I have held previous positions where there was a separation between packaging engineering and logistics. “We design what the customer wants, then it becomes logistics’ responsibility to calculate and figure out the method and costs for moving it around.” Over the past year at ModusLink I have had several dimensional weight projects come across my desk that show how these two disciplines are so clearly interrelated.
For those not familiar with the term “dimensional weight,” let me explain. When carriers ship parcels by air, there are two different ways to cost the freight. These two categories are actual weight and dimensional weight. Actual weight is basically that—the actual weight of the item. In order to avoid losing money by shipping air in a too-large container, carriers will also calculate the dimensional weight of a parcel. This is often done with a formula such as (length x width x height)/constant. The two numbers are compared and the one that is larger is what the carrier will charge.
In the submitted case study for our most recent Green Supply Chain Award, our client was using a stock package for shipments that were predominantly orders for a single phone, although the box could accommodate more. As a result, they were shipping unnecessary amounts of air and being hit by the larger dimensional weight shipping costs. By designing size-appropriate packaging, ModusLink was able to have shipments charged at actual weight. This relieved the client of the dimensional weight surcharge for over 90% of their orders.
Another benefit with this redesign is the elimination of unneeded bubble wrap. Not only is this a material and labor costs savings, but the lack of excess packing material also gives an improved out of box experience. By removing bubble wrap, which the customer ultimately has to throw away or try to reuse or recycle, and reducing the shipping box’s size, our client was also able to achieve a reduction in the carbon footprint for the packaging by decreasing the CO₂ generated to produce the packaging materials.
Combining packaging engineering with logistics is the smart approach. In this case, it checked all the boxes (pun intended) and provided a package that was less costly to ship, less costly to source, measurably more sustainable, easier to assemble and a better experience for the customer.
-Tyler O’Neill is a packaging engineer at ModusLink
While developed markets continue to command a significant share of global online retail sales, they show signs of saturation. To find new growth avenues, online merchants should consider looking beyond their domestic and developed markets.
However, when planning international expansion, online merchants should thoroughly consider how a broader e-business strategy will fit within their existing value-chain, specifically in areas of customer service, finance operations and logistics. The challenge is to balance consumer preferences and expected purchase experiences against the cost of increased complexity in back-office operations.
Global expansion will increase the complexity businesses face. Diverse government structures, unique social and business cultures, and an ever-changing array of legal requirements and compliance policies make it difficult to overcome country-specific challenges.
Online shops must be fully localized in terms of language, terms and conditions, pricing, check-out process and culturally preferred payment methods. Add the complexity of various import taxes (sales tax, VAT, GST) and foreign exchange and repatriation rules that need to be carefully attended, and it’s clear that a business may need to consider a country-by-country strategy. The online shopping experience continues long after payment and includes shipping, customer support and possible returns or repairs. All these factors need to be adjusted to the local flavors. A “one size fits all” approach will not be successful.
Of the various challenges, the complexity of government-based monetary policies can quickly become an organization’s biggest headache. Even very attractive emerging markets, for example Brazil, pose this problem. In fact, multifaceted tax, import and repatriation rules can be some of the most difficult issues to untangle and manage over the long-term.
E-Commerce taxation is a complex and dynamic field, as governments’ modify tax regulations to cater to ever-changing public policy needs. In the past decade, administrations have struggled to agree on tax treatment for cross-border transactions. In the context of international e-commerce, this complexity is compounded as online merchants have to deal with the differing tax treatments of multiple countries. For online merchants, the risk of non-compliance can be direct penalty cost, as well as indirect cost in terms of reputation damages and for those reasons it is imperative to carefully manage this element.
