eCommerce – beyond the click
Getting your supply chain to deliver on your customer promises
When customers click the buy button on your ecommerce store, the process of delivering on your customer promise begins. Far from being the end of the process, what happens next may make or break that new relationship. Nothing says I want to keep your business, like a late delivery, inappropriate packaging, damaged goods, incorrect invoices or unexpected duty charges.
Some tips below for your eCommerce supply chain, and how to ensure that your customer will continue to have the best experience, and return many times, to buy again.
- Map delivery options by region – customer delivery expectations vary by city and by market. Make sure that your offering is market competitive locally and if possible, give customers choice.
- Set expectations and meet them – be clear on product availability, when it should ship and when the customer should expect to receive shipments. Speed is important but reliability trumps speed every time.
- One touch data – systems should enable validation of address data and ensure seamless communication between website, fulfilment and transportation partners.
- Stock visibility – visibility to stock levels between website and fulfilment location is critical to managing customer expectations and ensuring that product, once purchased, is secured for the customer order.
- Pick and Pack – validate that your warehouse setup is optimised for efficiency, and that your pick and pack workflows ensure that the correct products goes with the correct orders. Plan labour requirements based on projected volumes, particularly around the holiday season.
- Packaging – customers have rightly become less tolerant of excessive packaging with eCommerce shipments. Give consideration to appropriate packaging that protects the product and reflects your brand experience.
- Gift wrapping and customisation – these options can add to the customer experience but can significantly impact throughput. Consider simple options – branded tape vs boxes – that can add to the experience without making the delivery process more complex.
- Proactively manage delivery exceptions – too many companies see their job as complete when the order is handed to the delivery company. Follow it through to delivery with proactive management of delivery partners.
- Returns – plan for a returns process that is customer friendly without encouraging a high level of returns. Pre printed returns slips or online returns processes can help streamline the returns flow.
Aligning your supply chain to customer expectations will be the success of the eCommerce channel. Done well, it can be an additional source of differentiation, but of course the converse is also true.
Contact us for a discussion regarding the development or optimisation of your eCommerce channel solution, and the supply chain structures to support it.
Re-emergence of Resilience
On March 11th, 2011 – just 10 years ago – a 9.1 magnitude earthquake struck just 231 miles northeast of Tokyo. The resulting tsunami triggered a sequence of events causing significant loss of life, damage to a nuclear reactor in Fukushima, and months of disruption to the automotive and other industries that had high concentrations in Japan.
This followed disruption in 2010 where large parts of European air space was closed for a week following the eruption of the Eyjafjallajökull volcano in Iceland. In July of 2011, the electronics and other industries in Thailand were disrupted by severe flooding following the monsoon season.
Three major disruptive events occurring within 16 months outlined the truly global nature of supply chains. Companies discovered a vulnerability to tier three and tier four suppliers that were previously invisible to corporate supply chain teams.
Supply chain risk management shot to the top of the priority list for companies around the world. Nine years later, as we dealt with the early impacts of a global pandemic, many companies found that their approach to managing and responding to risks within their supply chains fell short of where they needed it to be.
As companies emerge from the immediate impacts of the pandemic, many are now re-examining resilience frameworks in their supply chains. The shift to resilience reflects the need not just to manage risks, but to build the ability to respond and recover within the supply chain. We set out below some elements to consider in your risk management framework.
- Document and maintain the physical and digital scope of the supply chain
- Define a portfolio of potential risk events or event types to be considered
- Maintain and refine the scope as part of the governance process
Not all risks are the same so determine a measure of vulnerability that is appropriate to the business – e.g. revenue at risk.
- Key risk indicators – impact of a potential risk event and likelihood of occurrence
- Risk event planning – categorising risks and development of risk response templates. Defining processes, roles, information requirements within each template. Testing the templates.
- Define risk event triggers – the conditions that exist that will trigger a risk response
- Monitor Risks
Establish a process and mechanism to monitor and report on key risk types;
- Geographic risks
- Supplier risks
- Cybersecurity risks
- Regulatory and trade risks
- Manage, Act, and Learn
- Risk management governance – this must be a living process, with scheduled reviews, reporting, testing, and documented improvements
- Active risk engagement – from triggering of risk conditions, activation of risk templates, modifying the plan for actual conditions, and the management of reporting and visibility through the risk management process
- Post-event learning – review of risk event actions and responses to identify learnings for future planning
There is not an expectation that companies will have considered all risk scenarios. Certainly, none would have envisioned the level of disruption caused by the pandemic.
Those with existing plans and templates, however, were better able to modify them to deal with the uncertainty over the last 12 months.
