Four Supply Chain Disruption Myths Your Company Should Question
Pandemic-driven supply chain disruption is a reality that no business can argue. Along with disruption, the pandemic has also spawned myths. If these myths aren’t questioned to separate fact from fiction, companies will find it much harder to successfully move forward.
At Pivot International, our reputation for securely leading our clients through disruption continues to grow. Leveraging the power of strategic partnerships, we help clients bring award-winning products to market in exceptionally challenging times. With nearly a half-century of leadership in supply chain solutions, product development expertise that spans over fourteen industries, and extensive manufacturing capability, we are a premier one-source partner for companies worldwide.
What myths have arisen due to pandemic-driven supply chain disruption, and where does the truth of the matter lie? Let’s take a look.
Disruption has brought market opportunities to an all-time low.
While there’s no disputing that pandemic-driven disruption has introduced new challenges, it has also opened a wealth of new opportunities in consumer, industrial, sports and entertainment, and medical markets. For instance, the demand for virtual communication and collaboration technologies, digital self-services, and IoT-enabled home-fitness products has skyrocketed. The demand for telehealth services and home-care medical devices alone has mushroomed throughout the pandemic to represent a market of $250 billion in U.S. healthcare spending.
Supply chain risk is too high to begin or resume product development.
Companies are rightfully wary of sourcing shortages and delays. Many have shelved their product development plans indefinitely, believing supply chain risks to be too high to proceed securely. While this is understandable, it’s unfortunate.
Proven partners with transparent, diversified, company-owned sourcing networks can provide the level of security companies need for confidently moving their product development forward. At Pivot, even at the peak of COVID-19 supply chain disruption, we were largely able to protect our clients from adverse impact and keep their product development on track.
Cost-effective alternatives to China-based manufacturing are difficult to find.
For companies dependent on security-sensitive or critical components, recent trade regulations mean China-based manufacturing is no longer an option. This has caused many companies to scramble to find alternative sourcing solutions — no small task from a price-point perspective.
But high-quality, cost-effective alternatives do exist. With more than 200,000 square feet of manufacturing capability that spans three continents for serving U.S., European, and Asian markets, Pivot delivers the alternative sourcing solutions that companies desire.
Design needs to take a backseat to more reliable revenue drivers until disruption subsides.
Some degree of disruption and risk are inevitable and are simply the cost of doing business. The question is not whether disruption and risk exist, but whether companies are prepared to innovate their way through it.
Make no mistake, design is a key revenue driver. Design refers to far more than just how a product looks and feels. Design is also intimately related to how a product functions and whether it is optimized for UX and scaleable manufacture. DFM, especially, delivers multiple advantages that result in measurable improvements to ROI.
As the world continues its march toward the next normal, tough challenges remain. But by dispelling supply chain myths, businesses will be better able to move successfully forward to capitalize on emerging opportunities. If you’d like to learn more about how Pivot can help you bring a successful product to market, contact us today for a free consultation. We’re here to help.
Blockchain and Supply Chain: A Winning Combination
In today’s rapidly changing world and global economy, blockchain and supply chain are a winning combination that delivers businesses significantly increased transparency, security, cost-savings, and agility. In discussing the benefits of blockchain, it should be understood that this term has become a popular shorthand for a specific kind of distributed ledger (DL) designed to track and document transactions or digital interactions. In other words, all blockchains are DLs, but not all DLs are blockchains.
A distributed ledger is a type of database that spans multiple sites or locations, or that is shared among multiple stakeholders. This is in contrast to the centralized, localized databases that are still used by many companies. The primary difference between centralized databases and DLs is that the former has a single point of failure, making it exponentially more vulnerable to disruption.
At Pivot International, we’re at the forefront of deploying the most advanced supply chain, blockchain, and DL technologies to help companies overcome disruption, increase resilience, and successfully scale in a post-COVID-19 world. With nearly five decades of product development expertise that spans twelve industries and 200,000 square feet of manufacturing capability across three continents, we’re delivering leading-edge solutions for businesses worldwide.
What are the benefits of blockchain and DL technology?
DLs like blockchain are exceptionally valuable for cutting down operational inefficiencies. And because they are decentralized and their ledgers are inalterable, they provide unprecedented levels of data security.
