Do you know how Amazon receives your inventory?

 

Even wondered why Amazon is able to receive, pick and dispatch orders within hours?

Have a look at how Amazon receives inventory from their suppliers. Did you noticed how streamlined and strict their policies are when it comes to accepting new parcels into their fulfilment centres?

Porter's Five Forces

Porter's Five Forces Framework is a method for analysing competition of a business and determine the competitive intensity and, therefore, the attractiveness of an industry in terms of its profitability. An "unattractive" industry is one in which the effect of these five forces reduces overall profitability.

This framework was developed by Michael E. Porter and includes three forces from 'horizontal' competition, the threat of substitute products or services, the threat of established rivals, and the threat of new entrants, and two others from 'vertical' competition, the bargaining power of suppliers and the bargaining power of customers.

Threat of new entrants:

Profitable industries that yield high returns will consequently attract new entities. New entrants eventually will decrease profitability for other firms in the industry. Unless the entry of new firms can be made more difficult, profitability will fall towards zero. The most attractive markets are the ones in which entry barriers are high and exit barriers are low; the less time and money it costs for a competitor to enter a company's market and be an effective competitor, the more an established company's position could be significantly weakened.

Threat of substitutes:

Substitute goods or services can be used in place of a company's products or services and pose a threat to the existing company. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices.

Bargaining power of customers:

Defined as the ability of customers to put the firm under pressure and drive prices low. Consumer’s power is high if they have many alternatives but it weakens if they only have few choices. A smaller and more powerful client base means that each customer has more power to negotiate for lower prices and better deals, on the other hand a company that has many, smaller, independent customers will have an easier time charging higher prices to increase profitability.

Bargaining power of suppliers:

Similarly to the consumers bargaining power, the fewer suppliers to an industry, the more a company would depend on a supplier, and as a result, the supplier has more power and can drive up prices. On the other hand, when there are many suppliers a company can keep its costs lower and enhance its profits.

Competitive rivalry:

It refers to the number of competitors and it’s the biggest determinant of the competitiveness of the industry. The larger the number of competitors, along with the number of equivalent products and services they offer, the lesser the power of a company. Conversely, when competitive rivalry is low, a company has greater power to charge higher prices and achieve higher sales and profits.

 

El concepto Uber se traslada al transporte logistico

 

Tras un tiempo en el que se hablo mucho del potencial de la “Uberizacion” del transporte logístico, el Gigante Asiático ha sido el primero en desarrollar una aplicación similar a Uber centrada en el transporte de mercancías. 

Gracias a las nuevas tecnologías y al big data, esta aplicación ha sido capaz de cubrir un nicho de mercado hasta ahora inexplorado, poniendo en contacto a empresas y transportistas y facilitando la interacción entre ellos.

Todavía es pronto para saber si este modelo tendrá éxito fuera de China, pero con su introducción en el mercado sudamericano parece que hay futuro para esta nueva aplicación y los posible competidores que sin duda surgirán en el futuro cercano.

El articulo al completo lo podéis encontrar en el siguiente enlace.

El Uber de los camioneros

Has COVID-19 slowed down our quest for making packaging more sustainable?

2020 was supposed to be the ‘year of sustainability’, building on the momentum of last year where climate action and reducing plastics pollution were at the forefront of discussions.

However, since the outbreak of COVID-19 focus has quite rightly shifted towards overcoming the pandemic.

Most companies have been focussing on ensuring the safety of their staff and customers, managing elevated demand for essential items, and supporting their local communities.

This has mean that the packaging supply chain has had to become more flexible as demand has proven to be unpredictable.

With this in mind, it is not surprising that we have already seen signs that many consumers have rethought their preference for ‘packaging free’ consumption. With hygiene and safety being more prominent in consumers’ minds, some food retailers have gone back to increasing packaging and individually wrapping fruits and vegetables.

Some foodservice chains have also halted use of personal cups because of the risk of contamination, bringing back up the use of disposable paper cups and single use alternatives.

