Meta Third Party Logistics

a journey through international, value-added supply chains

Personal Update

Hello dear readers:

I just want to give you all a quick update.  Recently, I have been training for a position as an ISF (Importer Security Filing) Agent with a freight forwarder/customs brokerhouse.  It is a wonderful company that has plenty of growth potential.  At this time, however, I am not going to pin point which forwarder it is.  That is not because of any non-disclosure agreement:  I wouldn’t give proprietary information in any case.  Rather, I would like to not have logistics and supply chain professionals read my work with the bias that comes from organizational ties.

I am incredibly excited about the possibilities of working in this industry and with this company.  The fact that I could set my mind to working in this field and then making it happen, is absolutely fantastic!  If you are looking to add value to your life, then I cannot emphasize enough the benefits of goal setting and a dogged determination to achieve your career goals.  A word of caution is in order though:  do not compromise your integrity to get there.  If you are not true to yourself, it will be even harder to be true to your coworkers and employer.

I hope that in the future, I will be more informed and able to benefit you with solid resources and current issues in the industry.

Product and Distribution Strategy: Regarding a Dell Buy Out

With the recent developments for a potential buy-out of the computer company, Dell, it is a good time to review their overall strategy.

According to the WSJ, the business model that Dell had employed until recently was quite well suited to the market of the late 1990s and early 2000s. At that point the computer industry desired a cost efficient, tailorable solution to personal computing. Dell had a beautiful solution. Their supply chain was impeccable, they had options that customers wanted in personalizing their orders, and they had a direct to customer distribution strategy. But with the changing market expectations and methods, their strategy has fallen into disrepair.

With the commoditization of most electronics industries, many of the laptops that are being introduced have similar features that are either expected or desired. As a consequence, many people do not go out of their way to buy a computer; the availability of the product is high with distributors putting them in retail stores, department stores, and anywhere else where potential customers frequent. People looking for a PC can buy a laptop and get their groceries, all while waiting for their car to have its oil changed. The problem that this has posed for Dell is that with a direct to consumer strategy, it is losing a great deal of market share and profitability with a majority of the PC industry.

Another problem is that with as many cost-cutting measures that Dell employs, the company has not kept up with customers desires. Small additions in a commodity market, like the WSJ mentions, make a big difference to customers. While other companies used to have weaker supply chains around the turn of the century, they have since streamlined their operations. Therefore, the competitive advantage that Dell’s supply chain had is no longer there. These companies are introducing those small additions in a responsive manner, and Dell has not be able to keep ahead of the curb. They now have to compete with a greater degree of flexibility in a market that they once cornered.

Dell has attempted to deal effectively with the changing factors of success, but with lack luster results. However, with the possibility of a buy out, there may be hope for them yet. A renewed focus from the buy out may provide the direction that they need. Examples of this direction might be a tighter product line, focusing on fewer products to provide exceptional value for their customers, more differentiation in the products they keep (depending on their target customers), and a fresh approach to distribution.

That last part has special significance for those of us in the world of logistics and supply chain. Just as the example that Dell set in the late 90s gave us a case study that bore repeating throughout business schools globally, the opportunity that may be afforded to the company may have the same effect in the decade to come.

Details of the situation can be found at the Wall Street Journal’s article “To Dell in Talks on Buyout Fodderat $13 to $14 a Share”

Customer value: The engine of success

Principle: Business is run on customer value

 

Example:  Let’s say that you are out to buy a laptop. You know the kind of specifications that you want: not very customized, just a solid state hard drive of so many gigs, so much RAM, processors, video cards, screen size, etc. You know a couple of places that sell them, but you could be waiting in line for hours just to get into the store.  So how do you go about choosing where to go and from which company to make the purchase?

Introducing the VALUE PROPOSITION!  That is, quite simply, the benefits that the company is willing to sell to the customer; product, service, and image alike.  It’s what catches the attention of potential customers and fosters loyal patrons. The VP should be clear and differentiated to meet different segments of the market.

Big box retailers generally go with a VP of low purchase costs.  They streamline their supply chains so that their customers can find what they want and not miss a sale, and future sales from that customer (known as customer lifetime value).  The one thing that happens with this approach is that customer service becomes centralized to minimize costs.  This result can be off-putting to those customers who are relational and want to see friendly, accommodating faces.  However, the goal of the strategy is low costs and high volumes, and with the commoditization of a great deal of products, price has become the main selling point.