Blockchain technology functions to create virtually tamper-proof documentation of highly sensitive activity or transactions that range from international wire transfers to shareholder’s financial information. Blockchain offers companies a secure digital alternative to expensive, time-consuming, paper-heavy, bureaucratic processes.
Data written to blockchain is etched on the network, generating an accurate and immutable audit trail. Because no single person owns or controls the data of a DL, and no one can alter records that have already been made, the chances of innocent error or outright fraud are all but eliminated.
Why are DL and blockchain technologies a winning combination with the supply chain?
Advantages of DL and blockchain applications include:
- Increased transparency — Enterprise-level organizations have large, complex, and unwieldy supply chains into which they seldom have sufficient transparency. Applying blockchain to supply chain management, record keeping, data tracing, and product tracking via embedded sensors and RFID tags gives companies the strategic insight they need for improving supply chain efficiencies or reconfiguring their relationships with suppliers.
- Enhanced agility — The real-time insight that blockchain and DL technologies bring to the supply chain helps companies become more agile in order to quickly identify and act on emerging opportunities.
- Reduced vulnerability to disruption — It’s impossible to defend against what you can’t see coming and rapidly respond to. The transparency and agility that blockchain and DL technologies promote help companies defend against disruption by pinpointing risks to their supply chain before they become dangerous threats.
- Greater client and consumer trust – Clients and consumers are increasingly demanding transparency into the supply chain. Whether this is a client wanting assurance that their manufacturing partner brings multi-tier sourcing transparency to the relationship, or a consumer concerned about sustainable sourcing, blockchain and DL technologies are becoming critical tools for generating trust.
At Pivot, we’re leading the industry with the technological investments necessary for helping our partners recover from disruption, fortify their businesses for the future, and successfully scale in a rapidly changing world. We are ISO-certified, FDA-approved, and bring an impressive track record of bringing award-winning products to market in both the best and most challenging of times. If you’d like to learn more about how we can support your business, contact us for a no-cost consultation today. We’re here to help.
3 Critical Perspectives for Increasing Supply Chain Security
As companies scramble amid the COVID-19 sourcing crisis, crucial information is often unavailable or siloed within global teams. This results in a reactive and uncoordinated response, exposing companies to excessive impact and underscoring the need for critical perspectives that cut through confusion and increase supply chain security.
At Pivot International, as qualified Essential and Critical suppliers with nearly 50 years of helping companies successfully surmount disruption, we’ve long understood the necessity of advanced supply chain solutions, strategies, and technologies for mitigating and managing risk. With product development expertise that spans twelve industries and 200,000 square feet of manufacturing capability across three continents, we’re delivering both short- and long-term solutions to the current sourcing crisis.
Why is it that so many companies struggle to map their supply chains and adequately prepare for disruption, despite the consensus that this is essential? Here, we’ll take a look at barriers and offer critical perspectives for breaking through them.
Barriers to Supply Chain Mapping
There are two primary barriers to mapping the supply chain. First, mapping the supply chain can be expensive. As much as company leadership tends to be quick to acknowledge the need for supply chain mapping as a risk-mitigation strategy, this task is frequently back-burned due to the significant time and labor investment it involves.
The second barrier is that many companies rely on the personal reports of their top- and secondary-tier suppliers, trusting as valid what are often inaccurate reports or mere guesswork passed off as fact. Moreover, even when information is accurate, it is rarely adequately documented, and when procurement personnel change jobs, are promoted or retire, this information often becomes unavailable. Without proper documentation, the recovery of this information can take years.
Critical Perspective #1: The cost-savings of mapping your supply chain exceeds the expense required for doing so.
Though supply chain mapping can be resource-intensive and difficult, recent disruptions drive home the reality that it’s not only a key competitive advantage in the best of times but a matter of survival in the worst. Fortunately, the value of this map is far greater than the cost and time it takes to develop it.
The most common approach to supply chain mapping relies on a bill of materials and focuses on key components. Typically, it starts with an identification of the company’s top five revenue-driving products. From here, the suppliers of the components for these products are identified. Last, the suppliers of the raw materials for these components are identified. The goal is to drill down into as many tiers as possible, as there may be critical suppliers that are otherwise hidden from view. Additionally, the map should include information on:
- The activities a primary site performs
- Alternate sites with identical or similar capability to which a supplier may have access
- The time required for the supplier to begin shipping from an alternate location
Critical Perspective #2: When procurement focuses only on short-term cost savings, revenue-loss is only one disruption away.
