Amazon – increases the pressure on retail – 1 hour delivery

Amazon announced earlier that in New York City…okay in one zip code of NYC – 10001 – it will offer 1 hour delivery of tens of thousands of items for customers in that zip code. Click here for press release. This service will be for those customers to are Amazon Prime members and cost an additional $7.99 (2 hour deliver is free), another “perk” for paying to be part of the cool kids on Amazon.com. It would appear that the new Amazon store on 34th street will be tasked with handling much of the distribution for these potential customers. While the 1 hour delivery is limited to this area code for now, the retail giant plans to expand to other cities in the near future. I wonder if Boston is on their list of potential target cities…hmmm.

This should come as no surprise as Amazon continues to act as the 800lb gorilla when it comes to retail and supply chain. The idea of such rapid delivery is also not a new one. Anyone remember Kozmo.com? During the dot com boom that cool .com company could be seen in many an office lobbies delivering everything from ice cream to the latest CD from TLC. Alas they could not solve the issues of having to carry such a wide array of inventory with order runs that could not cover the carrying costs, delivery costs etc. So should we expect Amazon to fare better? Maybe. The have a couple of factors in their favor that Kozmo.com did not:

  • Years of experience with running distribution centers – unlike Kozmo.com that really started as a company leveraging bike messengers to pick up small orders and deliver them, Amazon is a well oiled machine when it comes to understanding the nuances and challenges of running DCs with large arrays of SKUs. Their move into the 34th street location was seen by some as curious. But for Amazon it was clearly just the ability to place another potential distribution hub closer to its target audience.
  • Vast amounts of buying behavior data for those Amazon Prime members in that zip
    Just this little slice of the Big Apple

    Just this little slice of the Big Apple

    code…and else where for that matter. Amazon has years of historic data for those that sit in the 10001 zip code (about 20,000 people). And as we all know, Amazon is very good at figuring out what to suggest for our next purchase and even claim to know what to put on the truck before we even order it. Of those tens of thousands of items that could be delivered in that zip code, I have a feeling all the purchase data being analyzed in the Amazon cloud has identified the 1,000s (maybe only hundreds) of most likely items that are most likely to be ordered for those customers.

  • A war chest that Kozmo could only dream of. I think it is safe to say that Kozmo.com could only dream of one day having the war chest Amazon can dip into. With over $5b of cash on hand, Amazon can afford to lose money on their delivery model as they work out the details. And unlike Kozmo.com, Amazon is only servicing one part of Manhattan. I bet the bike messengers from Kozmo.com would have appreciated that much more!

What cannot be under-emphasized is the impact this will have with regards to firing another salvo across the bow of the retail world. Just like with other bold moves – think drone delivery – this  move by Amazon is as much to test out a new fulfillment and commerce model as it is to cause ripples through the retail world and beyond. The digital disruption it will create is  disproportional to the actual disruption, but it will force companies and supply chains to once again figure out how to combat Bezos and Amazon.

I wonder how de Blasio will feel once Amazon looks to fly drones up and down 34th street.

 

 

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Filed under Current Events, Drones, Retail, Supply Chain

The Ruble reminds us – our supply chains do not operate in a vacuum

This week has not been a good for the Russian currency, as it has dropped close to 20% versus the US Dollar. Some analyst fear that the Putin and Russia will default on their debt and this might throw the global economy into a tail spin. The impact could have graver consequences in places such as Ukraine – where Russia has already acted belligerently this year – in Eastern Europe or the Baltics. It is not simply the Russian ruble that should enter our thinking process for our supply chains – look at what is happening this week in Belgium as well. As union workers have gone on strike, halting ports, airports and highways it has brought much of Belgium to a halt.

But this is not meant to be a post about geo-politics and world history, although those are the areas of my early formal training. What the issues in Russia and Belgium remind us, especially those of us in the supply chain space, is that we do not operate in a vacuum. I realize that I am stating the obvious, but at times I am surprised at how many turn a blind or an ignorant eye when it comes to global events. There have been and will continue to be articles and studies done on risk management. Something that is crucial for our supply chains. However

You need a complete view...otherwise the world remains blurry

You need a complete view…otherwise the world remains blurry

one aspect that remains missing from these conversations is how to account for these global events. Much thinking has been done around assessing risk for suppliers, customers, geography, transportation, raw material costs, weather and natural disruptions to name a few. Yet it remains difficult to quantify geo-political risk. In other disciplines this has been marginally tackled, but for supply chains it still takes a back seat.

