In January of 2013, during the National Retail Federation’s annual conference held in New York, Wal-Mart made a significant and noteworthy announcement. Bill Simon, the former head of Wal-Mart’s U.S. group announced plans to buy an additional $50 billion in U.S. sourced products over the next ten years.
Since that time, Wal-Mart has continued on a broad strategy to encourage its existing or new suppliers to source more products within the United States. The retailer also broadened its monetary commitment. Such efforts have included hosting open supplier summits where suppliers can learn from one another while pitching new product ideas to Wal-Mart buyers.
Last week, Chain Store Age featured a posting indicating that this global retailer is now in the process of planning for another supplier event to be held in early July. In the report, Cindi Marsiglio, Vice-President of U.S. manufacturing indicated before a meeting of targeted suppliers: “Second to price, customers care where their products come from. Our customers want to buy products closest to their communities.” Categories being singled out include baby and infants, food and consumables as well as pet care.
The Wal-Mart U.S. Manufacturing event is currently planned for July 7-8 in Bentonville Arkansas. Event details are still being worked out with registration expected to be opened in April. More information can be garnered at the following Wal-Mart web link.
Supply Chain Matters continues to applaud Wal-Mart for both its large monetary commitment and far-reaching efforts to promote further sourcing of U.S. manufactured products. We urge current or perspective U.S. suppliers to take advantage of such a program.
It was nearly 10 years ago when the initial hype of item-level tracking enabled by RFID began to emerge across retail and other consumer and industrial focused supply chains. The vision for the ability to connect the physical and digital aspects of the supply chain was within grasp and the hype cycle was extensive. Our readers might recall Wal-Mart’s highly visible corporate initiative for mandating RFID-enabled tracking across its supply chain as well as the U.S. Department of Defense efforts to do the same. But something happened, namely learning that seems to be rather consistent with advanced technology initiatives.
In the early days of RFID, there were challenges involved with the economic cost of individual RFID tags. Recall the threshold number of tags eventually costing less than 5 cents each. The IT infrastructure of required mobile and fixed readers, antennae, and database systems was more expensive than vendors were communicating. Industry-wide consistent information transfer standards development was elusive because either technology vendors continued to advocate for certain proprietary standards, hoping to cash in on the new technology wave, or specific industry groups themselves favored certain standards.
It is therefore very noteworthy to reflect on results of a recent survey conducted by GS1’s US Apparel and General Merchandise Initiative. For those unfamiliar, GS1 is a global information standards based organization that fosters trading-partner collaboration through adoption of global-wide consistent item numbering and identification electronic information exchange. Keep in-mind that apparel and merchandise supply chains operate on narrowest of product margins, with cost, inventory and shrinkage being prime challenges. Apparel and general merchandise was one of the prime targets of the early RFID mandates.
Last week the organization released the results of a 2014 survey providing indicators for how apparel and general merchandise manufacturers and retailers are utilizing item level Electronic Product Code (EPC) enabled RFID tracking. That survey indicates that nearly half of the manufacturers surveyed now indicating that they are currently implementing RFID, with a further 21 percent planning to implement within the next 12 months.
Of the retailers surveyed by GS1, more than half reported current implementation efforts underway with another 19 percent planning to implement in the next 12 months. Retail respondents indicated that on average, 47 percent of items received in their supply chains have RFID tags. In the news release, an Auburn University researcher indicates that retailers are garnering greater than 95 percent inventory accuracy, decreased out-of-stocks, increased margins and expedited returns. That phrase should sound familiar since it was the original declared benefits of the prior mandate efforts.
In the current clock-speed cadence of business where results are measured and expected in weeks and short months, 10 years is a lifetime. Yet, that it what was required for the technology maturity and economics of RFID item-tracking to reach what appears to be the dawn of mainstream adoption. This GS1 survey announcement should be viewed in that light.
For RFID enabled item-tracking, the early innovators have paved the way of learning and economics, as well as what worked and what did not. We at Supply Chain Matters have already brought to light the next wave of item-level tracking, sensor tags that can monitor the composition, state and movement of products across the global supply chain utilizing today’s mobile technologies and near-field communications (NFC). These tags will eventually provide for use cases in supply chain settings requiring higher levels of monitoring and detailed visibility such as fresh foods, pharmaceuticals, aerospace and others.
What is ever more important is that as a community, we learn from previous technology adoption curves where elements of business process adoption, standards and cost-effective technology all interplay. One obvious conclusion is that supplier mandates for technology implementation will not work if these elements have not been realistically evaluated.
