Did “Holiday Shopping” just revive the supply chain?

 

Here’s an interesting agglomeration of statistics from the recent shopping frenzy we’ve seen in the United States. As per several varying estimates, more than 195 million shoppers went out to shop and ended up spending more than $41.2 Billion. That is in fact more than last year albeit with a lesser spend per person.

Here’s an interesting set of graphs that caught my attention. These are primarily of the retail sector and are from the Mint Blog. Check these out and see if they signify a turnaround to you!!

And by the time you get to digesting that, here’s a totally different set of statistics from Cortera’s Supply Chain index. The website contemplates why they are seeing these surprisingly good results at this point of time in particular.

Here’s an excerpt from a Businesswire article about the same.

Data from the prior month (Cortera’s October 2009 Supply Chain Index) had revealed a slowing of payments consistent with a seasonal pattern seen over the past couple of years (2007 and 2008), as manufacturers, suppliers and retailers take on additional trade credit related debt in advance of the holiday shopping season. However, in the past, such seasonal delinquencies often continued over several consecutive months, continuing throughout the holiday season and typically returning to normal levels in January, as the cash received from sales flowed back through the supply chain. The latest data represents the fifth time in the last six months that the Cortera SCI has revealed improving cash flow conditions throughout the supply chain, though the SCI remains 20 percent higher than pre-recession levels of two years ago.

Source: BusinessWire Article

 

I’m not saying anything – but if you put two and two together, seems like consumer spending in the holiday season was just the boost the economy (more importantly supply chains) needed.

Does Geopolitics affect your Supply Chain?

 

Well.. what can I say?? We have the world leaders meeting at Copenhagen to discuss legislations that might make huge changes to the way we all operate our supply chains. It is a well recognized fact that we’re in a formative new “world economy” (not at the level of governments) at the level of the common businesses. This means that more and more small and medium businesses need to know how to do business with their bigger counterparts. Now.. doing business across such a diverse environment is a challenge in itself. Imagine what is to happen if you throw in a major US economic collapse and a  100% rise in the price of oil – makes for a pretty heady business environment huh?!

 

This observation brings us to realize the role that Geopolitics plays in today’s networked business environment. More and more businesses are realizing this fact and are throwing this under the gamut of risk preparedness of the supply chain. But we need to realize that this falls under more than any Supply Chain Risk Manager will ever know. It ties into the physical and political needs of the particular region concerned. A lot of factors add up when gauging the preparedness of the supply chain to proactively adjust to occurrences like this. Let us look at the oil supply chain in Iraq to drive this point home.

Just look at the chart to the left. Look at the US flags that line the region in the middle east. That’s all the countries in the middle east that have US bases. Now irrespective of how hard the US troops are trying to get out of the region, the fact of the matter is that politically, the region is highly unstable.

Now look at the chart right below it.

 

This chart gives the supply of oil (crude oil) that the US gets from all around the world. Around 45% of the oil supply comes from the Middle East and North Africa. Any potential instability in this region will certainly affect the supply of oil from these areas. What is the US doing to mitigate this risk? I’m sure there are experts who know and I’m equally sure that this is classified information. What I am trying to emphasize here is the fact that something as important as the supply of crude oil can be affected by the politics of the region. That leaves the rest of us that run our menial supply chains to literally bite the dust.

This realization must be dealt with on an “individual supply chain” basis. Economics experts from within the company need to get together with the Supply Chain Risk guys and figure out a long-term exit strategy (if you will) about how the company will balance its risk in case all suppliers from a single region are hit. This issue is indeed important – so much so.. I found an article on the ISM website regarding this. I’ll leave you with a few words from this article to think about.

Impacts of Geopolitics on the Supply Chain

A major issue facing organizations today is how to devise a global strategy that can withstand regional and global unrest, while ensuring continuity of supply. Until recently, supply chain strategies were based on a JIT operating environment. However, the current global recession revealed severe cracks in that operational philosophy. As credit markets dried up and manufacturing ceased, companies realized the lack of flexibility in their supply chains. To compound matters, Realuyo says consolidation in many industries is forcing companies to source raw materials and components from the same region.

This all contributes to what Realuyo refers to as the three dimensions that attribute to a threat's impact.

Space — Due to globalization, there is a lack of boundaries. Thus, if a country decides to be protectionist or quarantine its workforce during swine flu, there will be little impact unless other countries adopt the same measures.

Time — The marketplace is based on a 24/7 schedule and instant gratification. Rather than being in strategic planning mode, leaders are in response mode.

Depth — When there is a disruption, a solution may exist that solves the problem, but there are second-, third- and fourth-level effects that are not anticipated

How are these dimensions affecting supply management professionals' global operations? Every region of the world has its own geopolitical challenges coupled with global threats that can occur anywhere. It's the responsibility of supply management professionals to acclimate themselves with the geopolitical influences in the regions where they operate. Rising tensions in a region can have an impact on commodity prices and the supply chain even if there's not a direct threat, says Townsend. Consider the volatile environment in Iran, for example. While the country has not attempted to close the Straits of Homuse, the unrest in the region spreads fear among oil producers and causes spikes in oil prices. "Supply management professionals must recognize that if there's a single, isolated incident, the effects on the supply chain may be temporary. However, if it's a larger-scale conflict within or among sovereign states, the impact could be longer-term," says Townsend. "There requires a good deal of understanding of geopolitics to ensure a comprehensive contingency plan that moves your goods to market."

