Supply Chain Component Needs Consideration in Demand Management Processes

In its simplest form, demand management refers to the process whereby businesses utilize various indicators to forecast customer demand, and align its supply chain to meet those projections.  Now obviously there is no guarantee that demand management is going to be successful every time, but for many businesses, it has proven to be a reliable way to manage inventory and planning systems.

While some have likened demand management to “management by crystal ball,” the concept is actually quite complex, and involves the synchronization  and integration of many different parts, with technology being the glue that holds everything together.  A recent survey by Griffin Strategic Advisors, reported on by Supply Chain Management Review, found that just about half of businesses believe that their supply chain is adequately integrated with their technology function.  In fact, 25 percent of survey respondents said that they were not integrated at all.

This is particularly important, since responsibility for demand management most often falls to the supply chain function.  According to the Griffin survey, demand management responsibility tends to be assigned as follows:

  • Supply Chain – 33 percent
  • Operations – 21 percent
  • Sales – 18 percent
  • Procurement – 14 percent

So while businesses are increasingly assigning responsibility for the demand management function to supply chain managers, they are generally not taking steps to provide the visibility/technology necessary to evaluate all of the business’ moving parts.

Another surprising finding of the survey, only 17 percent of respondents said that their logistics/transportation function was “very involved” in demand management.  As the survey authors point out: “Regular input around supplier issues, capacity and mix, transportation or warehousing constraints, for example, are invaluable for a solid demand plan.  Similarly, logistics needs accurate and timely input to execute against the demand plan.”

Businesses that fail to factor logistics and transportation into their processes could be in for quite a surprise.  The transportation industry took quite a hit during the recession, with an estimated 3,000 carriers either absorbed by larger companies or forced out of business altogether.  This contraction in capacity, along with a serious shortage of drivers, could cause some businesses to have trouble locking in service.

Businesses that find demand management to be most helpful are those that integrate all functions into the demand management process – especially logistics and transportation.  By ensuring that all areas are looped into the process, a business can help ensure greater efficiency and results.

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Automotive Aftermarket Suppliers Need to Identify Logistics Efficiencies

Results from the Automotive Aftermarket Suppliers Association’s (AASA’s) quarterly “Supplier Barometer,” indicate strong concern among suppliers about higher manufacturing and fuel costs.   According to Steve Handschuh, president and COO of AASA, “all of our Q2 2011 survey respondents reported they experienced raw material prices increases over the last 12 months,” and while most reported price increases of 5 percent to 29 percent for raw materials, a significant number reported increases of more than 150 percent.

These findings are cause for concern among aftermarket suppliers.  News of the cost increases comes on the heels of what has been a very interesting period for the industry.  First, the aftermarket was able to withstand the negative fallout of the economic recession – largely due to cost-conscious consumers choosing to maintain their older vehicles.  The aftermarket also weathered uncertainty as a result of the earthquake and subsequent tsunami that struck Japan during March.  The disruptions to the automotive supply chain had a worldwide ripple effect, but the aftermarket was able to escape largely unscathed.

While the Japanese disasters have not had a major impact on the automotive aftermarket, a significant portion of Barometer respondents have “had to deal with parts shortages and seek alternative suppliers,” explained Paul McCarthy, AASA vice president of industry analysis, planning and member services.

With these issues on the horizon, the one certainty seems to be an interest in cost cutting and internal efficiencies.  Manufacturers will naturally be looking to their supply chains for savings. As suppliers do look to streamline logistics costs and improve efficiencies, here are a few things to keep in mind:

Customized Solutions are Key: A good provider will be able to offer a customized logistics solution that addresses a manufacturer’s unique business needs, which generally means that shipments travel more efficiently and seamlessly.

Keep it Local: If you’re sending a shipment of parts to Canada, doesn’t it make sense to use a logistics provider that has experience in the Canadian market – a provider that can ensure that shipments won’t be delayed at the border, and will arrive on-time at their Canadian destination?  This sounds obvious, but a surprising number of businesses trust their shipments to carriers with minimal experience, only to pay the price later with inordinate delays and unexpected fees.

