The complex links in the nation’s supply chain feature a broad mix of old and new processes, and potentially an operational threat from Washington.
Russell Goodman serves as editor-in-chief of SupplyChainBrain, which is billed as the world’s most comprehensive supply chain management information resource. He described how President Trump’s campaign promises of trade barriers and tariffs upon imported goods could seriously disrupt the modern system of on-time delivery for manufacturing.
According to Goodman, on-shore manufacturing that produces a wide range of products, including automobiles, has evolved to depend upon a global supply chain. In addition to disrupting this flow of assembly components, trade barriers will undoubtedly increase the price of manufactured goods, if domestic suppliers can manage to produce the needed parts and ship within the time frames needed.
“The public is not asking the right questions about the consequences of trade barriers and the media doesn’t understand the issues,” said Goodman. “It’s true we have experienced some job losses from outsourcing, but global markets are a reality now and the global system of trade is huge and part of the modern economy.”
Human resource challenges
Another challenge facing the modern supply chain is the acquisition of human talent. According to Goodwin, the vast majority of career supply chain employees are baby boomers, thereby making retirement close if not imminent. Unfortunately, the industry as a whole has not been able to attract talented and trained replacements for these veteran employees, setting the stage for a human resource crisis.
He noted that many colleges, such as Penn State, do offer effective supply chain programs and these students will endure a demanding curriculum, leading to quality jobs with good salaries. The education will expose the student to sophisticated technology that is evolving, and open the door to a satisfying career with great advancement potential.
“We haven’t been successful in exposing our youth to the great possibilities with supply chain careers,” said Goodman. “We have faltered with this, and thereby created a real problem with the baby boomer retirements on the doorstep.”
Fulfillment of e-commerce led by the Amazons of the world is also rapidly evolving, and Goodman is quick to point out that retailers who fail to deal with evolving customer demands will undoubtedly be left in the backwash of quick “drone” deliveries. Retail customers are also demanding delivery with low costs, requiring vendors across the country to operate regional fulfillment centers and outsource delivery to progressive third-party logistics providers.
“When goods are missing or damaged during delivery it is normal for the customer to blame the retailer,” said Goodman. “This then opens up questions about who will pay for the claim, including within a normal return situation.”
Delicious supply chain
A relatively new NEPA-based supply chain is helping culinary lovers enjoy specialty food items that exist beyond the shelves of the region’s grocery stores. The firm, known as igourmet.com, is based near Wilkes-Barre and was founded in 1997 by CEO Spencer Chesman with the goal of becoming America’s leading online gourmet food and gift retailer.
The company now operates both retail and wholesale divisions, and was named a “Best of the Web” selection by Forbes Magazine and Consumer Reports. At any given time igourmet features 6,000 items listed for sale on its web site, with 90 percent of its business from e-commerce.
Chesman, a trained mechanical engineer who was working within Wall Street IT, developed a simple web site for igourmet and worked the process from his garage. The effort is now global in outreach, even though international sales of food often have shipment restrictions that must be considered.
Purchasing for igourmet’s inventory involves a mix of direct buying from farms and manufacturers, importer involvement if necessary, and association with global trade agencies for exports into the United States. The system utilizes demand forecasts that recognizes how many items are used for seasonal gifts, including specialty goods for the holiday season.
“It’s therefore vital that every purchase order we issue has a firm delivery date,” said Chesman. “We allow customers to pre-order, which has grown to more than 20 percent of our business.”
Research from food sampling gatherings, trade shows, and investigation into new supplier categories are all parts of Chesman’s supply system. In the event an inventory doesn’t adequately sell the company will include it within a variety of seasonal gift baskets.
Chesman’s supply chain confronts ongoing challenges. Small and specialized buys are the norm, returns or shipments with damage can’t be shipped back, and packaging to keep food items cold during shipment is increasingly expensive. Certain shipments, such as to rural areas, may have a surcharge.
The supply chain future, according to Chesman, may include punitive tariffs from Washington on items such as cheese from France. This situation would disrupt igourmet’s business and increase merchandise prices.
“Fortunately, domestic craft production is strong with small batch production, and this would be an asset if trade tariffs are instituted,” said Chesman.
Discussions of modern supply chains must include recognition of the nation’s small business who operate vast but manual inventory processes, such as Vac-Way in Moscow. The company, in business for more than 50 years, sells parts for a huge variety of small appliances as well as chain saws, vacuum cleaners, and outdoor power equipment, plus the units they are used within.
Dave Partyka, co-owner, explained that thousands of parts are stocked in every nook and cranny within his building without computer management. Numbers for these components keep changing, but Partyka must maintain some sense of order and dead stock can become a real problem.
The life of a retail item plays a major role in the demand for replacement parts. Commercial chain saws may have functional lives of 20 to 30 years, and older parts that are stocked will inevitably sell.
“I can never can bring myself to throw anything out,” said Partyka. “Inevitably someone will walk in be looking for that part.”
When a manufacturer such as Husqvarna introduces a new retail unit, Partyka initially offers the applicable filters used for the unit’s maintenance. He then relies on a demand-based process where, as customer request replacement parts, he orders as needed but also stocks an additional component for future demand without forecasting.
New inventory for entire units is completed with seasonal buys, with manufacturers such as Husqvarna offering floor planning on whole goods for a full year without interest payments. However, Partyka has one huge challenge that, even in the modern age, controls his business cycles.
“We’re always at the mercy of weather to a large degree, and surprises do appear,” said Partyka. “We went for two years without any real snows, but then this year’s huge blizzard occurred out of nowhere and demand for snow blowers and repair parts suddenly exploded with no warning.”