When it comes to assessing our supply chain risks we need look to an index that looks at a number of geo-political aspects. A combination of credit rating, political stability, regional history, religious tension, border fluctuation, socioeconomic make up, relationship with neighboring nations to name a few, could make up a supply chain exposure and risk indices that would compliment the other data points we study.

Companies, such as General Electric, have chief economists on their executive committee, this is should be a role all businesses that are international and that have extended supply chains have – which means 99% of companies. But let us not limit ourselves to economists…as a political scientist at heart…I would argue corporations need to also look to have geo-politically focused assets at their disposal. Our supply chains touch all the four corners of the globe, if we do not have the assets in place to provide better insight into the impact history and politics have on the geographies, we risk exposing our supply chains to a greater array of disruptions.

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Demand – it is a fickle beast

Understanding customer taste and their buying patterns remains a tricky exercise. The story of L.L. Bean and their snow boots is a great example of how challenging it is to accurately predict demand. The Maine clothing and outdoor company is already sold out of their iconic boot. According to the Yahoo report, click here, there is already a 100,000 name long waiting list for the boot. Wow. Talk about a good problem to have, well maybe.

L.L. Bean cannot just ramp up their manufacturing, well in the long run they might be able to, but not fast enough to meet this pent up demand. Based on their meticulous manufacturing process, it takes half a year to train someone to manufacture the product, you cannot just bring on seasonal labor or outsource to a contract manufacturer to bolster your assembly line. So what should L.L. Bean do? It isn’t as if these shoes are a new product that vastly exceeded the expected demand. These shoes have been around, for what seems…forever.

No...you can't wear this LL Bean boot

No…you can’t wear this LL Bean boot

Their popularity is clearly back. I remember my classmates wearing these when I was in high school…and that was a long time ago. I never looked at them as a trendy item, not like what UGGs did or other brands. But clearly the product has regained popularity with the “younger people.” Meaning it is appealing to the 15 – 23 year old segment where trends can truly go viral. When you do a Google search for “L.L. Bean boots” you get sub searches “women,” “men,” “frat,” and “preppy.” Clearly it has mass appeal for the kids!

Should L.L. Bean have had better demand sensing? Could they have anticipated this upswing in orders months ago? Granted, based on the lead time they need with regards to adding manufacturing capacity, it might not have mattered. And how should they monitor this demand moving forward? Will there be this level of demand next winter? Or will some other brand become the cool footwear on campus next winter? This is one area of Matrix Commerce that calls for a high degree of digital sophistication as well as some good old fashion intuition.

Clearly this season is over capacity and there is very little L.L. Bean can do to accelerate the production. Moving forward, L.L. Bean needs to apply some savvy digital monitoring to better gauge the demand for 2015 and beyond. For example – what is the reaction of the shoes? Are they trending on social channels? How are they being discussed on social channels? Are the returns on pace with historic returns? Or are there more or less? L.L. Bean should monitor the fake and knock off products – imitation is the sincerest form of flattery. Companies that can produce a similar product will rush into the market if they believe the pent up demand cannot be met or if there is another layer of demand at a lower price point. These are all digital data points that L.L. Bean will have to pull back into their planning and forecasting engines to better manage their supply chain. Of course there is the other strategy of potentially keeping the supply low, to create exclusivity of the product. Hmmm makes one wonder.

But this latest Christmas season and fashion trend story reminds all of us, that accurately predicting future tastes and demands remain a fickle beast. The digital world allows us to cast a wider and more detailed net of what is going on, but we are far from being able to create an precise map for demand.

Now where are my boots…we are having a Nor’Easter here in Boston!

 

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Filed under Consumer Product Goods, Current Events, Retail, Supply Chain

Future hardware that impacts your supply chain – think V2V.

I wrote a post earlier this week about a number of hardware trends that will impact your supply chain, those are all in place today, already impacting supply chain and will only grow in significance. But here is one that is futuristic – V2V (vehicle to vehicle).  Why would  a driverless vehicle impact my supply chain you may ask?

Of course the biggest impact will be on making road safer, make cars more energy efficient, reduce congestion to name few. But this enhanced hardware also has the potential to impacting your supply chains. For example – last mile package delivery. Driverless vehicles will bring to delivery the same advantages as companies like Kiva have to warehouse management. Companies like Fedex, DHL and UPS could leverage a fleet of driverless vehicles to make

Coming to you...without a driver.

Coming to you…without a driver.

small parcel, last mile deliveries. With greater overall visibility of traffic patterns, other vehicles and tied into overall grid would allow greater optimization of package delivery. There are already applications such as Route4Me that look to provide optimal routes based on the errands or destinations the consumer has to run. There are a number of these apps that are being baked into the smart cars. Add to this routing software the ability for vehicles to drive themselves and you open up great possibilities when it comes to logistics. Private operators could “rent” out their vehicles for delivery purposes….just like Uber drivers do with their cars when it comes to the chauffeur business.