Out of the Box Thinking could mean Big Efficiencies: A post-recession supply chain check is a good time to match your current operating procedures against current industry trends to make sure you’re taking advantage of different options.

  • Distribution Center Bypass: Logistics providers are increasingly able to skip unneeded distribution center stopovers by taking advantage of increasingly connected distribution networks.  Direct-to-store transit also means that suppliers can maintain leaner inventories.
  • Inbound Freight Management:  Take control of your transportation spend by managing logistics for all incoming shipments.  By centralizing logistics planning, a business negotiates service agreements with a logistics provider, and utilizes that provider for all incoming shipments.  A business is no longer beholden to the costs and delivery schedule of a transportation provider selected by a supplier.

AASA’s recent Barometer Survey made clear that aftermarket professionals are quite concerned about both short-and-long term economic factors.  By taking the time to evaluate its supply chain, a business could easily put in place new logistics practices that could result in measurable efficiencies and savings.

Is your business within the automotive aftermarket?  Are you concerned about the future economy.  Share your thoughts and opinions here.

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Bug-Free Pallets Could Add to Border Delays

Until recently, shipments entering the United States from Canada were exempt from a requirement that all wooden pallets be treated for bugs prior to arrival at the border.  But now, the U.S. Animal And Plant Health Inspection Service (APHIS) is proposing to end that exemption, claiming that more than 320 million Canadian pallets cross the border each year, bringing the threat of bug infestation that poses a risk to U.S. agriculture and forest safety.

While APHIS’ proposed change is still in draft form, it has generated backlash on both sides of the border.

The Canadian Food Inspection Agency (CFIA) responded by issuing its own recommendation — to eliminate the pallet-treatment exemption currently extended to U.S. shippers.

Today’s reported that the government of Canada has urged APHIS to delay implementation until at least 2013, warning that the new rule would “have serious consequences for Canada-U.S. trade and North American competitiveness.

And trucking officials have raised concerns about the added delays that would result, as agents would be required to inspect each pallet.  The Canadian Trucking Alliance (CTA) expressed concern that the changes not be implemented until an adequate supply of treated-pallets is accessible – which is currently not the case.  As reported by Canadian Transportation&Logistics, CTA CEO David Bradley wrote to APHIS, stating that:  “CTA has seen too many examples in recent years where new measures affecting the border have been rushed, only to be withdrawn at the 11th hour when it became apparent that they were unworkable.  Let’s just take the time to get this right.

In addition to delays, there is concern about the costs of complying with the pallet-treatment mandate.  The Canadian Wood Pallet Association estimates that it will cost $2(Canadian) per pallet for treatment, for a total of about $300 million (Canadian).

U.S. border agents will begin notifying non-compliant shippers of the rule change in the coming weeks, with actual enforcement to be phased in at a yet-to-be determined date.  For shipments headed north to Canada, the new requirement will be phased in beginning this year, with full compliance expected by the summer of 2012.

Which side of the issue is more important to you, reduced delays or environmental concerns?

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Canada Gets High Marks from World Bank

Every year, the World Bank releases an “Ease of Doing Business” analysis, which ranks 183 different countries based on certain economic indicators.  In its most recent “Doing Business 2011” report, Canada was ranked number 7 for “ease of doing business,” with Singapore ranked number one, and the United States ranked number five.

The rankings are based on several economic indicators, intended to provider a snapshot overview for potential entrepreneurs interested in starting a business, and for businesses seeking to expand their global customer base.  Key indicators, along with U.S. and Canadian rankings include:

The Commerce Department reports that less than one percent of U.S. businesses are exporters, despite the fact that 70 percent of the world’s purchasing power is located beyond U.S. borders.  Based on Canada’s high marks from the World Bank, businesses might want to consider looking to Canada as a source of new business opportunities.  To help get you started, you might want to check out the U.S. government’s website, which has detailed information available that is specific to export opportunities in the Canadian market.

