44% of container cargo comes in and out of the U.S. through West Coast ports. 13,600 dockworkers’ contracts at 30 West Coast ports expire Monday, June 30. The International Longshore and Warehouse Union and the Pacific Maritime Association are in the process of negotiating, as a possible strike that could cost the economy billions of dollars, looms.

According to the National Retail Federation and the National Manufacturing Association, a strike could cost the economy almost $2 billion a day. A study from Wolf Research found that almost one-third of shippers have shipped their cargo early and increased inventory in preparation.

Under pressure to fill, quickly and cost-effectively, an increasing number of orders coming in from multiple channels, the distribution industry is undergoing profound changes. Multi-channel distribution has gone mainstream. The term that so recently was not widely used is now part of our everyday vocabulary, but figuring out the most cost-effective response to its logistical challenges is ongoing.

In this multi-part series, we will take a look at how the industry is dealing with the rapidly changing environment of multi-channel distribution. Although commonly considered a retail phenomenon, a study by the Peerless Research Group shows distributors and manufacturers across the board are grappling with the increasingly complex nature of filling orders coming in from multiple channels, as well as delivering those same orders in the most efficient manner.

Organizations are always looking for ways to increase profit margins. Too often we default to lowering costs as the way to do this. As I mentioned in a previous article, no organization has had sustainable success by simply cutting costs and relying on new methodologies. The most sustainable success comes from focusing on growth, innovation and effectiveness, and changing the overall mindset of the organization.

There are only three ways that margins (and therefore profits) can be increased: Increasing revenues and maintaining costs; maintaining revenues and decreasing costs; and increasing revenues and decreasing costs. You need to be able to master all three.

Although 50% of CEOs say that their supply chain can be a strategic differentiator in the new omni-channel customer paradigm, 83% of worldwide CEOs believe that their retail supply chains are currently "not optimal" for today’s changing retail environment. In a global retail CEO survey of more than 400 retail industry CEOs conducted by PwC for JDA Software titled: "CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World," CEOs indicated what they are doing to adapt to this changing environment and establish a new foundation for growth.

 

As mobile commerce comes of age, one of the biggest challenges facing CEOs is managing the transformation to omni-channel retail. However, only 34% of CEOs consider the rise of omni-channel shopping to be an external threat, while only 22% said it will have a direct impact on their organization.

In 2010, massive flooding in Pakistan profoundly affected the country and disrupted supply chains globally, spiking international prices for cotton, rice and wheat. This was only one in a string of weather disasters — including heat waves, hurricanes and wildfires — that have affected supply chains on a large scale in the past decade. 

Despite the enormous value at stake, climate risks in supply chains can be hard to see because they are so large. The key to getting it right, according to Acclimatise CEO John Firth, who spoke at the BSR Spring Forum last week, is for managers to address supply chain climate risks in terms of existing stressors — such as procurement costs, on-time delivery, water availability and secure energy and infrastructure.

You’re trying to do everything right to lure in online shoppers: You offer free shipping. Customers can return merchandise to a retail location. You even offer free returns through the mail. But this freedom for the customer can mean a lot of headaches and cost for you. The demands of the omni-channel marketplace are not only changing the way companies fulfill orders, but how they engineer reverse logistics processes. While you need to please the customer, you also need to be profitable.

 

Consider this common scenario: Since you offer free returns through the mail, customers have a tendency to over-order various styles, colors, and sizes, and then mail back the items they don’t want. Now, you have a significant increase in returns coming in via the mail and perhaps through retail stores. How do you handle this efficiently and effectively? How do you ensure that the product goes back into inventory quickly so it can be available for sale again? You don’t want to lose an order because it appears to be out of stock, but was actually returned to a store recently.

Omnichannel and ecommerce retailers are being pressured into finding new and different ways to increase sales, improve market share and reduce costs in a business environment that is increasingly customer driven.

 

While this quandary is constantly evolving, ecommerce, multichannel and omnichannel commerce operations must utilize all their assets to improve efficiencies and reduce costs. These assets include, but are not limited to, multiple distribution facilities, retail outlets and kiosks in order to improve their order fulfillment operations and meet the needs of all the channels simultaneously.

The top three sources of risk to a supply chain are information technology, pricing factors and the global economy, according to senior operations executives responding to a survey taken by Accenture. But while most of these executives see supply chain risk management as important to their business, only seven percent said they are generating returns of over 100 percent on their supply chain risk management investments, the Accenture study showed.

