2018 KATZSCAN NEWSLETTERS

There may be no I in TEAM, but what else can sports teach us about business?

The cover story of the October 8, 2018 Miami Herald business section was an eye-opener: South Florida is not known for having its fair-share of championship teams. Sure, the Miami Heat won a couple of basketball championships with LeBron James a few years ago, but otherwise that is about it. The Florida Panthers (hockey), Miami Marlins (baseball), and Miami Dolphins (football) have all struggled to secure any respective league playoff spot, let alone a championship, for quite a while.

And yet, despite sometimes losing seasons and a lack of fans in seats, teams are able to make payroll and dole out giveaways at games, even provide charitable contributions to the communities in which they live. Ever wonder where the money comes from?

Per the article, the out-of-season use of the sports facilities (arenas and stadiums) generates a whopping amount of revenue for sports teams, even as sometimes these facilities are run as separate legal entities or are funded by public dollars as is typical here in South Florida. 

How successful can some of these sports venues be when utilized for other purposes? According to the article which cited Pollstar – a firm that collects ticket sales data from multiple sources – here are some statistics for South Florida sports venues based on Pollstar annual ticket volume:

- The American Airlines Arena where the Miami Heat basketball team plays is ranked as the 18th most popular entertainment venue in the world. 

- The BB&T Center where the Florida Panthers hockey team plays is ranked as the 100th most popular entertainment venue in the world. 

It is the value of the venues that causes the sport franchises to be worth so much when they are valued.

This all got me thinking about what value businesses have beyond the products and services they sell?

Businesses can extract value from data analytics in looking at customer buying patterns. 

The business can utilize customer contact information strategically to reach out and remind customers that they exist. Marketing campaigns highlighting inventory the company is looking to move, or remind customers of seasonal services, are easy to produce but rely on fine-tuned data to be set up right from the beginning. 

Customer, items, and suppliers/vendors are the entities that a business relies upon, and each of these entities has unique data characteristics. Sales orders, purchase orders, work orders, and invoices are examples of business transactions, and each transaction type has its own distinct attributes that allow it to be analyzed. Together, entities and transactions form the two key components that data analytics are formed of. But if you don’t get the characteristics and attributes correct and conducive to the business, your analysis will be flawed and the results will not return the accurate insights you need … or want. 

Getting data correct takes a team effort: people who know the industry and people who know business and how business software systems can best be utilized to get the desired results. As I say on my web site: “My clients know their industry, but I know their business.” 

If your company is struggling to get insights into its own data and build revenue and growth from business intelligence analytics, contact me to help you successfully sort this out. 

At this time of the year we all get a little hectic with the happiness of the holidays upon us. Yet it is also a time to stop and give thanks for all that we have. Thanks to everyone – clients and colleagues – who has been a part of my 22 years of self-employment. Happy Holidays and Happy New Year to one and all. 

Are Shipper-Carrier communications still tone deaf? 

I was considerably struck by one particular graphic in the article titled “Will new tools fix our old problems” in the September 2018 issue of Logistics Management magazine.

The article analyzed data from the 27th Annual Study of Logistics and Transportation Trends. 

The graphic with the data that shocked me was the communication methods between shippers – companies that ship goods – and carriers. The graphic showed data for domestic (US) and international, but I am just going to focus on the US numbers herein.

Based on the percent of respondents:

- Email was used 28.4% 

- Electronic Data Interchange (EDI) was used 24.8% 

- Application Program Interfaces (APIs) were used 15.6% 

- Telephone was used 24.1% 

- Facsimile (a.k.a. “fax”) was used 7.1% 

Given that EDI has been around for several decades and is a backbone technology of the granddaddy of all supply chains – retail – I am glad I was sitting down when I saw this synopsis. To see that email use eclipsed EDI use was a complete surprise in this day and age of technology use. 

Though, after I thought about it, based on my experiences at a few clients, I really was not that surprised at all, and that was a darn shame. Most shipper-carrier communications I experience are hybrids at best whereby some baseline data is transmitted via EDI but then the rest of the conversation is carried out via telephone, fax, or email. Ugh. 

Forget about considering something like blockchain technology if your organization cannot even get its operations mindset wrapped around how EDI fits in. 

What was so disconnected and out of touch was another graphic that highlighted the survey respondents’ identification of key technologies for supply chain management. 40.7% identified data analytics as #1, with the Internet of Things coming in at a distant second place at 10.4%. My question is: How the heck can data be analyzed when so much of it is entering an organization via email, phone, or fax? 

