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No Strike Necessary: Just the Threat of Labor Stoppage at Ports Causes Supply Chain Headaches for Retailers

Posted By Administration, Thursday, July 10, 2014
Updated: Tuesday, July 8, 2014

by Leela Rao, GT Nexus


On July 1st, the fate of many retailers remained in the balance, pending labor negotiations affecting the 20,000 workers at West Coast ports. Remember in 2002, when a breakdown in negotiations resulted in a 10 day lock-out at the West Coast ports? That stoppage was estimated to "have cost the U.S. economy $1 billion a day, and disrupted supply chains for six months" according to Jonathon Gold, Vice President of NRF's Supply Chain and Customs Policy. Reuters published a great article on this very topic "Retailers nervous as West Coast port labor talks running out of time" and the impact it would have if another strike was to occur. The National Retail Federation estimates another 10-day stoppage would result in a loss of 169,000 jobs and cost the U.S. economy $2.1 billion dollars a day. Not only would retailers have to face out-of-stock during crucial summer inventory assortments, but they would also lose out on back to school sales where major retailers like Target and Wal-Mart will account for a large portion of their annual revenues.1

Forced to Sacrifice the Bottom Line

Most retailers took measures in the past few months to prepare for any disruptions due to the strike. While this eased some of the strain, it may have backfired. Rerouting measures have actually created congestion problems at non-West Coast union ports like Vancouver, Mexico, Gulf and East Coast due to their lack of capacity to easily handle the West Coast volume. LA and Long Beach ports are #1 and #2 in terms of capacity. In the retailer's race to continue product delivery, it only takes the threat of a strike to create a bottleneck due to alternate ports' inability to handle volume. Contingency plans involving increased air ship caused retailers to sacrifice profits in order to make goods available. Drewry's Air Freight index of spot rates in April was $3.38 per kilogram, its highest level so far in 2014. Brandon Fried, Executive Director of the Airforwarders Association says, "The amount of time and the opportunity costs associated with maritime shipping to other ports or locals can almost equal out to the extra money it takes to transport cargo via air."2

Solution Needed to a Bigger Problem

Retailers are finding that options to reroute through other ports or air ship are extremely expensive. Many seek answers to avoid disruption without sacrificing profit. But the risk of a port strike is perpetual. How are retailers expected to make effective decisions in an unpredictable environment? Supply chain experts suggest the answer is not controlling the environment, but being able to react to circumstances quickly and having an agile supply chain that allows them to make adjustments seamlessly. Real time visibility in a networked supply chain can allow retailers to make quick real time inventory decisions and manipulations that are instantly communicated across the supply chain. In other examples, when disaster does strike,3 retailers with networked supply chains are the ones that are able to move forward without skipping a beat or sacrifice their bottom line.

Planning for a port strike isn't a one-time challenge. And there's no quick fix answer. The solution lies in the way retailers connect their networks for trading partners. Traditional solutions with hard-wired connections are built more for the inner structure of the business – inside the four walls. The supply chains of the future will be built as networks, similar to social media models, where all parties are connected and everyone in the network has visibility to the data, orders and inventory that they need. This opens the door to a more resilient, agile and fluid supply chain built to handle port strikes and other supply chain hiccups that occur each week.

[1]  http://www.reuters.com/article/2014/06/27/us-usa-ports-labor-idUSKBN0F22FG20140627
[2]  http://www.oecgroup.ca/en/industry_news.php 13 June 2014
[3]  http://mktforms.gtnexus.com/WPWhenDisasterStrikes_Reg.html


Leela Rao is Retail Marketing Manager for GT Nexus. She has more than 10 years of experience working with fashion brands/labels including Levi Strauss & Co., Sephora, Estee Lauder, and L'Oreal Companies focusing on global product development, international channel execution and luxury products. Leela helped integrate Sephora's loyalty program, Beauty Insider, into Sephora in JCPenney stores. She later joined Levi Strauss and Co. where she partnered with wholesale and retail partners such as Dillard's, Macy's, and Kohl's to deliver heritage programs to Levi's enthusiasts. She has also developed marketing strategies for new market entrants Yellow Brick Coffee and Amyris. Leela received an MBA in Marketing and Finance from New York University's Stern School of Business.

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Tags:  Customs  Inventory Management  Labor Stoppage  Ports 

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Exploring the Benefits of the EU Ecolabel Licensing Program & New Program Eligibility Criteria for Textile and Apparel Articles

Posted By Administration, Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014

by Melissa A. Miller Proctor, Esq., Sandler, Travis and Rosenberg, P.A.


