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Speed to Market: now more important than Cost

Fast food, fast internet, fast coffee … it seems everything needs to be delivered to us fast these days.  We’re moving into an age where everything is driven by speed, and the Rag trade is feeling the pressure to deliver ‘Fast Fashion’ more than ever. With tech-savvy Millennials and time-poor consumers searching for more convenient ways to get what they want, when they want it, Speed to Market (STM) has become so important that Cost has become a secondary consideration.

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Q: What is a good freight rate?

Getting the right deal is based on your point of view and the importance you place on your supply chain. It depends on the nature of your supply chain, what type of service you need and the focus and attention you place on supply chain optimisation.   In short, it depends on you.

The saying “you get what you pay for” has never been more relevant than in the current market conditions. The costs and business consequences of something going wrong can far outweigh a minor saving in rates.

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When cutting supply chain cost costs you more

Finding a happy medium between price and service is the Holy Grail when it comes to most things. Cutting supply chain cost and optimising your logistics service is no exception.
Ideally, logistics partners should do more than simply move the freight.  They should be extension of your organisation, guiding your supply chain operations in line with your strategy.  In short, they should ‘have your back’.

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GST on low value goods imported into Australia

From 1 July 2018, GST will be payable on low value goods (AUD1,000 and under) supplied by overseas retailers to Australian consumers.  Under these changes, the Government will use the vendor collection model for collecting goods and services tax, where vendors (including online stores) will collect the GST on low value imported goods at the time of

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The ‘not so’ surprising link between supply chain optimisation and maturity.

Many of the discussions I have in the course of my work are around the different perspectives businesses have on how best to approach supply chain optimisation.  It all comes back to where their business sits in terms of logistics maturity.

Gone are the days where the cost alone matters. In order to survive, businesses need to constantly change with the dynamics of their industries and innovate to maintain competitive advantage.  This is the same with supply chain optimisation; technologies evolve, disruptions arise and new value add services emerge to address them.

The best companies continuously monitor, develop and reinvent their supply chains, even if they are leaders. As a result, they can manage risks; respond to changes in the economic, technological, and competitive environment; and explore new opportunities more effectively than their competitors.

Some recommendations to assist with supply chain optimisation in your organization include:

·         Define and distinguish between your corporate and supply-chain strategies. Ensure your supply chain supports delivery of the key parts of your strategy.

·         Collaborate with experts and create a modern, end-to-end supply-chain organisation.

·         Maintain complete visibility and utilise sophisticated statistical analysis. This allows you to manage supply chains end-to-end. Make sure your supply-chain combines operational excellence with strong analytical capabilities and data-driven, cross-functional decision-making.

·         Strive for supply chain excellence. Set performance standards for the organisation and measure accordingly. Give incentive to your supply-chain organisation to work in ways that deliver the most value for your business while protecting against its biggest risks.

There is a strong correlation between supply chain maturity and optimisation. Successful companies know their supply chain is much more than the cost and process of getting products into customers’ hands. These companies appreciate that a properly designed supply chain enables the implementation and realisation of corporate strategy. The day-to-day interactions both within and beyond the organisation make it happen.  The inclusion of this broader perspective on supply chain in business planning reaps rewards.

“The path to logistics excellence is partly defined by an organisation’s current level of logistics maturity.”

says James Lisica, research director at Gartner. Gartner has created a 5-step model to logistics maturity. I have summarised the 5 steps below:

Step 1: React — Silo-ed Autonomous Operation

Characterised by autonomous departments, such as sales and manufacturing, driving logistics priorities via manual processes and disparate, disconnected systems. This aims at bringing departments together.

Step 2: Anticipate — Functional Scale and Efficiency

There is a focus on creating standardised processes and methods to benefit from economies of scale and increased efficiency. Performance focuses internally on fulfillment percentage, productivity, costs and return on assets.

Step 3: Integrate — Integrated With the Supply Chain

The focus now is on integrating the logistics function into the overall supply chain.

Step 4: Collaborate — Collaborating With the Value Chain Network

By this stage, there is collaboration and visibility with suppliers and customers, as well as strategic partnerships with logistics providers that go beyond simple transactional services.

Step 5: Orchestrate — Network Orchestrator of Profitable Customer Value

Logistics and the rest of the supply chain facilitate processes across an ecosystem of partners to capitalise on unique business opportunities. As a result, information flows across the supply chain network in real time. This enables broader visibility and timely, fact-based decisions, which increases market share and growth opportunities.

At what stage of logistics maturity are you? Do you feel your supply chain is fully optimised? It’s not easy to answer.

