This two-part series highlights social media’s role in today’s supply chain organization.
In our first post, we looked at the potential benefits of social networking for supply chain professionals. This second post takes a look inside and around organizations to explore the multidimensional applications of the technology from staff to investors:
- Your workforce and human resources department: With workforces dispersed worldwide, technology enables the HR department to keep in touch with employees. New applications such as Socialcast and Opentext make it even easier and provide more effective ways to communicate with your own workforce. But perhaps the best value social media can offer to your HR management is in the area of recruitment. Here, the likes of LinkedIn can prove very valuable in identifying the right talent your organization needs, shifting the focus from reaching out to potential candidates to sorting and vetting the large number of possibilities – a nicer problem to have you may agree.
- Your public relations, advertising and marketing professionals: Never have any organizations held as much personal information on its members as sites like Facebook, Qzone, VKontakte, Bebo, and Foursquare do. While creating legitimate privacy concerns, the irony of it all is that users are voluntarily giving up personal information themselves. Social channels allow professionals to learn more about the likes and dislikes of followers, allowing for incredibly targeted marketing messaging. It also offers brands a multitude of channels to connect with customers and prospects on, whether it be YouTube, Flickr or Pinterest. Keep in mind that social channels also come with their own pitfalls as the recent ill-fated Twitter campaign from McDonald’s has demonstrated when it backfired within hours. No idea where to start? Don’t panic, a new breed of agencies, such as Converseon, specialize in social asset management offering advice and services to prevent you from making a total leap of faith.
- Your market research and R&D groups: Gone are the days of the infamous ‘suggestion box’ which – let’s face it – never lived-up to expectations. Companies like Spigit offer tailored Enterprise innovation management solutions to generate, collect and analyze feedback from your staff, collaborators, focus groups or your market. Brands can also encourage participation via these platforms by offering incentives and virtual compensation packages, making the process much more likely to succeed.
- Your investors and finance organization: If you are a public company, you are probably finding it difficult to properly communicate with individual investors via social channels. Platforms such as Wikinvest or StockTweets are becoming very popular among individual investors and offer a potential tool to interact with them. Governments and regulators are also looking for new ways to get shareholders more informed and engaged and are reviewing what social media could bring to the investment arena. On the other hand, such is the pace of social networks that any kind of misleading information can have a direct impact on your stock price and monitoring social media in real time is a new skill Investors Relations specialists will need to learn quickly. Regulation may still restrict your ability to share critical information, but investor forums can be a powerful way of getting feedback and ‘taking the temperature’ from the otherwise silent majority.
I believe we are still in the early days of social media in the workplace and various elements will need to be addressed such as privacy, confidentiality, legitimacy, piracy to name a few. No doubt that it will shake-up a large number of policies - perhaps much further than the emergence of ‘e-mails’ triggered in its early days. One thing is fairly clear - if you intend on keeping the lines of communication open with your customers, staff and other stakeholders, you will need to connect with them on the social platforms where they are congregating. Go on, give it a go, you could even save costs in the process!
I came across the 40 risks and mistakes of supply chain outsourcing in Supply Chain Digest and thought I would share with you some for my favourites:
- Inadequate business case development for the outsourcing decision – Often decisions are made on perceived cost alone, however hidden costs are not built into the business case, for example freight impacts, Tax implications, the impact of flexibility.
- Outsourcing undesirable functions versus the ones that provide greatest competitive advantage - In many cases the difficult or hard to manage functions are outsourced, however they may be core competences that should be insourced. It must be clear the value outsourcing a function will bring.
- Not casting one’s net widely enough for potential providers of the service, and thus missing good candidates - Many companies you have an outsourcing relationship with will tell you they have a specific set of skills but often on further examination capabilities are limited if not non-existent.
- Insufficient knowledge of service provider capacity limitations - Understand space availability and manpower requirements, get detailed information on how the supplier flexes during peaks and what you get for your money.
- Having an unrealistic timeline for any of the steps of the outsource process including start-up - Often outsourcing is complex and it must be implemented in a way that limits risks especially if the process relates to revenue generation. A pilot program usually limits risk and allows for a timely smooth start up.
- Inadequate planning concerning information systems and interfacing with the service provider - Systems integration is costly and needs collaboration from both sides, often resources need to be booked well in advance of the implementation date.
- Lack of incentives for provider continuous improvement - Aligning incentives is key to creating a long term collaborative relationship. The business should make both parties be profitable to achieve long term objectives.
