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THINK - November 21 2008

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A TODARO EMAIL BROADCAST TO MEMBERS, NOVEMBER 21, 2008

I have the sinking feeling many of you did not open and VERY carefully go over the amazing slides in the pitch I sent you yesterday by Paula Rosenblum from our Economic Forum Wednesday entitled “Economic Turmoil Breeds Darwinian Retailing”. It is amazing.

 

There are many graphs in it loaded to bursting with line items any one of which is something I didn’t even know was important. Take this graph for example - “Top 3 Business Challenges that Create Interest in Using Near Realtime Business Intelligence  in your Company”. You ought to leap out of your chair when you see the truth about what is going on at retail.

 

Maybe its just me, but each and every single slide on this powerful presentation tells me something about supply chains selling as teams to retailers who aren’t buying as them AND the impact of this break down.

 

Realizing, for example, that the reason many factories who are working with retailers can NOT pick/pack/ship to replenish daily is because they do not have the systems to get and break down the raw sales data is an epiphany to me. Of course, back when AAPN member Kellwood, who was a pioneer in VICS driven replenishment, had 72 factories in the US, they controlled their retail relationships with sophisticated computers. I was in IBM during this time. I saw this. But when they closed these factories and began to source from what grew at one point to 72 countries, this dynamic changed.

 

Today when factories are the ones being challenged (ironically on lowest cost ‘fob’ metrics most of the time) to better their services, like replenishment and distribution, not only do they not have the systems to replenish, but investing in them, which would  raise their costs, is the last thing the very retailer who needs the responsiveness will  recognize the value of, and accept higher costs (which are not ‘costs’ but value). So its a lose/lose proposition when it ought to be the other way around.

 

It’s not easy. As one of Paula’s slides says, “is anyone too big to fail?”. Well, if you know anything about GM, the answer is no. but the key is, why? Why does anyone who fails fail? What happened? There is only one story here. Everyone does it differently. Stores are full of merchandise that comes from hundreds of supply chains. That must mean there are hundreds of supply chains. There is no perfect one but there are hundreds of variations on the theme – and two sides to every one of them – the factory and the customer.

 

So, the freakin question you ought to be asking is why. Why did this company fail? What happened? Those who do not learn from history are destined to repeat it. And if we do nothing else good here at AAPN, we add a sentence, a paragraph, a page to the chapters of the ongoing history of this industry’s supply chain each and every single day.

 

Well, anyway, have a good weekend. I hope your team, with ONE exception, wins. Keep it simple. Right here on my desk staring at me was the theme of IBM during my glorious career there. It just says THINK. So, THINK........the answer is out there, unless you’re an AAPN member, then its in here.

 

Mike

 

 

 

Economic Turmoil Breeds Darwinian Retailing

How Retailers Will Overcome Credit Crunches, Sales Shortfalls, and the Media, and What it Means for You

 

Retail Winners

....... Winning is more than just successful cost-cutting, Sometimes…it’s just seizing the day – “It’s Wal-Mart Time”

 

New Overarching Business Challenges…

•Lack of ready capital

  –Re-valued asset-based lines of credit

  –Until recently, dearth of DIP money

  –Expensive, unreachable credit

•Consumer confidence at an all-time low

  –Gas prices down more than 40% -so what?

  –Holiday spending forecast as “light”

  –Who will be the next unemployed worker?

•A potentially AWFUL holiday season

 

Who is At Risk?

•Mid-priced department stores

•Jewelry chains

•Apparel specialty stores that are not “hot”

•Retailers that have outgrown the size of their target market

•Retailers without a compelling value story

•Will we see the end of “all China all the time”?

 

Hard to Predict Internal Obstacles

•Necessity is the mother of invention

–Can there be more than 1 JC Penney?

•Can companies go beyond “this is how we’ve always done it?”

•Can retailers wade through their tortured technology infrastructures?

•Is anyone “too big to fail”?

 

Information Sharing with Trading Partners

17% Do not share

8%   Phone/Fax

21% EDI

54% A mixture of high/low tech

 

A Glimpse Ahead

• This or the next administration will do something to assuage consumer fears

• It will not be a bright Christmas (gift card spend reduction may be the only bright spot)

• Some of you will be left holding bad, or aging receivables

• We CANNOT economically stage smaller shipments from across the world

  – More manufacturing in this hemisphere

  – Tax incentives for domestic production

• Ultimately, leadership in going Green

  – Bail-out money contingent on those initiatives

  – Cost-savings

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