A decision was recently published by the European Commission in which new criteria were implemented for textile and apparel products that are eligible for the European Union's Ecolabel program. Qualifying textile and apparel articles are those that were subject to environmentally friendly production practices in which the use of chemicals that are hazardous (or potentially hazardous) to public health and the environment were restricted or omitted altogether. Under the newly established criteria, textile and apparel products that may be approved for an Ecolabel license include the following:

  • Clothing and accessories of at least 80% percent by weight of textile fibers
  • Products for interior use of at least 80% by weight of textile fibers
  • Fibers, yarns, fabrics and knitted panels used in clothing, accessories or interior textiles<
  • Trim items that have been incorporated into the product
  • Woven and non-woven fabrics used for cleaning and drying of kitchenware

Textile products that will be excluded from the EU's Ecolabel program include: those intended for a single, disposal use; floor coverings; fabrics making up outdoor structures; apparel, fabrics and fibers that contain electric devices, form part of electric circuitry, or are designed to sense ambient conditional changes.

By way of background, the voluntary EU Ecolabel program is designed to assist companies in marketing products that are confirmed to have a reduced environmental impact from the raw material stage through production, packaging, distribution and ultimate disposal of the goods by the consumer. Approved goods are "licensed" and allowed to bear the EU Ecolabel logo, which distinguishes products in the marketplace that are good for the environment.

Products or services marketed in the European Union, Iceland, Liechtenstein and Norway are eligible for the EU Ecolabel program. Companies that may apply include manufacturers, importers, service providers, distributors and retailers; however, only retailers that sell products under their own brand names are eligible. Applications are reviewed and considered by the national authority (i.e., "Competent Body") of the country in which the products originate (if within the European Economic Area or Switzerland) or the country where the products will be marketed (if the products' country of origin is outside the EEA or Switzerland). Applications for the EU Ecolabel license are submitted electronically via an online tool which can be found at https://webgate/ec/europea/.eu/ecat_admin with a hardcopy version of the application package submitted directly to the Competent Body. The application will require companies to pay an application fee and demonstrate their products' compliance with specified product group criteria through the submission of supporting documentation (e.g., product data sheets, laboratory test results, etc.). It should be noted that the Competent Body may request a visit or audit of the applicant's manufacturing facilities as part of the application review process.

If the application is approved, the Competent Body will enter into a written contract with the applicant authorizing its use of the formal EU Ecolabel logo on qualified products and marketing materials. In addition, the company must register its products in the online E-Catalogue, which is the centralized repository for all existing Ecolabel licenses and qualifying products. During the period in which the Ecolabel license is valid, the Competent Body may periodically require the company to perform additional laboratory testing of the goods to ensure their continued compliance with the applicable product criteria as well as schedule inspections of manufacturing facilities.

With respect to textile and apparel items in particular, for which new criteria have just been rolled out, it should be noted that Ecolabel applications submitted on or before August 13, 2014 may continue to rely on the previous criteria; however, any Ecolabel license approved and issued for such products (using the former criteria) will be valid only until June 13, 2015.

For companies marketing their products in Europe, the EU Ecolabel may be a wise investment as the program's logo is recognized throughout Europe, quickly informs consumers about the environmental excellence of the products they are considering purchasing, and demonstrates the license holders' commitment to corporate social responsibility initiatives.


Melissa Miller Proctor is a Partner with Sandler, Travis and Rosenberg, P.A., resident in the firm's Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at mproctor@strtrade.com.

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Tags:  Environment  EU Ecolabel Program 

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In-Transit Cargo Crime Impacting The Retail Supply Chain

Posted By Administration, Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014

by John Tabor, All States Locate


A recent survey of retail security directors showed that almost half of those polled had been the victims of a supply-chain disruption directly related to cargo theft in the past year. This is a significant increase from just five years ago.

Envision the following scenario. You are at home around 8:15 at night watching television with your wife or kids when the phone rings. The caller is one of your regional LP managers in the Southeast. He tells you that you just had a tractor load of high-end apparel worth $2,000,000 stolen in Florida while parked at a truck stop. The driver had gone in to use the facilities, and when he came out ten minutes later his tractor and trailer were gone. While no one ever wants to receive a call like this, you can be prepared for it.

In order to fully understand the issue of cargo theft, you need to know why it exists, who is perpetrating it, how you can reduce your risk, and ultimately how to react to a loss. Most of those reading this have had some level of store- or logistics-security exposure. Good loss prevention programs involve some form of a "layered" approach. Based on the exposure, some, if not all, of the following countermeasures may be employed—surveillance cameras, alarms, locks, lighting, EAS, safes, employee awareness training, and others. Loss prevention professionals would be remiss in their duties if they did not explore all of these attributes to secure their stores.

That said, remember that virtually 100 percent of the merchandise in retail stores is delivered by truck. In many cases the only two preventative measures put in place to secure that same merchandise in transit is a key to the tractor and a seal on the rear doors.

On any given night there are hundreds of thousands of loads of merchandise parked in unsecured locations around the country. This is a well-known fact to various criminal elements, from organized Cuban and Eastern European cargo-theft crews to local gangs like MS-13.

To read more, download the white paper here.


