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November 19, 2015 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Manufacturers are from Mars, Retailers from Venus Part 2 bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet New Cartoon Caption Contest Begins bullet Trivia      bullet Feedback
bullet New Expert Insight and Supply Chain by Design bullet New Videocasts and On Demand Videocasts

Complimentary Ebook features:
Supply Chain Collaboration Tips From Unilever, CHEP and Cardinal Health to Leverage Modeling Technology to Identify Synergies and Test Collaborative Savings Opportunities

first thought


Supply Chain Graphic of the Week and
eCommerce Growth

Tata Steel, Others, Putting Price Squeeze on Suppliers
Oil Prices Fall to 2009 Lows - but There May be Fallout
On-line Customers and Binge Returns
Deadheading Issues in China to Europe Train Transport



Week of November 16, 2015 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Top Performing Shippers Are Committed To Continuous Improvement


Weekly On-Target Newsletter:
November 18, 2015 Edition

Santa Cartoon, Rail Q3, Supplier Squeeze, IoT in CPG, New Silk Road and more

Achieving Higher-Value Supplier Relationships

by Gary M. Barraco
Director, Global Product Marketing
Amber Road

CSCMP Report: Six Insights from LLamasoft and JLL

by Dr. Michael Watson

Townhall Meeting! The State of Retail-Vendor Relationships 2015

Results from SCDigest's New Benchmark Study of Retailers and Their Suppliers - and SCDigest's New Index to Measure the State of the Relationships

Featuring Interactive Event Format - Live Expert Panel and Audience Questions

Featuring Greg Holder,CEO, Compliance Networks, Kim Zablocky, President,

RVCF (Retail Vendor Compliance Federation), Victor Engesser, Retail Executive Advisor, RVCF and SCDigest's Dan Gilmore


What was rail carrier Union Pacific's net income as a percent of sales in Q3?

Answer Found at the
Bottom of the Page

Manufacturers are from Mars, Retailers from Venus Part 2

I am back from attending the RVCF Fall meeting in Scottsdale last week. It is an interesting group. It started out as the Retail Vendor Compliance Federation years go, serving mostly back then as a forum for consumer goods companies to vent about chargebacks/deductions from retailers.

RVCF founder Kim Zablocky later got the bright idea of bringing retailers into the mix and push a more collaborative agenda, and today the acronym stands for Retail Value Chain Federation, a combination of retailers and vendors.


"It can be argued vendors have more to gain from collaborations that allow them to better optimize production schedules, a benefit the retailer obviously cannot receive."


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So it was a good forum to discuss the results of SCDigest's new (and quite interesting) benchmark study on the state of retailer-vendor relationships in 2015. The results of the report were first unveiled at one of our Townhall Meetings last month, and now the full report is available. You can find it, the on-demand Townhall Meeting, and more at the report resources page: The State of Retailer-Vendor Supply Chain Relationships 2016

I did a retailers are from Venus, consumers goods companies from Mars piece a couple of years ago, based on results from a smaller scale survey back then that showed some very different ways of thinking about the supply chain between retailers and their consumer goods company "partners."

As I noted at RVCF, if one goes back through all the supply chain initiatives in this sector dating back to the 1980s (Efficient Consumer Response, Continuous Replenishment, Quick Response, CPFR, EPC RFID, the shelf-connected supply chain), the language used to describe the problems and opportunities as articulated by groups such as GS1 and VICS are virtually identical over all those many years.

That is, there is much to be gained by freely sharing information and operating a supply chain more like a single company would view the world than through disconnect supply chain planning and execution. The fact that the language never changes would suggest vision has failed to be realized.

There are some interesting examples of this more enlightened thinking. Unilever, for example, is bringing in retailers to its innovation lab in the US and using network design software to model how savings could be achieved if the supply chain was modelled as if it were a single company, not two.

