Cloud Technology Leaves Americans Fuzzy

A study by Gartner technology consultants found usage of cloud-based solutions within the supply chain management sector increased by 40 percent during 2012.   Further, the study projects cloud usage will increase by an additional 47 percent by 2016, during which an eye-popping $206.6 billion will be spent on cloud solutions.

The tremendous growth of “cloud computing” – defined by Logistics Management magazine as “the shared software and information that users access via the web” – is a solid indication that businesses are in need of options to help better manage their businesses.  Through the cloud, businesses can offer shared access to certain projects and processes.  Software systems used to be prohibitively expensive, are now viable options.  And the cloud’s web-based functionality means a business’ data can be accessed from any computer with an Internet connection.

Despite the tremendous success and the aforementioned positives, there is one glaring hurdle yet to clear:  Most Americans have little understanding of the cloud concept – although an alarming number say they have “faked” their knowledge in order to get by.

An August 2012 study by Wakefield Research asked more than 1,000 American adults about their knowledge of cloud computing.  Among the key findings:

  • 51 percent believe stormy weather could interfere with cloud computing.
  • 22 percent of respondents have pretended to have knowledge about the cloud, either during office hours, on a job interview or, as 17 percent revealed – on a first date.
  • 54 percent claim to never use cloud computing.  But, the survey revealed that 95 percent actually do use the cloud:  65 percent bank online; 63 percent shop online; 58 percent use social networking; and 22 percent store music online.

But all is not doom and gloom.  They survey found that even though Americans admit to not fully understanding the cloud, 68 percent, after learning a bit more about the concept, said they saw important economic benefits, including lower consumer costs (35 percent), small business growth (32 percent) and greater customer engagement (35 percent).  And not to be overlooked, 40 percent cited being able to access work information from home, while in their “birthday suit,” as a worthy advantage.

Cloud technology, which has only existed for the past five years or so, has already revolutionized the way many businesses and industries function.  And clearly, the cloud is here to stay.  Which means that as consumers expand their understanding , we can expect to see even more innovative uses of cloud-based solutions, and greater integration of the cloud into everyday life. Do you currently use the cloud? How do you feel this improves your business’ efficiency?

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Help Wanted: Supply Chain Candidates with Communication and Technology Skills

Considering a career in supply chain or logistics management?  If so, then it might be helpful to know what types of experience and education are most helpful in landing the job.  A recent study sponsored by Supply Chain Management Review asked hiring managers for feedback on current hiring trends.

Among the findings?  Confidence is in, but arrogance is out.  Also in are enthusiasm, communications skills and critical thinking.

Perhaps a bit surprising is most hiring managers seem to place a higher premium on communications skills than on knowledge about supply chain trends:

  • 58 percent cited communication skills as a desirable attribute
  • 40 percent are looking for candidates knowledgeable in the latest technology
  • 35 percent want relevant technical training
  • 33 percent look for knowledge of industry trends.

The purpose of the survey was to gain insight about the effectiveness of various academic programs designed to train supply chain managers.  Managers reported that job candidates “are sufficiently prepared” in the areas of Supply Chain/Design Fundamentals (44%), Transportation and Logistics (33%) and Technology Solutions (32).

The more interesting findings were managers’ concerns about areas in which candidates were not sufficiently prepared:

  • Supply Chain Strategy –47%
  • International Experience – 44%
  • Management Skills – 44%
  • Transportation and Logistics — 41%
  • Customer Relationships – 40 %

Speaking about the implications of supply chain academics on real-world applications, Damon Willis, logistics supervisor at medical supply manufacturer Zimmer, Inc. noted that students “are often well versed in ‘book’ knowledge, but lack real-world expertise.  He noted that there is no replacement for “practical supply chain knowledge,” and suggested that potential supply chain professionals consider an internship as a way to gain critical experience and insight.