Early Insights from Health Systems Survey
- Internal procurement and supply chain teams ended up picking up the slack for a lack of response from key existing supply chain partners – particularly in sourcing and managing PPE
- 76% of respondents felt that government agencies responded poorly or very poorly
- 53% of respondents felt that distributors responded poorly or very poorly
- 41% of respondents felt that GPOs responded poorly or very poorly
- Existing preparedness plans nationally and at a health system level, were insufficient to manage the scale of the pandemic requirements
- Existing suppliers could not scale at the level required, and rapid identification and qualification of new sources of supply was required
- Managing demand and allocation of critical products was manual in many cases, and became a process that needed action to protect valuable supplies and to make them available where most needed
- The internal logistics processes to store and manage the rotation of critical inventories needed to scale in line with requirements.
- Re-evaluation of critical inventory holdings for emergency and pandemic supplies
- Less reliance on single sources – distribution or manufacturers – for critical PPE items
- Consideration of increased regional supplier development for critical items
- Investment in systems and resources to make internal processes more robust – particularly forecast and product allocation processes
- Reconsider internal supply chain capacity and scale required based on updated inventory buffers
Insights into internal supply chain performance:
Implications for future supply chain design
The report is shared with each of the health system participants and we will host a webinar in the coming months to discuss the findings in more detail.,
Let's start the conversation on how best we can assist you in your Supply Chain journey
Assessing third party outsourcing partnerships
Much of the frustration with outsource partnerships stems from poor alignment on objectives, and capabilities from the outset. A successful outsource partnership can enable revenue, cost, sustainability, and other supply chain objectives, but it takes a mutual commitment and effort to succeed.
Here are our top 7 tips as you consider your next outsource partners;
- Start with clear objectives of what you want to achieve
If you do not have clear objectives on what you want, there is a danger that you will settle for what the partner is trying to sell. Set out why you believe that outsourcing is the right strategy, and what you want to achieve. By focusing on the objective, you still leave room for the partner to bring innovation on how to achieve that, using their capabilities.
- Research potential provider companies that can potentially meet your objectives
Be clear and concise about your scope, your volumes, and your expectations for future changes and capabilities, as your business evolves. Engage with the provider through a common process, and take the time to listen to their service options before focusing in on price, as organisation and cultural fit are frequently more important indicators of future success.
- Meet the operating team – not just the sales representative
One of the drawbacks of Covid-19 related travel restrictions, is the loss of interaction with potential partner teams, as part of site visits. Many have now created virtual tours that give an opportunity to ‘walk through’ an operation, but you should insist on getting to meet the operational team, to have them talk you through how your business would be managed. The sales contact will frequently disappear into the background once you have gone live, and you need to assess your comfort with those that will be managing the business, on your behalf.
- Consider what is needed internally, in order to make the external relationship successful
Outsourced supply chains rely on close integration and communication between the parties. They need to be committed to the relationship and to see the success of the partnership, as a joint responsibility. For first time outsourcers, a common mistake is to forget that internal processes will also need to change and instead try to replicate, step by step, what is currently done internally.
- Structure the deal to allow success – look beyond the win-lose
A sustainable partnership will require benefits for both parties in the relationship. Negotiations that focus solely on unit transactional values, frequently lose sight of opportunities to create and incentivise the creation of shared value. The University of Tennessee has done significant work, under the leadership of Kate Vitasek, on ‘Vested’ rules to structure successful third-party relationships.
- Pay attention to Integration
Systems integration is usually the most complex and time-consuming discussion when it comes to outsourcing decisions. The two major mistakes to avoid here are in trying to copy exact current flows that were not designed for the partner’s systems, or to move forward with minimal connectivity which is supplemented by manual processes and workarounds. Time and effort put into the architecture will be rewarded when it comes to implementation.
- Governance is key
The disciplines that are installed when things are going well are what will accelerate recovery when difficult situations arise. A regular structure of daily, weekly, monthly, and quarterly reviews – with defined attendance, metrics, inputs, and outputs – is essential to provide companies with the tools, to recognise potential issues and to manage them constructively, together. Every relationship will have its challenges, and it is in dealing with those challenges together, that the real strength emerges.
These seven points come from experience on the brand, the service provider, and over the last 8 years, having active consultancy in this area. We have also developed training for brands and outsource providers, on considerations in an outsourced environment.
A new customs and trade reality for the UK and Europe
On 31st December, 2020, Great Britain left the European Customs Union. For the first time since 1993, shipments between Great Britain and the EU require customs paperwork. Certain products require health certificates, and are also subject to additional inspections and checks.
Three weeks into the new process, and while we have been spared the image of long queues at border crossings, trade volumes are down, and companies are experiencing increased costs of compliance and increased lead times.
Even at lower trade volumes, companies like DPD, DHL and DB Schenker (among others), have suspended elements of their UK services in an effort to deal with the additional customs complexity.
