg late last month and promote the mainland’s industrial inland hubs.
The state-owned KTZ is a vast entity that also operates seaports and 11 international airports in the world’s largest landlocked country. In the last three years, the company laid more than 1,200 miles of rail tracks; it plans to invest $45 billion in rail transport, air terminals and a free trade zone in the next seven years.
Kanat Alpysbayev, vice president of logistics for KTZ, Tuesday opened the wholly owned KTZ Express office in Hong Kong, set up to increase the company’s import and export trade between China and Europe, via Kazakhstan and Central Asia.
One of the goals of the company will be to improve connection times between China and markets in Central Asia and Europe.
“The rail route to Duisburg is three times faster than sea and 40 percent cheaper,” he told reporters. “At the moment, there is one block train per week, but our target is to increase that to 170 trains per year.”
Compared to ocean shipping, the container throughput is small, with the trains carrying about 10,000 TEUs. However, with slow-steaming employed by the ocean carriers increasing the sea voyage to 45 days, the speedy 15-day transit is attractive to shippers with products that fall into the mid-value category.
KTZ is working on making the transit even faster by increasing the train speeds from the current 560 miles per day on average to 750 miles a day. That would enable, for instance, the HP block train to travel from Chongqing to Duisburg in just 12 days.
“We don’t see any threats, any slowdown or any downsizing of the trade,” Alpysbayev said.
KTZ Express has expanded its reach into the China market with a $100 million investment in an intermodal freight and logistics center at the Port of Lianyungang. The 21-hectare facility will have an annual throughput of 500,000 TEUs and is intended to provide direct access to Central Asia for shippers from Japan, Korea and Southeast Asia via Kazakhstan.
“Shippers from Asia currently have to use ocean freight to Europe and then truck or rail to Central Asia. Now they can access these markets directly by rail from China, saving time and cost,” said Sanzhar Yelubayev, president of KTZ Express.
Kazakhstan is part of a customs union agreement with Russia and the European Union, and once the block trains are cleared at the Kazakhstan border, which takes four hours, there are no further inspections, or delays, required until destination.
