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What gets in the way of supply chain visibility

In the global logistics environment, everyone is talking about supply chain visibility and control. Supply chain visibility simply means having the right information, when you need it, so you can act on it. Getting this information is a challenge, or near on impossible when you don’t have the right systems to support you.

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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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Chinese New Year 2018 – Plan Ahead

Happy New Year and of course, Happy Chinese New Year 2018!

China’s most important festival, also known as Spring Festival will be here before you know it. Most businesses in China and Hong Kong (as well as many other Asian nations) close for a week and sometimes longer in order for staff to travel to be with their families for the celebrations. This can cause delays in obtaining Customs Clearance documentation for Australian businesses importing cargo from China and elsewhere in the region.

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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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Changed requirements: Highly Manufactured Wooden Articles

The Department of Agriculture and Water Resources (DAWR) has announced changes to the treatment requirements for goods considered to be highly manufactured wooden articles as they are deemed to pose a low biosecurity risk and can be released with minimal biosecurity intervention.

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Be clear on your biosecurity reporting obligations

Recently the Department of Agriculture and Water Resources (incorporating AQIS) announced changes in biosecurity reporting obligations and penalties that may be imposed for failing to correctly report goods subject to a biosecurity control.

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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.

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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

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Source: McKinsey

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