26 Years. Since January 1996.
Sometimes you need a driver, other times you need a mechanic.
The COVID pandemic has exposed many personal and professional weak points and faults within numerous technology systems and method of operating. And I think that one of those is the hiring process.
Companies cannot seem to decide on who they need to fix their flaws, so they create convoluted job descriptions that include everything along with the proverbial kitchen sink.
Project managers are not business analysts. If you want a project managed, hire a project manager, someone probably with a PMP (Project Management Professional) certification. But don’t also task that person with analyzing your business to make it execute better, because that’s what a dedicated business analyst should be doing. Are there business analysts who are PMPs? Sure, there are. But if your project is complex enough for a PMP, then it likely needs a dedicated one at that. The analysis of the business needs should be left to those who can spend their time doing just that, along with their subjective insights, range of experiences, and technical and operational expertise. If you just need project leadership, an experienced business analyst will more than likely suffice. Certifications are not a substitute for experience, so don’t confuse the two. Hint: When the process has become the priority overtaking the product (e.g., software, something) as the project, there is probably a problem.
Hiring managers need to determine whether technical experience or subject-matter experience is the importance, and you won’t always find both in a person, especially to the nth degree on many job descriptions that I view. Sometimes you need a mechanic: the person who is the expert in the technology (e.g., the software, the language, the architecture) and has some knowledge of the subject matter (like supply chain) that they have naturally picked up from being within the environment. Other times you need a driver: the person with the end-to-end or focused subject matter expertise who is knowledgeable on the technology, but maybe not on the exact systems the company uses. Is this a problem? It should not be. If a person can drive a Buick, they can likely also drive a Chevy, and can probably also drive a Toyota and a Honda, just give them a bit of time to acclimate to each different vehicle. What is important is that they know how to drive a car, and can drive a car well, and can acclimate to an SUV or pickup truck too if needed. Working together, the mechanic and the driver become a formidable team, the sum of their knowledge greater in the whole.
Companies may believe that they are saving money in trying to find some unicorn individual who has the full range of subject matter knowledge, operational talent, certifications, and technical skills outlined in their job descriptions. Good luck. What these companies are in all likelihood are doing is putting up barriers to qualified candidates applying. If these companies are not happy with the employees that they are hiring, if these companies are not happy with their employee retention, if these companies are not happy with how their projects are working out, maybe these companies need to look at the starting point of the hiring process.
As my eighth-grade math teacher – Ms. Runyan – used to tell us ad nauseum: “When you mix apples and oranges, you get fruit salad.” (Thanks Ms. Runyan: 4+ decades later and this remains unforgettable!) Instead of job descriptions that look like fruit salad, companies need to determine who they need for the job at hand. Do you need a mechanic, or do you need a driver? Decide, and hire accordingly.
5 years ago, Mississippi struck manufacturing gold.
The COVID coronavirus pandemic has shaken up global supply chains and exposed their fragility and weak points. Manufacturers are scrambling to meet frustrated consumer demands. Congested ports are dealing with backlogs of ships and labor shortages. Shipping delays can be traced to a shortage of cargo containers. There are not enough qualified truck drivers to transport the goods to distribution centers, let alone likely for last-mile deliveries. All of this translates to rising costs, longer lead-times, and delayed – if not completely lost – sales revenue. What a mess, with no easy or short-term fixes.
Or are there, at least, some strategic solutions?
In a 60 Minutes pieces that was broadcast in December 2016, correspondent Bill Whitaker went to Mississippi and interviewed Joe Max Higgins, who is credited with the risen-from-ashes, Phoenix-like economic rebirth and economic development of the Golden Triangle area.
It seems that, for Mr. Higgins and his team, not only is Made In America possible, it is profitable too. Just ask the companies that he has attracted to the Golden Triangle area.
One personal story highlighted in the piece is that of a quality control worker at a shuttered pork processing plant. This woman lost her job – as did everyone else – when the meat processing plant closed. As someone who once worked for a leading apparel company, I can tell you from personal experience that manufacturing plants are the lifeblood of small towns, and that their closings cause deep, personal, economic hardships that ripple throughout the entire community.