Consider as an example, the changes the European Union has introduced to its VAT rules as a way to level the playing field when selling cross border e-services (e.g. downloads). Currently the applicable VAT rate is based on the merchants’ locale. However, in 2015, both EU and non-EU merchants will have to collect applicable VAT rates based on the consumers’ residence. For instance, the applicable standard VAT rate in Germany is 17%, compared to 21% in the Netherlands. Assuming product pricing is the same in both countries, Dutch consumers currently have a higher incentive to buy from an online merchant based in Germany, but this will change. The online retailer has a rather large responsibility to its consumers and countries where it does business and must understand and appropriately apply these changes to its model.
The critical difference between you and your competitors isn’t always about who offers the better product or service, but the experience customers have throughout the end-to-end purchasing event. A prerequisite for you to be successful is to fully understand the characteristics and regulations of the markets you are targeting. This positions your business to operate at a more professional level, with less risk of consumer dissatisfaction with a transaction. As a result, there is potential to gain a competitive advantage by developing an optimized payment mix in combination with a competitive e-commerce model.
Choosing the right partner can be the make- or-break decision that determines success in expanding your global footprint. An experienced partner can not only to help you tackle country- and industry-specific challenges, but also to help you grow as your e-commerce strategy evolves. In some cases, going a step further beyond payment transaction basics and outsourcing the primary elements of financial management operations, the supply chain and e-commerce processes provides the optimal solution, empowering you to focus on your core business. After all, e-commerce success is more than just payments.
When expanding your e-commerce strategy, look for a partner that is ready and able to extend your market reach, offering localized shopping experiences such as regional payment options and processing, multilingual contact center support and deep knowledge of local logistics, import and export complexities.
I’ve written before on our company’s work with the EICC. (Reminder, that’s the Electronics Industry Citizenship Coalition.) What I love about being so engaged with this group is that the work leads to valuable, measurable and visible results.
A lot of very dedicated people from the top electronics companies in the world are involved in ensuring we as a global industry not just meet the minimum criteria, but continually improve efforts around the use of natural resources and providing safe, healthy working conditions. EICC membership is currently at 89 companies, 40% of which we are proud to call clients!
Last fall, I led a sub team from the EICC’s Validated Audit Program (VAP) workgroup that created the EICC Facility Recognition Program. I officially launched the program at the EICC membership meeting in Taiwan last March.
We wanted a way to recognize those facilities managed within the EICC framework that took the extra effort to complete the entire VAP audit process, including what may be the most important phase – implementing corrective actions where necessary. This is no easy task and completion really shows a deep level of commitment and transparency in the electronics supply chain. And it’s not a “one and done” scenario, because the recognition is valid for a maximum of 2 years, ensuring the continuous nature of continuous improvement.
To date, the EICC Facility Recognition Program has recognized 10 global sites including facilities in the US, Mexico, the UK, Thailand, the Philippines, Hungary and Malaysia. Companies receiving recognition include Seagate, International Rectifier, Onsemiconductor, IBM, Ureblock and ModusLink. ModusLink currently has 3 facilities that have earned recognition: Raleigh, NC, and Miami, FL in the US, and Penang, Malaysia.
You can read more about the EICC Facility Recognition Program and other details on the coalition in the 2012 EICC Annual Report.
-Blake Cambey is a Regional Quality Manager at ModusLink
No, it’s not a reference to what is quite possibly one of the worst jokes ever (you know the one about the excellent farmer.) I’m talking about excellence in the global 3PL market, which is clearly vast and varied. There are specialists in every geography and vertical and no matter what anyone’s marketing materials might say, there can never be a single one-size-fits-all solution. There are, however, a few supply chain service providers who exceed expectations and go far beyond the basics to fully integrate with their customers’ business operations and help them drive top-line company goals.
The highly knowledgeable editors at Inbound Logistics take on a yearly task to uncover these strategic leaders in the industry and ModusLink has just been highlighted as one of their 2013 Top 100 3PL Providers. There’s no single metric. A lot of factors go into the selection including diverse operational capability, ability to mitigate rising costs, experience, skill in managing risk and disruption, security and an overwhelming amount of regulation and compliance, quickly changing market demands.