Your supply chain is one of the most critical parts of your business – you should always be looking for ways to improve it.  Choosing a logistics partner you can trust to navigate in this uncertain environment is essential if you want to get ahead and stay there. Magellan’s experienced professionals can help you consider and implement optimisation techniques that suit your business and put you on the path to supply chain maturity. For a confidential discussion about your supply chain get in touch with me today on +612 9153 0864 or via email.

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Understand, protect, optimise: And de-risk your supply chain

The world of supply chains and logistics is often volatile and turbulent. Keeping everything running smoothly has never been more challenging. Nor has it been more important to de-risk your supply chain

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China’s Comeback: Destination Hong Kong

As fashion executives around the world reported in the first BoF- McKinsey Global Fashion Survey, the year 2016 can be summarised in three words: uncertain, changing, and challenging. But in spite of this, fashion remains one of the key value-creating industries for the world economy.

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The State of Global Fashion 2017 – Uncertain, Changing and Challenging

Looking back at 2016 — one of the toughest years on record for global fashion

As fashion executives around the world reported in the first BoF-McKinsey Global Fashion Survey, 2016 can be summarised in three words: uncertain, changing, and challenging.

Indeed, this has been one of the toughest years ever for the global fashion industry. Terrorist attacks in France, the Brexit vote in the UK, and the volatility of the Chinese stock market have created shocks to the global economy, which has not been this volatile since the depths of the financial crisis of 2009. Meanwhile, consumers have become more demanding, more discerning, and less predictable in their purchasing behaviour, which is being radically reshaped by new technologies. But the shockwaves have not only been external. Fashion companies have also been looking inward, implementing changes to their core operations—from shortening the length of the fashion cycle to integrating sustainable innovation into their core product design and manufacturing processes—re-evaluating the entire fashion system itself.

Perhaps unsurprisingly then, 67 percent of the executives surveyed reported that conditions for the global fashion industry have worsened over the past 12 months, a fact that is clearly borne out in the industry’s financial performance this year. Sales growth is on track to slow to just 2–3 percent by the end of 2016, with stagnating profit margins. Speculation and uncertainty over the impact of the outcome of the election in the United States could further impact sales if consumer sentiment dampens. This is in stark contrast to the fashion industry’s performance over the previous decade, which saw the industry grow at 5.5 percent annually according to the McKinsey Global Fashion Index, outpacing overall GDP growth.3

It is important to note that industry performance in 2016 has not been even across all market segments and categories. This year was particularly difficult for the luxury and mid-market players, who were hit by the slowdown in China and the US and are expected to grow at rates below the industry average at 0.5-1% and 2-2.5%, respectively. One category that is experiencing significant deceleration is watches and jewellery. While it was the fastest growing category between 2005 and 2015 – having enjoyed a compounded growth rate of 11% according to the MGFI –watches and jewellery is expected to grow just 1.5-2% this year. The luxury end of the category suffered an especially hard blow.

But in spite of these and other challenging circumstances, fashion remains one of the key value-creating industries for the world economy. If it were ranked alongside individual countries’ GDP the global fashion industry would represent the seventh-largest economy in the world.4

Moreover, 2016 also saw many exciting changes: the advance of digital, the launch of “see-now, buy-now”, and a thorough creative shake-up at fashion houses.

Outlook for 2017: Glimmers of recovery

In 2017 we expect the global fashion industry to see the glimmers of a rebound.

This recovery has several foundations. First macroeconomic indicators, including GDP growth forecasts, are projected at 3.4 percent compared with 3.1 for 2016, however these have not been adjusted to reflect the ongoing impact of important political shifts in the United States and the United Kingdom.

Second, the investment community and the fashion brands themselves forecast improvement across the industry next year. Some 40 percent of executives we interviewed for this report expect conditions for the fashion industry to improve in 2017, compared with the 19 percent who reported

improving conditions in 2016. This is particularly true for the major players within each of the market segments and product categories. Many of them have already undertaken significant cost-cutting and restructuring exercises, and are now primed to capture the benefits. All things considered, we fashion industry growth could increase from 2–2.5 percent in 2016 to 2.5–3.5 percent in 2017, although the days when the industry outpaced GDP growth by more than 1–2 percentage points, as it has done over the past decade, seem to be over.

Performance will vary according to the individual dynamics of specific market segments and categories. Value and affordable luxury are likely to be the big winners, both outpacing the industry average at a projected 3.0-4.0 percent and 3.5–4.5 percent growth, respectively; however, all of the market segments—except for the discount market—should see a slight sales growth improvement of 0.5–1.5 percentage points.

Product categories are expected to grow in line with the overall industry average, but the biggest winners will be those companies with coherent channel strategies and clear value propositions. Athletic wear is positioned to be the absolute category winner, maintaining 6.5–7.5 percent sales growth, albeit no longer growing at a double-digit rate overall. The affordable luxury segment seems likely to continue benefitting from consumers “trading down” from luxury, while signs point to the continued growth of the value segment in line with the international expansion of large global players.

