In mid-March, Supply Chain Matters called attention to a business media expose focused on when a consumer product contains what it is supposed to. The Wall Street Journal had published a report reflecting on the importance of knowing your product, your supplier management and oversight practices along with supporting your core product marketing strategies. Today, the WSJ added another dimension to this topic, one that perhaps has more implications for regulatory oversight.
The March WSJ report focused on actress Jessica Alba’s co-founded company, the Honest Company, which has soared to a reported $1.7 billion in private valuation in less than four years. The stated core mission of this consumer goods company is to offer cleaning products that do not knowingly contain harsh chemicals found in mainstream marketed and sold products. One of the harmful compounds of question is that of sodium lauryl sulfate, referred to as SLS. The Honest Company’s claims to consumer are that its products are free of SLS. However, in its report, the WSJ indicated that it commissioned two independent testing labs to analyze Honest’s liquid laundry detergent only to determine that it contained significant amounts of the chemical.
Today’s WSJ report (Paid subscription required) reflects on one of largest producers of natural shampoos and skin cleaners in the United States, that being Hain Celestial Group. That company is reportedly in the process of reformulating dozens of products and dropping claims that do not contain SLS. Like Honest Company, Hain had long declared that its products contained no harsh chemicals. Instead, some products reportedly use the ingredient sodium coco sulfate (SCS), which actually contains SLS.
What adds more interest to this development is the WSJ indicating that it actually commissioned independent laboratory testing last fall on several branded consumer products containing the SCS compound. A product general manager for Hain Celestial indicated to the WSJ that it had begun to review product formulation last spring and decided in November, after being contacted by the WSJ of its findings, to remove the “no SLS” claims on products that contain SCS.
In its latest reporting, the Journal points out that there are no current regulatory guidelines for what makes household and personal-care products “natural.” Instead, producers have termed their products as natural if they are derived from natural ingredients, even they have been chemically processed. The notation that other consumer brands were tested is perhaps an indication that more revelations or revised product claim declarations may be forthcoming.
Our readers might recall that product ingredients and product specifications are increasingly under the public looking glass. Recall the Lumber Liquidators expose in 2015 forcing that company to suspend all of its China sourced laminate flooring products after 60 Minutes, an investigative news television program turned a public light on suspected high levels of formaldehyde from certain China based flooring offered by this retailer. While not of the same severity of concern related to natural products claims, it does reflect the relationships among product management teams and suppliers. Lumber Liquidators is still dealing with both the consumer perceptual and financial implications of that prior incident.
The takeaway from these ongoing developments is that today’s traditional and social media outlets are holding consumer goods producers to a high standard of transparency as to product formulation and declaration claims. These ongoing revelations run the risk of triggering added calls for more regulatory oversight of producers as well as suppliers, one that obviously the industry wants to avoid.
Thus the importance of a rather close relationship among product design, management, marketing and supplier sourcing teams to insure that there is total transparency of product formulation and composition declarations.
Supply Chain Matters was invited to attend the IBM Smarter Commerce Global Summit this week which was held in Tampa Florida. This was our third annual attendance at this venue and by each of our encounters, we have gathered a stronger sense of IBM’s continued direction in supporting the Buy, Sell, Service and analytics needs for industry supply chains. As noted in our prelude posting last week, IBM has been following a broad strategy, primarily through strategic acquisitions to assemble a portfolio of end-to-end commerce applications and solutions that extend from online marketing and selling through customer fulfillment. In early March, IBM’s CEO, Virginia Rometty, outlined in her open letter to stockholders and customers, a crisper set of strategic priorities that now include a heavy emphasis on cloud and services based solution offerings. The open question in our mind as we traveled to Tampa remained with the timetables, urgency and overall integration progress.
Ironically, the Summit theme this year was: Moments Matter, and just about every keynote amplified the reality that the speed of change and innovation determines today’s business environments. After a packed two day agenda of activity, our overall impression of this conference was that IBM has indeed stepped-up its internal development pace, and the initial signs of cross-application integration capabilities are beginning to come to market. However, the overall timetable is one that IBM customers will need to consider in their technology planning.
