With an office in the suburbs of Boston, Supply Chain Matters has observed and experienced an extraordinary event, the power of a workforce that has no real hierarchy and loyalty. Our readers residing in the United States may have already heard or read of the developments concerning Demoulas and Market Basket supermarkets within the New England region. The story has become viral. It is a chain of supermarkets with no equal. Workers decided to express loyalty to a CEO by refusing to work until that CEO was re-instated, which turned out to be a five week long standoff. The Boston Globe described the situation (paid subscription required) as “truly a breakthrough for middle-class workers” and provides a detailed account of the event.
In a capsule, this was about a private company that has an ample share of family focused dysfunction that spilled over in business relationships. It is a story of cousins, Arthur T. Demoulas (Arty T.) and Arthur S. (Arty S.) Demoulas at odds, and years of power struggles for control of the supermarket chain. Arty S. with a philosophy of seeking maximum return of profits and equity, assumed control of the Board of Directors earlier this year. Arty T., the operational CEO, who led with a philosophy that workers should be treated as true equals and share in the benefits of success with paid health benefits and profit-sharing, was removed in June. He was admired by the employees.
Employees, not belonging to any organized labor union, with many having multiple years, some decades, of employment history began figuring what was at stake. They surmised potential moves toward sale may have been in the works and elected to support their fired CEO by refusing to work. Arty S. hired two new co-CEOs who asserted themselves early in the game by dismissing eight organizers of the protests. The move galvanized workers and hardened opposition. Solidarity among both workers and customers was astonishing and again, there was no organized union. The next five weeks bore witness to an extraordinary meltdown of business with revenues reported to be down nearly 90 percent. Many believed, including this author, that the situation would end badly. It was a standoff that ultimately prevailed in favor of Artie T. and his management philosophy.
We often shopped at the local Market Basket store. The prices were far below any other outlets. We were by no means, alone. The shopper loyalty was extraordinary and became a key factor in the past five weeks of standoff. Market Basket employees often demonstrated commitment and caring for what they were hired to do. If you did not find an item, store clerks were more than willing to search the store or seek out a manager. Store managers listened and accommodated requests; including stocking a new item if there was local demand.
From this author’s supply chain management lens, this local chain was extraordinary. Highly competitive pricing fueled remarkable volume inventory turnover per store which translated to buying power directed at food suppliers. At certain times, the physical volume of shoppers in the store made navigation in the aisles a challenge. It often seemed that navigating within the store was of equal peril to navigating through the parking lot. Yet, in spite of this volume, a stock-out of an individual item was not as bad as one would think. Even more extraordinary for today’s retail culture, if you asked the store manager when an item would be back in-stock, he or she had an immediate answer. Managers demonstrated intimate knowledge of their individual stores and were not bashful to lend a hand in bagging or at checkout aisles.
The true scope of Market Basket’s supply chain prowess actually came to be appreciated during the work stoppage. As thousands of shoppers sought alternative competitive chains, it became apparent that many of these chains were ill-equipped and ill-staffed to accommodate shopper volume surges. Check-out lines were slow. Stock-outs were plentiful and replenishment was painfully slow. We speculate that the reason was that other chains were regionally based retailers serviced by distribution centers located in other states. In contrast, the main distribution center for Market Basket was located in the town of Tewksbury, about a 40 minute drive north of Boston, close enough to accommodate same-day deliveries.
Centralized planners and buyers of competitive chains initially seemed not to be aware of a local condition. We speculate that replenishments were pegged to normal shopping volumes, not to the extraordinary opportunity unfolding for competitive chains. As replenished inventory arrived, it was quickly consumed. By our observation it was near the fourth week of the Demoulas shutdown before competitors were able to muster an adequate supply response.
Now that the Market Basket crisis has been resolved, the test will be how many former loyal shoppers return. We visited our local Market Basket on day two of the resolution. While the store lacked a full complement of inventory, a good amount of shoppers were buying and the store was fully staffed. Once more we received multiple personal greeting from store employees, management and clerk alike: “Thanks for supporting our cause and thanks for being a loyal shopper.”
How many times have you experienced that greeting in this era of online mass retailing?
Business media has been reporting on recent rulings from the U.S. National Labor Relations Board (NLRB) that has implications for hiring and labor negotiations practices related to contract workers. Supply Chain Matters advises operations and customer fulfillment teams to stay abreast of these developments since certain rulings can have noteworthy implications for existing supply chain work practices and cost structures.
