#Lessonsfromthebest : SC Network Optimization

 Author’s Note: Over the last few weeks, I have been using this space to write about the lessons I learn from organizations with respect to their supply chain management, but not limited to it. I have also been attempting to convey my learnings as a narrative, and a story of sorts. So, if you want to learn something informative whilst having some entertainment, go ahead and read away! If you want to read my previous blog posts, click here! 😊

Shanmugeshwari, MBA '21

Amrita School of Business, Coimbatore

When the world just came out of recession in 2010, luxury took a hit. But Michael Kors was an outlier.

Kors modeled itself as an affordable luxury: giving recession-struck, cost-conscious American & European consumers a high style option. This was done by greatly overhauling its Retail distribution strategy & taking advantage of Low-cost manufacturing in China. It opened stores in newer countries, cities, malls & Duty-free zones.

This showed in revenue as $ 38Mn (2011) to $109 (2012) to $221 (2013). Soon becoming the best performing & most searched Luxury brand in the world.

However, three problems soon caught up:

• Overdistribution reduced its aspirational value
• Much of the growth was through markdown in the pricing structure that led to a weak P&L
• And finally, Michael Kors became one of the most counterfeited handbags in the world

Between 2013-14, the Inventory-to-Cash Ratio was around 0.5. This ratio being greater than 0.8 indicates a much higher inventory than what current assets can support. By 2016 this ratio sky-rocketed to 1.65, inventory increased by 37%, but cash reduced by 56%

How did they overcome this?

Kors stayed relevant by realigning its forecast and its distribution plans and giving us a good example of the inter-dependencies among Supply chain, Strategy & Finance.

They performed a supply chain network optimization study when they realized their long-term forecasts caused problems in the distribution centers as they couldn’t handle such large projected growth. By the time, they were moving from a high growth business to a mature business model. They started focusing more on how to utilize their retail assets for omnichannel distribution in order to derive maximum advantage for the lead times.

They reduced the number of touchpoints between the manufacturers and the customers. More goods were directly shipped to customers from the ports. Some orders went directly to the de-consolidators bypassing the distribution centers. Thus, by redesigning the supply chain, soon they developed a competitive advantage which over time became their core capability.

 

Reference for the financials from here.

The Next Big Thing in The US Retail Market: Direct Sales to Customers

    Retailers have come to understand now that e-commerce is the most secure anchor to hang on to and that omnichannel is the industry's future. Among the other developments that have emerged in retail since the COVID-19 outbreak is the increasing change from retail firms, consumer goods companies, fashion brands and even farmers across the country to direct-to-consumer sales.

    Mom-and - pop retail stores began to lose sales as millions of Americans remained confined in their homes to practice social distancing and the government closed down all but necessary retail outlets as a pandemic-prevention measure. The increase in online shopping for consumer products, grocery, food and beverages; and the increasing demand for home delivery services are driving retailers out of the shell and trying out creative sustainability business models.

    As the United States continues to be COVID-19's epicenter with over 5.44 million positive events, the economy of the nation is significantly impacted and the burden on companies to get it back on track is immense. All the country's 50 states have been getting back on their feet in the past few months. Yet a lot has changed.

    The pandemic hit the retail industry in America hard, particularly brick-and-mortar retailers, throwing a bunch of tough fight challenges at them, and some fast-emerging market trends to keep up with. At the same time, though, it has also opened up some huge opportunities for retailers to grab and stay competitive amid COVID-19's market effect.

    Manufacturers or retailers sell directly to the customer in a direct-to-consumer model without the intervention of intermediaries such as third-party distributors, wholesalers, and retail outlets for distribution. This is usually achieved by creating an online marketplace, or even a social media profile, from which customers can search and place orders. The company then ships goods directly to customer markets, using an in-house logistics facility or third-party transporters.

    Direct-to - consumer sales have been a steadily growing development for quite a while now. Web traffic to D2C pages has doubled over the last two years according to an eMarketer survey. But the pandemic has provided retailers and consumer goods firms a huge drive to sell directly to customers, triggering a massive rise in the industry.

    Fashion and clothing companies such as Levi's, Nike, and Adidas are going high on D2C sales, reinventing their online sites, launching new products on a daily basis, and offering their customers customized product choices. Top supermarkets with existing retail chains like Walmart and Publix also exploit this opportunity and sell online to meet the demands of millions of people in quarantine.