Mr. Higgins persuaded a helicopter plant to locate to his area, knowing that he had the workforce, they just needed some retraining. The pork plant quality control employee knew quality control very well, she just needed some retraining to transfer her skills from meat processing to helicopter engines and controls. And within six months she was successfully trained and on the job, making – at the time of the broadcast - $10,000 more in salary. Now that’s an American success story!
Just like the former lumber mill employee now working at a metals recycling plant and making more than 3X his former salary. Another stellar success story. And there are hundreds if not actually thousands of more success stories like this throughout the Golden Triangle region, all thanks to Mr. Higgins and his team.
So, Made In America can be achievable, can be successful, can be profitable, can cut out some of the chaos (like shipping) and excessive costs (transportation, overstocking inventory) and delays that has plagued supply chains during the COVID pandemic. But it takes someone like Joe Max Higgins to envision it, to believe in it, to wrestle with it, and – unfortunately – to convince others to have faith in something that should be a given acceptance.
The talent and workforce have always been right here in the USA. With a bit of retraining – and I am certain that there are government grants and tax credits to assist – workers with the skillsets can be transitioned from one industry to another, their skills applied to new industries, new challenges.
Companies will benefit from more dynamic supply chains, from having Made In America products, from a dedicated workforce, from shaving unnecessary supply chain costs and delays. The companies who bet on Mr. Higgins and his Golden Triangle workforce truly struck gold. What will your company do to address the global supply chain challenges ahead? Perhaps the answers are right here in your own backyard, or in a town nearby to you.
For the 60 Minutes piece about Joe Max Higgins, click online link below.
Are you Big Retail Ready?
In 2009 I had the opportunity to meet Joe Andraski, the president of the then 23-year-old retail industry trade association VICS (Voluntary Interindustry Commerce Solutions) when we were both speakers at a conference. At a hosted dinner one evening we were sitting next to each other, and, between bites, Joe allowed me to detail the difficulties retail vendors struggle with when they encounter supply chain vendor compliance technical and operational mandates. Joe found the conversation of keen interest, and my perspectives unique. Our conversation led to Joe asking if I would be interested in jumping aboard a VICS committee, and I excitedly accepted.
The committee upon which I served was involved in trading partner alignment, that is to say, the relationship between retailers and their vendors. But the committee lacked a real strong initiative in this area, something that would really pull the two often combative sides together. Having attended some committee meetings and understood the mission and frustration, I came up with an idea:
What was needed was an educational course that would instruct prospective and current retail vendors on how to be non-disruptive supply chain partners. My justification for what we thought could be an industry certification was simply: “An educated vendor is a less disruptive vendor”. Joe loved the idea, and over the next several months I set about creating what was essentially a vendor compliance course that was launched with excitement.
In 2012 VICS was merged into GS1US, and the Katzscan-VICS affiliation no longer existed. I included some aspects of my coursework into my December 2015 book, “Successful Supply Chain Vendor Compliance” which you can find at www.vendorcompliance.info.
I have always known that there was still a need for this unique and targeted online education. As such, I am very pleased to announce that the online course has been updated and relaunched for 2021.
Titled the “Big Retail Ready©” course, the online offering is comprised of 6 modules, each module spanning approximately 35 minutes. Covering core technical and operational components of supply chain vendor compliance, this course uniquely offers direct-to-consumer marketplace sellers the essential knowledge on what it takes to become successful B2B/B2C retail vendors.
For existing retail B2B/B2C fulfillment vendors who are struggling and being financially penalized with chargebacks, this course will help to provide important information to help stressed vendors understand what is going right and what is likely going wrong, and what corrective actions they should be taking.
3PLs take note: because you are responsible for supply chain compliance for your retail vendor customers, including chargeback reduction, this course will help you be and become better at what you do too.
Supply chain vendor compliance – and the technologies (Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI), and barcode labeling) and the end-to-end supply chain business operations – have been a core part of my professional career since 1993. In updating the course, I included new knowledge and experiences in helping retail vendors since first producing the course in 2009.
This course will likely answer a lot of questions for those who take it, but it is meant to be a starting point for anyone’s supply chain education journey. I don’t believe that there is another comprehensive educational course anywhere that focuses on supply chain vendor compliance like this one does.
For more information on my Big Retail Ready© course, including the introduction video and FAQs, please go to: https://katzscan.com/big-retail-help
Why stores still matter.