- Lack of a formal “lessons learned” roundtable on outsourcing in general and, specifically, established outsourcing relationship - An open collaborative approach is required to build a long term relationship. A formal review process such as QBR’s will help in this process.
Do you have any favourite mistakes you would like to add?
This two-part series highlights social media’s role in today’s supply chain organization.
If you think that social networking is a distraction and serves no other business purpose than to give marketing executives an excuse to tweet during working hours, well, I have three things to say to you: One, you are probably not alone. Two, you could well be right on two accounts. Three, you may still want to reconsider your thoughts on social media and the role that it can play in your business.
Like it or not, social media is an extraordinary phenomenon. With the exception of a few obscure chat rooms, the concept of social media did not exist 10 years ago. Yet, it is now estimated to involve and connect over 1.2 billion people on the planet, or more than 80 percent of the Internet population. Facebook, YouTube and Twitter are undoubtedly the leading forces behind the social era. However, a number of other networks are also making a remarkable “social” contribution for supply chain professionals.
Below are examples of these social tools and the benefits they can bring to various parts of your organization:
- Your end customer and customer support organization: It is probably fair to assume that a large portion of your customers are active social media contributors. In the last few years, a number of companies have seen that it only takes one influential and dissatisfied customer to damage your brand reputation online. However, this is a risk that can be mitigated. Dell, which relies heavily on its own e-commerce site to sell its merchandise, has recently taken an active step in monitoring what is said about the company via social media. The company is using a social media monitoring platform called Radian6 in its Social Media Listening Command Center to listen to and analyze more than 20,000 daily posts - and act where necessary to convert negative comments into satisfied customers. Before social media, satisfied or dissatisfied customers would share thoughts with a handful of their friends. However now in the social era, one unhappy person’s thoughts could be shared with a network of “friends” averaging over 100 people. The good news is that this also creates an opportunity for positive messaging which Dell well understood.
- Your channel partners and sales force: Sales representatives were the first people to safeguard and organize their Rolodex through online solutions such as Plaxo. However, these address book alternatives have been outpaced by professional networking sites such as LinkedIn. Professional social networking sites offer value-added tools that allow you to make targeted connections, leverage your extended network to a level never seen before, or just ‘keep in touch’ with more direct contacts than could have been manageable a few years ago. Industry groups and forums on LinkedIn are also becoming a meaningful way of identifying opportunities and gathering intelligence on your market as well as your competition.
- Your suppliers and sourcing/procurement specialists: Supply chain professionals have had access to specialized procurement platforms for decades. But what the Internet has brought is a faster way to access this information with a wider reach. Now brands like Salesforce are incorporating social media to create Enterprise social networks like Salesforce Chatter. Enterprise social networks like Chatter are cheaper and more informal ways of inquiring about solutions, prices or any other type of information that can help streamline sourcing, pre-qualification or even risk-management. This is also becoming an effective way of disseminating information (be it new policies or else) to your supply base and keeping an eye on what is happening with them. Finally, embedded survey tools or more sophisticated RFP (request for proposal) solutions can also help a great deal in making their administration more efficient, and this is also valid for the supplier selection process.
Next week we’ll explore the benefits social media can bring to your workforce, marketing, R&D and even investors relations. In the meantime I’d be delighted to hear your comments on your experience with social networks in the professional context.
According to an article by Jack Farchy in the Financial Times, oil prices have reached an eight-month high at $121 dollars per barrel and this trend does not seem to be about to change with current tensions in the Middle East. Did you ever wonder how much of that translates into a direct supply chain cost impact? Let’s take a closer look.
Freight providers are naturally the first to feel any fluctuations in fuels prices and they need to protect themselves through their pricing models. To do this, many impose fuel surcharges or escalators which are adjusted on a regular basis (usually monthly) to pass on higher (or lower!) costs related to the purchase price of fuel.
Most major companies take the published price of fuel in the local country or region and then use it on a scale to apply a percentage escalator (or more commonly known as a surcharge) to the base freight charges. The escalator is based on the percentage of fuel that will likely be used to provide the service. For example, fuel represents a much higher percentage of total cost for air freight services than it does for trucking. As a result the escalator for air freight services will be much higher than for trucking services.
However, fuel surcharges and service prices are not calculated in a universal manner. For example, all major freight providers have their own fuel escalators. An understanding of total service price requires knowledge of both the basic service price and the fuel escalator rules. Each fuels surcharge system must be investigated carefully to understand the ultimate impact on the costs of freight.