There were two significant product announcements made in conjunction with this year’s summit. Big Blue introduced IBM ExperienceOne, a new integrated portfolio of cloud-based and on premise offerings directed at helping customers to deliver deeper customer engagements by bringing marketing, sales and services business practices together in a singular information utility capability. This capability is essential an IBM consulting services service offering that leverages the company’s WebSphere Commerce, Customer Digital Experience and Enterprise Marketing Management software. That software includes elements of Sterling Commerce, Coremetrics, DemandTec and Silverpop, among others, all of which were prior acquisitions.
What should be of keen interest to our Supply Chain Matters readership was the announced launching of IBM Multi-Enterprise Relationship Management (MRM) platform that features cloud-based or on premise supplier and partner engagement capabilities directed at enabling a more adaptive end-to-end value chain. As can be noted in the IBM announcement, MRM leverages functionality from Emptoris for quicker on-boarding of suppliers and trading partners, supplier lifecycle and contract lifecycle management. MRM leverages the IBM Sterling B2B Collaboration Network for reporting and monitoring of transactions and IBM Aspera eXtreme File Transfer and Enterprise File Sync and Share, for sending very large amounts of information across a network including use of desktop and mobile devices.
In our previous conversations with IBM executives, we often probed on the opportunities for assembling an end-end supply chain support capabilities across a contiguous business network, while integrating all of the various IBM vendor acquisition products within such a network.
At last year’s summit, we noted that Emptoris’s senior development director Terrence (TC) Curley, was assuming a lead role in the initial integration of Emptoris suite components with those of Sterling Commerce and other IBM technology components. The current MRM announcement is the first phase of that effort and admittedly, an initial release. We had the opportunity to review the 12 month product roadmap for MRM and noted that beyond baseline an Enterprise Partner Engagement Foundation, the roadmap includes further adapters that integrate not only IBM Sterling B2B Collaboration Network, but also IBM B2Bi and SFG applications which can provide capabilities for quicker on-boarding of financial services, third-party logistics, business services or product management partners. The interesting aspect for MRM are the design principles that stress deeper levels of visibility, end-to-end network scale and collaboration along offering capabilities for supporting cognitive based commerce. If readers have not yet figured out what all of this implies, it means that IBM is gunning to be a viable player in offering an end-to-end business network platform. Again, more work and time is required, but the component assembly and roadmap milestones are now underway.
We do want to mention one other vivid impression from this year’s summit. We had the opportunity to sit in on a keynote session that outlined IBM’s vision for Cognitive Commerce as well a follow-on session that outlined the vision and roadmap for IBM Commerce Solutions. Make no mistake, IBM is indeed committed to huge investments in customer engagement, predictive analytics and machine learning capabilities tied to online commerce. One example of cognitive commerce service outlined was the ability to analyze peak selling periods and be able to predict the depth and breadth of product peaks and optimize inventory allocation to those peaks. Sales and Operations Planning teams should reflect on that type of capability.
There are plans for both enhanced B2C as well as B2B online and multi-channel stores, field sales applications that enhance mobility based applications and planned ecosystems of pre-integrated customer fulfillment partner solutions, including same-day delivery. Finally, there was an example of quickly IBM is responding to current day brick and mortar retailer needs. There are plans to be able to process an online order, by inventory checks of both fulfillment and store-level inventories. To the surprise of some in the audience, IBM described a “dark store” which is one that can serve as a localized fulfillment entity for limited volumes, or be able to convert to a broader based customer shipment fulfillment entity after retail closing hours. In essence, IBM is prepared to support a rather innovative capability for a multi-purpose use store.
Supply Chain Matters will feature additional observations and thought commentaries gathered from this year’s Smarter Commerce Summit in the days to come.
© 2014, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog, all rights reserved.
Supply Chain Matters was invited to attend Oracle’s Industry Connect Conference held in Boston at the latter part of March. The conference drew a large compliment of attendees, featured three industry tracts, along with a focus on program management. We enjoy attending industry focused events because they provide a keener sense of industry-specific challenges, viewpoints and perspectives. We encourage technology and services providers to host more such events.