John Tabor is the principal of All States Locate, a supply chain security and logistics consulting firm based in the New York metropolitan area, providing risk mitigation strategies to retailers, shippers, and transportation companies as well as conducting cargo theft investigations and training seminars. Tabor has 25 years of experience in loss prevention, most recently as the senior security executive for a national transportation and warehousing company. He can be reached at (201) 294-6866 or jtabor@allstatesupplychain.com

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Tags:  Cargo Theft  Carton Shortages  Damage  Loss  Shortages 

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A New Era of Retail: e-Commerce = Brick-and-Mortar = e-Commerce

Posted By Administration, Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014

by Dwight D. Hill, The Retail Advisory LLC


The pace of change in retail continues to accelerate. While retail sales have been on the rebound, pressure continues to mount for retailers to deliver a personalized, convenient shopping experience to their customer. E-commerce is continuing to grow at a rate of 13-15% per year, a much faster pace than traditional brick-and-mortar retail, which is in the 3-5% annual range. The customer is demanding a seamless experience across the web, mobile, social and brick-and-mortar. In fact, according to Forrester Research,1  53% of all retail sales are influenced by the web, growing from 42% in 2009. Thus, all retailers need to be considering how to develop their cross-channel capabilities – and quickly!

A trend is developing among some innovative retailers that looks something like "e-commerce = brick-and-mortar = e-commerce." While brick-and-mortar retailers are clearly expanding their e-commerce and cross-channel capabilities, others are answering the call from customers to provide the best that both the e-commerce and brick-and-mortar worlds have to offer. In fact, in a clear twist of the retail business model, several pure-play e-commerce retailers are now launching physical spaces to augment their assortments and brand.

1. Warby Parker, an innovative retailer offering a high quality yet affordable alternative to higher priced eyewear available in traditional optical boutiques. Warby Parker sells men's and women's eyewear that is positioned as fashion accessories, not simply an aid only to be purchased when a prescription changes. The company began as an e-commerce retailer but now operates several brick-and-mortar boutiques as well in select cities and also reaches customers through an old converted yellow school bus that is currently crossing the country. A recent visit to one of their new stores revealed an optician on staff, the signature school bus nearby full of inventory to replenish the store, and the store was packed with customers! The company offers free shipping and returns and employs a simple uniform pricing system with frames priced from $95 to $145. For those of you who see eyewear as a fashion accessory, Warby Parker is the place. Innovation takeaway #1: by using a customer-centric strategy, the company is reinventing the traditional model of eyewear production and sales.

2. Marks & Spencer, the UK-based international and multi-channel retailer selling apparel, home and food merchandise founded in 1884, has moved quickly to provide its customer with a seamless experience. As a part of their cross-channel innovation plan, the company has opened an e-boutique concept store in Amsterdam singularly focused on their cross-channel customer. This early stage concept combines the e-commerce and brick-and-mortar experience with an inventory investment that is a fraction of a standard store; the customer experiences a small store but large (online) selection of both food and fashion, a growing trend in the Netherlands. Customers can view apparel samples and order merchandise online via a digital "clothing rack" on a large screen. Style advisors are equipped with iPads and customers can connect their smartphones to free Wi-Fi in store. Marks & Spencer is demonstrating a method to test a new market with minimal risk. Innovation takeaway #2: Marks & Spencer is using this as a strategy to enter a market initially through an e-boutique to build trial and brand awareness, likely to be followed by brick-and-mortar stores.

3. Bonobos is a pure play e-commerce men's apparel retailer that has also broken the mold by opening "guideshops" in select markets throughout the U.S. Bonobos sells most all categories of men's apparel including suits/clothing, dress shirts, ties, and casual wear including jeans, sportswear, and shorts. The stores hold no inventory – customers try on garments and find the appropriate fit, order and customize as desired and merchandise is shipped a few days later. A customer can even schedule an appointment via the website for a more personalized experience. The best part that men will like – you don't have to tote around your purchases! Innovation Takeaway #3: today's customer is growing accustomed to "latent gratification" and repurposing the store as product showroom can indeed be both a brand builder and a productive way to manage your inventory investment.

4. Cool Blue is an e-commerce electronics retailer that has also seen the benefit of using physical locations to supplement an extensive online assortment. The company started in 2000 with a limited assortment that eventually has grown to almost 200 categories. They have found, however, that their customer also wants the option to visit Cool Blue physical locations and has opened six brick-and-mortar stores in the Netherlands and Belgium. Customers are treated to high touch service that includes the opportunity to see and demonstrate products, have face-to-face dialogue about product attributes as well have repairs performed if needed. Innovation Takeaway #4: excellent customer service in both e-commerce and brick-and-mortar channels is a fundamental ingredient to your cross-channel strategy.

These retailers are just a few that are leading this "online/offline mash-up" trend, capitalizing on dynamic shifts in consumer behavior. The ideas and service models being tested and proven out will have much broader implications to existing businesses. As the pace of change continues to accelerate, what takeaways from these examples can you apply to your business?

[1]  Forrester Research: US Cross-Channel Retail


Dwight D. Hill, whose background includes leadership roles with Neiman Marcus and Deloitte LLP, is Founder and Retailer Strategist, The Retail Advisory LLC.  Dwight can be reached at dhill@theretailadvisory.com.