The key pain points that we have noted to date include:
- Lack of clarity between trading partners, on which company is responsible for the export and import declarations, and a lack of readiness of customers and suppliers to fulfil their obligations
- Customs complexities are adding to the administration requirements, and lead-time, for companies using the UK as a hub to import and re-export to the EU. There have also been issues with Non-EU or UK origin products, that do not benefit from free trade agreements.
- Companies shipping multiple products requiring health certificates in a single consignment, which require complex and costly administrative processes, to enable shipments
- Companies shipping to end consumers in a third country are now subject to additional processing fees from carriers, and are subject to more complex VAT requirements
- Shippers and hauliers needing to deal with multiple customs systems and apps that are not integrated, in order to successfully process shipments
- Insufficiently trained personnel at logistics providers, to navigate the new customs processes successfully
- Delays and complexity of shipments to and from Great Britain are making it more difficult to find hauliers that are willing to serve that market
Such is the complexity of shipments through Great Britain, Ireland has seen volumes shipping direct to Europe and bypassing Great Britain increase by up to 500% in the first three weeks, at a time when overall volumes are still down.
While some of these issues will dissipate in time, as companies and logistics providers get used to the new customs procedures, there will remain a large administrative burden and cost for future trade between Great Britain and Europe. It remains to be seen whether benefits will accrue, which can outweigh these costs.
Read more on Brexit and its’ implications on your supply chain.
Do we need to talk about returns?
Following on from peak retail season, is peak returns season. With the added shift to online purchases during 2020, it is likely that we will see eCommerce returns volumes reach new levels this month.
UPS predicted that it would receive 1.75M returns parcels per day in the first week of January, and FexEx also confirmed that they were seeing record returns volumes. Walmart and Amazon in the US, have indicated that they may simply credit customers and ask them to keep certain products.
There are valid arguments that point to the need for customer-friendly returns policies, as an incentive to shop with confidence, online. Customers want to avoid paying shipping on returns, or restocking fees, and up to 70% of consumers will consider returns policies in making their online purchase decisions.
Companies have become much better at processing returns. Pre-printed return labels, drop off points, online and app options to process returns, all contribute to a faster, cheaper, and better customer experience. With online returns rates running at 30% (higher in fashion and clothing categories), have we educated consumers in the myth of free returns in the same way as we have with the myth of free shipping? There is a real economic cost of returns and perhaps, more importantly, a real environmental cost that we pretend to the consumer, does not exist.
On this occasion we are not offering an easy solution to the issue of managing returns. There are ways to make it better, faster, and to recover more value, but do we need to change how we engage with consumers, on returns for convenience?
Welcome to our December Supply Chain EnabledTM newsletter.
5 key supply chain takeaways from 2020
In our final instalment of Supply Chain Enabled™ for 2020, we have gone a little reflective on the state of our supply chains.
When we started Supply Chain Enabled™ we wanted to capture the things that companies, and professionals, could achieve through supply chain.
In that spirit, we wanted to finish what has been an extraordinary year with a look back at some key takeaways from the year just gone, and some thoughts of how our supply chains could make the world a slightly better place in 2021 and beyond.
Many of us have learned a lot about the state of our supply chains over the last 12 months. The plans for the calendar year were effectively in the bin by February / March,
and supply chains operated in an environment with disrupted manufacturing, disrupted transportation, the shutdown of retail channels, and a rolling global
health and economic crisis.
In this environment, our interactions with clients highlighted five key takeaways from the year:
- Agility and adaptability.
- Our previous assumptions about the scale of potential supply chain disruptions were well short of the mark and yet many supply chain teams performed admirably in the most difficult circumstances
- Skills that we would normally associate with disaster recovery – rapid assembly of information, key decisionmakers aligning on decisions with imperfect information, and ensuring regular communication with suppliers and customers became the order of the day.
- Traditional response times were cut, businesses responded to rapidly changing circumstances and many executives now wonder whether they should maintain more of this capability in future supply chain models.
- Accelerated retail shift to online
- Disruptions in brick-and-mortar retail, concerns about safety and the convenience of online, drove what we believe will be a doubling of ecommerce volumes in 2020. Clients that we have spoken to have experienced between a 100% and 800% growth in online orders across an extended holiday season.
- This has not been without its challenges as the volume bubble flows from suppliers to warehouse operations and through to last-mile delivery to customers. There have also been casualties in the high street resulting from this disruption and change.
- 2021 will require reconfiguration of supply chain capability and capacity models to cope with a continuation and growth of this volume into the future. Expect increases in automation and further innovation in packaging and last-mile delivery models.
- Remote and frontline workers prove their value
- The efforts put in by front-line workers in manufacturing, retail, and transportation were a significant factor in ensuring the success of supply chains in 2020. When other parts of the economy shut down, these workers continued to ensure that products were made, shelves were filled, and customers were served. Their visible presence reinforced the critical roles that they play in the quality of service delivered to customers.