When procurement is forced to resort to extreme measures for timely supply (for example, buying materials at a surcharge), the higher costs are assigned to other parts of the business (like the logistics function, for instance, in the case of expedited shipments). Too infrequently is the question sufficiently examined of how procurement’s commitment to securing the lowest price possible may expose the business to unnecessary risk.
Procurement, logistics, and supply chain financing divisions must work together to close key gaps (information, tools, processes, etc.) to protect the organization from disruption and expense that is unwittingly generated “upstream” through an indiscriminate pursuit of cost-savings.
Critical Perspective #3: Supplier performance metrics that fail to include disruption-assessments are misleading and potentially dangerous.
Because buyers and suppliers alike suffer when disasters strike, it makes sense that firms should incorporate disruption-related metrics in their assessments of suppliers.
When establishing a relationship and negotiating a contract with a new supplier, for example, many companies include language that requires suppliers to participate in annual supply chain mapping efforts. When force majeure events like the COVID-19 health crisis occur, those supply chain maps can be used as guidance for solutions. Additionally, contracts should outline expected recovery strategies and timeframes.
Pivot brings advanced risk management strategies and supply chain solutions (including digitization, ERP, and MRP systems), to help companies successfully weather disruption. With company-owned facilities, we’ve achieved exceptional levels of supply chain transparency and security that allow us to effectively support our partners’ short- and longer-term business objectives. Contact us today to learn more about how we can help your business survive and thrive in a climate of unprecedented challenge.
How to Assemble a Disruption-Resistant, Rapid-Response Team
One of the main challenges of major disruption is the fact that conditions tend to change so rapidly and unpredictably that the very protocols and processes that are an advantage during “business as usual” prove to be a liability during times of crisis. Among the top dangers that businesses must avoid is adherence to routine channels of organizational governance that delay urgent decision-making. For this reason, the order of the day during a crisis is the assembly of a network of specialized yet highly coordinated rapid-response teams.
At Pivot International, we’re a global product development and manufacturing firm with advanced supply chain solutions and rapid-response teams that have earned us a reputation as industry leaders for surmounting disruption. With nearly 50 years of experience across 12 industries and 7 locations worldwide, we leverage agile organizational structures and 200,000 square feet of manufacturing capability to help companies bring successful products to market, even under challenging conditions.
How can your organization assemble a rapid-response, disruption-resistant team for successfully navigating current and future disruption? Here are four steps.
1. Use a network structure to harness network intelligence.
Your rapid-response team should be created with a network (hub-and-spoke) structure, with a central unit functioning to direct and coordinate the insights gained through its various arms. A team with this structure harnesses the “network intelligence” that exceeds the sum of the individual members. The team must be supported to learn in real-time from the very challenges it is assembled to tackle. And to act quickly on the emerging opportunities the team identifies during this process, it must also be empowered with appropriate degrees of authority to operate independently of standard decision-making channels.
Three team-member types with cross-functional capabilities are of particular importance. First, an oversight type that brings holistic awareness to understanding the unfolding situation. Second, a planning type that identifies and explores various action-scenarios and their outcomes. Third, a customer-facing type that can bring key insights from the frontlines of this aspect of the business and industry.
Regardless of which type each member belongs to, they need to bring a proven track record of critical thinking and sound judgment. They also need to have demonstrated a willingness to rapidly revise their position in the face of new intel.
2. Act as coach, not quarterback
Following the assembly of this rapid-response team, the leader’s role is to ensure that well-coordinated communication is occurring across the network, as well as between it and the broader organization.
From here, the leader needs to step back from playing quarterback and assume the position of a coach that empowers his or her players to collaboratively innovate plays and run the ball accordingly. As a coach, leaders should foster teamwork, assist in identifying opportunities, and marshall resources — both tangible and psychological — for effective execution. The aim here is to step far enough back to communicate confidence (since over-involvement suggests mistrust) but to be available enough that the team feels the leader has its back.
This support can be best expressed by bringing open-ended questions to the table that provide a framework for keeping things on track and spurring critical analysis. For example, a leader might ask: What is your top challenge right now, and what resources can I provide that might solve for it? Are there conflicts between proposed courses of action, and how are they being reconciled? What are the latest learnings from customer-facing team members, and how are they being applied? To what degree, if any, are teams looking to me and other leaders to make decisions they have been empowered to make?
