Smooth Operating

The supply chain is a critical and influential component of your overall business strategy -- typically impacting 75 percent of operating results. Consumer goods (CG) companies must deliver the right product on time to increasingly demanding retailers and consumers around the globe. This is no easy feat in a world where trade agreements, security measures, legislative requirements and retailer mandates are constantly in flux.

Businesses must navigate through these complexities in order to stay ahead. And to do so requires the right logistics partner that can help make your company more efficient and, ultimately, more profitable by way of enhanced transportation and freight services, logistics and distribution, and international trade services. Here, the the Yankee Group helps Consumer Goods Technology explore supply chain services trends and issues past, present and future.

Making RFID Manageable
It is somewhat safe to say that the emergence of RFID has created its fair share of upheaval within the CG, retail, and solutions and service provider communities. The ability to know exactly where an order is in the supply chain from origin to store shelf is critical.

With continued pressure from large retailers, like Wal-Mart, Target and Albertson's, manufacturers are continuously in search of new ways to reduce costs and improve margins, all the while trying to determine the right compliance solution that uses the right RFID software, hardware and services.

Many CG companies will look to outside firms to minimize the risk and initial cost of complying with retail RFID demands. As the information infrastructure becomes more mature, the business case for the manufacturer will become more achievable and realistic.

Expect consumer goods companies to put an increasing emphasis on finding the right shipping company to assess their unique business needs and provide ways to not only transport goods, but also to handle information about them. This includes RFID data. Supply chain services partners will need to step up support and help manufacturers meet compliance requirements by configuring products to meet the varying customer demands with retail-ready programs.

Hours of Service
Not quite as popular as RFID, but just as important within the CG industry are regulations facing the motor carrier side of supply chain services. One of the larger developments impacting the supply chain services and transportation industries was the new Hours of Service (HOS) regulations that kicked off on January 4, 2004. Both manufacturers and retailers saw increasing freight rates looming as the Department of Transportation redefined the off-duty time for truck drivers.
"In a nutshell, idle time spent waiting for shipments to be loaded or unloaded would now count as on-duty time," says Mike Dominy for the Yankee Group. The changes meant that carriers have less available driver hours to spread fixed costs over, which will translate into higher costs per mile.

According to Dominy, the U.S. Court of Appeals for the Washington D.C. Circuit threw out the new HOS rules during the second quarter of 2004. However, Dominy predicts that the CG community should expect regulators and legislators to revisit the issue of HOS in the second half of 2005.

International Issues
Aside from RFID and HOS, industry analysts predict that off-shore component sourcing will gain traction in the CG space in 2005. Manufacturers are depending more and more on components that are sourced and manufactured off-shore in order to keep their own costs competitive. Similar to issues that retailers face, learning to manage increasing off-shore sourcing and the resulting inbound flow of goods is a huge challenge for the CG market.

Supply chain services companies will look to provide CG companies with critical components to enable successful international commerce, bridging the gaps between time zones, cultures, distance and language to help streamline the supply chain.

Tackling Customs
Somewhat related to off-shore sourcing is the issue of customs clearance. The advent of more stringent security regulations, increasing documentation requirements and advanced notification about goods before they arrive at international destinations means that customs clearance has become much more complex and unpredictable than before.

Looking to 2005 and beyond, CG companies should expect supply chain services companies to provide greater visibility into the customs clearance process through vehicles such as new tools for better status visibility of shipments and alert systems to monitor progress of shipments, all in an effort to ensure a smooth, synchronized supply chain.