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U.S. – Canada Price Discrepancies Focus of Senate Inquiry

Speculating about why consumer goods cost more when purchased in Canada has become something of a national pastime for some Canadians.  For the past several years, Canadian media outlets and blog posts have regularly asked why, despite the influx of American retailers in Canada, and the sustained strength of the Canadian dollar, Canadian costs are significantly higher than in the United States.

For example, a well known U.S. fashion retailer charges 15 percent more for merchandise sold in its Canadian stores and on its Canadian website.  (Online shoppers were infuriated to realize that duties and taxes pushed the price discrepancy to as much as 50 percent higher in Canada).  The Retail Council of Canada reports that automobile tires in Canada cost $169.69 in Canada, but sell for $128.21 in the U.S.  And a 2012 survey by the Bank of Montreal found that retail prices in Canada are about 14 percent higher.

The issue became so infuriating, that a senate finance panel launched a 16-month investigation, the results of which were released in February 2013.  The panel’s report, “The Canada-U.S. Price Gap” examined the underlying causes of the price discrepancies, and offered recommendations for alleviating those pressure points.  Noteworthy though, is the way in which the report begins:  “Canadian consumers are feeling ripped off.  When the Canadian dollar is at parity with the U.S. dollar, Canadian consumers notice that prices here are typically higher than in the United States.  When buying books or magazines, they notice two prices on the covers, and usually the price in Canada is higher.”

The report heard testimony from hundreds of experts and found several contributing reasons for the price discrepancies:

  • Customs Tariffs. Tariffs were cited as a significant cause of the price discrepancies.  The Retail Council of Canada said that Canada imposes rates of tariffs that are consistently higher than rates imposed by the U.S.  In one example, the Council cited ice hockey pants, which are subject to an 18 percent tariff rate in Canada, but a 2.9 percent rate in the U.S.
  • Product Safety Standards. Different standards imposed by the Canadian government force U.S. manufacturers to revamp products before they can be sold in Canada.  For example, the Canadian Apparel Federation told the committee that Canada imposes a different testing process for garment flammability, which means that items approved for sale in the U.S. must endure a second review in order to be sold in Canada.
  • Relative Size of the Canadian Market: Canada’s small size relative to the United States means that importers pay a higher price for smaller shipments of goods.  Canada’s small size also contributes to a lack of competition in certain retail categories, which results in higher prices.
  • Country Pricing. Country pricing refers to the practice by some manufacturers of adopting different price structures for different countries.  The Retail Council of Canada told the senate committee that some manufacturers charge Canadian retailers 10 to 50 percent more than U.S. retailers for identical products.  Three reasons were cited:
    • Canadians are used to paying higher prices
    • Higher operations and supply costs in Canada
    • Higher prices are necessary to compensate Canadian distributors and wholesalers

The study recommended that steps be taken to address each of these contributing factors.  Speaking specifically about the culpability of tariffs, Finance Minister Jim Flaherty said that while the government has reduced tariffs on a number of products in recent years, “I expect more tariff reductions” down the road.

Senator Joseph Day, chairman of the senate committee, urged Canadian consumers to be more price conscious and savvy as a way to control prices.  Day’s comments reflect the fact that price discrepancies are largely driven by market factors.  “There is no one answer,” he said in releasing the report.  “The government doesn’t determine prices.  The marketplace determines prices.”

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Return on Investment Doesn’t Always Mean Lowest Cost

It used to be when a business looked for return on investment (ROI) from its logistics provider, the provider would be expected to find the lowest cost carrier.  End of story.  Now however, it’s not that simple.

Instead, logistics providers looking to help achieve maximum ROI take a more macro look at a customer’s overall supply chain, and utilize several efficiency tools.  The result is often a leaner and meaner supply chain that improves efficiency across the supply chain – but does not necessarily look at lower transportation costs as the defining bellwether of its success.

For example, in a recent World Trade 100 article, Douglas Waggoner of Chicago-based Echo Global Logistics noted that “achieving a truly meaningful return on investment is a matter of having a good, integrated solution that uses best-of-class transportation providers, technology, the optimization of the flow of goods, and the reduction of work-process expenses.”