3. Foster a climate of safety and collaborative experimentation
Disruption, by definition, is a situation in which the usual strategies for success are no longer effective, and entirely new approaches must be innovated. For innovation to occur, however, a climate must be fostered in which the team feels safe enough to experiment with unpopular ideas, unusual approaches, and potentially risky courses of action.
Leaders need to come to terms with the paradox of needing to take smart risks to mitigate the dangers of disruption. They also need to openly show empathy for the anxiety that can naturally arise for teams as they attempt to rapidly innovate novel and often uncertain solutions to crisis situations. Team members should be assured that their willingness to entertain and take smart risks will be supported and even championed, even if the outcome is adverse.
4. Use the insights learned from navigating disruption to improve your organization.
It’s critical that your company not fall into the trap of thinking that navigating disruption has little to do with your everyday business operations. It’s a mistake to believe that after disruption resolves that things can (or should) go back to normal. Disruption is a crucial opportunity for applying key learnings not only to scenario planning but also to everyday business operations, as well as organizational culture.
Ideally, any significant disruption should not result in a return to “business as usual” but rather to a “new normal” in which the business is not only more resistant to disruption but also more agile, adaptive, innovative, and ultimately competitive in times of calm and crisis alike.
If you’re seeking short- or longer-term solutions for surmounting disruption, Pivot can help. Contact us today to learn more about how we can help you successfully navigate the current crisis and fortify your business for the future.
Transparency in Supply Chain Management: Challenges and Benefits
Supply chain transparency has become increasingly sought after in today’s market. In some cases, companies have no options but to comply as they’re subject to growing pressure from governments, NGOs, consumers, and other stakeholders to divulge more information about their supply chains.
At Pivot International, transparency is core to our business model, central to our brand identity, and paramount to our relationship with our partners. Because we operate our own facilities and have invested heavily in digitization, we can provide our partners with exceptional levels of insight into every phase of the product development process, as well as the supply chain. And because Pivot has comprehensive front-end processes in place for understanding our partners’ needs, we stand solidly behind our proposals and cost quotes.
Supply chain transparency is a hot topic in the industry. To better understand why, let’s explore the meaning of the term transparency, as well as some of the significant challenges and benefits associated with it.
Understanding Transparency
Before we dive into the issues and advantages of supply chain transparency, let’s take a brief look at how the term is currently being used. Transparency refers to how deeply companies can see into and account for the interconnected links in their supply chain, as well as how freely they share this information both internally and externally.
Reasons for achieving supply chain transparency vary across the board, with one reason being that consumers are increasingly demanding it. A consumer, for instance, may seek transparency to ensure that the products they purchase are environmentally conscious or created using fair labor practices. Another reason is that supply chain transparency can help companies reduce their risk of incurring reputational damage.
Beyond reputational risk, a lack of supply chain transparency can pose operational problems that can stop businesses in their tracks. Shipments missing origin documents, for example, can be held up or turned away at ports. The results of this costly disruption can ripple through the entire supply chain.
The Challenge of Transparency
Traditionally, supply chains have not been designed to be transparent. As a result, transparency can pose the following challenges:
- Organizations sometimes fear that disclosing too much information would negatively impact their competitive advantage or expose them to criticism
- Detailed information about upstream supply chain partners or practices may not be available. If it is available, it may be unreliable or misleading
- The investment in transparency doesn’t always satisfy near-term ROI requirements
Despite these challenges, there are measures companies can take to assess the business case for transparency and rate how their organizations are performing.
4 Benefits of Transparency
For companies that are unsure of whether achieving greater supply chain transparency is worth the investment, here are a few advantages to consider:
- Transparency helps companies to identify and act on opportunities to improve supply chain efficiency and performance
- Transparency supports compliance in the face of a changing and increasingly stringent regulatory environment
- Transparency can enhance a company’s reputation as a trustworthy organization and therefore attract more customers
- Transparency can be a bankable draw for employees that are eager to work for responsible, forward-thinking companies
While complete transparency may not make sense for every company and can be years in the making for those that choose to pursue this goal, the organizational and operational rewards can be significant. If you’re looking to work with a manufacturing partner that offers high levels of transparency throughout the product development cycle, Pivot can deliver. Contact us today to learn more about how our advanced supply chain expertise can help you profitably realize your product’s potential and position your company as an industry leader.