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Tags:  Brick-and-Mortar  Cross Channel  e-commerce  Omni-Channel 

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Vendor Compliance from a 3PL Perspective: 5 Warning Signs That It Might Be Time for a Change

Posted By Administration, Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014

by Scott Weiss, Port Logistics Group


Designing and manufacturing a great product with high demand while allowing your company to make a fair profit is challenging enough. Getting your product to market at the right place and at the right time involves many headaches and logistical challenges that can often be overwhelming so here are five signs that it might be time to make a change:

1) Too Many Chargebacks. Two weeks before Black Friday you sent out 10 truckloads of product to your biggest retail customer. Margins for the order were tight but you made it up in volume. 45 days later you receive an $80,000 chargeback from your customer for non-readable labels and late ASN's. This not only wiped out the profit from the order but gave you a loss. You can have the greatest product with the highest demand; however, if you are not able to properly follow the complex retail routing guide requirements set forth by your retail customer, you may receive a high dollar amount of chargebacks and/or invoice deductions that will directly reduce your bottom line margin and future orders from the retailer. Your inability to follow routing guides will also put you at a great disadvantage versus your competition. If both you and your competitor make a great product with equal demand, but your competitor complies better with outbound shipping requirements than chances are their product will be on the store shelves to sell before your product.

2) Running Out of Capacity. Your DC is 100,000 square feet and can hold approximately 6,500 pallet positions of product. You had a record Q1 and your biggest retailer has doubled their orders for Q2. They have also asked you to increase your safety stock by 30%. Suddenly you are placing pallets illegally in the aisles and product in containers in the yard. The customer does not care about your space problem. Operating your own DC means you have to have a facility that has enough size to handle your peak season inventory while making sure labor is managed efficiently. The saying that you have to "build the church for Easter Sunday" applies here. An optimal capacity level to operate a DC is 85%. Any level above that means that you might be storing product in a suboptimal manner which translates to inefficient productivity, hire costs, and opportunity for errors. Additionally, chances are your company wants to continue to grow so your peak inventory of today may not be the peak inventory of tomorrow and soon enough you may be out of space.

3) Too Much Space/Seasonality. You are a leading footwear company that has two peak seasons for initial orders: January/February and June/July. During these months inbound volume spikes substantially. The other 8 months are replenishment inbounds and volume decreases by 50%. In a perfect world, we would all have steady inbound and outbound volume 12 months out of the year but a footwear consumer does not care that you need to be busy 12 months out of the year. They only care that you have that size 6 in hot pink at the store to buy the night of their dance. And if it is not in stock, they will buy from your competitor. The reality is that most customers have seasonal business with inventory dropping at certain times of the year while peaking a few months out of the year plus there is that planned future growth. This is a very delicate balance that is a real challenge to manage. So the worse thing than having not enough capacity is too much capacity as you have to pay for the entire space 12 months out of the year while making sure you maintain a core labor force that understands your processes and business.

4) Speed to Market. Your factory ran late with product. The steamship line rolled your container by 1 week due to capacity constraints. The ports are renegotiating their contracts and the terminal is slow to unload the container at the arriving port. It is peak season and there is a 6 hour wait at the terminal to pick up your container. The DC is at capacity and the container sits at the warehouse door and does not get unloaded for 5 days. The global supply chain is a series of events that take place along the way. All it takes is for one of these events to be delayed and your orders are at risk. Your customer does not care about any of these events.

5) Poor Inventory Control and Visibility. Your product arrived at the DC three months ago but now the order picker cannot locate it. The truck arrived at the retailer's DC but no ASN was sent to alert the retailer of the arrival. A consumer ordered a blouse from your website 5 days ago and called your customer service number to complain she never received it. Owning or leasing your own physical DC is just one piece of the equation. You really need to be all in and being all in requires a substantial investment in people, processes, and systems.


As Vice President, Business Development, Scott Weiss works closely with apparel, footwear, and housewares manufacturers of all sizes to ensure compliance with retailer routing guide requirements.  Port Logistics Group is a market leader in gateway port logistics services, operating over 5 million square feet of warehouse space.  Services include port drayage, import deconsolidation, warehousing and distribution, retail compliance, local transportation, and store delivery in key port locations of Los Angeles/Long Beach, New York/New Jersey, Seattle, and Savannah.  Scott may be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

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Tags:  Vendor Compliance 

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The Great Retail Myth: Brick-and-Mortar Stores Are Dying

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Dwight D. Hill, The Retail Advisory LLC


A rumor based on few facts began circulating in the press several years ago. It sounded something like the following: "…retail stores are dying…" or "…the store is dead…" or even better "…e-commerce is making the store irrelevant…" These headlines certainly have garnered attention and continue to do so. Who can argue the point given the store closure announcements we are inundated with almost on a daily basis? Here are a few announcements for anyone who may have missed them1:

  • Abercrombie & Fitch: 180 stores closed by 2015
  • Barnes & Noble: approximately 33% of stores will close over the next 10 years
  • Aeropostale: 40-50 stores to close in 2014, for a total of 175 over the next few years
  • JCPenney: 33 stores to close in 2014
  • Office Depot: 22 stores to closes in the new combined entity
  • Sears Holdings: 300 stores closing
  • Staples: 225 stores closing

Thus it's hard not to be a pessimist in this environment and it's certainly troubling to see these headlines – and we're not even approaching the "dying mall" topic that is yet another story permeating media outlets. While the reasons behind each and every retailer's store closure decisions are complex and varied, they nearly all relate to dynamic shifts in consumer behavior that extend well beyond the four walls of the store.