Granted, the survey results leave some interpretation to be desired. Some shippers and carriers may be 100% EDI capable while others are far less than so, thus the results are a bit muddied. 

However, given that the survey queried for actions to improve progress towards performance goals, increasing supply chain agility (24.5%) and improving customer engagement (21.6%) were the clear top winning desires. But still … how is a company going to accomplish these targets when it cannot even succeed in implementing 30-year-old EDI technology, integrating it into its ERP or 3PL system, and incorporating it into its business processes? 

Readers, we apparently have a far longer way to go in the evolution of our integrated supply chain systems if companies – and industries – are going to achieve the kinds of supply chain agility and transparency and performance being written about and being demanded by customers, be they businesses or people. 

For any company out there who needs help, contact me. My book on successful supply chain vendor compliance lays out some business model tips for getting this – and more – successfully accomplished.  

To access the entire article, go to: 

https://www.logisticsmgmt.com/article/27th_annual_masters_of_logistics_will_new_tools_fix_our_old_problems 

The familiar framework of the ledger continues with blockchain.

There is perhaps no greater buzz-term being floated around right now than “blockchain”. Its potential use within supply chain and across financial transactions has morphed from fantasy to reality as this underlying concept of cryptocurrencies as made believers out of sceptics for its rock-solid security and transactional veracity. And while I am not sold on the cryptocurrency idea, the concept of the blockchain is one that I can certainly gravitate to, especially once I put it into a familiar framework. 

The concept of the blockchain is one of distributed ledgers across the network of all parties that conduct transactions. Each party has a copy of the ledger, and each transaction writes to all copies of the ledgers, that is to say the ledger retained by each party within the network. This full-on transparency allows all parties to know what transactions are occurring within the network, certainly those that are affecting them and their direct trading partners. 

Perhaps the blockchain is a great example of trading partner détente: I know what you know and you know what I know. 

Conceptually, trading partners have been executing transactions that have been writing to ledgers for decades. However, these transactions have been writing only to their own ledgers and not simultaneously to distributed ledgers. As such, there had to – continues to – be a great deal of trust but verify in supply chain transactions. 

In the 1970s businesses began converting their paper-based transactions to electronic standardized format and transmitting them via Electronic Data Interchange (EDI). Purchase orders, purchase order changes, purchase order acknowledgements, ship notices, and invoices are just some of the common business transactions sent and received via EDI that are generated from a company’s Enterprise Resource Planning (ERP) system. 

An ERP system is effectively two halves of a whole: a software system that controls how a company operates, and a software system that accounts for how a company operates. 

At some point, business transactions like those I mentioned above will affect the accounting side of the ERP system which includes the accounting ledger. Sales and invoices will be posted to various general ledger accounts. Inventory will be deducted. Shipping and freight charges will be recorded. 

The customer/buyer and the seller/vendor will take the same transaction, e.g. the purchase order initiated by the customer/buyer, and separately update the accounting ledgers in their ERP systems accordingly under traditional systems methodologies. In a blockchain concept, the single transaction would update a distributed ledger that each trading partner holds themselves. 

I see the blockchain as offering enhancements to ERP systems and helping to close some of the stress-inducing gaps that create relationship problems between supply chain trading partners. The concept of updating a ledger is nothing new, and thus companies should not shy away from looking into blockchain technologies by reliable providers. I would still be wary of cryptocurrency investments however, but please don’t rely on me for this kind of financial advice.     ;-)  

Retailers are facing fraud head-on.

For those of you – like me – who are old enough to remember the show and the tag line, “Smile, you’re on Candid Camera”, the next time you walk in to a retail store you may want to do the opposite instead. 

According to a McClatchy DC article in the May 28, 2018 Miami Herald newspaper, retailers are facing down shoplifting fraud by implementing facial recognition technology into their camera systems. By scanning the faces of people entering their stores and matching to databases of convicted or admitted shoplifters, retailers are seeking to block entry of nefarious persons into their brick-and-mortar establishments. 

Well … at least online shopping is an option for these fraudsters. 

Such facial recognition technology – which relies on proper lighting and superior camera resolution – is impressive. Within the first two steps of someone entering a retail establishment – in less than one second – a face in a crowd can be scanned and matched against a database of 25 million entries. 