    The greatest advantage of using e-commerce to go directly to customers is that it helps companies to establish a partnership with their end-users. It also gives manufacturers and retail brands a cost-effective sale choice. At the same time, though, there is some significant competition from major online retailers like Amazon.

    Manufacturers and retailers must also consider the logistical difficulties that may occur when selling directly to customers. Not all brands have the best transport management system in place and will need to rely on logistics companies from third parties to ensure successful last-mile deliveries.

    For those with an in-house logistics system, ensuring quick and timely delivery is a must, combined with excellent customer service. Retail brands do not forget that they have set out to please the consumer 'I want it ASAP' and 'Where is my order.'

    Coronavirus has shown us that the next big thing in retail is direct-to-consumer selling, but to make it huge success brands need to strategically implement this business model. Efficient logistics is a must-have to ensure two-day and the same-day deliveries, and technology such as fleet management, order tracking, and live status updates will play a crucial role in boosting customer experience in D2C selling.

Happy Learning.. !!😊😊

Future Logistics 1: Autonomous Trucks- Impact and Benefits

Hi, I’m Priyanka Sunil- A final year MBA student from Amrita School Of Business majoring in Operations and Marketing. Welcome to my progressive learning space for Logistics and Supply Chain Management.

 

Ok, when this truck photo bombed my shot, I was in a moving car attempting to catch a stunning sunset from the gulf desert. And it found its way from my dump folder to this blog today and loves all the publicity

Digitization and other advancements in technology are exposing the vulnerabilities in every industry. Now, the logistics industry is feeling the heat. Platooning with autonomous vehicles will be a centerpiece of tomorrow’s sustainable transport system. Step-by-step growth is already underway.

The autonomous trucks (ATs), will change the cost structure and utilization of trucking—and with that, the cost of consumer goods.  The majority of most countries' consumable goods are trucked to market. Autonomous trucks would decline costs by a huge amount. The big question is how these savings will be distributed.

At any step of the supply chain, automation extends the capacity of logistics organizations to stretch with peak demand, take on heavy freight, and pick and load individual goods -all qualities that help e-commerce. The trucking industry needs more drivers to satisfy the growing demand, especially from retailers that are under pressure to produce as quickly as Amazon to consumers. The lifestyle of a trucker -which takes long hours on the track, heavy lifting, and long hauls weeks away from home- hasn't appealed to younger staff. The trucking industry has long faced a lack of drivers, due in part to high risk, low pay , and long hours. Self-driving and semi-autonomous vehicles, including those at Embark, TuSimple, and Tesla in progress, may help fill this void. The advent of automated vehicles could mitigate the problem — but it may also reduce employment for aging men’s demographics that lack college degrees and might find it difficult to pursue new work.

Many automakers are now part of the game, making strong investments through in-house growth, alliances, and acquisitions through self-driving technology. Companies of technology – big and small – have already embraced different approaches to self-driving technologies aimed at reaching varying degrees of automation. 

PC: Mckinsey Company

Assessing the Impact and Benefits

·     AT can become a railroad operator's rival or associate. That can move enormous freight volumes from rail to road.Warehouses would likely need to invest in improvements in facilities, such as AT-compatible docks and exits, to ensure smooth connections.Related improvements can be made in ports too.

 

VC: Scania group

·Self-driving in confined areas  will not only save cost by eliminating drivers but also  acts as a safety measure as mines are full of hazards.

· Platooning helps fuel economy to improve as trucks that follow closely together set up air flows and help both trucks push forward. It can reduce air drag, fuel efficiency, and carbon emissions.

· If we have fully autonomous trucks- the driver shortage issue which has exacerbated the industry over the years will be drastically reduced. Moreover, since we don't need to take into account the time that drivers are taking breaks, getting meals, or going home, autonomous trucks can run 24/7.

As these trucks are connected to integrated warehouses and managed by intelligent Transportation Management System and Warehouse Management System, the future of Logistics Management will open up even more possibilities.

Reference

https://www.youtube.com/watch?v=lpuwG4A56r0

https://www.rosenohrlaw.com/blog/benefits-and-drawbacks-self-driving-trucks/

https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/distraction-or-disruption-autonomous-trucks-gain-ground-in-us-logistics