In the exponential expansion of marketplace ecommerce that has coincided with the dramatic decrease in brick-and-mortar stores, one could continue to conclude that the future is strictly online shopping and delivery. This may be, but I am here to voice my support for both business models as a compliment to one another and a necessity to each other.
In 1993 I began my supply chain involvement as the Information Technology Manager at a women’s apparel manufacturer. We were shipping to retail distribution centers and stores, but would also – at the direction of the purchase orders we would receive from the retailer via Electronic Data Interchange (EDI) – drop-ship direct to the customer, or a designate of the customer as in the situation of a gift. Pre-internet ecommerce popularity, this was about as close to online shopping as there was at the time.
Fast-forward to the modern-day landscape of blurred competitive products and private labels competing with independent brands on a myriad of ecommerce marketplace websites, the store retailer just might be the help a company needs in scoring sales and retaining revenue and differentiating themselves from the pack.
Those underpaid sales people on the retail floor? As I have experienced time and time again, they can be lifesavers when it comes to their encyclopedic product knowledge and recommendations, steering this wayward person in the right direction that no website has successfully done yet. And unlike a website’s pop-ups and other navigation tricks that are trying to get me to look at similar or suggested products based on my purchase, I think those annoyances are ignored by many who just want to check out, rather than a face-to-face from a helpful floor associate who gets too-little or little-to-no credit from the retailer for their upsell abilities and recommendation capabilities and ownership of the customers’ problems.
Returns are three to four times greater for online sales than in-store sales, and returns are an expensive process, with some ecommerce business models just letting the consumer keep the product rather than wrangle with the return at all. Now that’s costly!
Retailers have the capability – if they choose to use it – to cross-pollinate and promote products across department lines, bringing new and innovative items to the forefront and into the consumers’ perspective. Retailers have the ability – if they choose to use it – to foster and grow small, local, and diversity businesses into successful retail vendors.
Stores offer the ability to touch, engage, really see, feel, hold, smell, try on, handle, model, listen to, and all of the other metaphors for the physical engagement that we, as shoppers, really want to have with many of the products before we purchase them, but have capitulated to for the ease of ecommerce.
Don’t get me wrong: sometimes we don’t necessarily need to conduct a forensic analysis of everything we buy. And if we’re a little disappointed in our purchase, if it was easy online, we’re occasionally okay with that compromise.
But stores still matter, especially for the big stuff, the important things, the need to ensure we get it right things. Because websites don’t yet always tell the whole story, don’t always speak to us as shoppers.
Going into a store was once an experience. Retail associates were once valued knowledge purveyors. Store floors were once a place where one could discover and experience new, exciting, and intriguing items. Return the retail store to its origins and partner it with a worthy website, and this is, to me, the successful retail model of the future.
And if brick-and-mortar stores didn’t matter, why then is Amazon – the world’s largest ecommerce company – opening them in malls?
Does your retailer rightly recognize you?
An interesting article by Bloomberg News in the July 15, 2021 digital edition of the Miami Herald caught my attention. It is never a good idea to count out collaboration even among seemingly disparate groups when there is a sufficient common cause to be concerned about.
In this case, it is a coalition of 35 organizations, including Fight For The Future, Public Citizen, and the National Lawyers Guild, who are teaming together to challenge the use of facial recognition technology by retailers. The coalition wants retailers to cease the use of facial recognition on both their employees and their customers, citing privacy and racial justice concerns.
Retailers who deploy facial recognition technology – like Albertsons, Macy’s, and Lowe’s – state that facial recognition is used for “convenience” and “personalization”, and to help in the fight against fraud and theft. The claims here are that facial recognition can be used to either screen (potential) customers who are would-be or has-been shoplifters. Conversely, the facial recognition technology can be used to, purportedly, recognize frequent or valued shoppers and provide extra care or enhanced services.
But – as I have written before – A.I. (artificial intelligence) technologies like facial recognition are not perfect. Artificial intelligence (A.I.) is only as good as the foundational data it is built upon, and so it is not 100% 100% of the time.
Consider that facial recognition struggles with people of color, the darker the complexion the less the technological perfection. Perhaps this is due to the skewed data set: consider that the vast majority of software engineers are white (and male) and not people of color. Therefore, who are the test subjects, who were the test data, for the foundational AI facial recognition systems? Likely white (male) software engineers.