But what if errors or glitches occur? What if an innocent person is targeted and tagged as a shoplifter and excluded from entry to a store? The liabilities against the retailer for such a mistake can be considerable. Liabilities include not just the money won in a lawsuit but the company’s reputation when this is exposed to the public. And companies – retailers – are not required – there is no law necessitating – that facial recognition scanning signage alerting customers to the use of this technology be posted. Stores can deploy and use this technology without the consent and permission of any of us. And the technology accuracy varies based on skin color and gender. 

Retailers are desperate for anti-theft solutions. The nation’s 3.8 million stores suffered $48.9 billion dollars’ worth of losses in 2016. On the average, a store will suffer between 1 and 3 percent of revenue loss to theft annually. 

However, once the theft type is analyzed, shoplifting theft is believed to be responsible for less than half of the above numbers, with more losses coming from employees typically at the checkout counter. Still, with the annual loss numbers so significant, reducing the shoplifting portion would be a significant achievement for retailers. 

But how else could this technology be used … or abused? Could faces be shared among retailers in the same way that sales data is shared today by companies that monetize their customer information? Could a company one day sell their facial scans to a marketing company that would compare these scans to those of another company to determine these people’s shopping habits, and then try and identify these people through social media sites like Facebook and LinkedIn, after which they would send targeted advertising messages? (Hey – looks like I just created a not-so-futuristic business model if anyone is interested!) 

[SIDEBAR: Amazon – the powerfully potent online (and now intrusively brick-and-mortar) retailer has a nifty little piece of software developed by its Amazon Web Services (AWS) group called Rekognition. (AWS’ $5.4B Q1 2018 revenue make up for the majority of Amazon’s overall profits.) Rekognition will not only recognize up to 100 faces in a crowd at a time, but also discern the emotional state of each person based on the face’s characteristic (cheeks, lips, eyes) attributes (e.g. slant, opening). So, not only is there facial recognition software, but emotional state recognition software. Forget about walking in to work with a sour puss on your face because you had a bad commute or are a disgruntled employee due to something beyond your control: Big Brother may very well be monitoring and keeping a checklist of your behavior … possibly for your next performance review.] 

The article does point out that inasmuch as the technology is in use today by some retailers, there are legal and ethical considerations that are already being thought out. How secure are these facial databases from hacking? I am one of those people who would never give up his DNA to a commercial company for testing.  That my facial features are in various commercial company’s databases is uncomfortable enough. I am all for fighting fraud, but there has to be less personally intrusive ways to do so than such wide net casting. 

Buyer beware: You cannot simply “tech” your way out of your business problems.

My consulting straddles both operations and software, and I often find myself giving the same advice – and repeating it over and over again – to my clients who are software shopping. Inasmuch as newer technology offers legitimately better tools to do the task at hand, I caution that technology alone will not cure a company’s ills: it takes good business practices, procedures, and people to complete the picture. And my clients need to be skeptical shoppers when it comes to the sales pitches by software sellers who promise their technology will correct all of their company’s bad behaviors, because time and time again the realities are far from the promises. 

I was therefore delighted to read the quotes by Ali Sankur in the article “State of Global Logistics: Delivering Above and Beyond” in the February 2018 edition of Logistics Management magazine in describing logistics technology, as I acquainted Sankur’s comments to business software in general:

“Since the development of the first mainframe computers, companies have pursued technological solutions for their logistical challenges. Their search has led them up plenty of costly dead ends.” 

Inasmuch as Enterprise Resource Planning (ERP) systems have evolved from MRP systems, Sankur’s comments about MRP systems can be applied to ERP systems and still ring largely true:

“Manufacturing-resource-planning (MRP) systems, for example, promised a fully automated solution to difficult production-scheduling activities. In practice, their mechanistic, inflexible approach often struggled to cope with the uncertainties and volatilities of the real world in which machines break down, suppliers fail to deliver, and customers change their minds.” 

Sankur also highlights that other solutions – such as radio-frequency identification (RFID) – were more like solutions in search of a problem. RFID suffered from high costs and implementation difficulties that have significantly restricted its use, a significant downfall from the one-time prediction that RFID would replace barcode use. 

My clients engage me to help them select and implement software to improve their business. But software alone is not a panacea to a problem. While it is true that software such as an ERP system will have a prescribed methodology to perform a business task, such as enter a sales order, these objective steps are meaningless if it is not evolved into a subjective business process. How software solves a situation for one company may be different than how it solves the same situation for another company. 