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U.S. Customs’ Internal Assessment Program – Right for your Business?

Businesses that regularly import goods into the U.S. face the possibility each year of being selected for a Customs and Border Patrol “Focused Assessment.” What is a focused assessment?  Quite simply, it’s an audit.

Each year, CBP selects importers and conducts an exhaustive review to ensure those businesses are in compliance with all CBP controls, regulations and mandates.  As you might expect, the audit process can be exhaustive, costly and time-consuming.  Fortunately, there is a way to avoid having your business entered in the audit lottery – CBP’s Internal Assessment Program.

The Internal Assessment Program was introduced in 2002 as a way to facilitate the border clearance process for importers that have maintained a consistent record for compliance with all Customs mandates and regulations.  In exchange for agreeing to stringent internal controls and self-assessment protocols, IAP participants are exempted from Customs audits, and can also avoid costly and time-consuming inspections.

Interested businesses submit an application to CBP, and then successfully complete a rigorous review process.  Among the requirements necessary for consideration:

  • Business must be a member of the Customs-Trade Partnership Against Terrorism (C-TPAT) program.
  • Must be a resident importer with at least two years experience.
  • Must agree to comply with all applicable Customs regulations.
  • Must have detailed records of prior compliance with Customs regulations.

The Internal Assessment Program is very popular with importers anxious to avoid the rigors of a CBP audit.  It’s also a way to send a signal to customers and associates that your business has significant risk management and internal controls in place – strong enough to pass muster with the federal government.

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Seven Top Questions to Ask to Create an Efficient Supply Chain

According to the bellwether Institute for Supply Management, April marked the 23rd consecutive month of overall growth for the U.S. economy.  In addition, the ISM reported that the U.S. manufacturing sector is in the midst of 21 months of economic expansion.  But despite this positive news, many businesses remain unconvinced that the economic recovery is here to stay, and have taken a very cautious approach to planning and investing in the future.

Not surprisingly, businesses are taking a hard look at their supply chains, with an eye to finding efficiencies, correcting past mistakes, doing things smarter and hopefully cutting costs.  And, with logistics costs accounting for as much as 5-8 percent of revenue, it’s a good place to look.

As you consider changes to your supply chain – be they minor tweaks or a major switch in operations – here are a few questions to keep in mind:

  1. Scalability – Is my Supply Chain Flexible Enough to Adapt to the Ups and Downs of the Business Cycle? You know the highs and lows of your business better than anyone – and hopefully your logistics provider is a close second.  But does your logistics provider allow you to ramp up your level of service when needed, and then scale back, or are you locked into strict service levels?  If you find that your carrier does not allow you the flexibility you need, you may want to shop around.
  2. Range of Options – Why Pay Express Service Prices when a Shipment isn’t Urgent? Many businesses unknowingly are paying for higher levels of service than their shipments actually need.  Sometimes this is inadvertent, and sometimes it’s because a carrier offers a “one size fits all,” “take it or leave it” logistics solution.  Make sure your carrier has the capability to offer various services and delivery options that meet your business needs.  Do not pay for more service than you need!
  3. Customized Solutions – Can your Logistics Provider Work with you to Solve your Specific Logistics Needs? The logistics industry has advanced so much in recent years that it is no longer acceptable for a logistics carrier to offer inflexible, “out of the box” solutions.  Instead, a good logistics provider will work with you to understand your business goals, integrate your business processes, and offer you a customized solution.
  4. Customer Service – Is there Someone to Call when Things go Wrong? In the rush to cut costs and integrate technology, many logistics companies farmed out their customer service function to automated call centers and centralized 800 numbers.  As a result, businesses increasingly have no one to turn to when a last minute change needs to be made to a supply chain, or when a mistake or breakdown occurs.  The good news though, is that some logistics carriers still understand the importance of person-to-person relationships, and take great pains to ensure that customer service remains a priority.  When it’s the middle of the night, and you’ve got a problem with a top customer’s shipment, you’ll be grateful that you took the time to choose a logistics provider that values customer service.
  5. Cross Border – Can my Logistics Carrier Accommodate Shipments to Canada?  U.S. businesses are increasingly seeing the potential of tapping into Canada, with its 32 million potential customers, and comparatively strong economy.  It’s important to realize though, that as close as Canada may be on the map, there is a tremendous regulatory maze to clear before your goods can enter that market.  In fact, the U.S./Canadian border clearance process has gotten even more complicated in recent years, with each country introducing new security mandates and technology standards to supplement compliance requirements already in place.  It is absolutely essential that you choose a logistics carrier that has bona fide experience with cross border logistics.  An experienced carrier will provide flawless compliance with all required paperwork, and move your shipments seamlessly into the Canadian market.
  6. Think Out of the Box – What about Taking Charge of your Suppliers’ Shipments, or Shipping Direct to your Customers? As you look to improve supply chain efficiency, it’s important to put every current “best practice” under the microscope and ask if there isn’t a better way to get the same result.  For example, if your business depends on multiple shipments arriving from multiple vendors/suppliers, would it make sense for you to take control of those shipments?  An inbound freight management system would allow you to streamline operations and cut costs by choosing the transportation provider to carry all your inbound shipments.