In short, the industry now has the opportunity to stabilise and reset. Next year’s success stories are most likely to come from those that are already planning for the year ahead. They should do this in the context of the following trends that we believe will shape the fashion industry in 2017.

DOWNLOAD THE FULL REPORT HERE

10 TRENDS THAT WILL DEFINE THE FASHION AGENDA IN 2017

INTENSIFYING VOLATILITY

Volatility is the new normal. Geopolitical instability, terrorism, Brexit, and stalled trade deals will all increase a pervasive sense of uncertainty in the global economy.

CHINA’S COMEBACK?

China’s fundamentals, including growth of the middle and upper classes, remain strong and the government’s new fiscal policies are expected to improve conditions in 2017, but uncertainty remains.

URBAN ENGINES

City-based strategies trump country-based strategies: a new class of rapidly growing wealthy cities in newly influential markets are becoming central to the evolution of fashion.

SHREWDER SHOPPERS

Working harder to keep up with smarter shoppers: “always-on” consumers are becoming ever more sophisticated, more technology-driven, and harder to predict.

GENERATION CORRELATION

Opportunities to serve the young and the old better: fashion companies should consider how to fine-tune and diversify the way they approach both retired and millennials consumers.

THE WELLNESS DIVIDEND

Feeling good is the new looking good: more fashion players can start profiting from the wellness movement rather than competing with it.

CHANGING THE RHYTHM

Disruptions to the fashion cycle: expectations set by the faster pace of fashion and consumer desire for instant gratification must be addressed to deliver fashion immediacy.

ORGANIC GROWTH

Investing more to nurture local clientele: 2017 has the potential to be the year of organic growth based on deeper relationships with existing clients rather than geographic, channel,and store network expansion.

UPSTREAM TECHNOLOGY

Digital innovation goes behind the scenes: digitisation is a key to supply-chain efficiency, lower procurement costs, and enhanced sourcing opportunities.

OWNERSHIP SHAKE-UP

Emotionless reappraisal of brand portfolios: fashion conglomerates can be expected to further intensify their focus on big brands, creating space for other brands and industry outsiders such as private equity and family owners to acquire targets.

The Business of Fashion and McKinsey & Company © 2016

DOWNLOAD THE FULL REPORT HERE

Source: McKinsey

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High risk and lack of trust. The coming crises of confidence for Australian supply chains

Australia, by virtue of its geographical isolation, sits at the end (or beginning) of what are by any definition long supply chains. Moving anything into or out of Australia is more challenging simply because of the “tyranny of distance.” Chartered Institute of Procurement & Supply (“CIPS”) Australian Managing Director Mark Lamb recently said: “The growing complexity of supply chains, coupled with a heightened focus on supply chain risk, are (sic) changing the role of supply chain managers. “There is already evidence showing a fundamental shift in the role and priorities of supply chain managers, from a traditional cost control role to one that increasingly prioritises managing risk and building fair and sustainable supply chains.”

crises of confidence in Australian supply chains

Source:  CIPS Risk Index Q4 2015

CIPS found that the roles of Australian supply chain managers expand and extend well beyond traditional boundaries of simply controlling the flow of products and raw materials into and out of Australia. Because of the changing nature and complexity of logistics and supply chains, their responsibilities are taking on more of risk management flavour and including fraud prevention, partner relationship management – even in some cases to identification of human rights abuses, further down (or up) the chain.

Together, factors such as these pose increasingly serious commercial and financial risks to the sustainability not only of individual businesses, but to the whole economy.

A low point in trust and confidence

At a time, where according to CIPS, supply chain risk in the Asia Pacific region is reaching an all-time high; Australia faces a looming crisis of confidence and trust in our supply chain and logistics management capabilities. A recent CIPS survey of 645 global supply chain experts and managers, revealed that almost half (48%) of all Australian supply chain managers say that their employers are failing to equip them with the skills and training they need to do their jobs and avert major crises.

The CIPS Risk Index also highlighted a core of inadequately trained supply chain managers actually failing to prevent errors and poor management, not properly investigating the origin of raw materials and not following best practice. Eighty percent of respondents to the survey called out inadequate training and support and conceded the very real possibility of undetected faults or negligence in their supply chains. Fewer than 18% said they were even able to see the entire length of their supply chains.

CIPS MD Mark Lamb says expertise has never been more important. “You wouldn’t trust an inadequately skilled surgeon using outdated equipment to operate, but that is often what is happening in the management of Australian supply chains. It is a looming crisis that requires immediate action.”

Asia Pacific region contributes most to risk

The Q4 2015 CIPS Risk Index observed these findings, and revealed that global supply chain risk has jumped to its highest level since late 2013 – and that the Asia Pacific region contributed more to that risk than any other geography.