Essentially, the NLRB is re-visiting long-standing practices as to when contractual business arrangements, such as the use of supplemental contract workers render the contracting business a joint-employer of workers that are employed by the contract worker firm. An initial ruling involved global restaurant firm McDonalds and its franchisee restaurant operators, when the NLRB reviewed complaints alleging that the restaurant chain and its franchisees had violated the rights of employees who were involved in protest activities. After finding what it believed to be merit in the complaint of unfair labor practices, the NLRB ruled that McDonalds should be considered a joint employer.
A second potential ruling involves Browning-Ferris Industries of California and Leadpoint Business Services, a supplier of contract workers, which concerns a factory located in Milpitas California. A local Teamsters labor union is arguing that as a labor union, it cannot adequately bargain over labor practices unless Browning Ferris is at the bargaining table as a joint employer. The argument is that since Browning dictates labor practices, scheduling and work duties of both permanent and temporary workers as a single unit, it is a de-factor joint employer. How the NLRB rules in this case has far broader implications for various industry supply chains and partner service firms.
With the dynamic ebb and flow of business operations today, supply chains often have to manage spikes in operational and customer fulfillment, especially in seasonal or holiday-related time periods. A keen focus on costs has caused many production, fulfillment and logistics firms to utilize significant numbers of on-call temporary contract workers to supplement a leaner full-time, permanent workforce in such periods of work surges. Such practices have drawn protests directed at well-known brands, with protests involving two-tiered labor rates, avoidance in hiring full-time staff, or too much dependence on temporary contract labor in supporting supply chain operational needs. Supply Chain Matters has previously called attention to protest actions involving Amazon, Wal-Mart and certain third party logistics providers, to name but a few, to be placed in the public spotlight.
If the NLRB begins to consistently rule that brand owners who dictate work schedules and practices are to be considered joint-employers, the implications for supply chain flexibilities and costs can well be significant. Readers need to stay abreast of these developments and we at Supply Chain Matters will continue to provide updates as to implications.
Tomorrow, this author will be joining a distinguished compliment of speakers at the 7th Annual Supply Chain Management Summit sponsored by Bryant University and Benneker Industries. This event is turning out to be one of few premiere New England regional conferences focused on current issues and learning in supply chain management. Last year’s event drew upwards of 250 attendees among many industry settings.
Since many of our readers are located across the globe, the purpose of this Supply Chain Matters commentary is to summarize the key messages and takeaways of my talk.
My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. The key takeaway messages I’ll be delivering is that three converging mega-forces:
- Constantly shifting customer and business needs requiring sense and response, as well as more predictive business processes and decision-making capabilities.
- Supply chain process and IT technology convergence providing more cost affordable opportunities for integrating both physical as well as digital information and decision-making capabilities.
- Digitally enabled manufacturing enabled by the Internet of Things.
are aligning toward extraordinary opportunities for what has long been the Holy Grail of our community, namely, integrating information and decision making across physical and digital supply chain spectrums. The alignments of the above mega-forces are providing significant opportunities in management alignment and top management sponsorship which can be leveraged. New and emerging technologies, especially engineered systems, cloud computing, predictive and prescriptive analytics are becoming the technology catalysts. Besides touching upon the latest advances and significantly changed IT market dynamics surrounding supply chain technology, my primary goal in this talk will be to advise supply chain teams on the most important investments to focus upon in the coming months and years.
First and foremost, and without question, the most important initiative for any supply chain organization today is a concerted set of initiatives directed at Talent Management. The business benefits of advanced technology are marginal without people who have the necessary and required skills to be able to leverage and harness these technologies. Recruitment, retention and increased skill needs are constantly identified as the single biggest challenge across C-level, business, IT supply chain and manufacturing teams, and the challenge will continue as newer technologies make their presence among industry supply chains.
More than ever in the past, supply chain, procurement, customer fulfillment, product lifecycle management and service management teams must have active technology awareness and planning strategies. The umbrella and accountability of the supply chain now involves far broader dimensions of common information and related decision-making needs. The notion of the goal for pursuing Integrated Business Planning is not just IT vendor hype, but a necessary and required capability. An organization’s Sales and Operations Planning capability is thus the most critical to focus and improve upon. That stated, an important reminder for cross-functional and cross-business remains that final objective is not technology alone, but rather required business objectives and outcomes.