Digitization: The Future of Supply Chain Logistics
The future of supply chain logistics lies in digitization. With major consulting firms like McKinsey predicting that aggressive supply chain digitization can increase annual revenue growth by 2.3%, digitization is crucial to companies’ ability to compete in a rapidly evolving, omnichannel business environment.
The business case for digitization.
Digitization can be understood to refer to the use of digital technologies like robotics and blockchain. More broadly, digitization can be understood as the process of optimizing logistics by leveraging a combination of leading-edge mechanical/physical technologies and analytical/informational technologies.
Digitization manages and “opportunizes” complexity, therefore improving the agility and resiliency of supply chain logistics. This strategy enhances efficiency, accuracy, and real-time responsiveness, promoting greater customer satisfaction and increasing revenue and market valuation.
Top-ranked mechanical and analytical digitization technologies.
Based on a survey conducted with 350 supply chain and operations professionals across the globe, respondents ranked physical and informational digitization technologies in terms of perceived importance in the coming 3 years.
Among mechanical digitization technologies, 63 percent of respondents named robotics as chief among the 5 technologies they were invited to rank. Autonomous vehicles ranked next, followed by 3D printing, augmented reality, and the use of drones.
Though robots have been in use in the manufacturing industry for decades, the software interface afforded through the Internet of Things (IoT) has opened up vastly new applications for robotics, especially in relation to artificial intelligence (AI). For example, companies are in the beginning stages of robotized “piece picking” in distribution, and almost all advanced manufacturing facilities are employing AI to deploy existing robotics with greater efficiency.
Among analytical digitization technologies, 73 percent of respondents named Big Data as first among the 5 technologies they were invited to rank. Cloud-based applications ranked next, followed by the IoT, blockchain platforms, and sharing-economy platforms.
Digitizing the supply chain requires an integrative strategy.
It’s not enough for companies to take a piecemeal approach to digitization. Rather, digitization involves a fundamental redesign of supply chain strategy — a task that can be exceptionally challenging to most businesses. A common error is to jump prematurely to acquiring digital technologies before making the necessary operational changes to support them.
To tap the power of a digitized supply chain, companies must also revamp their operations. Key stakeholders must reconceive the future supply chain, taking stock of the status quo and discovering ways to extract greater value while engineering strategies for doing so. Further, manages must make decisive improvements as well as incremental changes that occur over time. Operations and technology must be well integrated and the organizational structure must be sufficiently agile to promote innovation and ongoing improvement. Last, strategies for digitizing must include compressed time frames in order to scale with rapidly changing digital solutions.
Product design, development, and manufacturing firm, Pivot International, has taken an integrative strategy to supply chain digitization. This strategy has resulted in compounded annual revenue growth of more than 100% over the last 5 years and made Pivot an industry leader. For businesses seeking a single-source partner, Pivot ranks first in customer satisfaction, and for more than 46 years has been the driving force behind some of the most innovative products on the market. If you’d like to learn more about how Pivot can help take your product or supply chain to the next level, reach out today for a free, no-obligation consultation.
In Wake of U.S.-China Trade War, Companies Scramble to Find Alternative Suppliers
With the threat of tariffs looming at 25 percent, U.S. consumer-goods companies with China-based manufacturing facilities are scrambling to find alternative suppliers in other countries. Some experts liken the situation to a game of musical chairs where companies are rushing to find a manufacturer outside of China before the 25 percent tariff hike goes into effect in 2019.
Majority of U.S. companies say tariffs have hurt their business.
More than 70 percent of U.S. companies operating in areas of China, where consumer product manufacturing is heaviest, are considering moving production to countries not caught in the crossfires of the U.S.-China trade war. That’s according to a survey of 219 companies by the American Chamber of Commerce in South China, a U.S. Chamber of Commerce-affiliated nonprofit that represents 2,300 American businesses in China.
Ten percent of these companies estimated annual losses exceeding $250 million, and 80 percent said tariffs have hurt their business.
The survey was conducted in the weeks shortly after the U.S. imposed a 10 percent tariff on $200 billion worth of Chinese goods. Beijing retaliated by imposing tariffs on $60 billion of U.S. goods. The 10 percent tariff on Chinese imports began on September 24, and on January 1 next year, tariffs will reach 25 percent.
Current trade climate poses multiple threats to U.S. companies.