Supply chains need to think about how this could impact parts of their business models. We are already seeing some retailers like Footlocker offering same day delivery from their stores. They are doing so using services from Deliv (think Uber for small parcel delivery). What if instead of having to use Deliv, they could dispatch driverless vehicles? What if the consumer could use the driverless vehicles for returns? What if the retailer use the driverless vehicles to bring back returns to other locations? This potential delivery channel could truly transform the consumers’ home into an extension of the brick and mortar store.

I realize that V2V technology remains in the future with regards to becoming a reality in our day to day lives. Unlike the other hardware changes, V2V is not going to impact your supply chain today. But think about the potential it may have once it becomes a reality – which is closer than you may realize.

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Filed under IOT, Supply Chain, V2V

Hardware is back! Impacts on supply chain from an old friend.

Hardware has been pushed to the back pages a lot of times – what is cool is the software that sits on the hardware. We don’t want to be bothered with thinking of servers, smartphones, computers, tablets, touch screens, televisions, appliances etc etc…we just want our apps! But hardware is making a come back, at least in the cool category. There are some changes coming to your supply chain…that being powered by changing hardware.

  • Robotics – okay okay, I know that automated factories is nothing new…but we are seeing a new surge in how robots are being leveraged within the factory and warehouse.  It is nothing new to see robots on assembly lines. However companies like Kiva Systems have pushed robotics deeper into the supply
    Coming to a supply chain near you.

    Coming to a supply chain near you.

    chain. Their orange robots gained fame by being integral in Zappos’ warehousing. The robots did the majority of pick and pack for the online shoe company. The joke was if you saw a light in the Zappos distribution center it was bad – a human was most likely fixing a robot! The horror…otherwise the robots did not need light…or a lunch break. But the robot influence is not limited at the warehouse or factory floor, companies like iRobot – best known for their Roomba robotic vacuum – offer a number of robotics for areas such as telemedicine and video collaboration. Think about the possibilities of this platform for such areas as after sales servicing. A technician could also have a telepresence robot that is tied back a veteran technician who could be located in one place but bring their expertise to numerous robots at once. Robots will also help do the 3D jobs – Dirty, Dangerous and Dull. Being able to off load these jobs to robots will free up the human for more valuable roles within the supply chain.

  • Drones – one could argue that drones are a subsection of robots…and you would have grounds for an argument, but I think they deserve to be discussed separately. What makes them unique is that the drones I am speaking of are the robots that fly. Drones became a part of our vocabulary through their usage by the US military. From a commercial usage we got our first taste of the possibilities when Jeff Bezos of Amazon went on 60 Minutes a year ago and suggested that some day in the near future we might be getting our Amazon packages delivered by drones. While Bezos has since tempered his Amazon
    remote controlled drone aircraft

    Don’t expect this to deliver your packages…but its little brother and sister.

    deliver via drone, we are starting to see actual usage of the technology to solve some logistics’ issues. DHL has started employing delivery drones to make deliveries to remote areas in Germany. Our supply chains have really only scratched the surface when it comes to using drones. We will continue to see them being leveraged for logistics but also to assist with tasks otherwise challenging to address.  Companies are looking to use drones to go “look” at potential maintenance issues in places that are difficult for humans to reach – for example, drones could inspect parts of oil facilities or factories that are difficult to access. Drones will play a greater role in our society and our supply chains. This time next year Santa Claus might very well be using drones to help him deliver his presents.

  • 3d Printers – Last week I took my son to a 3d printer store, and it was great to see how a 7 year old reacted to seeing the printers making a wide array of “things.” Dinosaurs, building models, snow men and other shapes. What I saw was the ability to change how we manufacture, how we deal with spare parts inventory and even impact logistics. Bringing 3d printers to the manufacturing floor will offer new methods but can also expand the factory floor. Manufacturers could place 3d printers closer to the final customer for products that might require some customization or assembly. One can imagine mobile 3d printing capabilities – allowing for true delaying of production and JIT (just in time). Companies like Nike are already experimenting with using 3d printers to make their sneakers. A customer could walk into a Nike retailer, customize a shoe and have it printed on site. True customization. With regards to spare parts, companies such as Airbus are looking to leverage 3d printers to keep certain plane models in service longer. Their vision is to leverage 3d printers to produce specific spare parts that would otherwise not be cost effective to continue to manufacture. When it comes to logistics – we are always trying to solve our last mile issue with regards to delivery. What if your local Staples or OfficeMax had a 3d printer and you could have some of our deliveries sent to the store and printed? Between drones and 3d printers we might have competing hardware solutions for the last mile delivery challenge!
  • Wearables – Mobility has had a deep impact on our supply chains already. This should come as no surprise as the BYOD (bring your own device) wave has swept over businesses in general. But I am not just speaking of greater usage of smartphones and tablets in our supply chains. Wearables are the next evolution – dedicated, connected items that we wear. The most common wearable is Google glass. While the jury remains out as to whether or not it will catch on, the genie is out of the bottle when it comes to growing usage of wearables. We are seeing the usage of Google glass in the factory, companies like Plex Systems are demonstrating how they are integrating the hardware with their solutions to add efficiencies on the factory floor.