Source: ISM article

Green Patents ~ vroooom…

 

It looks like the United States Government is finally going to actually DO something around the time Copenhagen hits the world. While officials continue to battle it out in Copenhagen regarding the Danish Proposal, at least one US Government Body has decided to take ‘Green Projects’ in its stride. Greenbiz tells us that the patents office is going to speed up the processing of nearly 3000 ‘Green Technology’ patents which could have taken up to a year more under normal circumstances.

The U.S. Commerce Department's Patent and Trademark Office announced Monday the pilot program could shave a year from the time it takes to get a patent for certain green technologies, such as those related to environmental quality, energy conservation, renewable energy development and greenhouse gas emissions reduction.
This could include inventions that reduce energy consumption in cathode ray tube circuits, electric lamp and discharge devices, combustion systems, industrial equipment or household appliances, or those that advance low-emission fossil fuel power generation technology.

Source: Greenbiz News

All hope lies in the fact that this will help companies bring out better options to the market faster. Hit the jump for the complete article at Greenbiz. Also, a friend and mentor of mine, Peter Lewin  has an interesting take on the Climate Science Fiasco.

Another example of Supply Chain efforts driving success [Profit]

A quick note about an article I just came across. This is in an effort to show readers of this blog how companies remove inadequacies from their supply chains and get into the profit mode by tweaking their supply chains.
This might serve as an eye-opener to a few and might be not-so-surprising for some others. Today, I’m starting off a new tag called ‘Profit’. I hope to do more such stories about real successes by companies. And in the end, I hope this serves as an inspiration and a starting point for you to make those very changes at your company – and hopefully impress your boss too!!
I just came across this article which talks about how Williams-Sonoma, a major retailer posted a profit in these troubled times by tweaking their supply chain and managing their costs effectively. What makes it interesting is that they managed this turnaround after facing the threat of a buyout. Here’s an excerpt from the article.

Retailer Williams-Sonoma says improved supply chain management, including cuts in transportation costs, were a major reason the company swung to a profit in its recent fiscal third quarter despite slipping store sales.

The home furnishings specialist removed $150 million in merchandise inventories from its holdings, cutting the inventory count 21.5 percent, while adding $200 million in cash to its balance sheet over that time.

The result was a $7.3 million net profit in the quarter ending Nov. 1 for a company that lost $11 million in the same quarter a year ago even as net retail sales fell 3 percent.

That included, he said, “the coastal consolidation of our large-cube inventory, and we are now shipping together orders that historically were delivered in multiple shipments. We are also consolidating six third-party furniture delivery hubs into one company-operated hub in Columbus, Ohio,” Lester said.

Source: Journal of Commerce article

And not so surprisingly, their shares have been strong through this troubled economy.  The image shows their YTD for 2009. I wonder what Bed, Bath and Beyond has to say to that.

Not so SHARP…

 

A few of the week’s top headlines were about a certain form of market control in the electronics industry. Market control by price fixing. Exactly… now you know how I got the title!! Lets first get the news out of the way.

 

Firstly this.

Mobile handset maker Nokia Corp. (NOK) is suing 11 companies and a number of their units in the U.S., including AU Optronics Corp. (AUO), Chunghwa Picture Tubes Ltd. (2475.TW), Samsung Electronics Co. (005930.SE), Sharp Corp. (6753.TO), and LG Display Co. (LPL), alleging they colluded to fix prices on displays.

The complaint comes a year after the U.S. Department of Justice fined several liquid-crystal-display makers for price fixing. Sharp, Chunghwa, and LG Display agreed to plead guilty to price fixing at the time and paid fines. Samsung, the world's largest LCD maker, wasn't cited in the department's decision but it cooperated with U.S. investigators in the probe, people close to the case said. The probe into the LCD industry became public in 2006.

Source: Wall Street Journal Article

That was about the time that I had (unwittingly) written a piece on Nokia and their supply chain strategy too. And then, immediately after… this.

On Dec. 1, Samsung Electronics sued Sharp Electronics Corp. for infringing its patents related to liquid crystal display devices used in televisions. Fish & Richardson partner Ruffin Cordell filed the suit.

Source: Legaltimes Blog

and this…

Samsung on Dec. 2 also sued Sharp in federal court in Wilmington, Del. over the same patents. Typically, federal court cases are stayed pending a determination from the ITC. The ITC can ban the import of infringing products, while federal courts can award cash damages for past infringement.

Source: Legaltimes Blog

and this…

Also on Dec. 1, semiconductor maker Analog Devices Inc. filed suit at the ITC against Knowles Electronics of Itasca, Ill. and Mouser Electronics of Mansfield, Texas over surface mount MEMS microphones and products.

Source: Legaltimes Blog

And that’s why it was a hectic week in the world of electronics. Now I’m not running a legal blog – so  the only thing that would have brought me to cover this story would have been a fistfight. At least for now, that doesn’t seem to be happening so I’ll settle for the second best topic in my book – a case study of the supply chain practices of electronics manufacturers – mostly starting with Sharp because they have been doing a lot with their supply chain.

Now I can promise that the title of the post won’t be as long or boring as what I just typed. But look for the post sometime during this week. And in the meanwhile, lets enjoy the fistfight.