The higher up the scale of differentiation, there is going to be a greater cost but have the added benefits of things like custom brands, personalization for individuals, and more of a personal touch to the interaction.  Highly differentiated brands of computers make certain that their customers understanding that they are important to the organization, that their business is appreciated.  All of this comes at a monetary trade-off though.

Martin covers three categories of customer service elements:  pre-transaction, transaction, and post-transaction.  That’s seems pretty simple to understand, but getting great service is something that is missing in the majority of businesses.  Even the low-cost chain stores have to keep up some level of service.

 

 

Let’s say that you first go to a locally owned electronics store ready to make your purchase.  After all, you want to support your local economy.  Pulling into the plaza’s parking lot you notice the sign and find the spot nearest the store (unless you are paranoid about someone hitting your car opening their own car door; then you park as far away from the store as possible).  As you enter the store, you are overwhelmed by a chaos that only pack rats and statisticians can tolerate.  Woah!  Nevermind.  We’ll take our business elsewhere.  This, although unlikely, is an example of a missed sale because of a lack of pre-transaction service.

Anything to do with the customer perceptions of value before the purchase, of either the product or company, defines pre-transaction service.  In the brick and mortar retail game, this could be anything from the location’s general atmosphere, the layout of the store, and sales associates knowledge or demeanor.  In online transactions or transactions of larger scales, such as Business to Business dealings, these things may be response times to inquiries,

Okay, so we’re at the office supply store.  It’s clean, professional, and you know that they carry laptops.  But wait!  They’re don’t have any in stock.  What luck!  Well, it is not necessarily based on your luck; it is a failure on the store’s part to anticipate your purchase, to serve you by having the product available.  Well, you don’t want to wait, and there are ten other places where you can the same laptop today.  Here we see a transactional deficiency.

That’s just as well; we can go to the electronics store in the plaza beside that trendy coffee shop/bookstore.  The store is nice, and the  sales associates aren’t too pushy.  There it is!  You’ve found the right laptop with the specifications that you want, the look that says ‘tech savvy, but not pretentious”, and at the right price.  You want it; you buy it; you got it!  That’s a successful interaction right?  Yes.  Almost.  The way that you perceive the value associated with this purchase is also contingent upon how well it performs for the next couple of months, or even years.

So let’s say that you get home and discover that the power cord is defective.  Time to call the store right?  Sure, they love to hear about this kind of thing.  So you find their number on the receipt and give them a ring.  A conversation similar to the following occurs:

Customer Service (CS):  “Thank you for calling Mega-Ultra Gizmo Shack.  How may I help you?

You:  “Hi, I just bought a computer from your store, but it has a faulty power cord.”

CS:  “Oh, that’s not our fault.  You have to talk with the manufacturer.”

You:  “But I just bought it 20 minutes ago and still have the receipt.  Isn’t there anything you can do?”

CS:  “I’m sorry, (insert gender specific title here).  I can’t help you.”

This is an example of a post-transaction service failure.  Of course, it is a reasonable thing for returns and warranty issues to go directly to the manufacturer.  Most stores themselves are not well equipped to efficiently handle bulk returns to hundreds of separate manufacturers.  The point of contention for this aspect of the service spectrum is the lack of empathy skills and customer orientation.

Customer Service, as it is noted in Martin’s book, is an all or nothing affair.  A customer is either completely satisfied, or not completely satisfied.  Even a small discrepancy in the transaction can lead to dissatisfaction, and a potential loss of customer lifetime value.

These lessons are simple because each of us may have experienced them personally.  So how do businesses make sure that the damages that can occur are mitigated?

 

Having a well-thought out buyer’s experience can be a key aspect of a lasting business relationships, whether it is a consumer–retailer or a transportation carrier–freight forwarder relationship.  One of the main aspects of effective supply chain networks is the management of those strategic alliances that need to be cultivated to provide the greatest value to your customers at a reasonable price and streamline cost structures in providing those benefits.

It is the total of these benefits, pre-transaction, transaction, and post-transaction alike, that comprise the Value Proposition.  Moreover, it is important to note from these silly examples that not every Value Proposition will be the same.  The combination of these different facets will give each company a distinction and competitive advantage.  Managers and strategy makers use this fact to set themselves apart to their markets to maximize their company’s potential and shareholder value.