Bringing together “experts” to offer input on various parts of a business’ supply chain – and then having them compare notes and arrive at a comprehensive solution – is central to achieving better ROI.

And what should be on the agenda when those experts meet?  A few key points:

  • Process Improvements: The first thing a logistics provider should do, is to dissect the inner-workings of each part of a business’ operations, and make sure that there is no overlap, and that all divisions are on the same page and working toward a common, clearly defined goal.
  • Regulatory Analysis:  Is there a process in place to make sure that a business is in full compliance with all necessary regulatory mandates, and that no unnecessary penalties or fees are accrued?  And, is there a mechanism to ensure that the business is achieving maximum tax incentives or, if applicable, favorable trade treatment?
  • Continuous Improvement:  It’s also important to look at ROI as an ongoing goal, rather than a short-term achievement.  Hopefully, a logistics partner will have established a long-term relationship with its customers, and will fully understand the business needs and priorities of that business.
  • Open Mind:  Finally, it’s important for businesses to understand that technology and supply chain management have evolved so much in recent years that processes that were considered cutting edge a few years ago, may now be obsolete.  Businesses need to be open to new ways of doing things, listen to advice, and not be afraid to try new strategies.

So next time a business wants to ensure that it is receiving maximum efficiency from its logistics provider, it’s important to talk in terms of improving ROI across the board, rather than just looking at one piece of the overall pie.

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Border Compliance Provides a Competitive Edge

Growing frustration about the increasingly complex U.S./Canada border clearance process has been well documented.  But some affected businesses seem to be turning the lemons of border compliance into lemonade, using their determination to master the compliance process as a competitive advantage.

“Look on the bright side,” one commenter to a recent Canadian Transportation & Logistics blog post wrote, “companies that can manage these issues properly can gain more competitive advantage over competitors.”

This particular blog commenter might not have realized how perceptive his comments were, given some of the “tweaks” that have been made in recent months by the Canada Border Services Agency. Canada is continuing with the rollout of an electronic cargo transmission process – eManifest – which, when fully implemented will require advance notification of all shipments headed to the Canadian border.

CBSA has announced that all highway carriers must be in compliance with eManifest by November 1, 2012.  Failure to comply could result in denial of entry and monetary penalties.  Industry analyst Laurie Turnbull, writing in his CT&L blog noted that the eManifest requirement “has tremendous significance in terms of the possibility for delay, or potential inadmissibility, of shipments.”  Turnbull suggests that transportation managers might want to “reexamine supplier agreements” to make certain that their carrier is up to the task of eManifest compliance.

Turnbull also highlights recent changes to Canada’s Custom Tariff Schedule that took effect on January 1.  Like most industrialized nations, Canada adheres to the list of internationally recognized tariff codes, as established by the World Customs Organization (WCO).  WCO maintains a list of more than 5,000 commodity groups, and assigns a six digit identifying code to each.  That six digit code means that shipments will be classified similarly around the world – a shipment of oranges traveling to Canada will bear the same six digit code as a shipment of oranges headed to China or anywhere else.

Each country is then authorized to use subsequent identifying codes, as a way to further track goods entering and leaving its borders.

Recently, the WCO made some changes to its coding system, which had the trickle down effect of causing some of Canada’s codes to change.  Unless a shipper or its logistics provider is aware of these changes, any affected items arriving at the border runs the risk of being deemed non-compliant, or of missing out on favorable tariff actions as a result of the mislabeling.

Which reaffirms the point that a savvy business will take advantage of the growing complexities of the compliance process, and turn it into a competitive advantage.

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Canada Continues to Draw U.S. Retailers

U.S. businesses continue to enter the Canadian market at a brisk pace, with apparel retailers Express Inc., Ann Taylor, and Tory Burch opening stores in recent months.  These fashion retailers join a growing number of U.S. businesses that have branched out to Canada including Lowe’s, J.Crew, Crate&Barrel, Victoria’s Secret and Bath and Body Works.  Retail giant Wal-Mart has been in the Canadian market since 1994, and currently operates 329 retail stores across the country.