    Another way to cut costs and improve efficiency might be to eliminate a distribution center stopover from your supply chain.  Many businesses find that they can shave days from their transit schedules by eliminating a costly and unnecessary distribution center stop, and send shipments directly to their end destination.  Not every logistics carrier can offer DC Bypass, but it’s worth the time to find a carrier who can.

  7. Returns ManagementDoes My Supply Chain Maximize the Bottom Line Impact and Customer Service Opportunities of Well-Managed Returns? Two facts to keep in mind:
    1. found that as much as $100 billion worth of goods are returned each year to U.S. companies, a figure that can represent as much as seven percent of a company’s gross sales.
    2. The 2007 National Shopping Behavior Survey, conducted by KPMG LLC financial advisory company, found that 58 percent of consumers said that a company’s returns policy was a factor in their decision whether or not to shop with that retailer.

    With this much at stake, it’s essential to have in place a returns policy that ensures customer satisfaction, and that also allows you to recover some of the costs associated with replacing goods and returning unused goods to inventory.  Many businesses are realizing the value of repairing or refurbishing returned merchandise, and offering it for sale on a secondary market.  And of critical importance, businesses are realizing the importance of having logistics processes in place to guide the returns process.

Clearly, there is a lot to think about when considering changes to your supply chain, and many options for improving efficiency.  What are some of your top questions when shipping cross-border?  Ask away!

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Online Tool Simplifies Tariff Assessments

A new online platform from the U.S. International Trade Administration (ITA) allows exporters to know, at the click of a mouse, tariff assessments for shipments headed to any of the countries with which the U.S.  has in place a Free Trade Agreement (FTA).

With this tool, referred to as the FTA Tariff Tool, businesses and interested parties now have near-instantaneous access to tariff information for thousands of products, information that previously was available only by combing through arduous documents and legalese-laden Excel tables.

According to the ITA’s website:

Using the tool, users can see how U.S. and FTA partner tariffs on individual products – searchable by keyword or tariff code – are treated under an agreement.  Additionally, U.S. importers and exporters can see the current tariff and future tariffs applied to their products, as well as the date on which those products become duty-free.  Finally, by combining sector and product groups, trade data, and the tariff elimination schedules, users can also analyze how various key sectors are treated under recently concluded FTAs.”

As a practical application, the ITA’s official blog Tradeology notes that, using the tool, an exporter can see “that the 20 percent tariff Peru used to charge on [a product] has been reduced to 14 percent under the U.S.-Peru Trade Promotion Agreement.  Next year, the tariff will drop to 12 percent and will completely disappear in 2018.”