I’m also urging technology selection teams to broaden their context of their technology planning to include leveraging information and decision-making capabilities across an end-to-end, value-chain and B2B business network. With today’s pace of business change, supply chain planning or forecasting can no longer stand-alone as a capability, and must be augmented and synchronized with the sensing of actual events occurring across the supply chain network. The good news here is that the supply chain technology market has shifted its emphasis toward broader support capabilities in this area.
For those who plan on attending tomorrow’s Summit, I look forward to meeting and chatting with all of you regarding your organizational and personal objectives. For those unable to attend, be advised that next week we will post a PDF copy of the presentation in our Supply Chain Matters Research Center for complimentary reader downloading. Minimal registration information is all that is required.
As always, give as a call or contact us via email if you require further assistance or if this type of presentation can assist your organization or forum in setting its supply chain management objectives for the coming year. Our home page can be accessed at this web link.
A commentary posted on Logistics Management makes the observation that the threat U.S. West Coast port disruptions as a result of current ongoing labor union contract negotiations raises an open question as to “peak shipping season” this year. News Editor Jeff Berman makes note that inbound container shipments destined for the ports of Los Angeles and Long Beach, which together account for upwards of 40 percent of incoming U.S. container traffic, increased 16.5 percent and 8.8 percent respectively during June. The premise presented is that buyers scrambled to move cargoes earlier to avoid the potential of goods being caught-up in a port stoppage.
Logistics Management further conducted a reader poll of 103 buyers of freight transportation and logistics services. That survey indicated 68.1 percent of respondents expecting a more active peak shipping season this year. Some respondents are reported to be concerned about potential transportation lane disruptions in the fall.
Meanwhile, as we approach the end of one month since contract expiration, no real news has come forward regarding the ongoing labor talks between the Pacific Maritime Association and the International Longshore Warehouse Union. That provides continued uncertainty and concern among industry supply chains.
Supply Chain Matters proposes to conduct its own reader poll. For those readers managing inventory, procurement, transportation and logistics services, here’s the question:
What are your organization’s current plans or strategies regarding a potential disruption or work stoppage among U.S. West Coast plants?
Provide your responses in our interactive poll at the bottom of our right-hand panel. We will open this poll for two weeks and will announce the final results.
A recent posting on CNET reports that standards related to support of the Internet of Things (IoT) has now become a lot more complicated.
The potential benefits of IoT is rather broad and today comes with significant technology vendor hype cycles. Numbers such as 20, 50 100 million connected devices are quoted based on the most favorable market research numbers a vendor can find. There is added confusion related to IoT associated with consumer devices such as appliances, thermostats and wired homes vs. industrial networks of sensors and other equipment.
A handful of tech heavyweights, namely Intel, Broadcom, Dell and Samsung Electronics recently unveiled a new non-profit termed Open Interconnect Consortium (OIC) with a mission to come-up with certification standards for devices operating in an IoT environment. This announcement comes after a December announcement from nonprofit Linux Foundation in conjunction with names such as Microsoft, Panasonic, Qualcomm and others that calls for the AllSeen Alliance to come up with a similar goal.
Both consortiums rightfully communicate that wider adoption of the benefits of IoT cannot be gained without common standards among technology providers. However, many of these vendors have different goals related to how they will strategically leverage this new market in longer-term business plans. One example could be Qualcomm, which has garnered significant influence and revenues pegged on its mobile phone related proprietary technologies.
For our supply chain and B2B business network focused readers, these tech dynamics will sound quite familiar. They are very similar to the dynamics that occurred in the hype cycle of RFID enabled item-tracking as vendors jockeyed around various standards development initiatives, each with different strategic agendas. The end-result is one that we are very familiar with, the true business benefits of RFID and item-level tracking was stalled because multiple debates and conflicting standards approaches confused many technology implementation teams, making the technology choice too risky and too expensive.
In the early days of RFID this author wrote some guest columns in RFID Journal. In January of 2006 this author penned the following opinion:
“As for RFID, over the next two to three years, the industry standards for automatic identification and product information transfer will mature. Generation2 standards and the decreasing cost of individual tags will facilitate the ROI thresholds required to justify RFID as a transformational enabler of accurate, timely supply chain business intelligence. But RFID can and should be used alongside other traditional sensing technologies. Taking a sensory network platform view that includes all the available and/or appropriate technologies to enable more responsive and accurate supply chain business intelligence is a path to meaningful ROI.”
I along with other industry analysts obviously miscalculated on the real effort in coming up with common technology standards and subsequent attractive cost of infrastructure. Too many vendors became consumed with individual interests and we as analysts were too vested in technology vendor hype.