Beyond all the hype are the inherent realities. Advanced technology does provide meaningful business benefits when applied to well-understood business process needs, challenges and cost factors. Technology adoption is not driven by vendor product marketing but by business education, process maturity, people and process realities.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Last week. The Wall Street Journal reported that there is: “a war bubbling up in laundry aisles of Wal-Mart” (paid subscription of free metered view), and it involves two global giants in the consumer product and household goods area, namely Procter & Gamble and Henkel and their respective premium-priced laundry detergent branded products. This story is yet another example of how Wal-Mart can leverage the power of any supplier, even one with a long-lasting and presumed highly collaborative relationship.
Wal-Mart recently decided to stock and feature Henkel’s Persil laundry detergent along-side the iconic Tide branded detergent. According to the report, Tide currently accounts for 60 percent of all U.S. sales of laundry detergent along with an estimated 85 percent of the profits. The brand received a prior sales boost with the introduction of Tide Pods in 2012, but that came after an uncharacteristic and visible supply stumble involving the product’s initial introduction.
Persil itself has generated over a billion dollars in annual sales and is available in 60 countries. However, the brand was not featured in the U.S., at least not till Wal-Mart’s recent actions. Last year, to drive more revenue and profitability, P&G elected to raise the consumer price of Tide while reducing the amount of detergent and number of loads per container.
The WSJ cites as spokesperson for Wal-Mart as indicating that the stocking of Persil provides U.S. customers another laundry detergent option and that the brand is already stocked in the retailer’s other global based stores. Another spokesperson indicated to the WSJ that competition is good for the category and good for consumers. Who can argue with that.
However this new development involving the marketing and availability of laundry detergent is from our lens, a clear “shot across the bow” among two previous strong collaborators. It is therefore keen to keep abreast of how this U.S. laundry detergent war eventually turns-out.
If there was any supplier more experienced in working with and collaborating with Wal-Mart, it was P&G. Their collaboration in joint marketing, supply chain stocking and promotional initiatives was the basis of many a consumer product goods marketing case study in win-win. Now that relationship may have suffered a setback. However, Henkel and its Persil brand stands to gain a rather powerful U.S. presence, one that can be leveraged to other retailers down the road.
Supply Chain Matters has featured recent commentaries relative to the tectonic market shifts occurring in the consumer goods market, and their associated supply chains. Those shifts are predominantly on the demand and cost pressure side. This latest development involving Wal-Mart and two laundry detergent giants is an indication of perhaps other dynamics involving prior long-standing relationships among key retailers. Then again, we are discussing Wal-Mart, and this global retailer gets to play by its rules.
Just about two weeks ago, this author had the opportunity to be the opening speaker at the Intesource 2015 Innovation Best practices in Sourcing Conference held in Las Vegas. Intesource’s customers generally reside within various tiers of food and beverage supply chains either as retailers, wholesalers or restaurant services providers. Besides addressing significant converging industry, IT and people skill megatrends impacting supply chains, I also addressed the needs for greater levels of multi-tiered visibility and transparency across food supply chains. Consumers now demand quality choices in the food they consume and branded products can no longer stand on just presence but on the composition of the products offered and served by the brand.
I was therefore pleased to read in the Wall Street Journal CIO Blog (paid subscription or complimentary metered viewing) that Bumble Bee Seafoods is planning to launch a website that allows consumers to trace the origins of their tuna utilizing specific codes printed on cans. Information will reportedly consist of where and how the fish was caught and by which fisheries. According to this report, much of the data for this traceability initiative already exists in the company’s procurement and supply chain systems.
The same article makes note that Whole Foods has technology projects underway to provide shoppers with information such as animal welfare ratings, whether a food contains genetically modified products (GMP’s) or modified ingredients.
These are just two examples of how consumers are fundamentally changing the product demand and consumption dynamics of food and beverage supply chains. On Supply Chain Matters, we have called attention to the next wave of smarter item-level tagging that not only traces product identity and movement but monitors the state, genealogy and condition of products. More discerning and informed consumers who are increasing health conscious continue to elicit greater levels of visibility and smart sourcing and sustainability of animal, farm, fishery and food products. I certainly look forward to utilizing such applications when they become available and I suspect that I will not be alone in that effort.
Sourcing and procurement professionals as well as brand and product management teams must continue to be on the forefront of these advanced technology efforts.
The following is a Supply Chain Matters guest blog commentary contributed by Ken Sickles, Vice President of Product & Strategy, 1WorldSync. As a result of a recent briefing regarding the increasing importance of the product information supply chain we invited 1WorldSync to contribute this educational commentary for all readers.
In the retail industry, the supply chain has long been viewed as critical to success and profitability. Companies with tremendous reputations like Apple and Wal-Mart have long enjoyed the fiscal and customer satisfaction benefits of an efficient supply chain. But the retail industry is changing, and so will the supply chain.