Let’s take a look at the escalator of UPS Express Critical Service, an air freight service. As demonstrated below, UPS Express Critical Service’s escalator is based on U.S. Gulf Coast Kerosene-type jet fuel prices.
(USGC) kerosene-type jet fuel historical prices
Source US Energy Information Administration
Clearly there has been a steady increase in these jet fuel prices – which have essentially doubled over the last year. But what does this mean in terms of the fuel escalator on the basic price of freight?
The below graph illustrates that as the fuel prices increase, the percentage fuel surcharge that applies will increase on a defined scale. Many providers will also provide bands for price stability within which fuel prices can fluctuate without driving a change to the escalator percentage.
UPS Surcharge Example
Source UPS
So what things should we look for in the surcharge system?
- What fuel and pricing mechanism is the surcharge based on?
- How often are the prices reviewed? (monthly, quarterly)
- Are they based on the costs of the previous month or an average of three months?
- What is the method of application of the surcharge?
- Are the bands small or large?
- How does the surcharge system change at different price points for fuel?
The cost of fuel can have significant effects on your supply chain. Understanding that impact is important as there are business levers that you can deploy to as the impact gets larger – network optimization, packaging redesign, postponement, changes to mode, etc.
Do you know what a further 20 percent increase in fuel costs would mean for your supply chain?
After visiting several clients to discuss further optimization of their business I noticed that managing an e-store is not always as easy as expected. When analyzing e-store launches, we noticed that a lot of attention was given to topics like:
- Web design, web functionality, (international) payments solutions, legislations and tax and customer support.
- The (IT) project management for development until the close of the hypercare period was going smoothly.
- Outlining roles and responsibilities for maintaining the e-Store.
However, when the monthly results of the online sales figures were reported, it was noticed that the goods sold were not in line with the forecast. But why does this happen?
Process integration
As mentioned in one of my earlier blogs the interaction between sales, online marketing and IT is critical to become successful in the online world. It is essential that the processes between these functions are linked and where possible are integrated. Several international consultancy/analysts firms have been reporting on the importance of integration of e.g. online marketing in relationship with successful management of an online store.
Most organizational structures do not encourage communications between departments, as the reporting lines are often not in line with the process structure. Therefore it is preferred to implement functional processes that enforce the communication between the different organizational teams. This could be done with a matrix organization or a temporary project structure with sufficient mandate to implement change. When those procedures, communication and reporting are clearly defined and managed it will help to achieve the objectives and provide the mechanism to steer and align activities.
Organizational implementation
If we examine existing e-store implementations we notice that a clear split has been made for the operational functions. What frequently is seen is the following organizational implementation:
- e-Commerce shop management function is (part-time) performed by the client
- IT Web store management is outsourced to an external party
- Payment processing mostly outsourced to a specialized provide
- Customer services is performed by the same or another external party
- Fulfillment is performed by the same or another external party
What is being noticed is that even having a fabulous designed web store that is technically functioning superb it is no guarantee for success. If your website can not be found online by your potential customers the success will be limited. Therefore the importance of the eCommerce shop management function is vital for launching and maintaining a successful web store.
Requirements for sourcing models
To ensure that e-commerce shop management will contribute significantly, it is a valid option to have an experienced/specialized party involved to do the set-up of the shop management function. Based on their knowledge and use of supporting tools/techniques they can do the initial set-up and implementation of this function. When your own organization wants to and is capable of performing this function on its own, the sourcing contract needs to be flexible enough to provide you with the opportunity to do so without any impact to the other contracted eCommerce services.
Suggested E-2-E communication model
To ensure that the integration of on and offline channels is secured it is desirable to have periodic alignment sessions. During these sessions a check is performed on brand strategy, strategic marketing planning and related items.
The online marketing function is more and more an integrated part with the other (technical) functions needed to support an e-commerce solution.
Conclusion
When outsourcing an e-commerce solution, it is preferred to have the possibility included in the sourcing contract, to insource/re-source the online marketing function. You should have the flexibility to do this without jeopardizing the other services in the contract.
How is your online marketing function organized?