A few years back, Kraft Foods was doing what it called "collaborative transportation engineering" with retailers, looking for logistics opportunities across the joint networks, especially with regards to backhauls/continuous moves. ( I am not sure what has happened with that program after all the corporate drama in recent years at Kraft, which of course is now Kraft Heinz.)

But the reality is that there are two different companies in a given relationship, with their own goals and strategies. That fact alone is complicated by a couple of other factors: (1) a given retailer can easily have hundreds of suppliers and perhaps thousands for the larger ones - just how much collaboration is really possible across that breadth? (2) to some extent, it is a zero sum game, meaning if one vendor gains share at a given retailer it is at its competitors' expense, and the total sales for the category at the retailer may not really change (though jointly removing costs could benefit both sides and not be zero sum.)

So with all that in mind, last summer we conducted a survey to get some handle on the state of the supply chain relationships between retailers and vendor after more than three decades of push for both sides to become more integrated and collaborative. In the end, we received responses from 50 retailers, about 200 manufacturers, and 80 "others" (consultants, academics, etc.) who also wanted to weigh in on the issues.

We can only summarize a small sample of the data here in this column. As you might expect, in most cases we asked almost identical questions to retailers and consumer goods companies to compare and contrast different views from each side.

All told, retailers and manufacturers rated the state of their supply chain relationships with the other side fairly strongly - both about 4.8 on average on a 1 to 7 scale, where 1 was the least strong and 7 the most, so well above the mid-point level of 3.5. But that might have been the most positive news from the survey results.

Naturally, the subject of chargebacks - always a hot button issue that never goes away - generated some very different perspectives. 51% of vendors said that the level of chargebacks they receive is rising, versus 36% of retailers who said their chargeback revenues were increasing.

Some comments from respondents on this issue were quite interesting. 

One retailer, for example, commented that "Some vendors are improving, but technology is allowing us to find more [violations] to replace those improvements." Another retailer noted that "Vendors simply continue to struggle to deliver on time with the right labeling, documentation, etc."

On the vendor side, one manufacturer commented that "Retailers have largely increased their non-compliance fees. Further, the retailers have added many new compliance initiatives relative to e-commerce." Another noted that "Carrier capacity challenges are driving chargebacks with poor on time performance." That is an interesting point.

There was an especially large gap on the future of chargebacks. As seen in the graphic below, 52% of vendors believe that the level of chargebacks will grow over that period, versus just 33% of retailers that see things that way.  Meanwhile, a solid 44% of retailers actually believe the level of chargebacks will decline over those 5 years, versus just 13% of vendors.

Here, we clearly have two very different perspectives. I believe it is probably something like this: retailers believe a combination process improvement and the pain of the chargebacks will eventually lead vendors to reduce their compliance violations. Vendors, on the other hand, believe retailers will get more aggressive in this area, and find new ways to trigger deductions.

The majority of retailers place their collaborative skills as just average (55%). 39% considered themselves above average, and interestingly, no retailer placed itself "near the top" of collaboration capabilities. Vendors scored themselves as possessing higher collaboration skills than do retailers. Here, a combined 53% scored themselves as either above average or near the top, with just 37% scoring themselves as average collaborators, as shown below.

There was a clear pattern in the survey data of vendors rating their collaborative skills higher and finding more value from collaboration than retailers. This could be for a number of reasons. First, many manufacturers have been at the true supply chain game for longer than merchandising-oriented retailers have been on average, at least until recently.

Second, it can be argued vendors have more to gain from collaborations that allow them to better optimize production schedules, a benefit the retailer obviously cannot receive. Indeed, some retailers that have done collaboration around time-phased order forecasting have complained they aren't receiving any benefits (read "lower prices") from helping their vendors improve their supply chains.

I have barely scratched the surface here and am already out of space. All told. I rated the state of the retailer-vendor relationships today based on the data just a B- grade - OK, but with much room for improvements.

If you are at all interested in the consumer goods to retail supply chain, you will want to check out this highly graphical report. Thanks to Compliance Networks, a provider of retail vendor performance management solutions, for commissioning this research.