The American invasion is set to continue, with Target Corp. planning to open its first Canadian store in March 2013, with as many as 135 stores to open by 2014.   High-end retailer Nordstrom has announced plans to open four stores in Canada by 2014.  J.C. Penney, Kohl’s, Macy’s, Bloomingdale’s, and Saks Fifth Avenue are among other U.S. retailers interested in establishing a brick-and-mortar presence north of the border.

Why the sudden interest in Canada?

Retail consultant Wendy Evans, of Evans and Co. told Reuters “Many chains see Canada as untapped territory, having nearly run out of promising locations in the United States to open new stores.”

For others, the allure of operating in a relatively stable economic environment has been a deciding factor.  The Canadian economy weathered the economic recession better than the U.S., although disappointing economic indicators in early 2013 point to a possible slowdown in coming months.  Still, the comparative strength of the Canadian dollar has given consumers newfound buying power for desirable U.S. goods.

But despite the steady trek north, retailers need to do their homework before setting their sights on the Canadian market.  Canada is not ripe for every business.  As Alison Paul, vice chairman at Deloitte LLP told Reuters:  “Just picking up a store that you have in the U.S. and plopping it down in Toronto is not going to mean you are successful.”

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When it comes to Exporting – Logistics is Local

According to data from the U.S. Commerce Department, less than one percent of U.S. companies’ export – and of those that do, 58 percent export to only one country, typically to Mexico or Canada.  U.S. businesses’ rate of participation in the export market is significantly lower than other developed countries.

With all the talk about “the global marketplace,” the perception for many was that exporting companies were the norm, and that companies without export markets were being left behind.  This line of thinking was fueled when President Obama set a goal of doubling U.S. export growth by 2015.

In fact, most U.S. companies do not export and according to at least one logistics expert, businesses should be careful not to enlist a logistics carrier that specializes in “global service,” when a more regional approach is needed.  “We know that globalization has been vastly exaggerated, and that relying on a ‘mega-forwarder’ is not always the distribution answer,” Shay Scott, director of the Global Supply Chain Institute at the University of Tennessee recently said in an article that appeared in Logistics Management.  Instead, Shay concludes that most U.S. businesses “only require a basic forwarder.”

This sentiment is echoed by Pankaj Ghemawat of IESE Business School in Spain, and author of World 3.0.  In his book, Ghemawat notes ,“the number of American companies with any foreign operations is vastly overstated.”

Businesses should focus on finding a logistics partner that best meets its specific needs.  Buy only the logistics you need and do not be swayed by glitzy advertising and sales talk that offers unnecessary global reach.  U.S. businesses that export to Canada, for example, should partner with a logistics provider with Canadian expertise.  As Shay points out, “Many of the smaller forwarders have better relationships with Customs than the bigger players.”

This local expertise can be extremely valuable, especially when a “routine” shipment goes awry.  “Imagine your goods have gotten stuck somewhere en route – perhaps the paperwork wasn’t filed correctly because the regulation has changed, or the promised transportation service didn’t materialize,” says Delcan Corp. senior business analyst Rosalyn Wilson.  “The delay can hit your bottom line in terms of dollars, but can also damage the reputation of your product or company.”

At a time when many U.S. businesses are looking to Canada – and its 34 million potential new customers – having the right logistics partner can be a very valuable tool.  The trick though, is taking the time to research options and choose the provider that will be the best fit.