    Other solution providers like Unvired are leveraging Google glass into their warehouse solutions – bringing greater efficiencies to the pick – pack process. Warehouse workers, using the Google glass hardware coupled with the Unvired solution have hands free access to vital data that makes their job more efficient. Look for wearables to impact a growing number of other parts of our supply chains such as logistics, maintenance and service, POS (point of sale) to name a few. Wearables offer greater mobile intelligence, think of them as adding this enhanced connectivity at the edges of the supply chain network. Look for this added capability to open new business models and capabilities.

  • Sensors – The internet of things (IoT) has permeated many of today’s headlines. Pundits speak of all the wonderful things that will come from being able to connect an every growing part of our infrastructure and supply chain. But what is one of the underlying technologies to make this possible? That’s right, the inexpensive and smart sensors – the hardware – needed to make this connectivity possible. Companies like GE are working to infuse a greater number of sensors into their products from locomotives to wind turbines to airplane engines. The sensors throw off a wide array of data allowing for better monitoring of the assets, usage and network optimization. As these sensors continue to drop in price – look for their usability to be expanded to a greater number of assets and products.  Sensors and IoT hold tremendous potential for driving greater network optimization for supply chains – providing the necessary solutions and hardware to achieve greater network visibility. And much like wearables – pushing control and intelligence to the edges of the network.

These hardware evolutions have and will continue to drive innovations in our supply chains. Of course these are all tied into software and intelligence that make the hardware “smart” and useful. Reality is the line between hardware and software has blurred over the past few years and will continue to do so. But companies need to think about reinvesting in hardware to take advantage of these new innovative tools.

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Filed under Drones, IoT, Mobility, Robotics, Supply Chain, Wearables

The holidays are approaching – does your supply chain need IoT to improve results?

As it seems to happen every year, the holiday season seems to sneak up on my faster and faster. I do not know if it has to do with my getting older. Maybe Pink Floyd had it right when they sang: “And you run and you run to catch up with the sun but it’s sinking…Racing around to come up behind you again.” Of course these lyrics come from their wonderful song Time which is something that all retailers and CPG companies have very little of when it comes to the holiday season. The time of the year that is loosely book-ended by Halloween and New Year’s Eve is when many of these companies make the majority of their fiscal revenues. These companies are always looking for whatever technological or process advantage they can leverage to improve their top line sales as well as gain margin. One of the most influential technologies is mobile.

We don’t need to rehash the growth of big-sale-shopping-cart-full-of-gift-boxes-vector_Mkgk8gDdsmartphones globally nor the amount of connectivity and functionality these smartphones put in our pockets. While as consumers we have become tethered to their mobile devices, retailers and CPG manufacturers are all working feverishly to crack the code as to how to maximize our relationships with our smart phones.

Whether pushing promotions and coupons directly to our phones, allowing for payment via our phones or even allowing cross channel sales between the application and brick & mortar store, the usage of mobility remains high on the functionality Christmas list for these firms. When we start speaking of mobility it begs the question – what about IoT (Internet of Things)? Their consumers are already connected via their smartphones, but can or better yet, should retail and CPG integrate IoT into their businesses? And how?

IoT is a hot topic – one that has opened the door to what appears to be vast potential for new business models. But as with many new technologies, not all supply chains’ adoption rate are at the same pace. When it comes to retailers and CPG companies, IoT can offer value – but not the same impact across the retail and CPG sub-segments. For example, in the footwear and apparel sub-segment does IoT mean putting sensors on every pair of sneakers or winter coats? Not necessarily. But making  the pallets smarter allows for better tracking of inventory, when does it ship, when is it received at a distribution center or within the retail channel? Better inventory tracking across the entire network would greatly improve these supply chains. However for those in the food and beverage space being able to do a more precise track and trace – via sensors – will mitigate the risk that arises when there is a food recall. Think of the recent problems faced by the likes of Mars Chocolate or Tesco, and one realizes what an impact better visibility and traceability would have for these firms and their supply chains. Rather than having to invoke massive recalls and spending valuable time to identify the root of the problem, leveraging more IoT would allow you to more quickly identify the root of the problem.