And software alone is just the tool: people are the users of the tool, and they must be trained and educated on how to wield this tool effectively. Showing someone how to walk through steps is not the same as truly educating them on how to effectively understand and use the software. 

Companies that understand the differences are the companies that are successful in their software implementations. 

The use of data analytics to mitigate supply chain fraud, waste, and abuse: 4-year statistics perspective.

Since 2014 – two years after the 2012 publication of my book “Detecting and Reducing Supply Chain Fraud” – Deloitte has been performing annual polls seeking feedback relating to how companies use data analytics to mitigate supply chain fraud, waste, and abuse. 

The number of poll respondents for each year are: 3,056 in 2014; 2,596 in 2015; 3,115 in 2016; 3,185 in 2017.

Despite the implementation of advanced ERP and business intelligence systems, deeper views into supply chain activities with demand planning and forecasting systems, forging stronger data relationships with supply chain partners, and the drive towards the acquisition of more data, overall companies are still experiencing more fraud, waste, and abuse in their supply chains than not in the prior 12 months:

In 2014, 31.4% versus 22.0%; in 2015, 28.9% versus 25.6%; in 2016, 31.3% versus 24.6%; in 2017, 31.6% versus 26.7%.

What is perhaps more disconcerting is the significant percent of companies that don’t know if they have experienced supply chain fraud, waste, or abuse: 46.6% in 2014; 45.0% in 2015; 44.1% in 2016; 41.7% in 2017. Inasmuch as this trend shows a 5% decline from 2014 to 2017, all years still show that greater than 41% of companies don’t know if they have suffered supply chain fraud, waste, and abuse, so I am not sure the slight decline is statistically significant enough to celebrate. 

What would be worse is that if companies implemented new technologies and still failed to realize they were subject to supply chain fraud, waste, and abuse. The polling does not go in to the age of or the types of technologies used at the respondent companies: that would be a very interesting aspect, e.g. whether the company was using a legacy or custom ERP system; whether the company was using a business intelligence system or working from spreadsheets. 

What could possibly explain the gap in visibility of knowing if supply chain fraud, waste, or abuse has occurred? Certainly, software system sophistication is one consideration. 

Companies may be also experiencing skill gaps in the technologies they are relying upon or have implemented, as well as talent shortages in critical thinking and data analysis. Quite simply, companies cannot “tech” their way out of their problems. 

Companies need to ensure their employees are able to master the technologies the companies are implementing and have the necessary critical thinking and analytical skills to creatively and subjectively harness the data output into meaningful and actionable information. 

My book describes a business model where standard supply chain systems – Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI), and Automatic Identification (e.g. barcode labeling and scanning) such as that used in a warehouse or distribution center – and the transactions that are output, can be utilized to not only analyze supply chain performance but also to audit for fraud. If you are interested, please go to www.katzscan.com for more information and to contact me for a further discussion and assistance. 

Digitization on any scale can produce noticeable results.

From an article in the May 2018 edition of Southeast Manufacturing News magazine, automobile makers are realizing significant production and financial gains from their investments in digitization. But before you say “That’s great but how will it lower the cost of my next new car?”, let’s define what digitization is.

Digitization is the conversion of text, images, and audio into a digital format that can be processed by a computer. 

For automakers, this means everything from design drawings to simulation testing to robotic manufacturing. Per the article, Maserati previously took 30 months to manufacture the Ghibli sports sedan from beginning to end, but after implementing a digital strategy the automaker reduced the timeline to 16 months and increased manufacturing productivity threefold. 

While automobile manufacturers have the financial capacity beyond the means of many companies, digitization is not out of the reach of numerous much smaller organizations who struggle daily with mundane data entry tasks. 

Digitization, which includes the conversion of text, includes technologies such as Electronic Data Interchange (EDI) and automatic identification (e.g. barcode labeling and scanning). 

EDI is the exchange of business documents – purchase orders (which are converted to sales orders once they are imported into the business software system known generically as the Enterprise Resource Planning (ERP) system), invoices, ship notices – with a supply chain partner (typically a large customer). Usually this is a mandate based upon the customer’s supply chain vendor compliance requirements. 

Automatic identification is a very convenient way of counting inventory and reducing errors in physical inventory and the picking-and-packing process in the warehouse or distribution center. It also helps to improve the integrity in internal controls and reduce fraud. 