Due to a commitment to attend another event, we devoted the majority of our limited time focused on the Retail industry tract of speakers, but did manage to catch a cross-industry panel discussion featuring the theme of the Customer Experience. One clear theme brought out by this panel was that nearly every industry sector is adjusting to more demanding and more personalized experience factors concerning customers. Healthcare consumers now have many more choices for an healthcare provider and with a new emphasis on wellness, consumers have higher expectations as to the healthcare experience. Retailers are of course, continuing to deal with the shift of information power to the side of online and mobile-based consumers. Fellow blogger and panelist Vinnie Mirchandani pointed to the trend of mass customization of products as the antidote to commoditization.
We attended a Retail focused panel discussion of executives representing Deckers Outdoors and Scheels moderated by Susan Reda, Editor-In-Chief of Retail Stores Magazine. One statistic shared was that 73 percent of shoppers want an empowered shopping experience. A retail presence provides the opportunity to connect the passion of consumers with the passion for brands. Both retail executives provided clear examples of how their retail brands concentrate on the consumer experience, community outreach and provide a focused destination for consumers. As an example, Scheel’s is a sporting goods chain that features a ferris wheel, deli restaurant or fudge in any one of its 25 retail outlets. Community outreach includes sponsorship of local athletic or recreation events. A further common theme was a recognized need for the creation of a singular leader for Omni-Channel operations that span both brick and mortar and the online customer fulfillment experience.
Another insightful session titled How to Counterbalance Instinct with Data-Driven Insights, delivered by John Bible, Senior Director of Retail Data Sciences at Oracle, contrasted two distinctly different approaches to retail. Bible contrasted Amazon’s retail strategy initiatives as those posed as a software engineering problem contrasted to brick and mortar retail brands whose retail strategy focuses on the retail experience and destination. We found that comparison rather insightful. Consumers have tendencies toward cognitive biases and have tendencies shop based on existing beliefs and group dynamics such as consumer feedback on products. The notion of the “wisdom of crowds” is a rather real consideration. An important conclusion was that decisions supported by time-series forecasting and planning can no longer keep-up with constantly changing buying trends. Instead, decisions need to be supported by more-informed insights
In our recent travels and discussions with multiple industry supply chain professionals, we often hear about supply chain improvement initiatives, particular those that have a either a design for supply chain or sustainability program focus. More and more industry supply chains are responding to increasing mass customization and product innovation needs from customers. At the same time, there remains continued pressures for reducing or controlling overall supply chain costs. Planned new products, and even existing products, are increasingly being reviewed for opportunities to design these products with supply chain physical, operational control processes or sustainability program objectives in-mind.
One of the key aspects or common denominators for these forms of initiatives revolves around the packaging of products. In today’s dimensions of global-based logistics and increasing levels of direct retail shipment or online fulfillment, packaging strategies have become a rather important consideration. Yet, who actually owns cross-functional responsibility for product packaging strategy?
Supply Chain Matters had the opportunity to recently speak with Tom Blanck, who leads the Packaging Optimization Practice at Chainalytics. Tom’s background includes over 12 years of consulting expertise in packaging strategies and leads a team of packaging engineers at Chainalytics. When we discussed common challenges incurred by manufacturers and retailers, Tom echoed that for the most part, no one organizational group tends to own packaging strategy. Marketing or product development may often have the focus of product packaging but the focus is often on product appearance, promotion and brand amplification. Inputs from the supply chain or from manufacturing that relate to the impacts to processes or efficiency needs are often overlooked or dismissed, or sometimes conflict.
Thus the realization of needs for assistance in package design or optimization subsequently comes from supply chain or other executives who suspect that packaging strategy is sub-optimized and could be an opportunity for significant savings in efficiency and cost. Like many other initiatives in these times, packaging optimization needs to be articulated into the bottom line benefits to all of the business, and that is where Tom’s team plays a role, namely building the business case on identifying opportunities and facilitating the tactical groundwork of the strategy components and subsequent benefits.
In our conversation, Tom shared a number of examples where manageable changes in packaging sizes or adoption of standardized packaging standards have led to considerable savings for clients. They might include leveraging the maximum use of transportation vehicle utilization, distribution center efficiencies or fulfillment pick and pack execution. As more firms change their focus toward increased online fulfillment, small parcel and direct shipping requirements require protective packaging, and at the same time, there are consumer focused primary packaging requirements as well.