Over the last few months, I have seen an increasing number of companies taking a hard look at the role China plays in their supply chains. For a variety of reasons, many companies have already begun moving certain manufacturing and supply chain activities out of China and back to the U.S. For example, last year Sleek Audio moved 100% of its operations from Guangdong, China to the U.S. citing concerns about quality and process control. American handbag manufacturer Coach also recently moved a significant portion of its operations out of China to escape rising labor costs. Unlike Sleek Audio, however, Coach moved these activities not to the U.S. but to India, Vietnam and the Philippines. Plenty of analysts are seeing this as a more likely trend. This article makes the case that while manufacturing may shift away from China, it will most likely move to lower-cost countries as opposed to the U.S. or the U.K.
When companies look at their supply chains and re-evaluate which activities they perform in China, there are five primary factors they must consider.
- Labor costs in China are rising. Recently wages have risen by 15 to 20 percent per year. Whether they will continue to increase at this rate is questionable, but a continued increase is a near certainty.
- The value of the Renminbi against the dollar is increasing. If this trend continues, as it has over the last 18 months, doing business in China will become increasingly expensive for American companies.
- Performing supply chain activities closer to consumer markets can improve responsiveness to shifting customer preference.
- Protection of intellectual property is a top concern for many companies, particularly those in highly competitive markets. Companies must be able to establish processes and select partners that will ensure their IP is safe.
- Many supply chain costs are difficult to predict or model. For example, predicting how often an unexpected rework or engineering change will occur can be difficult, even when historical data is available. Supply chain design decisions will have a significant impact on the cost of these kinds of events when they do occur. In some cases, these costs can be so significant that they offset any expected savings by moving activities from a higher cost location close to consumers to a lower cost location that is much more distant.
It is impossible to say with any degree of certainty what is likely to happen in the future, but there is plenty of evidence suggesting companies will be re-evaluating how China impacts supply chain performance. I think the companies that are able to evaluate their supply chains – building in flexibility – on an ongoing basis will be in the best position to make changes when it is appropriate to do so.
Have you seen companies taking a closer look at the role of China in their supply chains? If so, what conclusions have you seen them reach? Please share your thoughts in the comments section.
The following post was written by Scott Crawley, President, Integrated Services for ModusLink.
More than 1.6 billion wireless devices are produced every year. Less than 1% of these devices are recycled1. With smart phones being replaced or upgraded every 11.5 months, most discarded phones show little wear, still perform to the manufacturer’s standards and have considerable life expectancy left. ModusLink has teamed with Sprint Nextel, eRecyclingCorps, Brightstar and CDMA Development Group to found the Device Renewal Forum (DRF) and breathe new life into used electronics.
The DRF is designed to expand the use of renewed devices by building awareness, ensuring product quality and certifying their proper operation. By creating a technology-agnostic “gold standard” for testing and certifying renewed devices globally, we can extend the lifecycle of wireless devices and reduce the more than 65,000 tons of toxic waste created by billions of devices discarded each year.
Earlier this week, I had the pleasure of announcing the creation of the DRF alongside the other founding members during a press conference at the Mobile World Congress in Barcelona. We were able to get in front of the leading players in the wireless space at the industry’s biggest event of the year to discuss the benefits of a device renewal standard. The benefits to the environment are clear. Our objective is to also demonstrate that proper e-recycling and device renewal can have a financial ROI if we create a more secure environment where the economic return from secondary channels outweighs the operational challenges.
This can be done by building confidence in the renewal process among potential customers, the carriers who will provide service for the devices and brand owners whose products are re-entering the market in an uncontrolled manner today. That confidence will come from the creation and maintenance of a common device renewal standard with input from these and other stakeholders in the process.
The potential benefits of this type of standard include:
For consumers:
• A concrete set of performance expectations for a renewed device
• Assurance around robust data wipe processes
• Access to a higher level of technology at a lower cost
• A venue for receiving value for those consumers upgrading their device
For carriers:
• Confidence that renewed devices will operate effectively on their networks
• Creation of a new pool of potential customers
For OEM brands:
• Address key issues of intellectual property protection
• Shorten the replacement cycle for new devices by creating a stronger market for renewed devices
For device renewal partners:
• Create a certifiable standard that will be used in the industry for the protection of employees, consumers and the environment
• Ability to leverage economies of scale
The biggest potential winner in this process is the environment. With more than 80 percent of all cell phone purchases in the U.S. to replace an existing phone2, Dave Edmondson, founder and CEO of eRecyclingCorps summed it up best, “Reuse is the highest order of recycling.”
We are delighted to be a part of the forum and have high ambitions for what it can achieve. I’d like to invite other interested stakeholders to join us in developing the standard and eventually creating standards for other consumer electronics renewal beyond mobile phones. Visit the DRF website to learn more.