Some of the most far-reaching trends include:

1: Store Traffic is Declining. Brick-and-mortar foot traffic during the November/December holiday season has dropped by nearly half since 2010. As a result, retailers are grappling with their store base – paying for the "if we build it they will come" real estate approach from the past several years.

2: Digital Retailing Continues to Grow Exponentially, with Growth Rates in the 13-15% Range. Consider eMarketer's April 2013 projection that online sales will grow from $225.5 billion in 2012 to $434.2 billion in 2017.2

3: Mobile Commerce: The "Store" in the Palm of Your Customer's Hand is Being Increasingly Adopted as the Channel of Choice. According to eMarketer, mobile commerce sales (including both smartphones and tablets) are projected to be $58 billion and 19% of total web sales in 2014, growing to $133 billion, nearly 27% of web sales by 2018.3

While the customer is rapidly shifting to the added convenience and transparency of the e-commerce channel, is brick-and-mortar retail doomed and does this signal the end of the retail store as we know it? Yes…AND no! These trends are forcing retailers to modify their customer experience and begin to think about their channels in a slightly different way. Consider the following questions and topic areas as a way to develop a strategy within your own brand:

1. What is your customer's journey through your brand? How does she interact with your brand and through which channels? Retailers must map the customer's journey across the brand and gain insights into how she interacts across channels. In this environment the customer is shopping brands across multiple channels and entry points and is very likely encountering inconsistencies ranging from service policies to pricing to inventory levels and service. To ensure consistency and reach the desired customer experience, retailers must map their customer's journey from initial consideration to ultimate purchase and beyond. Retailers must work diligently to engineer the customer experience that best suits their brand promise.

2. What elements of the shopping experience can be simplified or enhanced to improve conversion? Customers are demanding a convenient shopping experience across all channels. In thinking through this journey, retailers must determine how to satisfy their customer's desire for transparent information and ease in their shopping experience. According to a recent survey by Baynote, over 50% of customers use their mobile devices to compare prices during store visits, redeem coupons while in store, and look at product ratings while in store.4 Thus a cross channel dialogue must be taking place to understand and develop solutions for the root causes of failed shopping missions, or worse, customer defection.

3. How can the brick-and-mortar base be leveraged to enhance the cross channel customer experience? What elements of the mobile or e-commerce experience can be integrated into brick-and-mortar? What new metrics should be employed to measure cross channel effectiveness? Is the role of the brick-and-mortar store as simply an outlet for merchandise forever changed – in fact now rendered obsolete? Absolutely. Brick-and-mortar stores are now part product showroom, distribution center, social gathering spot, and are a critical element in the customer's shopping journey. E-commerce sales are growing at an average rate of 20% per year according the Commerce Department, but e-commerce volume remains only 10% or so of the business for most retailers. In addition, numerous studies have proven brick-and-mortar stores influence e-commerce sales – and vice versa. As a result, retailers must be developing strategies and measurement mechanisms that will enhance these cross channel sales, to ensure their own organization effectiveness does not get in the way of the customer experience.

Back to those headlines for a moment – is the brick-and-mortar store as we once knew it dead? Yes. The entity that has emerged in a cross channel environment, however, has proven to be an essential element of the customer's shopping experience and progressive retailers are working capitalize on these assets. Retailers that do not recognize or capitalize upon these trends will likely lose the customer to the competition – only one or two clicks away!

[1] "Nine Retailers Closing the Most Stores: Douglas A. McIntyre and Alexander E.M. Hess, 24/7 Wall St., March 12, 2014
[2] http://www.internetretailer.com/trends/sales/ 
[3] http://www.internetretailer.com/2014/04/21/mobile-commerce-critical-internet-retailings-future
[4] http://www.baynote.com/wp-content/uploads/2012/12/Holiday-Survey-2014-Final-PDF.pdf


Dwight D. Hill, whose background includes leadership roles with Neiman Marcus and Deloitte LLP, is Founder and Retailer Strategist, The Retail Advisory LLC.  Dwight can be reached at dhill@theretailadvisory.com.

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Tags:  Brick-and-Mortar  Cross Channel  e-commerce  Omni-Channel 

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Should I Use a 3PL Outside the NYC Commercial Zone?

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Alpha Distribution Solutions


Introduction
When choosing a third party logistics provider, the facility's physical location is of great importance. The location may provide significant savings on freight in an unexpected way.