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ACE: Easing Cross Border Clearance Process

As anyone who regularly brings commercial goods into the U.S. knows, U.S. Customs Border Protection (CBP) has been involved in a years-long undertaking to enhance border security by automating and centralizing the border processing system.  The initiative, known as the Automated Commercial Environment (ACE), features a secure data portal through which any entity doing business with CBP must register and maintain an account.  While ACE applies to every mode of transport – rail, air, ocean and highway – several system releases/upgrades have been introduced that impact goods entering the U.S. via truck.  Among those developments:

  • In its January 2013 update, CBP reports that ACE electronic truck manifest capabilities are available at all 99 U.S. land border ports of entry.
  • CBP also reports that processing time for trucks has been reduced by roughly 30 percent from pre-ACE service levels.
  • The eManifest data interchange is fully operational, and available to all registered carriers with access to high speed Internet.  Through the electronic truck manifest, CBP personnel can pre-screen shipments as a way to detect any potential contraband or hazardous materials that may be included in the shipment.
  • Automated billing statement: Registered carriers are provided with monthly payment options and account statements that allow carriers to better manage payment schedules.  More than 60 percent of all duties and fees are collected each month via ACE.
  • Reports:  Carriers are able to generate numerous reports to evaluate their internal compliance processes, and make adjustments to improve future performance.
  • Carriers can also record and track data related to drivers, trucks, equipment and shippers.  This eliminates the need to re-enter data for each manifest, which saves time and eliminates chances for errors.
  • A link has been established from the ACE portal to the Importer Security Filing (ISF) portal, so that ISF filers can now access progress reports directly through ACE.  Prior to this enhancement, progress reports were only available via email subscription.

The concept and design of ACE is similar to the Canada Border Services Agency (CBSA)’s  Advance Commercial Information (ACI) system.  ACI, which implented its e-Manifest data portal in late 2012, has become the cornerstone of Canada’s border security efforts.

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Supply Chain Visibility – Essential to Efficiency & Results

If your supply chain is a network of closely aligned moving parts, then doesn’t it make sense that if a breakdown occurs, it’d be easier to fix the problem if you could tap into each individual part to find out exactly where the failure was occurring?  The alternative, of course, would be having no control over your supply chain, and having to dissect the chain, link by link, until you found the source of your problem.

Thankfully, the “roll the dice” approach to supply chain management has become outdated, as new technology and logistical capabilities are giving businesses unprecedented insight into their component parts.  Businesses are increasingly realizing the value of having visibility into each part of their supply chain, so they can ensure the net result is a well-oiled, well-functioning machine.

But what exactly do we mean when we refer to “supply chain visibility?”  A survey by Capgemini consultants of executives from 300 leading companies worldwide, defined visibility as “knowing where products and inventories are, being able to monitor order progress, and being able to anticipate unplanned events in the supply chain, like delayed transport or non-conformance quantities in the production process of subcontractors.”  Supply chain visibility was so important for this group, that 45 percent ranked “improving supply chain visibility” as their top concern.

For many businesses though, gaining insight into the supply chain is easier said than done.  But it doesn’t have to be that way.  A number of relatively straightforward solutions are available to help achieve enhanced visibility:

  • Choose the Software option that’s best for you: Not surprisingly, technology is key to having insight into the many different suppliers and businesses that make up the typical supply chain.  But not every software solution is suitable for every business need.  You’ll need to shop around, and ask a lot of questions.  Of course larger businesses can afford to have customized software solutions designed to meet their exact specifications, but most businesses will need to adapt “out of the box” solutions as best they can.
  • Cloud Technology: A relatively new concept in logistics management, cloud technology allows a business to “rent” space on an outside server, and to store any and all data on that server.  A business can then allow outside vendors access to that stored information, so that each party can update records and be aware of the status of certain shared projects.  For supply chain managers, cloud technology is rapidly becoming a preferred way to track shipments – with small-to-medium sized businesses expected to spend $100 billion on cloud computing by 2014.  A huge advantage of cloud technology is that it allows businesses to access customized software – the costs of which are shared by fellow users — without having to shoulder the costs alone.
  • Logistics Provider Expertise: A good logistics provider will offer a high degree of visibility so that you can pretty much have 24/7 access to your shipment’s whereabouts.  This is particularly important if you’re shipping to Canada, and your shipment will need to not only clear the arduous Canadian border clearance process, but also enter a Canadian distribution network.  Be sure that your carrier (a) can offer 24/7 visibility for the entire transit cycle; and (b) will keep control of your shipment for the entire cycle, and that it will not be offloaded to an unknown third party.