There is a risk that the low oil price may lead to an increase in the use of virgin plastic materials and in some places, single use plastic bags have become widespread rather than reusable ones.

It’s hard to anticipate what the impact of COVID-19 will be on sustainable packaging, but one thing we can say for sure is that in the short term, our behaviours and habits have been transported to the ones we had 10 years ago.

The importance of cost to serve in Supply Chain

In this post, we are going to shed some light on one of the most critical concepts in Supply Chain that most times is not being given the importance it deserves; cost to serve.

Cost to serve is a process that will allow you to identify the total cost of servicing your customers at a customer and product level in order for your business to provide the appropriate levels of service to achieve its business goals.

Cost to serve is critical as it shows that each product and customer demands different approaches and has a different cost profile. Many businesses today still adopt a one size fits all service policy.

Different customers drive different supply chain and logistics costs; large customers, small customers; large orders, small orders, frequent orders, less frequent orders, strict delivery time windows, detailed invoices required in triplicate, constant account management needs etc

The same is true of your products; large products that take up more warehouse space, products that have to be kitted or bundled, products that need temperature controlled storage and many more.

If you can identify the characteristics of your customers and products or services that drive your cost to serve, you will be able to identify low margin customers, low margin products and services and high cost processes so that you can make sure all of your customers are more profitable by providing the right service levels to the right customers.

Overall, understanding Cost to serve will enables your business to focus on both long-term decisions and the prioritisation of short-term actions and will make you able to reposition customers and services, and how they are served to improve overall margin.

The video below explains in a very graphical form the importance of cost to serve and how airlines have been able to make the most out of it!

Bio-plastics: is not gold all that glitters

It shouldn’t be a surprise that there is often confusion when talking about bio-plastics, In this post we will clarify some terms and also shed some light on the cons of bio-plastics.

Let’s start by listing some of the different types of plastic:

- Degradable: All plastic is degradable, even traditional plastic, however not all degrade at the same speed.

Some additives to traditional plastics make them degrade more quickly. Photodegradable plastic breaks down more readily in sunlight; oxo-degradable plastic disintegrates more quickly when exposed to heat and light.

- Biodegradable: Biodegradable plastic can be broken down completely into water, carbon dioxide and compost by microorganisms under the right conditions.

- Compostable: Compostable plastic will biodegrade in a compost site. Microorganisms break it down into carbon dioxide, water, inorganic compounds and biomass at the same rate as other organic materials in the compost pile, leaving no toxic residue.

If we turn our focus now to bio-plastics, we can identify two main types:

- PLA (polyactic acid): Typically made from the sugars in corn or potato starch, or sugarcane. It is biodegradable, carbon-neutral and edible.

PLA can look and behave like polyethylene (used in plastic films, packing and bottles), polystyrene (plastic cutlery) or polypropylene (packaging, textiles).

- PHA (polyhydroxyalkanoate): Made by microorganisms that produce plastic from organic materials. The microbes are deprived of nutrients like nitrogen or oxygen, but given high levels of carbon.

They produce PHA as carbon reserves, which they store in granules until they have more of the other nutrients they need to grow and reproduce. Companies can then harvest the microbe-made plastic.

Because it is biodegradable and will not harm living tissue, PHA is often used for medical applications such as sutures, slings, bone plates and skin substitutes.

Now that we have clarified some of the different types of bio-plastic, let’s address the controversy.

While bio-plastics are generally considered to be more eco-friendly than traditional plastics this isn’t necessarily true when the materials’ life cycles were taken into consideration.

Bio-plastics production results in greater amounts of pollutants, due to the fertilisers and pesticides used in growing the crops and the chemical processing needed to turn organic material into plastic.

While the biodegradability of bio-plastics is an advantage, most need high temperature industrial composting facilities to break down and very few cities have the infrastructure needed to deal with them.; as a result, bio-plastics often end up in landfills where, deprived of oxygen, they may release methane, a greenhouse gas 23 times more potent than carbon dioxide.