As the automakers have discovered, the additional data being collected through a digitization strategy has the bonus benefits in being able to better analyze not just what has happened in order to make better future decisions, but in trying to predict what could happen before it does happen. While reactive examination is how information has been – and continues to be – traditionally used, predictive analysis is the new forefront of how and why data is now being collected and studied. 

Both Electronic Data Interchange (EDI) and barcode labeling and scanning technologies have been around since the 1970s. Inasmuch as the science behind the technologies has improved, these tried-and-true technologies remain unchanged and still the backbones of various worldwide supply chains such as retail, grocery, pharmaceutical, medical products, automotive, and government (especially defense). 

If your company wants to explore a supply chain digitization strategy, please get in contact with me to learn more. You won’t need the bank account of an automaker, just the company commitment and vision to improve and be more competitive. 

Reconciling two competing views of supply chain data.

The article, titled “Inaccurate Cost Data is Hurdle for Supply Chain Professionals, Study Finds” which appeared in the April issue of Supply Chain Brain magazine is well‑timed as I just finished up a fulltime 10-month assignment last month. I helped a client map out their current operational and software state, analyze and migrate data, and lay the future state foundation for their new Enterprise Resource Planning (ERP) and Electronic Data Interchange (EDI) software projects. 

As a business analyst, software/systems analyst, and data analyst, I spend a lot of my time working directly with the user community to understand the current state, envision the future state, and define the transition between the two. This involves the data, the business operations, the executive strategy, and the information upon which people will make their decisions. 

The article is a joint study by two well-known organizations: APICS (formerly known as the American Production and Information Control Society) and the IMA (Institute for Management Accounting). I am more closely familiar with the IMA as I have been a speaker at two of their national conferences. 

From my recent client experience, and as the article describes in the joint report titled “Working Together to Enhance Supply Chain Management with Better Costing Practices”, the problem is the perception of costs between different factions of folks within an organization, namely the accounting and finance group versus the supply chain and operations group. 

The disparity in the analysis of what comprises supply chain costs was associated with three primary factors based on the report’s conclusions:

1. Too much reliance on external financial reporting systems which over-simplified how costs were calculated. The simplification may be due to the use of external systems that results in the inability to sufficiently analyze certain variables which impact costs associated with supply chain activities. (Norman’s note: external systems can include spreadsheets.) Some general ledger models may also be inadequate to capture all supply chain costs.   

2. Use of outdated costing models. Not only may the use of outdated costing models be creating challenges, but inadequate (too simple, too complex) costing models may be obfuscating the true supply chain costs. Deploying an appropriate cost model that suitably identifies the supply chain costs will aid in cost analysis and bring better clarity and transparency. 

3. Accounting and finance resistance to change. Given that the IMA was part of the workgroup, this is a significant admission. Accounting and finance professionals need to be more educated in supply chain concepts to understand the greater need for cost details in an ever more complex business model environment. GAAP can still be adhered to and all controls still in place with new ways to capture detailed costs and without creating an unmanageable general ledger. 

The ability to accurately drive into supply chain costs has a direct impact on an organization’s capability to set prices that are in line with margins (and visa-versa), and to determine where profits and losses are at each critical point in the supply chain. 

Transportation, vendor compliance, warehousing, labor, manufacturing, raw materials, service fees, and returns are examples of some of the supply chain cost areas that demand detailed analysis. If your organization is not focused on these and other supply chain costs, the true cost of conducting business is probably hidden and is therefore likely higher than you realize. 

Supplier risk is a top concern for 2018.

Two different articles in the December 2017 issue of Inbound Logistics (www.inboundlogistics.com) magazine point to supplier risk as a top concern for this year. 

In 2017, Amber Road and AAEI published “The Trade Trends Report, 2017 Survey on Sourcing, Trade and e-Commerce” which points out four key global trade strategies and challenges:

1. E-commerce will continue to dominate over brick-and-mortar sales, thus online sales will continue to surge.

2. Speed-to-market, disruptions, and free trade agreements are seen as challenges to execution. 

3. Sourcing is at the center of global supply chains because of the affect on raw materials, labor, and manufacturing capacity. 

4. Top concerns for 2018 include supplier risk (25% of respondents), regulatory risk (20% of respondents), lack of adequate staffing (19% of respondents), and transportation costs (15% of respondents).