Seventy-six percent of companies participating in the "Accenture Global Operations Megatrends Study – Focus on Risk Management," describe supply chain risk management as important or very important. Of the more than 1000 companies represented across 10 industries, 25 percent plan increased investments of at least 20 percent in supply chain risk management in the next two years.

The U.S. automotive industry has experienced significant growth since the 2008-2009 economic downturn, with U.S. automotive sales volumes increasing from approximately 10 million units in 2009, to approximately 15.6 million units in 2013, according to LMC Automotive. Recent automotive financial metrics have also shown similar improvement in profitability and debt ratios throughout the automotive supply base (source: KPMG Vontik database).

However, while the automotive community is optimistic, new challenges are emerging. 

There is perhaps no business sector that’s more reticent to reveal its inner workings than that of high-technology.

 

So closely do companies like Apple, Google, Samsung and Microsoft guard their secrets and proprietary information that combined they’ve spent literally billions on lawsuits and countless hours before federal and international court judges arguing tooth and nail to maintain the "private" in private enterprise.

 

That penchant for privacy extends to how they manage their supply chains and the methods they use to speed the latest tablet, laptop and cell phone to a public eager to swap out last week’s device — often, literally, last week’s device — for the latest model.

When it comes to e-commerce, Westerners are very familiar with Amazon.com. Alibaba, the Chinese e-commerce giant, is largely unknown. Amazon’s revenues of $74.4 billion dwarf Alibaba’s $8.4 billion.

But Alibaba has a different business model.  Unlike Amazon they do not take ownership of inventory, stock it in their distribution centers, and then fulfill the orders. Alibaba has an e-commerce platform and a "community" to connect buyers and sellers.  So while Amazon’s revenues are bigger, transactions on Alibaba’s online sites, at $248 billion last year, were about two and half times bigger than Amazon’s. And Alibaba is hugely profitable, Amazon barely so.  Alibaba will soon go public and this is forecast to be one of the biggest tech IPOs ever.

3D printing (3DP), also known as additive manufacturing, is showing signs of triggering transformations in U.S. industrial manufacturing, from product design and production to restructured supply chains, according to a report released by PwC US in conjunction with The Manufacturing Institute.

The report, 3-D printing and the new shape of industrial manufacturing, which includes findings from a survey of over 100 industrial manufacturers, revealed that two-thirds (67 percent) of manufacturers surveyed are currently implementing 3DP either by experimenting with the technology or by already using it for prototypes or final products. One in four respondents said they plan to adopt 3DP in some way in the future. 

As the manufacturing industry spins its web across the world more and more, the network connecting businesses and their partners become much more complex. One of these areas most impacted is a company's supply chain, the main catalyst of one's ability to produce and distribute their products as efficiently and to as large and diverse of a customer base as possible. While this broadening supply chain ability certainly brings along many benefits, the ability to manage risk, particularly in the area of quality, becomes quite challenging.

In a new report released by Sparta Systems, entitled "Four Best Practices To Improve Quality In The Supply Chain", Mohan Ponnudurai, Industry Solutions Director for the company, discusses the difficulties manufacturers are encountering in their supply chains with respect to quality, and offers a quartet of solutions aimed at not only remedying the issues at hand, but ensuring that they don’t occur again down the road. 

The first rule of thumb in creating a solid supply chain sustainably is to think broadly. "Companies need to think broadly about supply chain sustainability to really get the most out of it," Nick Delay, managing director, sustainable business solutions, at PwC US, told EBN in an interview. For example, successful initiatives look at the whole life cycle of a product, from design to end of life. Further, the initiatives need to consider the breadth of potential benefits: environmental, social, economic, and ethical, he contends.

With this new way of thinking, sustainability initiatives can reach into new areas of the organization that might include publishing codes of conduct, new ways of thinking about repurposing products, looking for new and different kinds of partners, measuring decisions against job creation, and more, he added. 

In 2010, massive flooding in Pakistan profoundly affected the country and disrupted supply chains globally, spiking international prices for cotton, rice and wheat. This was only one in a string of weather disasters — including heat waves, hurricanes and wildfires — that have affected supply chains on a large scale in the past decade. 

Despite the enormous value at stake, climate risks in supply chains can be hard to see because they are so large. The key to getting it right, according to Acclimatise CEO John Firth, who spoke at the BSR Spring Forum last week, is for managers to address supply chain climate risks in terms of existing stressors — such as procurement costs, on-time delivery, water availability and secure energy and infrastructure.