To wrap things up, mastering the art of the value proposition is a skill, and developing it is a story that will unfold as we journey through the world of international logistics and supply chain management.

 

PS.

Just in case you are wondering, these examples are for informational purposes; it is not necessarily the case that I am disgruntled by experiences with any particular organization.  I’m not going to point any fingers, but if I were to do that, you wouldn’t see it anyway.  I mean, this isn’t a video blog or something.

Business simulations: Creating a competitive advantage

“And what is the point of being in any business?”  asked my business strategy professor.

“To maximize shareholder profit, ethically.”  the soon-to-be graduates chanted.

That was the mantra of every business student that passed through that class.  Every aspect of business was focused on bringing the greatest returns for share holders in a way that was consistent with moral and legal standards. In this class particularly, the students would spend half of the semester reviewing the principles outlined in the book, learning as much as they could about creating and implementing business strategies.  The second half was spent competing against each other to do test what they had learned.  Each student was assigned to group of two or three other classmates to effectively run a tech manufacturing company. The simulation had each team start from a base line, which was equal to every other team.

What each team was required to do was to choose strategies and market segments (based on Porter’s categories), make detailed decisions about everything from production capacity to market research, and try to turn revenues into bench-marked Net-Profit After Taxes (NPAT) ratios. In each class, the pertinent information of each organization was reviewed:  market share, total revenues, NPAT, Earnings-per-Share ratios, etc.; and afterward, the professor would discuss different methods and things on which the teams should focus.  Essentially, every class would be a refresher in SWOT analysis. To wrap it up I’ll say that the experience was phenomenal!  With as many different options that the simulation presented, there were opportunities to learn what it takes to have a competitive advantage and grow as a member of a focused team.

This idea of training managers and executives is not something that is just done in business schools at universities, but many major companies send their rising leaders to conferences and simulation seminars.  Companies like IBM offer such training to supplement and promote their product/service line. If you want a simple game to test your , there is their Innov8 2.0–it’s a short game in the style of ‘choose your own adventure’ that has some of the basic issues affecting supply chain, customer service, and smart traffic.

So how does all of this affect our purposes?  Well, just like my last post about Martin Christopher’s book, the main area of reducing costs while providing value to customers is the supply chain.  Having the opportunity to learn those key lessons about competitive advantages, without the risk of losing accounts and possible revenues of hundreds of thousands of dollars, may itself be a competitive advantage for many companies.

Well, I look forward to the next post, which will cover more of Christopher’s book and several articles on a customer-centric model of supply chain management.

The Value of Logistics

As I read through Martin Christopher’s book, I have come to understand his main slogan.  He says that these days, it is not the companies that compete, rather, it is their supply chains.

Thinking about this idea, it makes sense.  He explains that with globalization and the commoditization of many markets, products need to have a clear and differentiated value proposition to command a reasonable profit. This of course is nothing new to the business world, but what is relatively new is the facet of supply chain management on this value proposition.  If one company demands low costs from suppliers or high costs from distributors, then the value proposition has made a null gain for the end customer.  That is that the cost to the consumer is the total of all value-adding activities, regardless of which intermediate company had a lower cost per unit. Then, the sales total product sales are the same, and the markets that are increasingly based on commodity pricing will buy the cheapest option.

However, if a company can manage the upstream and downstream relationships well enough to work collaboratively, then the entire chain can realize greater gains. This can be critical for commodity markets as the total cost at the point of sale has the ability to be lower.  It also has implications for the specialty markets as a better managed chain is better equipped to serve the customers’ needs and changing demands. Not to get ahead of myself, as I will be discussing them in posts to come, but Mr. Christopher lists the four traits of an effective supply chain as the 4Rs.  They are Responsiveness, Reliability, Resilient, and Relationships.

So how does this relate to third party, or contract, logistics? 

With increased globalization and outsourcing of non-primary functions, as the author states, the area that a company can reduce their costs and maintain the flexability to respond to variable customer preferences is outside the company,  especially in the timing and movement of products.

 

 

 For a further look at what makes a solid supply chain, I suggest going to the Business Excellence page on the topic.  Alan Braithwaite, chairman of LCP Consulting and visiting professor at Cranfield University’s School of Management, describes what he calls the ‘new normal’ of business and gives five strategic recommendations for success.