3PLs provide their clients with savings due to their expertise, assets, and effective and efficient distribution processes. 3PLs utilize automation, warehouse management systems, and locations with lower real estate and employment wages to provide the best value to their clients.

Another way 3PLs are able to provide savings is through the commercial zone. If a wholesaler's 3PL is located outside of the New York Commercial Zone, the wholesaler will most likely not be responsible for paying the freight from the 3PL to the retailer. The retailer within the New York Commercial Zone is typically responsible for paying the freight from the 3PL to their stores.

History
After the civil war, railroad companies, across the U.S. held a monopoly over the destinations they serviced. Due to public pressure, the government passed the Interstate Commerce Act of 1887 to lower prices, increase competition, and decrease corruption in the railroad industry. The Act created the Interstate Commerce Commission (ICC). In 1935, Congress passed the Motor Carrier Act, which enabled the ICC to regulate the trucking industry. The agency was eventually abolished in 1995 and responsibilities were transferred to the U.S. Department of Transportation.

Before they were disbanded, the ICC defined commercial zones that were exempt from provisions of the Motor Carrier Act, creating an area free from federal regulation. Commercial zones, with exceptions, were determined through a general population mileage formula still used today. There are currently 18 commercial zones across the U.S.

New York Commercial Zone Defined

New York, NY Commercial Zone1
According to the Code of Federal Regulations

The zone adjacent to, and commercially a part of, New York, NY, within which transportation by motor vehicle, in interstate or foreign commerce, not under common control, management, or arrangement for shipment to or from points beyond such zone is partially exempt from regulation under 49 U.S.C. 13506(b)(1), includes and is comprised of all points as follows:
(a) The municipality of New York, NY, itself
(b) All points within a line drawn 20 miles beyond the municipal limits of New York, NY
(c) All points in Morris County, NJ
(d) All of any municipality any part of which is within the limits of the combined areas defined in paragraphs (b) and (c)
(e) All of any municipality wholly surrounded, or so surrounded except by a water boundary, by the municipality of New York or by any other municipality included under the terms of paragraph (d) of this section.

About Commercial Zones
If a wholesaler's 3PL is within the New York Commercial Zone, the wholesaler is usually responsible for paying the freight from the 3PL to the retailer. If a wholesaler's 3PL is outside the New York Commercial Zone, in most cases, the retailer pays the freight from the 3PL to their stores.

To determine overall savings, the initial cost of freight from the port to the 3PL must be considered. Wholesalers who partner with distribution centers outside of the New York Commercial Zone will most likely have higher initial freight costs, transporting their goods from the port to their 3PL, but ultimately save more by not paying freight costs from the 3PL to the retailers.

[1] EXEMPTIONS, COMMERCIAL ZONES, AND TERMINAL AREAS. (n.d.). Retrieved June 16, 2014, from Federal Motor Carrier Safety Administration: http://www.fmcsa.dot.gov/regulations/title49/sectio/372.235

For the full white paper, click here.


Alpha Distribution Solutions offers a comprehensive list of logistic services for your business needs as they relate to warehousing, packaging, distribution, order processing, fulfillment, shipping, back office outsourcing, or stand alone refinishing projects. Visit www.alphadistsol.com for more information.

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Tags:  Commercial Zone 

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Controversy Averted (at Least for Awhile): The Rollout of the CPSC's Proposed Changes to Certificates of Compliance Will Be Delayed

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Melissa A. Miller Proctor, Esq., Sandler, Travis and Rosenberg, P.A.


The Consumer Product Safety Commission (CPSC) recently voted to delay implementation of its proposed changes to the required certificates of compliance for certain regulated consumer goods. The CPSC previously announced its proposed changes to Part 1110 of its regulations – often referred to as the "1110 Rule" – in a Federal Register notice published more than a year ago, in May 2013. The delay in implementation is attributed in large part to the criticisms raised by industry, which warned of the detrimental impact that the proposed rules would have on supply chains, business operations and the clearance of imported goods into the United States. As a result, CPSC has opted to seek additional input and comments from industry and U.S. Customs and Border Protection before formally adopting the proposed changes.

By way of background, the Consumer Product Safety Improvement Act (CPSIA), enacted in 2008, requires that manufacturers, importers and private labelers of regulated consumer products certify in writing that their goods have been tested and fully comply with specified safety standards. Since the CPSIA's enactment more than six years ago, the CPSC has continued to rollout additional requirements for consumer products including new standards for the testing of children's products and component parts. The May 2013 proposed rules were intended to incorporate the more recently implemented rules into the 1110 Rule. For example, CPSC proposed, among other things, to:

  • Provide definitions for the various types of certifications required under the CPSIA
  • Use the term "importer" in the CPSIA to refer to the "importer of record" as defined under the U.S. Customs Regulations – hence, common carriers, forwarders and third party logistics parties could, in some instances, become responsible for the certifications of compliance
  • Require U.S. importers to certify products that are manufactured abroad (except where the goods are drop shipped by the foreign manufactures to customers in the United States)
  • Clarify that brand owners need not provide finished product certifications unless they are also acting as the importer of record, domestic manufacturer or private labeler
  • Require the electronic filing of certificates with each shipment of imported merchandise with CBP at the time of entry into the United States
  • Expand the data elements required to be provided on the certificates
  • Require the certifier to not only swear to the accuracy of the certification, but also to acknowledge its understanding that knowing or willful misstatements or omissions are violations of federal law; etc.