But the coalition against the use of facial recognition by retailers has concerns beyond the false-positives that could inadvertently, and unjustly, keep otherwise innocent people out of retail stores. Data collected by corporations could be shared, and according to the Surveillance Technology Oversight Project, another group mentioned in the article, is often shared by corporations, with law enforcement.
For the majority of people who are law-abiding, having faces scanned and recorded by retailers may not pose a problem. And certainly, law enforcement needs all the help that they can get in solving some of the more difficult and heinous crimes whereby every shred of evidence is necessary to put away the criminals. But given that facial recognition technology is not perfect, the potential for a casual retail shopper to potentially be assigned guilt by artificial intelligence is a very scary proposition indeed.
Also, what is the liability and accountability should a retailer holding facial recognition data be hacked, and the digital faces of their shoppers become compromised along with other personal information, ending up in the clutches of cyber-criminals?
As I have also written previously, I am not against the use of any advanced technologies. I am all for the responsible and practical use of technology. But I do believe that there are technologies that are just not fully mature yet for unfettered deployment, and that we are relying too much on some technologies without proper checks-and-balances. Instead of unleashing these technologies and dealing with the backlashes and aftermaths, how about more up-front responsibility and due diligence? I think it would make the world a whole lot easier, and safer, a place to live in.
Do we expect too much from technology too soon?
There was an interesting article by Vanessa Friedman of The New York Times (NYT) that appeared in the February 15, 2021 digital edition of the Miami Herald titled “Why is Facebook rejecting these fashion ads?” The NYT article highlights several adaptive fashion apparel and product companies, and their owners, whose product advertising has been rejected, sometimes over and over again, by Facebook’s (and Instagram’s, which Facebook now owns) automated intelligence software which is supposed to screen out and prevent advertising that is purportedly against its policies, though sometimes which policy or which offending product is not always identified precisely.
Facebook uses artificial intelligence (AI) and machine learning (ML) both for the screen process and for the dispute/appeals process. According to the article, the use of these technologies, essentially on the front and back ends, perpetuates the problem.
Facebook is not alone in this misclassification problem. According to the NYT article, both Amazon and TikTok have had similar issues as well. But, as the article notes, Facebook has 2.8 billion users and has positioned itself as being a place for communities.
Adaptive fashions, used by people with a disability which, per the article, the Centers for Disease Control (CDC) states that 1 in 4 people in the United States do, is a growing and potentially very profitable business, with possible sales reaching over $392 billion by 2026.
But let’s get back to the root problem that the article called out: Facebook’s AI was blocking adaptive fashion companies from getting their product advertising onto Facebook, despite multiple tries, despite wording content changes, despite multiple resolution attempts. Some adaptive fashion and product companies just gave up.
In writings, presentations, and speaking engagements like webcasts and podcasts, I have been very clear in my position that, inasmuch as I believe technologies like artificial intelligence, machine learning, and blockchain, all have great potential, and some are finding selected or targeted use, these technologies are fully reliant upon clean data and great operational processes for success. I just don’t think that these technologies are fully robust enough to be completely unleashed without sufficient checks-and-balances, and many companies are not disciplined enough to fully take advantage of what these technologies have to offer right now.
AI – as pattern recognition software – needs clean data to find recognizable patterns. ML – machine learning – bases what it is learning off of AI. So, if the AI pattern is bad, ML is learning “bad behavior” or will behave badly, take your pick. As sophisticated as we might think these advanced technologies to be, I fully believe that they still have a long way to go before our reliance upon them will meet our expectations of their performance.
Per the NYT article, Facebook is throwing money and people at this problem. Well, they have the resources to do this, but the problem persists because even more resources are certainly needed. Of note, the article does state that none of the adaptive fashion companies believes that Facebook itself is purposefully discriminating against their companies. I do believe that this is a case where there is just too much reliance on a still immature suite of technologies, and herein lies the lesson for other companies:
I am not “Negative Norman” when it comes to these advanced technologies: they offer great potential. However, most companies cannot even get much out of the starting gate with decades-old technologies that are core to their businesses, like supply chain software systems Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI), and barcode labeling and scanning applications. Master Data Management (MDM) remains a political hot-potato within companies between departments and an overhead disruption between supply chain stakeholders.
