From merchandising and demand to warehouse and logistics, factories have been gearing up for the December holidays. We will start with what happens earlier in the year, knowing from a process perspective that we should start with Demand. However, it seems more interesting to think about what is happening ‘right now’ (or any other time there are volatile conditions). This document is designed to provide an across-supply-chain ‘checklist’ of practices and actionable suggestions to tune your supply chain for better performance, no matter what the season.
With Chanukah’s first night, Black Friday, and Cyber Monday upon us, retailers are advertising their doorbusters, stocking shelves, and pushing promotions. Though late, factories for consumer products are working around the clock to respond to demand variability that will ultimately occur no matter how well-planned the holiday season may be. The volatile economy and new focus on geo-risks are changing the way many companies procure products.
- Financing—long purchasing and payment schedules are gone. 30-day payment schedules (or shorter) are in. And an interesting factoid I have heard from many smaller manufacturers is that many of the supply chain members are not connected electronically. So there is little-to-no room to move—in other words, that 30-day payment schedule is eaten up by delayed receiving and snail-mail payments. From auto to pharma to consumer supply chains, the tight cash situation is having an impact on inventory management strategies and supply chain agility.
- Compliance—globally we have seen a huge increase in regulations. But in the smaller factories, many manufacturers have not been able to implement much. Instead, they have packaging and logistics companies do a lot of the compliance work for them. However, the better the factory implements EDI, labeling, ticketing, and traceability, the better prepared they are to compete in
the global economy. Larger firms have been chipping away at these issues as they arise.
- Inventory staging—Vendor Managed Inventory, Consignment, and other hedging strategies are hot topics now, due to the above issues. Demand uncertainty due to economic volatility leaves retailers in doubt about how much they will actually sell. The lower-tier factories will not retain inventory—that is on the boat. And factory orders may be inadequate to meet rapid upswings if demand improves. The issue for manufacturers is the need to get their house in order regarding planning methods and risk strategies for up- or downside demand.
- Increases in transportation costs—added to the issues associated with volatility are the recent rate increases by carriers. So if you don’t get the model right, you will pay multiple times for shipping costs.