One of the greatest criticisms of the proposed rule is the fact that, as written, the certificates of compliance would not only be controlled by the CPSC, but they would also become a required entry document under the U.S. Customs Regulations. As such, CBP would have the authority to deny a shipment's entry into the United States for the failure to timely submit the certifications. Any material misstatement or omission in the certificate could lead to penalties imposed by CBP against the importer for violations of Section 1592 of the U.S. Customs Regulations. In addition, as the certificates themselves would be considered an (a)(1)(A) List record under the U.S. Customs Regulations, the underlying testing documentation would likely be considered supporting documentation – both of which would be required to be maintained by the "importer of record" for a period of five (5) years from the date of importation into the United States. Thus, the proposed rules would expose importers to increased liability under both the CPSIA and the U.S. Customs Regulations for violations involving certificates of compliance.

Industry had anticipated that CPSC would issue its final rule implementing these changes in early Fall 2014; however, because of the significant issues and concerns that have been raised, it appears that the CPSC will soon reopen the proposed rule's public comment period as well as sponsor a public workshop where these key concerns may be addressed and discussed in greater detail.


Melissa Miller Proctor is a Partner with Sandler, Travis and Rosenberg, P.A., resident in the firm's Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at mproctor@strtrade.com.

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Tags:  CPSIA 

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Retail Transformation: What It Means for Retailers and Their Trading Partners

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Bryan Nella, GT Nexus


Mike Relich, COO of Guess, Inc., spoke a couple of weeks at the GT Nexus Bridges conference about transformation occurring in retail. Relich pointed out that one billion square feet of dead mall space exists today. This is a result of several factors ranging from e-commerce growth, to showrooming, to same day delivery. But the necessary transformation today is being built entirely around the customer. Retailers have to be prepared to engage the shopper at all points in the omni-channel – from e-commerce interfacing to the in-store shopping experience.

Place Your Bets on Your Most Profitable Customers
Relich suggested making investments wherever your strongest customers are – and decreasing investment in areas of weak performance. For example, he pointed out the approach some retailers have taken where they utilize sub-performing store locations to serve as distribution centers. On the other hand, staying close to customers and knowing their preferences should be fundamental. In well-performing locations, sales staff should be empowered to know who the most valued customers are when they enter the store, and be able to knowledgably engage these clients based on CRM data around prior purchases or items searched on the retail website. Relich used an interesting comparison to illustrate the current disconnect: when you enter the supermarket and purchase everything you need for the week, you might spend $300. You have to wait in a long line to check out. But the customer with 12 items or less – who is least profitable for the retailer – receives a fast lane to checkout. This thinking is backwards. The changing retail landscape means knowing where you're profitable and being agile enough to make changes that center around your most valued customers.

How might this approach play out in the vendor-retailer relationship today? Here's a few emerging trends we're beginning to see:

  • Empowered Factories: Consumers can order custom goods online and receive them in just days. The order is fed direct to factories who interpret the data, build the single customized good, flip the order data into the shipment, and then pack, scan and ship the item direct to store or direct to consumer.
  • Knowing Customers Better Than They Know Themselves: Consumer shopping patterns, when tracked effectively, provide unique insights that sometimes the consumer doesn't even realize. Using that data, retailers are able to offer a personalized shopper that sends e-mails or pop-up offers online to valued shoppers, essentially suggesting their next round of purchases based on their style, taste and preferences. Picture a retailer offering customized shirts or shoes delivered each quarter, direct to consumer, based on customer data. Suppliers who specialize in specific goods become a driving force behind a targeted customer program that caters to the individual while eliminating costs related to inventory, warehouses, and retail stores.
  • Delivery/Returns as a Differentiator: Same day delivery is having a huge impact. But when that's packaged together with free delivery and free returns, it's hard to make a case for physically going to a store to purchase a pair of shoes. However, here's where some retailers can fall down without the right infrastructure to communicate and collaborate with trading partners and suppliers. Retailers that operate as a network are connecting stores, DC's, logistics providers and factories in one place to capture a single view of all goods wherever they reside. This is essential to delivering this high-level shopping experience while maintaining margins. The vendor-retailer relationship is more of a partnership – where all parties align to act as a network with the primary goal of delivering goods as rapidly as possible without sacrificing cost or quality.

Forecasting the Future
The retail transformation is all about value to customers. But on the back-end of business, it's all about questions like: How much product to carry and where? How to ship? How far can my suppliers and trading partners contribute to the customer experience while continuing to add value? Brick-and-mortar is not going to die. But the future is going to look very different from the one we've all grown up with.