When bio-plastics are not discarded properly, they can contaminate batches of recycled plastic and harm recycling infrastructure. If bio-plastic contaminates recycled plastic, the entire lot could be rejected and end up in a landfill. So separate recycling streams are necessary to be able to properly discard bio-plastics.

Another point is the fact that the land required for bio-plastics competes with food production because the crops that produce bio-plastics can also be used to feed people. In addition, the water and petroleum used to run the farm has a greater carbon footprint.

Finally, at the moment bio-plastics are still relatively expensive, 20 to 50 percent more costly than fossil fuel based plastics because of the complex process used to convert corn or sugarcane into the building blocks for the final product.

In summary, right now, it’s hard to claim that bio-plastics are more environmentally friendly than traditional plastics when all aspects of their life cycle are considered: land use, pesticides and herbicides, energy consumption, water use, greenhouse gas and methane emissions, biodegradability, "recyclability" and more, but as researchers around the world work to develop greener varieties and more efficient production processes, bio-plastics do hold promise to help lessen plastic pollution and reduce our carbon footprint.

COVID-19: impacts on supply and demand

How resilient and responsive is your supply chain? If you did not know before, there’s a chance you will soon find out.

There’s been a lot of talk about risk management with regards to Brexit, which seemed like enough of a challenge, but now many nations around the world are facing an event that, unlike Brexit, couldn’t be predicted or properly planned for.  

As supply chains tend to be highly customer-focused, changes in customer behaviour and demand has impacts throughout the supply chain.

In China, retailers reported changes to the demand profiles of specific products, as shopper behaviour changed in response to the outbreak of COVID-19.

One trend observed since the outbreak has been a surge in online shopping. This is not surprising and a consequence of people going out less, in response to government advice to self-isolate.

KFC and Pizza Hut started trialling contactless delivery services in an attempt to reduce person-to-person transmission and JD.com introduced five vending machines to a residential compound in Beijing, offering residents 24/7 access to fresh fruit, vegetables and more. 

Demand and supply planning becomes difficult when demand patterns change.  In the case of COVID-19, there isn’t a sufficiently comparable historical event that can be used to get a sense for customer demand.  For products that are seeing surges in demand as a result of the outbreak, supply chains will likely struggle with replenishment and lead times will increase, unless additional sources can be found and/or capacity can be increased at current suppliers. This will affect on-shelf availability (OSA).

Some retailers have attempted to actively manage demand for products that shoppers seem to be stockpiling.  UK retailer Boots has tried to reduce the demand for hand sanitizers by introducing signs on the shelves that limit customers to two per shopper.  In Australia, Woolworths has applied a quantity limit of four packs of toilet paper per purchaser.

Retailers should consider the possibility of a scenario in which consumers go out less and demand more grocery home deliveries.  If this happens, retailers may need to enhance online delivery capacity in order to meet increased online demand. 

Finally, businesses need to understand where their supply network partners are located and consider what the impact of the virus is in each of those locations.  They should also consider how worsening circumstances might affect operations at these locations.  Businesses will need to assess whether they can reduce risk by procuring finished goods and raw materials from alternative sources.  

Situation is changing rapidly and every day we have new news, but ultimately the reality is that supply chains will be severely impacted, but will also be a key player in solving the crisis that is yet to fully materialise across the globe.

Net Promoter Score (NPS)

Net Promoter Score (NPS) is management tool that measures the loyalty that exists between a provider and a consumer. It serves as an alternative to traditional customer satisfaction research.

Calculating the NPD is very easy using the answer to a key question; using a 0-10 scale: How likely is it that you would recommend my brand/service to a friend or colleague?

Responses are grouped as follows:

- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fuelling growth.

- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.

- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

Subtracting the percentage of detractors from the percentage of promoters yields the Net Promoter Score, which can range from a low of -100, if every customer is a detractor, to a high of 100, if every customer is a promoter.

The importance of the Net Promoter Score is that it gives you insights into your customer loyalty spectrum, and by measuring customer loyalty you can identify customer experience weak points that need improving.