With a solid supply chain visibility process in place, a business can better manage inventory, and more proactively plan for unexpected disruptions:

  • Coordinated deliveries: If your business relies on components from several different providers, visibility will allow you to coordinate schedules so that materials arrive when you need them.
  • Global Coordination: As today’s supply chains become increasingly global in nature, it can be much more difficult to manage vendors located in different parts of the world.  With a good technology solution in place, vendors can easily provide project updates and transit status reports.
  • Weather: While the 2011 Japanese earthquake stands as a worst-case scenario for weather-related effects on supply chains, it’s important to plan for the unexpected.  If your supply chain includes manufacturers or warehouses located in snow-prone states, make sure you have a Plan B in place to keep your materials moving.  Similarly, hurricane season comes every year – rather than take a chance that your supply chain won’t be affected, work with your logistics carrier to develop an alternative should you suddenly find that your preferred network is unavailable.
  • Infrastructure Delays: When the city of Los Angeles shut down a critically important section of the 405 Freeway last summer, many feared a traffic-crippling “carmageddon” would ensue.  While good advance planning helped to avert the disaster, the potential existed for major disruptions.  Would your supply chain have had alternate plans in place?  Major highway and bridge closings are usually publicized weeks in advance by state or federal highway departments – but the key is to make sure your aware of the information, and make necessary adjustments.
  • Labor Disputes: What if one of your key parts suppliers faced a strike by one of its labor unions?  It’s essential that you are aware of all potential labor disruptions among your suppliers, and that you have a plan in place to minimize any impact on your supply chain.

Supply chain visibility allows a business to see the many moving parts that comprise its operations.  Businesses are now able to pinpoint problems –even anticipate problems – and have fixes available before any serious disruptions occur.  And for many businesses, control of the supply chain is also a competitive advantage, since operations run much smoother, with less redundancies and a higher degree of accountability.

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Retailers Have Reason for Cautious Optimism

While many are still figuring out the winners and losers of the fiscal cliff resolution, retailers are hoping consumers will shrug off some of the concern that kept them from spending in the final weeks of 2012.

A key tenet of the agreement, which maintains current tax rates for individuals earning up to $400,000 ($450,000 for joint filers), is an end to the uncertainty that has kept people from knowing exactly what their tax liabilities were going to be going forward.  At the same time though, the agreement failed to extend the payroll tax cut that was enacted in 2011, meaning that most workers will see a decrease in take home pay beginning with their next pay period.

Retailers however, are betting that removal of the uncertainty over tax rates will provide the badly needed spark needed to ignite consumer confidence.  “This agreement might not be seen as perfect by everyone, but it gives American consumers and businesses the certainty they need to put worries over this issue behind them,” National Retail Federation (NRF) President and CEO Matthew Shay said in a statement.

North Andover, Mass. business owner Sam Ramey echoed those sentiments, when he told The New York Times:  “Once something gets settled, even if it’s not the most popular settlement option, it still gives you a sense of what the rules are and what you need to readjust.”

Retailers saw firsthand the impact of consumer concern over the fiscal cliff when, after an initial Black Friday burst of spending, consumers held back.  A report by the Conference Board found that its consumer confidence index – a key indicator of consumer behavior – fell sharply in December, to its lowest level in August.  Economist Pierre Ellis called the drop in confidence an “obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December – presumably reflecting concern about imminent fiscal cliff tax increases.”

NRF Chief Economist Jack Kleinhenz found that if Congress and the President had failed to avert the fiscal cliff, the ensuing tax increases and spending cuts would have resulted in flat retail sales for 2013, with negative growth during the first half of the year.  Similarly, the White House projected that consumer spending could have decreased by $200 billion in 2013 if middle-class tax cuts had been allowed to expired.

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