The survey makes clear that the escalating trade war between the U.S. and China is jeopardizing profit margins and U.S. companies’ ability to compete, as vendors are forced to absorb cost increases or raise consumer prices.
In an attempt to stem the tide, U.S. companies are mobilizing to reconfigure their supply chains and relocate production.
Attempts to bypass tariffs via appeal pose difficulties.
Thousands of companies have tried to bypass the tariffs by appealing to the U.S. Customs and Border Protection to reclassify their products, but this process is can take several years.
What’s more, even U.S. companies that have deliberately planned ahead to avoid logistical pain points by securing capacity for the peak season are encountering disruptions that many suppliers didn’t anticipate.
For these reasons, U.S. companies’ best option to avoid or mitigate losses is to either resource materials or relocate production to avoid tariffs.
Competitive solutions lie in reconfiguring supply chains.
While successful companies always keep a close eye on supply chains to ensure their efficiency and competitive edge, very few have engaged in contingency planning to offset their vulnerability to tariffs.
The question many companies now need to ask themselves is how to turn their supply chain from a necessary evil to a competitive advantage by relocating production.
At Pivot International, we’re helping U.S. companies successfully answer this question. As a single-source designing, engineering, and manufacturing company with facilities in Taiwan and Manila, we’ve already helped many large and mid-size companies find competitive solutions to the problems posed by the current trade climate. If your business is faced with the production liabilities of looming tariffs and is seeking a viable alternative to your current supplier, contact us today.
How the Amazon Effect and Last Mile Logistics Are Changing Product Delivery Models
In this piece, we’ll be talking about a concept called the “last mile,” which many manufacturers are probably familiar with. But for those who might not know the term, it simply refers to the delivery of products from a transportation hub to their final destination. For the path we’ll be talking about today, the final destination is a personal residence and not a business or retailer.
Obviously, the goal of any logistics one uses for the last mile is delivery to the final destination as quickly as possible. And in an era of e-commerce retailers – specifically Amazon – quick purchasing means the delivery must be even quicker, largely because of increased customer expectations. The old 6-to-8-week delivery model is simply inconceivable in the age of point-and-click purchasing.
So how do companies change and improve their logistics to get their products to customers as quickly as possible? Here are some trends and innovations that some businesses use.
Drones
The use of electronic delivery drones is doubtless one of the biggest innovations in last mile logistics. Drones provide an obvious advantage over other delivery methods simply because there are capable of navigating, or bypassing, difficult terrain, fly over obstacles and move faster than most vehicular or even airborne delivery methods.
There’s also an environmental advantage because drones are not as impactful to the world as trucks or airplanes using fossil fuels and creating harmful emissions.
Advanced analytics
There have been many new developments in software over the last few years that have had a major effect on last-mile delivery, allowing established companies like UPS and FedEx to improve their services. Much of this new technology revolves around priority delivery customization services like on-demand or same-day delivery.
But there are also new programs that create algorithms for delivery routing, and a concept called task-courier matching, which determines the best carrier for the delivery of a product. There’s also an extension of this concept that allows the customer to search for the couriers and companies that work best for them.
Improved communications
There are new tools that allow merchants and providers to keep customers updated on their order status. With these new tools, merchants are able to alert customers about more than just when their order has been shipped, and the delivery providers can give information about the estimated delivery date and even the time, along with emailed or texted confirmation of delivery or notifications about a required signature.
Forecasting
Just as retailers can use advanced analytics to anticipate demand and determine the preferred storage levels at each of their warehousing locations, delivery services can use those same analytics to anticipate the demand for their couriers.
Using a past date from the same period of previous years, a delivery service can predict potential order volume and plan out the number of drivers they’ll need, the optimal schedule to have the drivers on and other workflow needs, and they can even partner with other companies to prepare for spikes or valleys in demand.
Whatever the delivery service needs of your company are, they aren’t going to be useful unless you have finished, reliable products to sell. Click here to find out how Pivot International can help you keep up in the modern marketplace.
How Amazon is Changing Logistics
If you are a fan of Amazon, you likely know that one of the keys to their success is their highly efficient supply chain. Amazon is a master of supply chain management. Through exceptional supply chain management, they have been able to reduce costs and get products to their customers faster than ever.