Consumer product goods firms directly supplying retailers increasingly need to accommodate requests for products to be pre-packaged in shelf-ready promotional packs or end aisle displays which add an additional emphasis for packaging optimization guidelines and standards.
Service focused supply chains have taken on new importance with changed business models for manufacturers and service parts stocking and fulfillment comes with its own unique challenges in package standardization and optimization. It can literally amount to analyzing the right number of boxes and box sizes.
Another area Tom identified was the often discovered interdependence of packaging optimization on overall operations management, logistics and transportation, or overall supply chain network deployment strategies. More and more, these interdependencies are discovered by clients and Tom can call upon the other practice areas of Chainalytics to provide added expertise and the right skill sets for the client.
This author learned a great deal from our conversation and I came away with a deeper understanding of the importance for having packaging optimization as a component of cross-functional supply chain and business strategy.
Disclosure: The author is also a guest blog contributor on www.chainalytics.com .
The following commentary is a Supply Chain Matters guest posting contributed by Guy Courtin. Guy is a veteran and student of the supply chain and technology space, having held leadership roles at Progress Software, SmartOps and i2 Technologies.
North American consumers have gotten to know Old Navy as the “less expensive” alternative in the Gap/Banana Republic family. It is a wonderful store to get basics for the entire family at a very reasonable price. Case in point – a pair of basic khaki shorts there last year cost me $12. A very similar pair (probably came off the same assembly line) was priced at over $40 at Banana Republic! Old Navy has done a good job carving out its place in the market and fits well into the Gap universe.
Something else Old Navy does very well – Demand Shaping. While the Gap and Banana Republic do their fair share of promotions and attempts to shape demand, Old Navy has an uncanny ability to drive disproportionate traffic to their stores with what would seems to be minor promotions. Recently, Old Navy offered a one day in-store only, Solid Flip Flops for $1, (Limit 5 per customer).
One whole dollar…100 pennies…4 quarters….10 dimes, okay you get the point. And we are talking about flip flops, basically a pair of rubber with a plastic tube that fits between our toes…The amazing thing; this drives incredible demand for Old Navy. Just go to a store during one of these sales. It is the “lord of the flies.” Just read what some reactions are on the Old Navy Facebook page:
- What time do the stores open?
- is there a limit ??? and what time does it start
- I was going to get them for my wedding favors but it is limit 5.
- When does it start? As soon as the stores open? Or does it start earlier something like a Black Friday sale..?
- Old navy–is there still a 5 flops per transaction policy? Gotta make sure I have enough hands with me! 😉
- I will be there at 5 in day morning again! Yay!
And one of my favorite posts “they are $1 at the Dollar Store year round.” But, that is not the point. Old Navy has struck a nerve with their audience and they have found a way, for $1, to do some serious demand shaping. Even the fans of the Old Navy flip flops state that they know they are not as comfortable as other brands, but for $1, max out with 5 pair and once they are worn, get rid of them!
The beauty of Old Navy is that since they sell a large assortment of basics, there is always something you “need”, a new pair of khaki shorts and a $9 solid polo that looks good, oh it is only $9 with my $1 flip flops. See what I am getting at?
Old Navy will drive greater traffic to stores and cross sell/up-sell once the patrons are there. Time this with the July 4th week, where many will be with family and loved ones heading to barbeques and the beach (I will most likely be working…) and you have the perfect demand shaping opportunity.
Old Navy has found a way to elicit an emotion and behavior with something as banal as a flip flop that as one of the comments on the Old Navy Facebook page pointed out, are always a dollar at the Dollar Store! I am sure their in store sales during this $1 sale are very healthy. A Sale, cannot be over used, otherwise it will lose its appeal. If Old Navy started having these sales all the time – $1 flip flops – the appeal would wane. Timing and strategic use of Sales are right on.
As a business, think about what offerings you could make to illicit this reaction and ability to shape demand. This is not just for the B2C world either. It does not have to be a promotion, but it can be some event (and not simply a user conference type event) that is anticipated and drives attention.
Otherwise, I will see you at Old Navy. I have a $2 bill, 7 quarters, 8 dimes, 2 nickels and 35 pennies lying around. I “need” my flip flops!