In the past decade, advances in primarily mobile and social technologies have allowed consumers to become much more digital and connected to information and each other, and it has altered the way they discover and purchase products. While e-commerce has grown to almost 10% of the overall retail industry, analysts estimate as much as 50% of the retail industry is influenced by a consumers digital interactions. These “digital consumers” have a thirst for transparency about the products they are buying, and their thirst for information about them seems unquenchable. In some cases, digital consumers are so vocal about their needs; we are seeing governments put regulations in place requiring consumer transparency (e.g. EU 1169 – a European Union regulation requiring digital access to nutritional, ingredient, and allergen information for consumers at the point of sale).
The result is retail and manufacturing organizations have to be better at capturing, managing, and sharing product data through the supply chain. In fact, the need is so great, a data supply chain in its own right needs to be developed. Developing a Product Information Supply Chain, tightly integrated with the traditional supply chain, will help organizations ensure that ultimately consumers in the digital world have complete, up to date, and quality information where and when they need it in their purchase lifecycle.
We are already seeing evidence of the product information supply chain taking shape. The industry is investing heavily in the software and processes that create and share product information. From the product development – aggregation and management of product data at the manufacturer – to setting an item up for sale at a retail or online store – to presenting that information to the consumer. Industry organizations such as GS1 are investing in new initiatives and capabilities to support the product information supply chain.
While the supply chain has long been a critical component to success in the retail industry, the product information supply chain may be an even more important to success in the future of the retail industry, as every consumer becomes a digital consumer.
Lumber Liquidators is reported to be one of the largest and fastest growing retailers of hardwood and laminate flooring in North America. This weekend, a broadcast report from CBS News’s 60 Minutes program turned a public light on this retailer’s supply chain and the consequences are becoming quite troublesome from a brand and financial perspective.
The 60 Minutes report concluded that:
“Much of its (Lumber Liquidator’s) laminate flooring is made in China, and as we discovered during our investigation, may fail to meet health and safety standards, because it contains high levels of formaldehyde, a known cancer causing chemical.”
All laminate flooring carried by Lumber Liquidators bears a label indicating that it is CARB Phase 2–compliant, referring to the California Air Resources Board, which sets standards for formaldehyde emissions in wood flooring.
The program reported these findings after conducting its own sanctioned tests of select flooring and after interviewing workers among various China based suppliers. An executive director of a nonprofit group was teamed-up with a prominent environmental attorney, to test the Chinese-made laminate flooring. Chinese suppliers were interviewed by a 60 Minutes reporting team posing as buyers and using hidden cameras. Employees of three Chinese mills indicated they were using core boards with higher levels of formaldehyde to save the retailer up to 15 percent on price. Three mills further admitted on camera to falsely labeling products as CARB 2–compliant. The report then concluded:
“While laminate flooring from Home Depot and Lowes had acceptable levels of formaldehyde, as did Lumber Liquidators American-made laminates, every single sample of Chinese-made laminate flooring from Lumber Liquidators failed to meet California formaldehyde emissions standards. Many by a large margin.”
Lumber Liquidators’ founder and chairman, Tom Sullivan, indicated to 60 Minutes that the tests weren’t valid and said the company isn’t required by law to test finished products, as the program did. In a filing with the U.S. Securities and Exchange Commission on Monday, the company reiterated that the testing method on which the CBS program based its report was improper. It said it is fully compliant with California standards. “Our laminate floors are completely safe to use as intended” the filing said.
While this retailer vociferously insists that its flooring is safe and meets certain standards for environmental safety, the initial fallout among investors has been severe. Shares of the company’s stock closed down 25 percent today, and were halted through the morning ahead of a planned news release. A published report from MarketWatch indicates that this retailer blamed the attacks as the work of short sellers, “who are working together for the purpose of making money by lowering our stock price.” This report further indicates that short interest in Lumber Liquidators stock reached 30 percent ahead of the CBS program’s airing, according to FactSet data. The company is reportedlybeing sued by environmentalists, backed by a group of Wall Street short sellers, who accuse the company of violating California’s toxic-warning statue.
Beyond the Wall Street and legal messiness, this incident is yet another example of the needs for transparency across the global supply chain, particularly when an individual country’s or state’s product safety standards are cited. Interpretation of standards can tend to take on a different lens from different suppliers and thus the need for vigilant and consistent supplier monitoring. Supply chain focused snafus or product quality issues continue to cause reverberations for brand loyalty and investor confidence. The fact that news networks can place hidden cameras and conduct interviews of a company’s suppliers is further cause for concern.
No doubt, the situation at Lumber Liquidators will continue to reverberate among business headlines in the days to come.