One way Amazon has managed to beat out the competition again and again is by delivering products to customers so quickly that their competitors just can’t keep up. Amazon has effectively revolutionized logistics and here’s how they did it.
Automation
In 2012, Amazon acquired Kiva Systems, a provider of robotic warehouse solutions. Amazon rebranded Kiva to Amazon Robotics and has continued manufacturing warehouse robots for use in their warehouses. As of January 2017, Amazon had 45,000 warehouse robots at work in their warehouses. The robots are currently used to bring goods to people for picking orders but there are plans to make robots that can pick their own orders, reducing the need for human pickers.
New Technologies
Amazon is developing a drone-based delivery system, indicating that Amazon is willing to do whatever it can to take advantage of trending manufacturing strategies in order to have the best supply chain in the market. As part of a publicity stunt in 2013, Jeff Bezos, Amazon’s CEO announced that drones would deliver items under five pounds to locations within ten miles of Amazon’s distribution centers within 30 minutes. In November 2017, Amazon confirmed they are building a drone-based delivery system with objectives similar to what they announced in 2013.
Options
One of the many things customers love about Amazon are the multiple delivery options available. Common delivery options include Prime customers, one-day, first class, and free super saver. Amazon continues to make fast delivery a priority and this is a main reason for their success.
Warehouse Placement
Part of Amazon’s success with its logistics is due to its strategic placement of its own warehouses. They are moving closer and closer to major urban areas so they can meet increasingly fast delivery promises. The warehouses are also grouped into five classes to make meeting product demand easier. Classes include library prime for books and magazines, pallet prime for full-case high demand products, case flow prime for less-than-case high demand products, reverse storage for irregularly shaped and low demand products, and random storage for moderate demand smaller items.
Outsourcing
Amazon relies heavily on outsourcing its inventory management, especially for products not purchased regularly. Almost 82% of Amazon’s sales are from third-party sellers. Although inventory management is outsourced, Amazon relies too heavily on its logistics to rely on third-party delivery methods so they use their own delivery vehicles for their same-day or one-hour delivery options.
If you’d like to take a page out of Amazon’s book and try outsourcing a step in your supply chain, Pivot International can help. Our global supply chain management services can help manage your supply global chain providing resource planning, purchasing services, Quality audits, source inspections and overall management of global suppliers to help you manage your supply chain operations as efficiently as possible. To learn more about how we can help you manage an efficient supply chain, contact us today.
Understanding How the Global Supply Chain Can Affect Your Product’s Success
As commerce and trade have become truly global over the past half-decade or so, keeping your supply chain contained within the country where you’re located has become less and less common.
Since it’s become easier to source products more economically from other countries, more companies – small businesses, mid-size companies, and mega corporations – have embraced global sourcing.
While this can result in cost savings and greater choice of materials, it also requires more intensive logistical management – and this is often where a company can run into limitations.
However, by understanding global supply chain management and outsourcing where necessary, you can help increase your product’s chances of success.
Coordinating all the moving parts of the supply chain becomes more challenging when parts of the supply chain are handled internationally. Outsourcing supply chain management to a firm experienced with dealing in other countries can be a huge help.
The success of your product depends on the quality, demand, and price of your product. Here’s how a global supply chain affects all three.
Product Quality
Product quality can be at risk when you have a global supply chain because you can’t always monitor what’s happening in other countries. Here’s where outsourcing your supply chain management can be a huge benefit. Pivot International provides full support at all stages of the supply chain including product manufacturing through our Manufacturing Resource Planning system so you’re guaranteed a resulting product that’s top quality.
Product Demand
A global supply chain allows you to meet product demand in emerging markets. Once you’ve done the market research and know where the highest demand is for your product, sourcing materials globally can help you deliver it efficiently and economically. Partnering with a foreign vendor, or sometimes multiple foreign vendors, will help make selling your product in a new country much easier.
Product Price
When you source materials globally, you have the opportunity to save costs without jeopardizing quality – as long as you have good quality control mechanisms in place. By saving money on materials and at other stages in the supply chain, you have more flexibility with what you choose for an end market price.
Whether you’re looking to go global with your entire supply chain or just specific parts like materials sourcing and product distribution, carefully consider how this will impact your product’s success. A global manufacturing and distribution firm can help you effectively tap into international markets. Pivot International offers global manufacturing, supply chain management, and market research services to help you set up and manage your global supply chain. To learn more, contact us today.