Compliance with trade regulations and uncertainty about the process are often cited by businesses that have yet to expand their customer bases beyond U.S. borders.  FTA’s new tariff tool will hopefully help shed a little light on the process, and help businesses realize that, with the right logistics partner on your team, expanding to new markets can be a smart, and relatively painless business strategy.

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Ignore those Returns at Your Own Risk!

Last year U.S. consumers returned more than 8 percent of their purchases.  That’s a staggering statistic for a retailer, and a figure that exceeded $200 billion last year.

But despite knowing that a significant chunk of merchandise is certain to be returned, and despite the fact that 80 percent of returned items are not defective, many retailers have yet to implement a serious returns management policy.  Businesses that neglect their returns do so at their own peril however, given that:

  • 58 percent of consumers said that a company’s returns policy was a factor in their decision whether or not to shop with that retailer.
  • The estimated cost of generating a new customer is five times more than the cost of keeping an existing customer happy.
  • Businesses can increase earnings by as much as 5 percent of sales, by implementing a sound reverse logistics process.
  • The Secondary Market is a rapidly growing sector of the economy – accounting for 2.28 percent of U.S. GDP during 2010.  Returned and refurbished merchandise is resold in secondary market venues including outlets, dollar stores, value retailers, auctions and retail salvage operations.

With so much at stake, businesses are increasingly turning to qualified logistics providers for help in developing returns management solutions.  For example, businesses with significant export volumes to Canada, need to ensure that their returns process takes into account the added hurdles of the U.S./Canada customs compliance process, along with the distribution challenges of the vast Canadian landscape.

An experienced logistics provider will offer different options to meet your specific needs, including:

  • Consolidation capability to help meet peak returns volume.
  • Tracking and reporting capability so that your customers are constantly aware of their return’s status.
  • Distribution capability that provides returns to designated warehouse or refurbishment locations.
  • Returns/replacement capability so that customers are provided with required replacement merchandise or account credit on a timely basis.
  • Returns Management Authorization (RMA) capability so that you can better track returned items, and receive “early warning” with regard to any potential defects or product malfunctions.
  • For international transactions, carrier must have the ability to seamlessly transport goods across borders, and to comply with all regulatory and security mandates.
  • Ability to integrate forward and reverse logistics into overall supply chain strategies.
  • Established distribution network that allows returns to avoid unnecessary route detours and warehouse layovers.

Gone are the days when a business could ignore their customers’ returns, and just let them accumulate in an untended pile.  With more than 8 percent of all merchandise destined to be returned, and with money to be made in the secondary market, it’s imperative that businesses put in place a returns management process that meets their needs – and satisfies their customers.  What methods do you use to manage returns?

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Don’t Let an Ill-Prepared Shipping Label Hold You Up

Sometimes it’s the easy things that can mess you up.  Take shipping to Canada.  Most businesses are so concerned about the Customs clearance process, and making sure that they don’t get slapped with hidden fees or unexpected delays, that they tend to overlook something as simple as proper labeling.  As many businesses can attest, overlooking the labeling process can be a surefire way to ensure delays in having your packages arrive on time.

Following is a list of six tips that certified international trade professional Curtis Cook pulled together.  Failure to follow any one of these suggestions can mean the difference between a successful delivery – and a happy customer – or a shipping nightmare.

1. Label boxes and containers with required information.

For export, this information includes, but is not limited to, the country of origin, shipper’s mark, weight and/or volume information, cautionary marks and handling instructions (for instance, the word “glass,” the symbol of a glass, the words “this side up,” or the symbol of arrows pointing upward), consignee’s mark, destination and order number, and the number of the package and size of the case if there are multiple boxes or containers.

2. Do not label boxes with extra information that is not required.

If there is no need to specify the content of the box on a label, avoid doing so.  Identifying valuable goods contained in a box is an invitation for thieves and vandals.  Use coded marks to identify export goods unless local laws prohibit this practice.