If enterprises cannot get foundational software, data, and business processes implemented, running smoothly, and synchronized, what makes it believe that layering on advanced technologies will be a panacea to their woes? It won’t, and doing so will only cause more chaos. And most companies don’t have the seemingly unlimited resources or monopolistic power to somewhat shrug off their struggles as Facebook does. So, if your company is not in the same comfortable position as Facebook, think long and hard about whether you are really ready to install advanced technologies in your company before you get the foundational software, data, and processes established and correct first.
A sci-fi Colonial lesson on cyber-security.
The Colonial Pipeline cyber breach of last month prompted me to reminiscence and took me down science-fiction memory lane.
In the thrilling and realistic 2004-2009 season reboot of Battlestar Galactica, we find the human refugees of a robotic attack on their home world fleeing from their man-made machines who are focused on their total destruction. Aboard a rag-tag fleet of spaceships, the only obstacle protecting the people, their vulnerable ships, and standing in the way of the attacks by the artificial antagonist Cylons is an aging, what was to be decommissioned battleship, the Galactica, and its also aged and no longer able to retire Commander William Adama played dramatically by Edward James Olmos.
There is one scene in one of the multi-season episodes that has always stood out to me, that now is, I think, more-than-ever relevant given the recent Colonial Pipeline cybersecurity breach.
To plot an escape against the Cylons, Commander Adama must do something that he has forever refused to do under his old-style command, on his old-style battleship: fully integrate the disparate critical systems together. Adama has kept his critical systems – e.g., navigation, faster-than-light drive, damage control – separate and distinct with their own firewalls for one reason: to prevent what he knows that he is about to combat, which is a Cylon cyber-virus that is designed to takeover and disable the Galactica and would thus leave the entire fleet defenseless, and the remaining population of humans at the mercy of the Cylons, machines who have no emotion or compassion whatsoever.
Without spoiling the episode plot, Adama does give the order to integrate the systems so that their combined computing power can be utilized to work through the problem at hand, and the humans – and series – lives on for another episode, if not season, as I don’t recall that this scene happened in an episode in the final season of the show.
But certainly, there are lessons here from Commander William Adama and his partitioned systems approach that are applicable in today’s cyber warfare environment, yes?
Inasmuch as businesses need integrated software applications, whether best-of-breed or just interconnected systems, does this mean that enterprises must solely rely on one cyber software system solution for its defense? Isn’t this like putting all of your eggs into one basket, and then hoping that the basket doesn’t break or get broken in to?
Wouldn’t it be better to divide-and-conquer to improve cyber defenses, reduce cyber breach impacts, and increase cyber resiliency? If different cyber software solutions were used, from different cyber software providers, it should make it more difficult for hackers to penetrate the full extent of a network or software system. All I seem to notice in the news is that when there is a cyber security breach, only one cyber security software firm and one cyber security software product is ever mentioned.
Maybe it’s time to change that mode of thinking.
Given that different software applications tend to reside on different computer servers or different server partitions, maybe it’s time to start thinking about how to divide software on servers and assign different cyber defenses on different servers or partitions, or to assign different cyber defenses to different applications on the same server. Problem containment would lesson the overall severity and should enable an enterprise to get back on its feet faster from a more focused restoration.
Oh … and the name of the collection of rag-tag ships guided and guarded by the mighty Galacticaand its dedicated crew, under the vigilant leadership and watch of its Commander Adama, that overall represented the last of their population as it was fleeing from their artificial machine enemies across the stars, forced from their destroyed home world and now in search of another planet upon which to build a new civilization, that was so named after what they once individually and now together represented? The Colonial Fleet.
Paying the innovation price versus saving money.
As I have previously written on several occasions in my analysis of my 25+ year retail supply chain vendor compliance experience, in their quest to impose draconian and one-sided technical and operational mandates, retailers have for the most part actually paid a price.
The failure to understand that different business models – e.g. brick-and-mortar and online – actually could and should have shared vendor compliance requirements meant that retailers multiplied their own internal efforts and then forced replicated requirements upon their vendors, driving up costs for both parties while summarily beating up on their vendors to keep prices down.