I now pose this question for open Supply Chain Matters reader comments: Is the current path of multiple IoT standards-based consortiums a replay of history?
Discuss among yourselves and share your views in the Comments block.
Supply Chain Matters News Capsule July 11: Google Shopping Express, Typhoon Neoguri, Accellos and High Jump Software Merger
It’s the end of the calendar work week and we continue with our news update series related to previous Supply Chain Matters posted commentaries or news developments. In this capsule commentary, we include the following topics: Google Shopping Express, Typhoon Impacts Japan, Accellos and High Jump Software Merge.
Google Shopping Express
While there is lots of attention being directed at Amazon, Wal-Mart and other online retailer same-day delivery capabilities, Google is about to invest serious money to provide its own capabilities.
A posting on ReCode.net: Inside Google’s Big Plan to Race Amazon to Your Door, Jason Del Ray writes that the Google Shopping Express service has been piloting in select cities and is about to receive some serious investment money from Google. He writes that the search provider who has been displaying local shopping results is now coupling a same-day delivery capability.
Rather than operating a network of physical fulfillment centers, Google will rely on inventory from local retail outlets. Rather than compete directly with retailers, Google’s thrust is to become an ally and complement a retailer’s local brick and mortar presence. Shoppers in select cities visit a dedicated web site and select the goods such as groceries, clothing or consumer staples, that they desire to purchase. A network of local couriers is then marshalled to pick-up the goods at local retailers and delivers them. Del Rey indicates initial retail partners are Costco, Target, Toys ‘R” Us and Whole Foods. For its efforts Google charges retailers a transaction fee while consumers pay a $4.99 delivery charge. Eventually, Google plans to charge shoppers a flat membership fee, similar to Amazon Prime. Retailers themselves are reported to be taking a cautious approach to the service for fear that that Google may assume more of the direct consumer connection including the mining of valuable shopping trends.
The posting cites a source familiar with the company’s plans indicating that Google executives have set aside upwards of $500 million to expand the service nationwide. That obviously, is some serious money when one considers that the model does not require inventory or warehouse investments. This will be an important area to watch for B2C online fulfillment.
Typhoon Neoguri Continues to Impact Japan
After slamming the southern islands island of Okinawa, Typhoon Neoguri has continued on a path across the main island areas of Japan and is being classified as the most severe storm to have impacted the country in the past 15 years. While the storm was recently downgraded to a tropical storm, there remains a concern for very heavy rains and subsequent flooding. According to the latest media reports, this storm is likely to reach areas near the tsunami-crippled Fukushima nuclear power plant sometime today.
Neoguri impacted the mainland yesterday near Akune City on the southern main island of Kyushu, which is home to 13 million people. Kyushi lies next to the country’s biggest island of Honshu where major cities including Tokyo and Osaka are located which could also be impacted by the storm. The storm’s strength weakened somewhat overnight, packing gusts of up to 126 kilometres (80 miles) per hour as it moved east. Latest reports indicate that the storm passed just to the southeast of Tokyo but concerns remain for torrential rains and landslides across the country.
Although the storm does not represent the massive supply chain impacts that occurred from the 2011 earthquake and subsequent tsunami that impacted the country, there could be some impacts depending on the amount of flooding, landslides or other damage to factories or transportation infrastructure.
The next few months represent the monsoon season across eastern and coastal Asia and this may just be the beginning of other super storms.
High Jump Software Acquired by Accellos
Warehouse and logistics management software providers Accellos Software and High Jump Software have announced a merger, but that appears very much like an acquisition. According to the announcement, “the combination of the two companies creates a product portfolio that is uniquely positioned to meet the advancing needs of retailers, distributors, manufacturers, and logistics service providers to manage complex order fulfillment cycles and collaborate with supply chain partners.” The merged company will operate under the name HighJump and continue to use the Accellos brand for midmarket supply chain execution technology. Accellos founder and CEO Michael Cornell was appointed CEO of the merged company. Terms of this merger have not been disclosed.
A posting on the Minnesota based StarTribune news site headlines the merger as an acquisition. It notes that the merger is driven in large part by the need among retailers for added online fulfillment process flexibilities including the ability to deliver goods quickly from a warehouse, as an online-only retailer would, if such goods are not available in a store. Both High Jump and Accellos have backing from respective private equity partners which implies that this was an engineered marriage.