3. Do not use boxes or containers with old labels.

Recycling is admirable; however, all old marks, addresses or advertising must be removed or permanently obscured to eliminate confusion for handlers and carriers of your export goods.

4. Ensure labels are clear and permanent.

Labels must be large enough to read and information must be indicated in the appropriate language.  Labels for your export goods must also be waterproof and resistant to the elements.

5. Label more than one side of the box or container.

Consignee marks as well as destination and transfer point marks should be applied to at least three sides of the package.

6. Symbols have international appeal.

Exporters can purchase self-adhesive labels with international carriage symbols.  These are cautionary symbols providing carriers and handlers with instructions on the correct manipulation of your packages.  There are commonly seen symbols such as the wine glass (fragile) and the umbrella with the raindrops (keep dry).  There are also more obscure symbols, such as the penguin inside a box (keep frozen) or the penguin inside a box with a diagonal line intersecting it (do not freeze).  When an export shipment involves transfers through different countries with different languages, symbols may act as the universal language that protects your goods.

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Canada by the Numbers: Top Reasons to Expand Your Customer Base North

Looking to increase your customer base? Expanding to new markets and even new countries is a common plan. As a US based business, Canada is an obvious place to look, because of its close proximity and the many cultural similarities we share.  In addition, here are a few facts to keep in mind as you consider whether or not Canada might be a logical source for new customers:

32 million potential customers: The population of Canada is roughly 32 million people, about 90 percent of who live within 160 miles of the U.S. border.

E-Commerce has taken Canada by storm. Internet shopping was slow to hit Canada, but once it did, it took off with a vengeance.  According to Statistics Canada, Canadians placed more than 95 million online orders during 2009, which marked a 32 percent increase over 2007 levels.  The study also found that the average value per order during 2009 was $158.

Comparative strength of Canadian economy. Canada was able to avoid the direct recessionary hit that slammed other nations, including the U.S.  As a result, the Canadian economy avoided the dramatic drop in employment, output and corporate profitability that the U.S. experienced.  Although the Conference Board of Canada has raised flags about the pace of Canada’s post-recession recovery, the country has recovered much of its financial footing.

Canadians have an Affinity for U.S. Goods: Canadian consumers have long been drawn to the wide selections and desirable status of U.S. brands.  In fact, when the Canadian dollar – referred to as the loonie – hit parity with its U.S. counterpart in 2007, the result was a surge in cross border sales by Canadian residents hungry for U.S. goods.  By one estimate, U.S. goods and services account for 60 percent of purchases in Canada.

Ease of Doing Business in Canada: According to an analysis by the World Bank, Canada ranks number Seven (out of 183 nations surveyed) with regard to “ease of doing business.  Criteria included in arriving at that ranking include:  Starting a Business, Trading across Borders, Enforcing Contracts and Paying Taxes.

More than $1 billion in Goods Cross the Border Every Day: Prior to the recession, the flow of goods between the U.S. and Canada averaged about $580 billion per year – roughly $1.6 billion every day.  The recession saw a drop in trade levels by about 30 percent.  However, trade is rebounding strongly, and is on course to return to pre-recession levels in the coming months.

Reduced Corporate Tax Rate Invites Business Expansion: The corporate tax rate in Canada fell from 18 percent to 16.5 percent in January of this year, marking the fourth time that the tax has been cut in as many years.  The tax is scheduled to drop again next year to 15 percent.  When provincial taxes are factored in, the average rate will be 25 percent.  Contrast this to the United States, where the average rate is a world-leading 40 percent (35 percent federal rate plus average 5 percent state rate).

Other U.S. Retailers have Already Taken the Plunge:  Several U.S. retailers including Victoria’s Secret, Crate and Barrel, Anthropologie, Bath and Body Works, Brooks Brothers and Loews have already opened stores in Canada.  Other stores have announced plans to head north, including Target, J. Crew and Marshall’s.

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