In addition to all of these, one of the key metrics we hold ourselves to as a core value is strategic vision on behalf of our clients.
Felecia Stratton, Editor of Inbound Logistics stresses, “Tactical operational results are fundamental to 3PL value, but so is the strategic vision of experienced logistics providers. IL readers say they appreciate 3PLs that are consultative, proactive, take the lead in sharing best supply chain practices, and help to drive enterprise business process improvement.”
This is our goal for clients and why we are honored to be chosen as a supply chain service provider by the top names in high-tech, consumer packaged goods and other intense, global and quickly-changing industries.
Corporate Social Responsibility or “CSR” today goes far beyond a feel-good message. As my colleague Doug Cutler discussed in a recent article for Supply & Demand Chain Executive magazine “it is in many cases a fundamental business requirement for ModusLink as a supply chain provider to be heavily engaged in the same environmental, health and safety programs as our clients.” The fact is more and more companies are looking at global CSR-based initiatives like EICC and incorporating those principles not only into their own operations, but also into their supplier requirements.
This is obviously moving large numbers of companies in an excellent direction toward real and measurable improvements in ethical and environmental standards. And in many cases, there can be clear synergies between CSR initiatives and business-driven initiatives.
For example, we recently worked with Toshiba Electronics Europe on a packaging redesign (you can read the full case study here.) The engagement resulted in a best of both worlds situation.
The company experienced clear bottom-line cost savings by overhauling its memory products’ packaging—in some cases with up to 80% less material. By carefully taking stock of the environmental impact in all aspects of their business, Toshiba naturally measured the sustainability impact of this efficiency project. The company can report that not only did they save considerable money by reducing materials use and improving the shipping density of their products, they also realized a 31% reduction in annual CO2 emissions as a result.
I believe this will become a norm as enterprises begin to routinely think about operational improvements and CSR initiatives in tandem. What better place to start than with your supply chain?
Last month, ModusLink was recognized by our customer AMD for their annual Supplier Excellence Awards. And to channel a gracious Oscars contender, “it was an honor just to be nominated.” But truthfully, this wasn’t just any industry award—it garnered more excitement and held a bit more meaning. Why? The answer is pretty simple: the kudos came from a client.
Like any company, ModusLink doesn’t exist without our customers. They are the reason we work so hard each day. We genuinely want to help them run their supply chains in the most economical and sustainable way possible. So when we are publicly recognized for our good work, we get excited. A “thank you” is certainly recognition enough, but a trophy sure makes our day!
Here are three reasons why I believe customer awards are the best kind of recognition to receive:
1. Validation from the People You Work With Everyday
This is the primary reason we love these awards. Customer awards are a direct and public acknowledgment of the collaborative work we do for our clients every day, and that’s special. When a customer gives out an award unprompted, it shows the appreciation they have for the energy, attention and work you put into their business. Industry awards are great validation for a company’s vision and services, but customer awards are ultimately about the people and the work they do.
2. Building Existing Relationships
Winning a customer award offers a great chance to reinforce the existing relationship. It’s a great opportunity to talk about expanding your existing partnership and look at additional ways a new service expansion of the partnership can benefit other aspects of your customer’s business. At ModusLink, many of our longest and best partnerships are built this way. By starting small and demonstrating competency in one area, you gain the trust to help with more.
3. Finding New Relationships
Customer awards are a great way to build relationships with prospective clients. Companies are just like people—they want to work with a proven winner. When others see the good work you’re doing, they’ll want to bring that same success to their business. Often, this third party validation holds the most weight in a company’s decision on awarding new business.
Have you won a customer award recently? What did it mean to you? We'd love to hear your thoughts.
Apps are changing the face of the supply chain. It is already possible to order products and track parcels through apps. However, there are some more innovative apps that have caught my eye over the last few weeks that will undoubtedly have an effect on how we build supply chains in the future. One such app is Postmates.