- Others in supply chain adapted their work practices to a world of remote working and online meetings. The accelerated use of technology enabled a collaboration that was previously only considered possible in person. While there have been some limitations, many of these practices are expected to continue as the ‘new normal’ in the management of global business.
- Accelerated speed to market
- The development, approval, and bringing to market of vaccines for the world’s population within 12 months is just one example of the acceleration of cycle times driven by need in the context of a global pandemic.
- Similar results were demonstrated in the efforts to source, qualify, and retool supply chains to produce PPE at scale and to react to demand shifts in other critical products. Communication was faster, process steps were conducted in parallel, and new processes and technology were deployed to enable faster collaboration and results. The best elements of this approach will be taken forward into the future.
- It would be a mistake to think that every supply chain performed well under the pressures from the pandemic. Many mistakes were made and critical vulnerabilities within supply chains were exposed.
- The work of identifying these vulnerabilities and redesigning supply chains for the future has already started. Even those that did adapt, will take the opportunity to learn from mistakes, to take forward a stronger supply chain into the future.
Health Systems Insights survey
We have had a very positive response to our Health Systems Insights survey, we hope to publish the findings in January 2021.
Positive impacts of supply chain
In 2006, AMR research issued a publication under the title – Supply Chain Saves the World. They recognised the position of influence that supply chain professionals have on areas that influence key social issues.
If we want to eliminate plastics, migrate to a circular economy, eliminate waste, accelerate healthcare improvements, reduce the cost of housing provision, ensure ethical sourcing, or migrate transportation away from carbon dependence, supply chain professionals are either driving these decisions or in the room as key influencers.
We know that our supply chains will continue to evolve to meet market challenges. The difficulty with many of the social challenges is that we need to consider the impact on our supply chains across a timeframe that extends beyond the normal budgetary horizon.
The unique skills that we have developed in supply chain can be applied to many of the most pressing social issues facing the world today. The challenges we face include:
- Getting serious about sustainability, circularity, and climate change
- Working to eliminate food waste
- Improving access to healthcare
- Improving access to housing and shelter
- Promoting equity within our supply chains
- Promoting diversity and equality within our supply chains
- Supporting humanitarian supply chain efforts
Most of the solutions to these problems also go to the heart of waste elimination, enabling new revenue sources, building resilience within our supply chains, and protecting our brands.
This is not about creating new headlines for corporate social responsibility reporting. It is about recognising our responsibility, when we are considering our supply chain priorities for 2021, to take on initiatives that go beyond just cheaper and faster for the next budgetary cycle.
After all, if we are to attract inspire the next generation of supply chain leaders, we need to show them the power of the profession to deliver on social as well as financial objectives.
Welcome to our November Supply Chain EnabledTM newsletter.
Brexit update – 40 days to end of the transition period
Although the UK left the EU in January 2020, the real impact of that change to supply chains will occur on 1st January 2021. From this day, customs controls will be placed on the movement of goods between Great Britain and the EU.
Today, a simple sale of goods between the EU and the UK, requires little more than a phone call to a logistics provider and a ferry booking. From January 2021, this will require a co-ordinated series of actions:
Submissions of formal declarations
Interaction with multiple systems
Confirmation of approval to proceed between all stakeholders, including exporter, importer, haulier, ferry companies, customs officers and authorities
Further changes will be required to shipments involving live animals or animal products, or other controlled goods. These will involve pre-notification and the submission of health certificates, introduced on a phased basis between January and July 2021.
- There are new requirements for the use of wooden packaging (pallets) and phased changes in product labelling, origin statements, product safety and regulatory requirements
Shipments between EU countries that use the UK Landbridge will need to cross two borders – interacting with customs authorities on both the EU and UK side at each crossing.
Many companies have been preparing for these changes for several years, but as we approach the go-live date, businesses need to extend their level of detail beyond the registration for EORI numbers and the researching of product tariff codes.
Detailed conversations between customers, suppliers and supply chain providers need to take place, in order to map out the future process to confirm readiness. Outside of any future duties and tariffs, there will be additional administration and compliance costs associated with any changes required. with these changes.
Global supply chains have proven themselves capable of dealing with highly complex customs requirements around the world. In time, we expect that supply chains will adapt to the new EU / UK requirements. However, with many of these requirements and systems only becoming available late in the transition process, there is a high potential for disruption in the early months of 2021.
Click here to register your interest in participating in our Health Systems Insights Survey, and we will contact you by return.
The Irish Times has published a special report on Supply Chain Management, with a number of quotes from PerformanSC CEO, Lorcan Sheehan.