In a report published by the Business Continuity Institute, with support by Zurich Insurance Group, companies are found to be turning to technology to overcome a shortage of skills in supply chain management. As I have said before, you cannot tech your way out of your problems. This study also reveals that 63% of organizations do not use any technology to track, analyze, or monitory supply chain performance. The report also sites a lack or loss of talent and skills as a top cause of supply chain risk. 

The two reports share a citing of supplier risk and talent management in their assessment of current supply chain risk for this year. 

An answer to ensuring that your staff is enabled to face the challenges they will encounter in an ever-changing and more complex global environment is to not just hire well but also to provide mentorship, education, training, and knowledge transfer. Bring in the experts and expertise your company needs to meet and beat the competition. 

Supply chain vendor compliance sits at the center of supplier relationship management and supplier risk management. The vendor compliance perspective is not just about how a company performs in meeting its customers expectations, it is also about assessing how well its suppliers are performing. The very same metrics that customers judge your company on can be the basis for how you company judges your suppliers. 

But be forewarned: it takes a lot of talent and the right software systems to properly execute a vendor compliance problem, given that you become judge, jury, and executioner in the determination of who is at fault for what kind of supply chain disruption. 

And don’t just think vendor compliance is for external perspectives: the same analysis and performance measurements can be turned inward for a critical and revealing look at how a company is performing in meeting its own demands and expectations. 

For a resource for supply chain vendor compliance, please go to: 

www.vendorcompliance.info. 

Tips for creating the right customer experience in the era of impatience.

The December 2017 letter from the publisher in Inbound Logistics (www.inboundlogistics.com) magazine drives home the importance of delivering the right customer experience in the era of what the publisher calls supply chain impatience. Regardless of whether the customer is the B2B buyer or is the end consumer, expectations of supply chain performance are coming together and need to be in place from one end of the supply chain through to the other to ensure a seamless execution occurs and that the customer – whomever it is – has the best experience possible throughout the supply chain. 

Some tips to ensure the right customer experience occurs are:

1. Consider your processes’ customer service implications from as far back in the supply chain as possible. From the point of demand, delve as deeply into the supply chain to reveal all possible failure points and consider how those failures impact who the customer is at each point. Remember: there may be more than one type of customer impacted at a particular supply chain failure point as the failure ripples through the supply chain. The customer may be the end buyer, e.g. a retailer or manufacturer or distributor, or may be the consumer. Likewise, the failure may manifest itself differently as it moves through the supply chain, so it may likely have to be handled differently as it changes.

2. Your customer experience should be considered as a competitive advantage. It is easy to delivery good customer service when things go right, but how is your customer experience when thing go awry? Showcase to new customers your competitive advantage, and leverage it to keep current customers yours and not your competitors. 

3. Just because some customers are not sophisticated and “plugged-in” does not excuse the fact that they don’t expect or demand great customer service. It is your job to deliver the same level of superior service regardless, so find a way to satisfy all levels of customers regardless of their level of technology embracement. 

4. You cannot tech your way to better customer service, or to any business solution as I often tell my clients. People will always be the critical and deciding factor. Technology is only a tool to get a job done. Inasmuch as you need to invest in the right technology tools to enable superior customer service, you cannot rely solely on technology to deliver the right customer service: people will always be the critical differentiating factor. Invest in the right people and provide them with the right training and educational opportunities, along with the right technology tools, to ensure that they are prepared to be on the front lines as they represent your company when dealing with unhappy customers in need of fast resolutions to their problems. 

We have all been in the need of customer service and faced both good and bad customer service experiences. Ask yourselves how you want your company to be represented and remembered for its customer service experience. After experiencing your company’s customer service would you do business as a customer with your company again? 

If customers cannot connect, content does not matter.

I have been having my fill of some companies lately whose business models are technology-centric: anti-malware, cellular-service, operating system, and ride-share to just name some. The issue is simply that these companies continue to operate as technology companies first-and-foremost and consumer product and service companies as an afterthought.

While we may still have to accept the fact that doctors continue to run behind schedule in keeping with their appointment times, we should not have to put up customers being required to be software engineers and wait days for email-only responses just because we purchased something that is not tangible and is instead a technology rather than a traditional consumer product. If a company does not offer telephone support, I am just not interested anymore. If the product isn’t fully tested across the range of devices and operating systems, this isn’t my problem to help them diagnose and debug for free on my time. 