The Postmates concept is to provide one hour delivery of a product in a local area by matching customers with couriers and bike messengers who have free capacity to deliver an item. Currently the system operates in San Francisco, Seattle and most recently New York. Couriers register online and receive information about their next pickup and delivery through their smartphone. It’s similar to the way the Hailo Taxi app works—the customer can see information about the courier and track the delivery.
Currently, the main customers for the service are restaurants and local stores. Whole Foods has embraced the service and pays the delivery fee for the customer. This innovative method of delivery will not go unnoticed by the large retailers and e-tailers and it will be interesting to see how they will capitalize on the service.
Another app that will change supply chains in terms of getting more accurate data on shelf detail from retailers is Easyshift. It allows the general public to earn extra cash by taking small shifts to photograph shelves in stores and take simple notes on a product’s availability. After each task is completed, the person gets paid immediately. The beauty of this app is that a company can immediately see how a marketing campaign or the demand for a product is going without relying on ERP data from the retailer.
The app space is growing and will undoubtedly change the supply chains of the future and there is clearly no shortage of innovation.
Despite Crude oil prices being down fairly consistent $92-$93 a barrel range, compared to 18 months ago where they were close to $110 a barrel, price fluctuations are still certain to present themselves.
Fuel price fluctuation is not an isolated incident, but a long-term challenge for supply chain management with a direct impact on the bottom line. It presents many challenges as the instabilities make budgets difficult to project and render budget adjustments merely a short-term solution.
Now, as much as when crude oil crossed the $140 per barrel threshold in 2008, or even fluctuated to $98 per barrel this past February, companies should be pushing themselves to explore alternative options and transportation efficiencies within the supply chain that will impact shipping costs.
When possible, companies should seek alternate routes that reduce mileage and transit lengths, but must also consider ways to ship and deliver goods more efficiently if they expect to manage these short-term rises and lulls, and long-term increases in prices on oil. Three alternatives to consider now are:
- Rail Transport from China to Europe: Put into operation in 2012, the Yuxinou (Chongqing-Xinjiang-Europe) International Railway provides an alternate shipping method to Europe for multinationals that have set up factories in central China. Shipping by air remains expensive and trucking goods to a port and shipping them to Western Europe can take up to 40 days. According to Bloomberg, “although the train is about twice the cost of shipping by sea, it takes only 21 days for products from a factory in Chongqing to reach Western Europe by rail. The carbon footprint of rail, meanwhile, is about one-thirtieth that of air freight.”
- Slow Steaming Sea Transport: Sea transport is another alternative. By decreasing cruising speeds companies are also able to decrease fuel consumption – significantly – ultimately leading to a reduction in shipping costs. Traveling more slowly also improves the CO2 footprint, lowering emissions without any significant innovation. The challenge with slow steaming is a lengthened supply chain, requiring more consideration, accurate modeling and preparation for demand – especially for unexpected oscillations or those that occur seasonally.
- Reimagining Packing: With shipping costs increasing across the board, forward-looking companies are seeking out innovations on the variables within their control, and package design can have a significant impact on transportation. Companies should question their current packaging and its excess, as well as how much more they could get on a pallet by reducing product size. Both dimensional and air weight can be decreased by eliminating and reducing unnecessary accessories, inefficient materials, or extraneous space.
Ultimately, innovation in logistics and distribution strategies that minimize transportation are the keys to managing supply chain during ongoing periods of fluctuating transportation costs. If companies put in place a way to improve upon, or maximize the transportation lines they’re already employing, a jump in price won’t amount to extreme disruptions in the supply chain.
E-Commerce payments have seen tremendous development in the past decade. During the last 15 years, the market has expanded and is still growing. The e-business industry, however, suffers from a lack of standardized, country-specific rules and regulations. The impact of not identifying necessary measures such as local acquiring, offering local payment methods, and taking cultural differences into account has a tremendous effect on revenue, fraud expenses, operational effectiveness and is a threat to the overall success as such.