As a result, and with the rise of internet-only retailers and direct-to-consumer business models as online shopping has become more commonplace, retailers became more commoditized and lost differentiation. Vendors, seeking anyone who would sell their goods, invested just enough time and money into supply chain partnerships. This created visibility gaps in areas such as shipping and inventory whereby retailers were begging, for example, for more and accurate and timely EDI 856 Advance Ship Notices but were not getting full compliance from their vendors. Why dedicated oneself wholeheartedly to a relationship that you know might not last that long, or with an abusive partner?
As recounted in a December 2020 Supply Chain Management Review magazine article titled “Are We There Yet”, GM (General Motors) had once followed a similar, and abusive, supply chain vendor compliance path, until the company realized that it was actually contrary to its continuity and innovation.
According to the article and how the story apparently goes: In the early 1990s, GM’s chief purchasing officer – J. Ignacio Lopez – ripped up supplier contracts for the purpose of driving down prices. In imposing GM’s will over the suppliers, GM did in-fact save $4B per year in material costs. Suppliers also withheld critical engineering knowledge and innovative technologies in the process, since they were being beaten up on costs. The ramifications of this ill-conceived money-saving strategy is that by 2015 GM’s very survival in the new age of autonomous and electric vehicles was seriously threatened.
Realizing the seriousness of the situation, GM’s new purchasing chief, Steve Kiefer, did a complete 180-degree turn and began engaging with suppliers, offering up to 10-year contracts and working with suppliers on innovation and engineering problem-solving. Kiefer began treating vendors like valued partners, and it worked, with results visible by 2017.
As many retailers have shuttered their stores, I have often wondered how many could have survived if only they would have engaged their vendors like valued partners instead of like combatant suppliers. Vendor compliance initiatives should be like portals, not blockades, to conducting business. Yet notably within the retail industry, though also in other industries as I have experienced and reviewed, vendor compliance seems to restrict rather than enable supply chain partnerships, and this is just plain wrong and the opposite of what it should do.
Vendor compliance – technically and operationally – is a necessity. No customer/buyer business cannot unify its downstream supply chain requirements. But there is a right way that is beneficial and a wrong way that is sometimes unethical and illegal. And it is the latter that I truly believe is a contributing factor to why we have fewer retailers today. And that is bad business for all stakeholders. And that needs to change. www.vendorcompliance.info
“It all begins with data quality.”
The title of this month’s newsletter is the last sentence – which itself was the last paragraph – of an article written by Kraig Adams, Vice President, Blockchain, GS1 US that appeared in the September 2020 edition of Supply & Demand Chain Executive magazine.
The statement bears repeating: “It all begins with data quality.”
The article touted the benefits of blockchain technology’s immutable ledger in enhancing the authenticity pharmaceutical transactions, and thus the products. Through the implementation of 1D and 2D barcodes, and a GS1 data-sharing standard called EPCIS (Electronic Product Code Information Services), there is robustness in pharmaceutical industry transactions that enhances integrity. Adding blockchain would further provide greater security and veracity.
But – as suggested by Kraig Adams – we are getting ahead of ourselves.
As I have written in newsletters past, before companies can even consider advanced technologies like A.I. or Machine Learning or Business Intelligence or ERP 4.0, enterprises better get their data cleaned up and correct, something that they struggle terribly with today.
Supply chains cannot even run on 1970s based Electronic Data Interchange (EDI) without having gaps in master data management, let alone the thought of laying more advanced and barely-developed technologies on top of their fragile Enterprise Resource Planning (ERP) systems. Never mind the discord between internal departments and non-value-added communications between customers and partners like contract manufacturers and third-party distributors to discuss and fix data discrepancies and master data misunderstandings.
When the data is bad, the information is wrong.
When the data is dirty, the analytics go astray.
Folks, is it really a good idea to overlay “intelligent” applications (A.I., M.L., blockchain) over and on top of software applications (namely, the ERP system) with data integrity issues? Isn’t this fundamentally why HAL-9000 went cuckoo-bananas.
I am not against any of the new and up-and-coming technologies that – in specific use cases – have already proven to show real worth for potential widespread use. But the vast majority of companies are just not there yet.
Data quality demands discipline. Quality data requires a thoughtful consideration as to the ramifications as to the current state, the future state, and beyond just one person’s or one department’s need.
This is why quality data is so darned difficult to acquire. This is why data quality is so darned difficult to achieve.