Warehouse design – capacity, layout, throughput and efficiency
For many companies, calendar Q4 represents the peak season focus on physical inventory and warehouse activity. The challenges in 2020 are exacerbated, not only by changes in business profiles, which is associated with increased eCommerce volumes, but also the need to ensure social distancing within operations.
While now may not be the best time to consider a warehouse redesign, it can nevertheless be the right time to visualise flow pinch points and congestion. Only then can you assess whether a future design project could unlock additional capacity and efficiency.
There are some key areas to consider in your walk through at this busy time, whilst remembering that those who are closest to the operations, will have direct insights into their daily challenges. The top 7 areas to consider are;
1. Racking configuration matched to product size and throughput
- Is the space being effectively used?
- Do the pick faces match the storage characteristics, for the products being picked?
- Are you using full pallet locations to store partial pallets?
- Should fast moving products be stored in different configurations?
- Do you have products stored in the correct locations to minimise travel distance while avoiding congestion in busier aisles?
- How is slotting determined, in order to optimise your put-away and pick efficiency?
- Working capacity is broader than storage utilisation. It needs to consider doors, receiving areas, equipment utilisation and staffing and shift patterns.
- In addition, consideration should be given to pickface utilisation, replenishment efficiency, marshalling space, packing and shipping.
- Are there clear routes for pedestrian and vehicular traffic flows?
- Are there sufficient precautions identified to avoid a mixing of these activities?
- Are you using an appropriate pick method for the profile of orders?
- Are pickers picking for a single order or for multiple orders?
- Should you use a single stage pick or a batch pick and a separate pack operation?
- Are there opportunities to consider automation to reduce travel time and non-value add activities?
- Does your team have the right conveyance and material handling equipment to support the profile of activity?
7. Are you keeping the right inventory to support your customer and business needs?
As with many processes, the data within your supply chain can be used to design and operate more efficient and higher throughput warehouse operations.
Using this available data, PerformanSC can develop warehouse designs. Through 3D simulation, the client can visualise many configurations to highlight opportunities and deliver improved supply chain performance.
Welcome to our October Supply Chain EnabledTM newsletter.
With just a couple of days to the US election and two months to the end of the Brexit transition period, we thought it would be an opportune time to examine the interaction between political policy and global supply chains.
Policy and Supply Chain
Whether you lean red, blue, left, or right, the prize of influencing the future direction of manufacturing and international trade is tempting. Who wouldn’t want to bring back manufacturing, rebalance international trade, restore pride in domestically produced goods, or establish a leadership position in product innovation?
We have seen multiple efforts to influence global supply chains from tariffs to taxes and trade and while many have been disruptive, few have had the desired effect of significantly reshoring supply chain activity. So why do supply chains seem to stubbornly resist attempts to steer them in a particular direction? Even with the impact of a global pandemic and pledges from all sides to end reliance on extended supply chains, change on the ground appears to be slow.
Supply chains are in a continuous state of evolution. In an ‘anywhere world’ a core element of supply chain strategy revolves around strategic footprint decisions. Supply chain teams model the impact of relative labour, transportation, and input costs against lead time and capacity criteria.
Here are 7 points to consider for policy makers of all persuasions that want to influence real change in this supply chain footprint.
- Supply chain networks not factories
Todays supply chains rely on a closely integrated network of suppliers with access to raw material sources, logistics networks, and specialist service providers to make them effective. Change is possible but it is more like moving a city than moving an individual enterprise.
- Infrastructure and connectivity
Access to underlying digital and physical logistics infrastructure is critical to the effective movement of information and products. Supply chain teams will consider current needs and the ability to scale so clarity and commitment on future investment policy is as important.
- Access to markets
While physical supply chain infrastructure is highly mobile, the distribution of consumers with the financial ability to spend tends to shift more slowly. Trade and logistics access to key markets is important and barriers or uncertainty around future access will discourage investment.
One of the best kept secrets in supply chain is the wide variety of career options that exist with the plan, source, make, deliver, return, operate continuum. Supply chain talent in the past has evolved more than planned but the talent needs of the future will require connect thinking and action between industry, academia and government.
- Functional and industry targets
Many supply chain functions operate independent of manufacturing or distribution locations. Targeting supply chain shared services and knowledge functions or specific industries can be more effective than a blanket land grab for manufacturing.
The notion of a tax efficient supply chain is not new, but a strategy based purely on tax changes can only succeed when the other supply chain elements are in place. In a competitive global economy with increased international cooperation to combat tax avoidance, the ability to create sustaining advantage in this area is questionable.
- Stability and commitment
Supply chain decisions require medium term certainty that decisions will survive short term political policies and results. Creating a consensus approach around key elements of industrial policy and that addresses known social and sustainability issues can go some way towards building confidence in that stability.
