QCould you talk a little about some businesses you’ve seen that have completely transformed themselves on
the back of warehousing and logistics innovation?
AOne would be Samsung, which has completely over- taken Sony in the consumer electronics space.
Although Samsung officials have publicly credited the chief
design officer for the company’s recent success, that’s nonsense. The reason they’re outselling Sony three to one isn’t
just that someone designed a cute TV. The other part of the
story is that someone worked out how to package it and get
it there without driving the price up.
Another example is Zara, the fashion retailer owned by
the Spanish company Inditex. If there is an industry that
got walloped by the economic downturn, it is fashion retail,
right? Yet the Inditex share price doubled, or almost doubled, during the recession. And store sales are up in Spain,
which was one of the hardest hit markets.
To understand how they did that, you have to know a little bit about Zara’s business model. Essentially, Zara offers
you couture design with a second-rate fabric for not half
the price, but one-tenth the price you’d pay for a high-end
brand.
And they’re not just cheap; they’re also fast. They can go
from design to distribution in 15 days. Fifteen days. I mean,
just imagine that. What they do is they go to the Prada cou-
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ture show in Paris or Milan, see a design they like, and two
weeks later, they have it in the store—beating Prada to the
market even though they’ve been working on it for two
years. This is not a small operation. They have 300,000
SKUs. It is just mind blowing.
They call it fast fashion. In my opinion, it is the most efficient retail supply chain around. Think about it: Where
does a fashion company lose money? What kills their margin? Oversupply of the wrong stock.
QOh, absolutely, because if it is fashion, it’s worthless if it isn’t current.
ASo you end up discounting 30, 40, 50, even 60 percent in a market like this.
But these guys don’t have that problem with overstocking. They never have more than two items of any size,
shape, or anything else in the store because they know that
whenever they sell something, it will be replaced within 24
hours. They just don’t have long stock-out times.
QWhere does this go next?
AIf some of your clients are pretty advanced with that stuff, you look at how you do that with less human
capital input. For example, you might look at RFID technologies and their potential to slash data capture costs.
Where else might it go? Well, we are starting to see algorithms and rules being built into databases that actually
make better decisions than humans can make. In other
words, the information gets intelligent. We’re seeing a phenomenal move from information gathering to knowledge
capture to intelligent systems.
That’s why you want to be starting fresh today with the
technology available to you now. If you’ve got a legacy
CRM or inventory system that is 15 years old but still
works, you’re probably tempted to stick with it. But it’s
important to ask yourself: How else could I do this?
Tiger Woods is a case in point. His personal problems
aside, Woods is widely considered the number one golfer in
the world. Yet at the peak of his powers—after winning every
major there was—Woods basically went and completely
deconstructed his game to rebuild his swing from the ground
up. When asked why he did that when he was already the
best, he answered ‘Because I want to stay the best’.
Woods’ rebuilding his swing was like an organization’s
rebuilding its supply chain and warehousing and distribution network. Yes, it hurts for 18 months, but, wow, the
impact it has 36, 48, 64 months down the road. Add that to
the kind of market we’re in now, where you can acquire
capital equipment for 30 percent less than you could at the
market peak of 2007. Right now, you could rebuild and
reinvent all this stuff for a lot less money than you’ll be able
to in two years’ time because everyone is bleeding out there.
They’ve got this capacity that is unfilled. It is actually a
good time to seize some of those opportunities.