So, before your company spends money on the next bright shiny technology, how about investing in what it already has and getting that to work correctly first?
I will end with a quote by Professor Yossi Sheffi, director of the MIT Center for Transportation & Logistics and the Elisha Gray II Professor of Engineering Systems at MIT, in the professor’s March/April 2021 article in Supply Chain Management Review magazine titled “Enduring lessons from the COVID-19 pandemic”: “Even the most sophisticated digitization tools are only as good as the data they rely on … “
Taking it to the consumer can be a problem for retailers.
In a Dialog (letters to the editor) feature in the September 2020 edition of Inbound Logistics magazine, I noticed a submission that mentioned PepsiCo’s direct-to-consumer websites, Snacks.com and PantryShop.com.
As much as I find that I tend to gravitate more quickly to the highlights, features, and news articles, this shows that informational nuggets which can spark ideas and insights can also be found in the opinion letters too.
With these direct-to-consumer websites, PepsiCo is breaking from tradition and promoting some its most popular brands and products direct to consumers. In doing so, it is cutting out the middle-entity retailers. Free shipping if the order is above a certain dollar amount.
This might help to alleviate PepsiCo from having to deal with price negotiations that involves shelf-level real estate wagering, so this is likely an immediate boost for PepsiCo’s bottom line. Lower and upper shelf space is priced differently than pricier mid-level shelf space that is at eye-level and thus places items more immediately noticeable to shoppers. PepsiCo just needs to advertise its brands and consumers will continue to find them wherever they are, notably online and easily available from a smartphone for direct delivery.
What is maybe not as obvious to those who are analyzing this business model is the savings to PepsiCo from the alleviation of supply chain vendor compliance overhead, deductions, and chargebacks.
The more that PepsiCo pushes consumers to purchase direct, the less that PepsiCo will pay for any data carrying fees through value-added networks (VANs), assuming that PepsiCo was not connecting directly with its retail trading partners and bypassing VAN services completely.
As more consumers purchase direct, the less that PepsiCo should have to worry about excessive deductions for damages and co-op marketing and advertising. Damage deductions by retailers has always been a dicey issue in my experience, with retailers sometimes taking more than the contracted amount, and typically declaring fault by the vendors even when the blame rests with the retailer’s own carriers or is occurring at their own distribution facilities.
And as consumers purchase more goods direct, with less goods flowing through retailer distribution, there should be less vendor compliance violations occurring, thus less chargebacks (financial penalties for non-compliance) to worry about. Fewer cartons and pallets mean fewer barcodes that couldn’t (supposedly) scan, fewer (supposed) damages to record, fewer EDI transactions with incorrect data. It’s a game of numbers: even if the percentage of problems remain the same, reduce overall population and you have reduced the size of the problem.
With more people homebound due to the coronavirus pandemic, PepsiCo’s direct-to-consumer venture isn’t just answering the call of a trend. To me, this is bucking a draconian tradition that retailers are still struggling to realize is damaging their business model and reducing them to being indistinguishable players in a commoditized industry.
Until retailers realize that their vendors – all vendors, regardless of size – are valuable and should be cherished like customers, the landscape of retailers will continue to shrink as more vendor companies offer their products not just to any and all retailers (brick-and-mortar and online), but also and instead direct to consumer, refusing to invest in retailer loyalty. Retail has a place, and can be revitalized, but not upon antiquated vendor compliance initiatives.
I was doing my daily due diligence check on a neighbor’s house. A wonderful couple who are snowbirds, I have been keeping a hawk’s eye on their home for the last 20 years, ever since they have owned the place (and I have owned mine). I chase away trespassers who think that open driveways are theirs to use as their own, oversee maintenance that needs to be done in their absence, and install the shutters when hurricanes approach. I have also intercepted packages when their address is used for shipping fraud, as was the case last year.
I scooped up the package and examined the shipping label. The first thing I noticed was clearly that the ship-to name (and company) did not match the homeowners who are also original owners of the house. The address was correct, so it was not a case of an incorrect drop-off.
I took the package home and contacted the ship-from company. I explained who I was and why I had their package, and that in no way did the person who claimed to reside in the home actually live there. The company representative informed me that since the COVID-19 crisis shipping fraud had increased at his employer, a purveyor of musical instruments and equipment. I asked for – and received via email – a pre-paid shipping label that I affixed (via clear tape) to the box. I scheduled the shipment on the carrier’s web site, (which should be a better user experience), for the next day and set the box outside the next morning. All good.