How much progress have we really made in retail-vendor relationships over the past 30+ years? Any reaction to the data from the new report? What is your view of retail chargebacks? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

New Videocast:

Trends and Issues Global Sourcing and Trade Management

Results from SCDigest's New Benchmark Study on Practices and Technology in Global Trade

You'll learn the results of the survey, unveiled in a new report launched with this Videocast. Not to be missed by anyone interested in global sourcing, global trade management and supply chain visibility.

Featuring SCDigest editor Dan Gilmore, Gary Barraco, Senior Director of Supply Chain Solutions at Amber Road, and Dan Gardner, President of Trade Facilitators Inc.

Thursday, December 10, 2015

December Videocast:

Using Supply Chain Modeling to Improve Operations and Outperform the Competition

PriceSmart Builds Optimized, Aligned and Dynamic Supply Chain Network

You'll learn about key new trends in supply chain design, where companies are finding the value, and learn the powerful story of how leading retailer PriceSmart has used network design tools to craft its network of the future to support growth, optimize flow paths, and right size inventory levels.

Featuring Frank Diaz, senior vice president, distribution and logistics at PriceSmart, and Toby Brzoznowski executive vice president at LLamasoft and SCDigest's Dan Gilmore

Wednesday, December 2, 2015

On-Demand Videocast:

Making Supply Chain Business Intelligence Pay Off for Mid-Market Companies

New Technology Options and BI Use Cases Delivering Competitive Advantage and ROI

Includes demystifying supply chain BI, the keys to deployment success, key trends such as the move beyond scorecards to dashboards, and how new BI offerings are enabling cost-effective, easier to implement BI solutions to mid-market and even many larger companies

Featuring Donna Fritz of TAKE Supply Chain,Tom Dadmun, former head of supply chain for high tech manufacturer Adtran and SCDigest's Dan Gilmore

Available On Demand


This week some more emails on our recent story on American Apparel trying to keep its production on the US despite just filing for bankruptcy protection, as Wall Street analysts urge it to go offshore. Some of the Feedback come from our friends at RetailWire, which republished our story. A few of these Feedback below, maybe more later.

Feedback on American Apparel's Attempt to Keep Producing in USA


Made in the U.S.A. is vital to American Apparel, but it needs to stand for quality, not just point of origin. American Apparel does not have to rush towards lowest price to be successful. It needs to deliver quality goods at a fair price point while retaining its Made in the U.S.A. point of differentiation.

Don't listen to Wall Street. After all, these are the same geniuses that gave us the Great Recession. Instead, focus on quality and stay on message.

Max Goldberg
Max Goldberg & Associates


A good product at a good price "Made in America" sells. A good product at a good price "Made in [China, Vietnam, Bangladesh, et. al.]" sells.

"Made in America" is irrelevant to the decision. We can talk about "Made in America" all we want, but how many extra dollars will anyone spend just because of the label?

Gene Detroyer


As always the question we see in this discussion points to labor as the cause for higher costs of goods sold which are American made. Many manufacturing companies have farmed out the legal limits of labor simply to keep the "Made in U.S.A." tags. What we are left with is product which can not be made in the U.S. if need arises. Again we are headed into a pointless argument that can never lead to solutions for easy earning needs versus earning a profit.

Since the dawn of written history economies have looked to production cost increases as a factor of labor only. There are few that look to any of the other contributors in LOHM G&A's burden and responsibilities. Should companies consider alternatives to buying or engaging in long term facilities leases? Can we be so bold as to look to outsourcing the responsibilities of "C something or other Os" by passing the ownership jobs back to ownership and/or the board of directors? 

And what about making the same things our ancestors wore the same way they made them? Can we do better than that? These things might be worth a try as well.




Q: What was rail carrier Union Pacific's net income as a percent of sales in Q3?

A: An astounding 22.2%. By comparison, profit as a percent of revenue was just 5% at Ford in Q3, and 15.8% at Procter & Gamble. Apparently, railroads are where you make the money these days.

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