The fact of the matter is that whether you offer a product or a service, customer relationship matters. And this comes from someone who has offered services for over two decades to a variety of numerous businesses, which includes being very responsive to phone calls and emails for just inquires. 

The issue for companies of the type I mentioned is that their investment in content is devalued if they fail to acquire a consumer or lose a current customer. Companies such as cellular providers, telephone services, software security, ride share, and the like rely on alternate revenue streams to build cash flow into their business models apart from what should be their core competencies given that those specialties are how they came in to being. But when companies lose focus on the fact that those core technologies are how customers connect to the content they are investing in and building, those investments don’t matter as customers flea to competitors who offer function and customer service. It is just that simple … well, it should be. 

The general statistic I have continually heard is that is costs 5 times more to acquire a new customer than it does to retain a current customer. When you consider the cost of telephone solicitations, search engine optimization, media advertising (telephone, mail, television, radio), discounts, and employees to handle this, just to name a few of the more obvious costs, there is considerable effort just to bring a new customer in. 

Yet the technology-based companies I have encountered do a miserable job in customer retention because they act like a technology company first, not like a consumer product company. And so, I move on. And their up-sell content? It just doesn’t matter to me one darn bit because it is a commodity that I can acquire from their competitor who I am jumping ship to.

Customer service has generally devolved into risk management, which is why cable and telephone/cellular companies have “Office of the President” representatives who answer Federal Communication Commission complaints, another operating expense that companies could reduce if they simply got their operating act together at the foundation level. Companies should be trying to increase customer retention and decrease their customer acquisition costs. As the saying goes: Bad news travels faster – and spreads wider – than good news. What does your company’s customer retention and customer acquisition plans look like, assuming they exist at all?  

Will the growth of e-commerce grow new last-mile delivery opportunities? 

I was having an interesting chat with my letter carrier in early December, just last month. He has worked for the US Postal Service for 30 years. We have known each other for ten, maybe even close to fifteen years now, so I have known my letter carrier for a significant part of his long career. And in true customer service fashion, it is great having a letter carrier who knows me and who I can trust.

During our early December conversation, my letter carrier showed me his already over-flowing postal vehicle that was filled with parcel boxes for holiday delivery. The postal service has been increasing their ecommerce deliveries, opening up services on the weekends, to boost revenues amid declines in regular mail volume as people engage more in electronic media for bills and magazines, especially with magazines struggling to make it in a digital world. 

However, as my letter carrier pointed out, while those tiny mail trucks may be fine for the majority of the year, they are generally too small to handle the volume of packages during the holiday season. The postal service won’t invest in larger vehicles because there is no justification to do so: the capacity analysis just doesn’t pan out because there are no problems during the rest of the year.  This places a stress on the postal service fleet and risks compromising the speedy delivery of holiday packages. 

The alternative for shippers looking for a last-mile solution is to use the only other two options: FedEx and UPS. But my belief is that companies look to the USPS first because the shipping costs are less, so converting to alternate carriers may increase costs. 

The capacity gap faced by the USPS may be an opening for an entrepreneurial company to step in and offer some additional delivery help during the holiday season. A transportation or technology company with a ready fleet of vehicles or drivers (think Uber or Lyft) could partner with the postal service and help lighten some of the load by utilizing some of their capability and capacity. And a third-party could offer delivery times outside of when the USPS normally functions, e.g. evening and nighttime hours. 

This would reduce the incidences of package theft by delivering when the customer is home.  

Inasmuch as the main carriers – FedEx, UPS, and the USPS – seemingly got the holiday happiness delivered this without the capacity headaches of years’ past – the growth of e-commerce will only put more stress on the big – or shall we say “only” – three main parcel carriers at holiday time. Will this, plus the increasing theft of packages at the front door, (here’s a suggested solution: have holiday packages delivered to the workplace), push consumers back to the stores to ensure they get their gifts safely, securely, and on-time? 

Holiday shopping in the omnichannel world brings with it new supply chain opportunities, and that includes the possibilities of some unique partnerships that improve delivery safety and security which reduce costs and help ensure everyone has a happy holiday season right from the early start. 

The end of 2017 brings to a close the 22nd year of business. As I look to 2018 and the beginning of year 23, I look forward to another year of providing insightful help to my clients in the areas of data, operations, software, supply chain, risk, and fraud. And I’ll keep sharing my insights through my monthly newsletters.