But here is the second part of my newsletter story. With my girlfriend’s birthday around the corner, I had ordered some gifts for her and one of them was arriving – via the same carrier – the same day as the musical instrument return. The carrier, a top-two private company, was completely aware that they were both dropping off and picking up from my house.
In fact, the drop-off delivery was placed on top of the big box that was set outside for pick-up. The drop-off and pick-up occurred within a timespan of one hour from each other, both around mid to late morning.
With all of the data analytics being developed and available, and all of the talk of A.I. (artificial intelligence), I don’t quite understand how a major shipping carrier company could miss the fact that they could have accomplished two tasks with one visit to my house.
Why didn’t the drop-off driver, who arrived to my house first, also pick up the waiting package? Why would a logistics company have scheduled more than one visit to a physical location on the same day, within one hour of each other?
It seems to me that as drop-off drivers drop-off packages, it frees up space in their trucks, enabling them to pick-up packages when there is route efficiency to be gained, e.g. the delivery and pick-up is at the same location within the same timeframe, and especially if it is for the same number of packages (making it a one-for-one swap), not accounting for package size. Since not every delivery stop is also a pick-up point, the net effect should be an efficiency improvement overall and should not be a capacity problem for the truck.
I certainly invite commentary on this topic. As shipping rates rise, private carrier companies (FedEx, UPS, DHL, Amazon) all need to explore creative ways to improve efficiency that keeps costs manageable for (small and all) businesses and consumers alike.
Katzscan’s 25-Year Anniversary
January 2021 marks Katzscan’s 25-year anniversary. Officially, I started Katzscan Inc. on January 1, 1996.
Personally, professionally, and technologically, it has been an evolutionary experience. From dial-up modems connecting to America Online® for email and relying on pagers for notifications, to the high-speed Internet connections and smartphones of today, the changes I have witnessed and experienced have been remarkable.
It is amazing to look back on my achievements and accomplishments, from the number of companies that I have helped and the nature of the software, operations, and supply chain projects, to the many US national and international writing and speaking engagements that I have completed. I never could have imagined that I would have become such a stage presence and traveler. For a list of who I have helped, to read reviews of some of my top projects, and see my speaking journey and media presence, please go to www.katzscan.com
Most certainly, I am absolutely proud of my books, with the announcement of my third which was published at the end of November 2020. Each of my books is a first-of-its-kind exclusive: no one had previously written and published a book on those topics until I did.
My first book – “Detecting and Reducing Supply Chain Fraud” – published in August 2012. It explains how core supply chain systems – ERP, EDI, and automatic identification (namely barcode labeling and scanning) – can be used not only for supply chain performance analysis, but also to analytically detect and reduce transactional end-to-end fraud better than traditional methodologies such as general ledger analysis. For more information, please go to www.supplychainfraud.com
My second book – “Successful Supply Chain Vendor Compliance” – published in December 2015. It is a dual-audience book. The first part of the book provides a framework for customer/buyer organizations to help them better design and implement a vendor compliance program that is more understandable internally and externally, and more achievable for its supply chain partners. The second part of the book provides operational and technical guidance to supplier/vendor companies on how to be less disruptive, and thus more competitive, supply chain partners. For more information, please go to www.vendorcompliance.info
My third book – “Attack, Parry, Riposte: A Fencer’s Guide To Better Business Execution” – published in November 2020. This book, a merger of my profession and personal passion, fuses the strategies and tactics of the martial art of fencing, (which I have been participating in since 1993 and coaching since 2007), with my real-life experiences of helping companies improve their performance and business execution. Topics covered include: brand management, software projects, leadership, personnel management, competitive analysis, self-assessment, and more. For more information, please go to www.attackparryriposte.com
I am very thankful that I love what I do: helping companies execute better and helping the employees at the companies I assist perform their tasks with less burden. It has not always been easy, and I have grown and learned through it all. If your company is facing some complex problems in its supply chain performance, business operations, or software systems, your “Principal Execution Officer” is here to help.
And if you need an engaging speaker for an event or conference, whether online/virtual or in‑person (after COVID when it is safe, of course), please contact me to discuss.