Bryan Nella is Director of Corporate Communications at GT Nexus, the world's largest cloud-based supply chain network. He has more than 12 years of experience distilling complex solutions into simplified concepts within the enterprise software and extra-enterprise software space. Prior to joining GT Nexus, Bryan held numerous positions in the technology practice at global public relations agency Burson-Marsteller, where he delivered media relations and communications services to clients such as SAP. In previous roles he has worked with clients such as IBM, MasterCard and U.S. Trust. Bryan holds a BA in Mass Communications from Iona College and a MS in Management Communications from Manhattanville College.

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Tags:  Brick-and-Mortar  e-commerce  Omni-Channel 

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New ISF Guidelines from CBP

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Mark Kopp, Yusen Logistics (Americas) Inc.


On May 14, 2014, Mr. Craig Clark, Importer Security Filing (ISF) Program Manager for Customs and Border Protection (CBP), met with members of the trade community in Newark, New Jersey. Mr. Clark's presentation was held under the auspices of Avalon Risk Management and the New York/New Jersey Foreign Freight Forwarders and Brokers Association, Inc.

CBP has processed over 10.5 million Importer Security Filings from approximately 2,500 filers and 264,000 importers. The compliance rate is about 90%. CBP issued guidelines for enforcement of ISF fines and penalties on July 9, 2013. Mr. Clark's comments were to inform the trade community of new guidelines that went into effect on May 13, 2014. The new phase of enforcement strategy is to be final as of May 13, 2015. CBP has also updated the FAQ section of their ISF policy on their website to highlight the new enforcement strategy. More detailed information can be found in the FAQ.1

Some fines and penalties have been issued by the ports since July 9 of last year; however, as of May 13th, CBP has "hit the reset button" on these penalties. Except in cases of fraud or criminal activity, CBP will not be approving liquidated damages claims for violations before May 13, 2014.

In the future, CBP will issue three warnings. This informed compliance outreach may be by e-mail, telephone or letter. The fourth will result in pine and penalties. Fines will be issued for egregious violations, significantly late filings and repeated violations. However, the exact definitions of egregious, significant and repeated will be left up to the individual ports. Local discretion will allow each port to make decisions based on infrastructure or staffing resources. For example, some ports may elect to hold freight rather than issue a penalty. In this regard, all importers are urged to continue to monitor the pipelines from their specific ports of entry.

All fines and penalties issued by the ports will continue to be reviewed by Headquarters. Headquarters will continue to take a measured and common sense approach. CBP plans to issue all fines and penalties within six months of the violation but reserves the right to issue liquidated damages up to the statutory limit six years.

CBP will allow for mitigating factors as provided for in the Federal Register notice of ISF implementation of November 25, 2008.2 In his comments, Mr. Clark specifically mentioned C-TPAT membership as a mitigating factor. CBP understands there may be certain factors outside of the Importer of Record's control such as changes to the bill of lading made by the carrier.

CBP will use an internal national database to monitor violations. The database will allow individual ports visibility to other ports nationwide. This will allow CBP to identify locations and specific importers where enhanced compliance outreach is required.

Importers should monitor the status of their ISF entries. No bill match equals no filing in the mechanical eyes of Custom's computer. While fines and penalties will not be issued until next year, containers arriving with no filing (no bill match) will be subject to examination. The implication is that CBP will not prioritize these examinations. Depending on the merchandise and the need for it, this could actually cost the importer more than a $5,000 penalty to be imposed in the ISF enforcement guidelines. Also, while CBP has repeatedly stated that ISF data will not be compared to the customs entry data at the time of entry, it may be compared during an examination. To date, the largest number of cargo holds has been on the West Coast and Norfolk. Currently only about 1% of containers are being held.

It is important to know that amendments, particularly bill of lading amendments, may be made up to the time of arrival and in some cases after arrival. Amendments do not reset the clock in terms of timeliness. Timeliness for amended entries will be based on the original filing. This new enforcement policy will apply only to ISF-10 filings. ISF-5 violations are not currently being enforced pending changes to the regulations.

[1] CBP
[2] http://www.gpo.gov/fdsys/pkg/FR-2008-11-25/pdf/E8-27048.pdf


Mark Kopp is currently the Senior Manager for Import Compliance for Yusen Logistics (Americas) Inc. Mark has over 30 years experience in all aspects of supply chain management and compliance - from product development and buying, cargo management and shipping, customs brokerage, to warehousing, distribution and retail sales. He has managed/directed imports for Kinney Shoe Corporation, Woolworth Corporation, Russ Berrie & Co. and DHL. He has also served on the Footwear Distributors & Retailers of America government customs council, been a member of the Board of Directors for the Toy Shippers Association, and been an instructor at The World Trade Institute in New York. Currently, he is a member of the NY/NJ Freight Forwarders & Brokers Association and serves on the American Apparel & Footwear Association Government Relations Committee. Mark graduated from Franklin & Marshall College in Lancaster, PA with a B.A. in Political Science.

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Tags:  10+2  CBP  ISF 

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