So next holiday season will we see a greater presence of sensors within our retail channels or attached to the side of Lego boxes? At early adopter firms I expect to see sensors and IoT being a greater presence, while I would expect a greater adoption of sensors for most of these firms through the back end of their supply chains. Both IoT and supply chain solution providers need to determine how they can assist and leverage this technology with their retail and CPG customers. As for CPG and Retail companies – determine how the usage of more sensors will impact your supply chain. Do not hesitate to work with your service providers to co-develop solutions. Look for more of our research in upcoming reports.

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Filed under Current Events, IOT, IoT, Retail, Supply Chain

Not your father’s POS system

Here is something to tickle your retail supply chain – we are under 50 days until Christmas. Avoiding the debate over the mass commercialization of the holidays, the reality is that consumers will, or already have, started their shopping engines. With so many retailers dependent on good holiday sales, for example Lego moves 50% of their sales between Thanksgiving and Christmas, the ability to properly capture orders is vital.

The POS (point of sale) systems, whether in brick and mortar or on line, are the vital touch point between the consumer and the commerce supply chain. Like with the majority of technologies, this has been impacted by the digital old-fashioned-cash-register-isomorphic-viewwave. POS systems are not longer limited to the larger systems synonymous with the corner store – remember the ones where numbers would pop up once the large typewriter like buttons were pressed. These systems have evolved into a new range of sleek mobile devices, and those large legacy systems are now smarter. POS systems are also getting into greater areas and increasing their reach – supply chains need to craft strategies about how to take advantage of the new data as well as the new places POS systems will pop up.

For example:

  • The POS systems in the air. Those us that have been flying long enough remember the days when we were served a meal and drinks as part of our overall plane ticket. Today if you want a scotch on the rocks and a can of Pringles, you need to pay for these items. Airlines have put mobile POS devices in the hands of their staff to take your payment. Rather than just using these as order taking machines, airlines like Delta Airlines have made these mobile devices a much more valuable part of their supply chain. Beyond just taking payments, the mobile devices are enabled to communicate about customer and maintenance issues. So if the passenger in seat 7a voices a legitimate complaint, Delta employees can use the POS system to give that passenger 10,000 miles. If a seat is found to be broken or an overhead can’t open, the flight attendants can use the system to communicate the problem and location to the destination airport and schedule the appropriate maintenance.
  • Infusing retail into other entertainment channels. We have all used to having to walk through the store when we leave a museum, zoo, aquarium or other attraction. But what about the movies? Get ready for your phone to become part of a POS system for the movie theater. I am not speaking of the POS when you are ordering your over-sized tub of popcorn, but post movie viewing. For example – you go see the Transformer movie, once the movie is over as you are leaving the theater there are QR codes on promotional posters at the exit and even pop up kiosks where you can scan your phone to find where to get the latest Transformer toy. There could potentially be a 3D printer right there allowing you to get your item made in place. If you scan the product at the movie theater you may be given a discount – incentive consumer to make transaction at that point. Your portable POS systems – aka your smart phone – will have an app that allows for this to happen and could also communicate with the closest Target, WalMart or other retail channel that carries the item. Or even tie back to Amazon and have the eCommerce giant dispatch your item immediately.

Of course there remains a continued evolution in mobile POS, companies like Square and Apple are allowing anyone with a tablet and connectivity to run mobile POS systems. Retailers can start looking at these mobile POS systems as great data sources – where do most of the transactions happen on the store floor? Are there still locations for impulse purchase displays? Can you tie these mobile terminals into the inventory systems? A prospective buyer is looking for a specific piece of cookware at William Sonoma. The item is there but the consumer wants it in sky blue. Using the mobile terminal the associate helping that consumer can instantly scan the inventory at different stores, identify where an item can be secured and ship directly to the store or to the consumer. The mobile device should also be able to pull up the consumer’s profile: are they a loyal shopper? If so the associate should have the ability to waive shipping costs or expedite the product.

Supply chains need to think of their POS systems as Point of Service, not sales. In a world of Matrix Commerce, these are the intersection points between the consumer and the commerce supply chain where the digital reality has great impact. How companies take advantage of this will determine who leads and who is a laggard.

 

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Filed under eCommerce, Mobile payment, QR Code, Retail, Supply Chain, Tablet, Wireless