On Tuesday I’ll be part of an expert panel discussion at the CNP EXPO addressing “Breaking into Brazil (and other cool places)”. The main theme will be to discuss the pitfalls merchants face trying to take card-not-present payments in a faraway land. These range from legal issues to currency conversion, import tax to repatriation issues—and there are many more.
Planning the elements of your end-to-end e-commerce strategy starts with your product or service and culminates with the successful completion of the payment process (although the sales cycle can continue long after payment to include shipping, customer support and possible returns or repairs.) Your proposition is key, determines your online strategy and can be impacted by the payment process. The effort to create a pleasant experience on your website will not have the wanted effect if the checkout flow and payment pages are not well thought through and don’t take the right payment method mix into account. In the end, that’s where it’s happening, that’s where the deal is closed, where shoppers convert to buyers.
We will be sharing tips and tricks on how to be successful, increase conversion rates and comply with local tax and repatriation rules while avoiding profit-damaging surcharges for yourself and your merchants.
Don’t forget that the critical difference between you and your competitors isn’t always about who offers the better product or service, but the experience customers have while dealing with you throughout the end-to-end e-commerce process. When choosing your payment partners largely on cost considerations, cheap can turn out to be very expensive.
As a reformed chemical engineer now leading sales in the high tech space, three days at the end of February at the SCMWorld conference in Miami with supply chain leaders across a broad range of industries took me back to the early days of my career, when I had more opportunity to interact with leaders in aerospace, pharmaceutical, and consumer goods. I was fortunate enough to speak at this event, and chose a topic: “Don’t Outsource Your Supply Chain, Transform it with your Customer in Mind.” Given the cross-section of industries represented, I was a little concerned that my topic might not be considered relevant to many, but judging by the range of companies that chose to attend (without leaving half-way through my talk) some of the common themes were definitely relevant.
The message that I attempted to convey was that the traditional approach to outsourcing one’s supply chain is fundamentally flawed. It reinforces a silo approach to supply chain, moving existing problems, hindering visibility, adding complexity, and creating barriers between you and your customers.
True supply chain transformation starts with an understanding of your customer requirements and your company’s business objectives, and designs an end-to-end supply chain that best aligns to meet these requirements and objectives.
Functional area experts in material sourcing and procurement, manufacturing, and logistics can drive cost reductions in their functional area. However, after years of driving functional improvements and excellence, the opportunities most frequently lie in the interaction between functional supply chain disciplines. Collaboration is required between those that analyze and those that execute to push the parameters of what is possible in the real world through strategies including network optimization, postponement and packaging redesign. It is only in this context of enabling or accelerating supply chain transformation that outsourcing provides real value.
In starting a supply chain transformation, we align our supply chain with our customer requirements and our business objectives, by first understanding “Who is our customer?” Certainly it is the purchaser of a product, but the more complicated answer must consider all of the different channels involved in getting the product to that customer, as they also will have a significant impact on the requirements for the supply chain. Second, we must consider our corporate objectives and market position. The supply chain for a cost-leadership, mature product will have different requirements than one for a technology-leadership, emerging product.
With these objectives in mind, I discussed some of the tools and processes that can be used to enable this transformative process, and provided some examples to illustrate the trade-offs between functional areas that must be managed to optimize on a broader supply chain perspective. Specifically, I highlighted the benefits of incorporating this broader view on supply chain design and on packaging design. Most importantly, I stressed that this design process needs to be collaborative in including all of the internal and external partners that will ultimately be a part of the design and execution across your supply chain.
Based on the questions and dialogue during and after the session, I was pleased to see that the overall message was relevant across industries. Given the quality of speakers and topics at this forum, I considered myself fortunate to simply be included with this group and look forward to participating again at their next event. While Miami in the winter will be hard to beat as a venue, Scotland should be fun as well.