Share your success stories about device renewal or other ideas for reducing e-waste below.
1. Source: CDG, GSMA and EPA 2. Source: Gartner
On February 28th, I attended Supply Chain 2012, an annual Irish supply chain event. A wide variety of industry leaders from companies like Microsoft, Logitech, Vodafone, Dell, and Diageo were in attendance, all speaking on a range of topics including the supply chain as a competitive advantage, consumer behaviours as a driver of supply chain development and implementing new supply chain strategies.
Some of the hot topics at the Conference were:
- The need for supply chain leaders to be at the executive table in the boardroom.
- The need to change the structure of supply chains for mature and growing markets.
- How fuel costs and global instability are making companies take a second look at the structure of the supply chain, driving postponement.
- How the supply chain and its visibility is key to protecting the brand.
- Developing people in the organization to be supply chain professionals.
- The importance of lean thinking in the supply chain to ensure agility and lowest total costs.
- The importance of understanding all the costs in the supply chain to build business cases that make improvements or changes in the supply chain.
All in all it was a very enjoyable event that included some of the leading minds in the Irish supply chain industry.
With the search for global revenue growth extending to remote markets with often challenging infrastructures and service requirements, could it be that your e-commerce strategy is hindering your ability to capture your share of online revenue in your more mature markets? In a recent Euromonitor report on e-commerce market opportunities it is clear that the online share of retail spend continues to increase, but to capture those dollars you need to be able to serve customers across multiple markets.1
This growth is forecast to continue with online sales expected to account for 5.7% of Western European retail sales by 2016, and up to 10% of retail sales in the UK.
Serving a dominant home market is certainly a good first step in capturing the e-commerce opportunity, but the Euromonitor data indicates reluctance for shoppers to make cross-border purchases. While 36% of European citizens have made Internet purchases, only 9% have made what they consider to be cross-border purchases online.
Challenges range from language and cultural expectations, to perceived ease of returns processes, excessive shipping costs, managing duties, payment security and financial process. How many of you have seen global e-commerce sites that tout global reach, but shipping costs end up exceeding the product value and lead times extend to weeks? Just because you can ship to a market does not mean that you have enabled consumers to buy.
While I recognize that aggregate market data will break down very differently for specific products, take a minute to score your own company’s e-commerce market coverage in many of the mature markets that you serve:
• Are you guilty of underserving the online market opportunity in key markets?
• How many of even the top 7 country markets can you claim to properly serve with a localized e-commerce solution?
• How much could that be worth to your company to solve?
The trouble is that those difficulties experienced by the consumer with cross-border commerce become the same challenges brands must overcome if they want to effectively serve these markets. You need an infrastructure capable of dealing with local payment types, and in local languages, supported from a fulfilment and returns network that meets lead time and cost expectations. (Learn more in our white paper on the globalization of e-Commerce). For the brand, the choice is whether or not to commit to serving these markets and then making the business case to invest in capturing this market share. For the consumer, there is also choice and that is to move their dollars or euros or yen to the brand that best serves their needs.
Share with us your thoughts and experiences in this area.
1. Euromonitor International, “Passport: European Digital Divide: E-Commerce Markets in Europe – Opportunities and Prospects,” November 2011.
The New York Times ran an article last weekend called How the US Lost out on iPhone work that has been making the rounds on supply chain and general business blogs. It offers a great look at the level of flexibility, responsiveness, and technical expertise that certain companies in China can bring to the table for a client like Apple. My favorite part of the article tells a story about a meeting in 2007 where Steve Jobs expressed frustration over the scratches on his plastic-screened iPhone prototype and demanded his team rebuild the device with a glass screen. According to the article he said, “I want a glass screen, and I want it perfect in six weeks.” The article continues, “After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.” The article offers a number of additional examples of flexibility and responsiveness found in Chinese operations.
People who have experience outsourcing work to companies in China have known for a long time that the benefits of doing so go far beyond labor costs. And people who have experience working around the world will no doubt have experienced regional differences in flexibility. I think this is the most important aspect of the article and the area where companies most need to focus. As fuel prices and labor costs in China increase, certain manufacturing and supply chain activities will naturally migrate to other parts of the world. But the need for companies to be responsive, flexible, and agile will remain constant – particularly in rapidly changing markets like consumer electronics. The challenge for companies will be to drive the same culture of flexibility that Chinese companies have embraced in their operations around the world.
What is your company doing to become (or remain) flexible and responsive to rapidly changing client needs?