Supply chain partner selection in a travel constrained world
In March, many companies paused plans to assess new supply chain partners. Our traditional processes of tenders, meetings, and site visits were disrupted, and consideration was given to waiting out the process. By April it was clear that we would be living with the impact of Covid-19 for many quarters and like many other areas in life, we would need to find new ways of working in a travel constrained world.
This is as difficult for suppliers and providers as it is for decisionmakers, but we are seeing that decisions are once again being made. We continue to be involved in supporting several of these assessments and processes – with a view on how it is being managed by providers and decisionmakers alike.
It turns out that many of the best practices in normal times can be adapted for a travel constrained world.
- Clarity on Scope is more important than ever
We have always said that if you go searching for a partner without a clear scope, you risk buying from the best sales person, rather than finding the best partner. Completing the work up front on what is required and what success looks like will help all parties to be clear on requirements and how they can be best met. Sharing physical product samples can also help provide a more visual connection to the business.
- Video tours – rooted in place – linked to process
Traditionally a facility tour can take 30 to 90 minutes with explanations about health and safety, security, a walk through the process from start to finish. It includes a chance to meet team members, ask questions, view metrics boards, and point out areas of differentiation. It also provides an opportunity to explain where the new business could be housed and to visualise the flow for customers. The best virtual tours that we have seen follow a similar format (but in a shorter time) – bringing customers on logical stops through the facility, and walking them through the process, explaining what they would see if they were there in person and inviting questions.
- Let the team drive the process
Sales people are important but customers will want to meet the team that will be running their business. The confidence building process comes from letting the subject matter experts demonstrate their knowledge and passion for a prospective customer’s business. Beyond the initial presentations – look for opportunities to have subgroups connect on technical areas for more detailed conversations.
- Governance and executive support
Getting an early understanding of ways of working – meeting cadence, KPIs, reports, reviews – will help set expectations for how the future relationship will operate. It provides for an effective way to communicate and to manage issues as they arise and to plan for improvement and growth. Walking through the process beyond a decision and into implementation will also provide assurance on the path to a successful onboarding of a new client relationship. Clarity on escalation paths if needed from both teams will help as will having visible executive support to provide assurance that resources will be made available.
- Culture and fit
Probably one of the most difficult areas to assess through this process is the cultural fit between organisations. We miss out on many of the normal social interactions over a lunch or a dinner. Where possible spend some time on the context of both organisations, their origins, their values and provide some background on similar customer stories and how those relationships have developed. These can also be supported by choosing appropriate customer references and giving an opportunity to have these conversations.
The usual mechanics of a tender process can be adapted to the current circumstances and there are ways to get assurance and set up for success. With current restrictions, if it is possible to facilitate even a limited site visit as part of the final selection process, we believe that there is still great value in making that happen.
Health Systems Insights Survey
Over the last 8 years, PerformanSC has published four studies on trends within Health System supply chains in collaboration with US based health industry analyst Jamie Kowalski. The studies took inputs from supply chain leaders within Health Systems in the US, Canada, UK and Ireland and examined the impact of consolidated service centers on the inbound flow of materials and services within Healthcare supply chains.
Data gathering for the 2020 report was postponed from the normal April timeframe due to the pressures associated with Covid-19 but this will be launched in the next two weeks. The research will capture the latest insights from Health system supply chain leaders, including the learnings from the experience over the last 12 months.
If you are interested in participating in the research click here to contact us.
We live in an anywhere world, where products can be designed anywhere, made anywhere, and consumed anywhere in the world, through an increasing variety of customer channels. All of this is enabled by supply chain, and with so many choices on how to bring a product to market, those that excel at this discipline have an opportunity to differentiate.
In this Supply Chain Enabled update we take some time to explore the changing paths to customer as we enter the 2020 holiday season. We also provide an update on Brexit preparations and explore some potential opportunities to use customs simplifications post transition period to create increased certainty in cross border trade.
Navigating the route to customer – channel and portfolio strategies
Back in March – seems like a long time ago now – we completed a piece of research in conjunction with Amplify-Global and Avalara on opportunities and challenges in international commerce.
Even before the impacts of the pandemic, eCommerce and marketplaces were highlighted as the greatest areas of future growth but with that growth came additional complexity. Understanding local customer delivery expectations and managing international trade and compliance were among the top challenges. Companies placed a significant reliance on third party logistics providers and benchmarking of marketplace and local retail offerings to provide local market insights and intelligence.
The restrictions on traditional retail during the pandemic have accelerated the growth of marketplace and ecommerce channels. Fedex ground revenues in the US increased by 36% over the last few quarters, Metapack reported parcel volume increases of 60% from March to June and in Ireland DPD reported over 100% increase in parcel volumes. These increases lead to concerns over peak on peak capacity requirements in Q3 and Q4 and we have seen some of the larger freight providers introduce peak season surcharges on deliveries.