Currently Reading

Currently Reading

Logistics & Supply Chain Management by Martin Christopher

Logisticians Unite!

Success!  I was able to talk with a couple of people at a freight forwarder/customs broker house, and I got some GREAT advice!

If anyone decides to take the Customs Broker License Examination, it is a serious endeavor.  Studying for the customs broker license examination is a very detailed and intense process.  I spoke with a woman who works in an office out of Charleston who just took the exam for the fourth time.  Each time, she said, she has seen the same people.  Determination is certainly the key to getting licensed as a broker!

There are several local companies that provide these services, but the majority of the licensed brokers in their organizations are in different offices in major port cities.  Where I am currently, in the Upstate of South Carolina, there are plenty of logisticians and freight forwarders.  I am now in the process of researching the businesses that have local and regional offices with open positions.

Transitions

 

Hello Blogisphere!

It has been a few months since I have written on this blog.  In the meantime, I have taken a while to evaluate my plans and goals.  Looking through project management opportunities, I realized that the majority of project managers step into the role because of previous experience in their fields.  People do not usually enter into project management straight away, and trying to do so has proven to be a challenge.

Over this summer, I had the opportunity to do manual labor as a line operator for a tree service company.  With the contract that the company owner had, I worked with a small team of professional tree men on the side of a local mountain.  Not that it needs to be mentioned, but this is probably the most physically fit I have ever been.  Running back and forth on a mountain has its rewards in the ways of doing a hard day’s work well, but I decided that it was not something to which I would dedicate my ambition.

During this time, I had many opportunities to consider what I would do with my career.  I studied International Business in school, and having traveled to several corners of the world, I recognize my interest and desire to be involved with other cultures and markets.  Then, I began working with a staffing company to find a position that might suit me.  When I had the chance to interview for a position with a freight forwarder in a nearby city, my interest was immediately piqued.  I began to research the logistics field.

Freight forwarding is one of the many importing/exporting options that are available to businesses foreign and domestic.  Many forwarders act as third-party logistics companies, an agent of one of the parties to handle the shipping side of the deal.  This can encompass anything from a simple negotiation with a trucking company (carrier) to deliver the product, to a more complex process of arranging a multi-modal, international deal.  This is where I have found a launching point.

One of the processes that is involved in this more complicated affair is customs brokering.  According to Customs and Border Protection,

“Customs brokers are private individuals, partnerships, associations or corporations licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports. Brokers submit necessary information and appropriate payments to CBP on behalf of their clients and charge them a fee for this service.”

So I have decided to make progress by starting here.  I have been studying the Harmonized Tariff Schedule of the U.S. and the Regulations for brokers (CFR 19) for the past month.  It is a small part of the industry, but it is a step forward into the global logistics industry.

Having given you the update, I look forward to keeping you abreast of what I discover and my journey into the world of international business!

Happy learning!

Automation World 2012

Attendees look on as a National Instruments rep discusses company features

 

As my first foray into the world of business and the technology world, I decided to attend last week’s Automation World at the COEX of Seoul, South Korea.  The event is a convergence of factory automation and technology giants from around the world.  The conference lasted for three days amid the bustling streets around the World Trade Center in Seoul.  There were over 300 companies in attendance with over 600 booths and exhibits.  A few of these prominent companies are LSIS, ABB, Panasonic, and National Instruments.

As I talked with a number of the representatives, it became obvious that the automation industry is very much project-oriented and that many companies structure themselves accordingly.  I was thrilled with the opportunity to discuss with industry leaders (a number of Korea-wide top executives) these concepts which are so fresh to me.

 

Open Access Journals: The Debate Rages

8,200+ Strong, Researchers Band Together To Force Science Journals To Open Access

Open Access promomateriaal

Open Access promo material (Photo credit: biblioteekje)

Although I know that academic research is costly, I am very much a fan of open access journals.  I use the Directory of Open Access Journals (DOAJ), which currently

has 70 journals from around the world in several languages.

An approach that publishers might try is to provide certain journals or types of journals in open access, while using others to fund the administration and reviews that go into these publications.  This could be done through a well-timed use of the marketing strategies of corporations throughout the product life-cycle.

Let me know if you have any thoughts.

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