The rise has been predominantly driven by a continued tightening of credit in China, which has forced managers to look much more closely at how robust and reliable their Asian supply chains really are.


Magellan Logistics has been navigating global supply chains for Australian fashion, footwear, textiles and retail businesses for 20 years.

Originally posted at http://www.ragtrader.com.au/insights/the-coming-crisis-of-confidence-for-australian-supply-chains

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Containerisation makes the world go round

The brief and transformational history of containerisation

In the late 1930s, Malcolm McLean, a North Carolina truck driver was becoming more and more frustrated by constantly having to load, unload, repackage and store his bales of cotton as they were transported from plantation to port. He thought there must be a better way.

What if he could pack the cotton once into large containers that could be easily loaded on trucks and ships?

In 1956, around 20 years later his original spark of invention was realised, and McLean’s first container ship set sail from New York and the universal shipping container began to replace the myriad ways that food and other cargo was shipped around the world. The entrepreneur’s invention solved the many problems that long distance shipping had endured for centuries would eventually go on to change international shipping forever.

Since the early 17th century shipping had been a difficult and labor intensive business. Goods from overseas were loaded on and off ships individually, by barrels, crates and burlap sacks. The process required many workers, around week for every ship, and lots of cargo was lost due to spoilage and damaged packaging.  McLean’s innovation, allowed for goods to be packed into large and sturdy containers at their source – farm, factory or warehouse. These intermodal containers, designed to be moved by various forms of transit, were able to be easily picked up from trucks or trains and transferred directly onto ships and back again without the need to unpack and repack the contents.  This significantly reduced transport costs. If a team of 18 men once needed eight hours to move 80 tonnes, containers allow nine people working in a row to load 2,000 tonnes in the same amount of time.

This outrageously simple new way of shipping, using one container that would fit on many modes of transport allowing goods to be transported from sender to recipient unopened, was not without early opposition from unions, ship owners and ports who were concerned for their jobs and the cost of the new port infrastructure.  In Europe, the idea was not taken seriously and many saw McLean as a fanatical American.  But no-one could argue with the numbers; McLean’s cost/benefit analysis won the day.

intermodal shipping containers

Containerisation of shipping

Initially used only along the east coast of the USA for dry goods, the standard intermodal shipping container was swiftly adopted internationally. In 1961, the International Organization for Standardization (ISO) established worldwide standards for containers. While many different sizes are used today, the standard for transporting goods is still the 20-foot container, “Twenty-foot Equivalent Unit,” or TEU. In 1966 the first international shipment of 110 containers from the US arrived safely in Germany.

For products such as fruit and vegetables, flowers and fish however, this new procedure needed a bit more work and early refrigerated containers yielded mixed results – some shipments arrived in perfect condition while others were opened to reveal cargo that was either partially or completely spoiled or frozen solid.

Shipping companies began working with scientists and came up with mobile laboratories that monitored perishable items while they were in transit. Barbara Pratt, now the head of “reefer services” at Maersk Line Shipping Services worked for seven years on a project that led to the development of sophisticated shipping container technology that allows control of airflow, humidity and the way the treated air is dispersed inside the container. This new technology can even control the ripening of fruit to ensure it arrives at it estimation port in peak condition.

Containerisation, as the technology is known today, has changed the entire face of the shipping industry in a brief 60 years. McLean’s invention is seen on the back of semi-trailers, on trains and the decks of ships and barges all over the world. Today around 129 million standard container loads of goods (TEUs) flow freely across time zones around the globe each year ready to be delivered to stores in every city and town. And just as the volume of cargo continues to grow, so too does the size of container ships and their ports of origin and destination.

While there is no doubt that containerisation has changed the way we ship and consume our goods, for many containers that is not the end of the story.

An emerging global fondness for industrial design and upcycling has seen the intermodal shipping container used in a variety of construction applications – from schools, to pop-up bars and swimming pools to apartment complexes.  See more in our earlier post about uses for retired containers.

The modern shipping container is such a ubiquitous feature of our modern landscape it is hard to image that a few short decades ago it was merely twinkle in the eye of one entrepreneurial American.

If you have any questions about how we can help you with the movement of your cargo, please get in touch with Magellan on 1300 651 888.

containerisation infographic

 

Sources:
http://www.slate.com/blogs/the_eye/2015/09/09/reefers_the_temperature_controlled_shipping_containers_that_transport_our.html
http://www.worldshipping.org/about-the-industry/history-of-containerization
http://www.maerskline.com/en-us/
http://www.dw.com/en/the-whole-world-in-boxes/g-19231681
http://www.joc.com/maritime-news/container-lines/how-container-changed-world-infographic_20150430.html

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