Traditional retail is also changing. It is no longer just about brick and mortar as retailers expand their online offerings and position themselves as platforms rather than just stores. They look to engage customers with content, online and in store, leveraging their physical assets as part of their delivery network. Walmart’s involvement in the TikTok purchase, Best buy’s announcement that it would be using 250 stores as ecommerce hubs as part of a pilot and Target announcing that their holiday season staffing plans would enable them to scale same day and curb-side pickup are just some of the developments we have seen over just the last month.
Marketplace and social channels also continue to evolve. With the dominance of Amazon – certainly in western economies, brands find themselves needing a specific Amazon strategy as part of their overall channel portfolio.
Each customer channel represents a growth opportunity but also comes with channel costs, unique operational requirements and implications for overall brand positioning and relationships with customers. Supply chain executives have a key role in promoting a greater understanding of these choices and cost to serve while operationally enabling growth across multiple channels.
As we prepare for the 2020 holiday season here are some of the key things to expect;
- Capacity with parcel carriers will be tight and delivery performance will need to be managed carefully. If possible, spread the risk and volume across a few providers. This may also provide customers with additional choice.
- The shift in channels will also place addition strain on fulfilment and returns operations. The infrastructure required to support the same volume of sales in business to consumer channels will be different to retail and distribution channels.
- We are seeing signals from retailers that holiday season promotions will start earlier to spread the volume more across the season
- Covid will remain a factor through this season and is likely to change how consumers want to engage in the coming months. Safety is a new factor in how customers will shop with reduced store capacity and increased requirements for store pick up and local delivery.
- Retailers are looking beyond just store sales and your engagement with them will be helped if you can support them beyond the store. For example, can your supply chain support a much greater assortment on their online channels that you could fulfil directly to their customers?
Longer term supply chain plans will need to take account not only of expected growth rates but will also need to consider the portfolio of products, channels and geographies that need to be supported. This mix will determine the operational footprint and capacity required to support the business.
Sign up below for our latest webinar with Spieckerman Retail on Aligning Brand Supply Chains to Key Retail Trajectories.
You can also view historic webinars on our PerformanSC youtube channel.
Brexit – opportunities beyond the bluster
As discussions around the potential future relationship between the UK and the EU enter a critical stage, we have also inevitably reached peak political positioning and bluster.
The rhetoric surrounding the future state negotiations has been dialled up and the publication of ‘reasonable worst-case scenarios’ in the UK prepares the groundwork to shift blame to individual companies lack of preparation if we end up with queues of up to 7,000 trucks trying to access the port of Dover. This again raises the potential for delays to critical supply chains, at least in the weeks following the transition period.
We already know that customs paperwork will be required from the 1st January 2021 and we outlined a number of actions that companies should be taking now in our August newsletter and these remain valid ahead of the end of the customs transition period.
Regardless of the political outcomes, there are a number of customs simplifications that companies can consider that may ease some of the compliance burden and costs.
- Authorised Economic Operator (AEO)
- Two forms of AEO – customs and safety and security
- Customs authorities place increased reliance on customs and security procedures for known traders – after application and audit process
- Fewer physical and document related checks
- Easier access to customs simplifications
- Priority treatment if selected for control
- Possibility to request place of control
- Mutual recognition of AEO status with third countries (CTPAT (US) and others)
2. Authorised consignor / consignee
- Regular shippers / receivers registered with customs
- Start (consignor) or end (consignee) customs movement at own premises
- Declare goods without presenting them at customs office
- Electronic authorisation to load / unload from customs
3. Comprehensive customs guarantee
- Defer customs duty and VAT payments from point of import
- Cover customs duty and VAT on transit shipments
- Requires financial guarantee to cover expected throughput
- Guarantee can be reduced for AEO certified companies
4. Customs warehousing
- Store goods in an authorised location without being subject to duties
- Cashflow benefit – duty payable only when goods released into free circulation
Duty avoidance – no duty payable if goods re-exported
5. Inward processing
- Products imported for further processing, manufacturing or repair
- No duty or VAT at the point of import – only due if subsequently released within the customs territory
- Goods tracked and discharged within a specific timeframe
6. Outward processing
- Products temporarily exported for processing or repair outside the customs territory
- Claim full or partial relief from import charges when these goods are re-imported
7. Temporary admission
- Temporarily import goods free from Customs Duties and VAT
- Must not alter the products and must be identifiable on re-export
- Defined timeframe for re-export of goods
Key to getting the benefit from these simplifications starts with an understanding of the customs opportunities in conjunction with the supply chain flows within your business – not just in relation to Brexit. Our team is well positioned to discuss and advise on these matters.
Read more on Brexit planning
AUGUST 2020 NEWSLETTER
COVID-19 – where next for supply chain?
Beyond the human tragedy of Covid-19, the first half of 2020 taught us all a lot about ‘agility’ within our supply chains. The rolling impact of manufacturing and retail shutdowns combined with travel and consumer restrictions, impacted consumer demand and disrupted the channel mix. New requirements for PPE and social distancing created sourcing and operational challenges that will remain with us in the coming quarters.
For many companies, the first half of the year is traditionally quieter and as we prepare for the ‘Holiday’ season there are several areas that may require attention:
- Assess operational capability and consider actions to manage capacity and diversify risk – particularly in areas such as eCommerce and final mile delivery. Parcel demand rose by over 60% between March and June 2020, which will put pressure on the entire chain in managing a seasonal peak on already inflated demand.
- Adding additional delivery options can improve consumer choice and create opportunities if individual partners run into difficulty
- Improvements to order status visibility can proactively manage customer communications and expectations at peak times
- With uncertainty remaining, planning will need to accommodate a range of demand scenarios
- Managing a slightly reduced product portfolio can allow for more flexibility in inventory policy without increasing overall exposure
- Reduction in range can also drive operational efficiencies and can assist in managing social distancing requirements.
- Develop Covid-19 impact scenarios on key in house and partner operations.
- Most companies have already taken precautions to minimise the risk of infection. Consider extending this to include contingencies in the event of the need to temporarily close key operations in the case of infection.
- Engage with partners to understand their policies and how decisions would be managed and communicated.
Thinking beyond the short-term impacts, companies will want to consider how their supply chain reacted to the disruptions caused by Covid-19.
- The scale of disruption to global supply chain operations from Covid-19 is beyond what many would have anticipated within previous risk planning. In many respects the scale of the pandemic tested the limits of existing risk plans and many will have been found wanting.
- Companies may need to develop a more systematic approach to risk and resilience planning within supply chain operations and there are several useful frameworks that can be considered in that approach.
- A refreshed assessment of supplier and customer risks may be required to understand the financial toll taken in many sectors from the pandemic
- There may be some capabilities, developed to deal with the uncertainty of Covid-19 that companies will want to take forward into future supply chain processes.
- 2020 has seen an acceleration in a shift towards digital channels – much of which may continue beyond the immediate impact of Covid-19.
- This will require an alignment channel strategy and operational capabilities to meet this demand.
- There have been several casualties within high street retail and a rethink of role of retail within the customer purchase experience will need to be developed.
- The changed economic landscape is likely to drive a more urgent need to accelerate transformation to improve cost to serve or to take advantage of emerging market opportunities
Read more on planning for recovery post Covid-19
Lorcan Sheehan speaks to Tom Raftery of the Digital Supply Chain Podcast on how businesses are coping with risk and resilience in their supply chains.
Click HERE to access the Podcast
We participated in a number of new webinars on Brexit, Covid-19 and eCommerce strategies that are now available on the newly created PerformanSC youtube channel.
Brexit – latest status
The UK formally left the EU in January and on the 1st January 2021 the transition period which effectively maintained the status quo from a customs and trade perspective comes to an end.
From January 2021:
- Shipments between the UK and the EU will become third country shipments requiring customs formalities for all imports, exports and transit shipments.
- Special rules will apply to Northern Ireland which will allow free movement of product north and south on the island of Ireland but there will be some formalities required for shipments between Northern Ireland and the rest of the UK.
- The UK will lose the benefit of the existing free trade agreements between the EU and the rest of the world, but it is free to independently negotiate its own trade agreements.
- UK and EU materials will no longer be considered as a common origin which may impact final product origin for trade purposes
- In the absence of a UK – EU free trade agreement, shipments between these territories will be the subject of WTO tariffs and quotas. Progress on such an agreement has been stalled for some months and if an agreement is reached, it is expected to be more limited in scope than the original ambition.
Many companies have already conducted extensive preparations for the customs formalities associated with Brexit. For those that find themselves less prepared we would suggest the following minimum actions:
- Ensure that your company is registered to trade with the relevant customs authorities
- Engage with suppliers, customers and logistics providers on the impact to shipments post 1st January 2021 and ensure that there is clarity on:
- Which company will act as importer and exporter of record?
- The incoterms in place for trade which will define the responsibilities of the buyer and seller in each transaction
- Who will prepare the necessary customs paperwork and the costs associated with this administration?
- The source of information around tariff codes, origin and valuation that will be required for customs paperwork
- Potential to buffer for delays once the transition period comes to an end
- Train key supply chain, logistics and finance personnel on customs matters, company and individual responsibilities.
- We have developed a variety of courses that can be delivered online including a Brexit essentials series that can be tailored to your individual company needs
- Explore potential exposure to tariffs and consider whether the application of special customs procedures could be of benefit to mitigate against the expected changes.
Read more on Brexit planning