ABC retailing

Letters ABC have a special relationship with retail. For instance, there is a chain of grocery stores called ABC Stores on the islands of Hawaii, that sells delicious chocolate covered macadamias. They are so widespread in Oahu, that some people say that “ABC” there stands for “all blocks covered”. They are also pretty often photographed, and for that reason for some people it stands for “always bring camera”.

Another meaning of “ABC” in retailing comes from inventory analysis – it is a classification system often used for products sold at a store – those that are “Type A” generate the most revenue, “Type B” generate some, and “Type C” – would be some obscure stuff kept on bottom shelves. And while those macadamias are surely Type A for the Hawaiian chain, the question is what are the type A products for a typical American grocery store?

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Shipping Apples around the globe!

Today is a big day for Apple, with a launch of the new iPad and possibly Apple TV. It is also a bonanza day for shippers. In anticipation of the launch Apple booked a large chunk of air cargo capacity to bring boxes from China into the States. According to this article the shipping rates over the last week went up by as much as 20% (hat tip to Zach Chahalis for the link).

Apple is certainly enjoying its status of a big boy in a sandbox here. For smaller companies though it means a struggle to get the goods from China. But there is also an opportunity. Since the cargo is flowing mostly into the States (and probably Europe as well), there must be excess capacity for shipping goods in the opposite direction. I wonder if anybody has decided to capitalize on this.

Managing this flow imbalance also presents a challenge for shippers. Of course with $100B in cash Apple probably paid them the return-ticket fare, but still looks like some money could be left on the table if they fly back completely empty.

Labels and supply chains

Interesting information you can get from reading product labels. And I am not talking about food ingredients. What I am talking about is how long does it take from the moment a product is manufactured until it is sold? Or even, how long can a manufacturer afford this lead time to be? Lead times are tricky and rarely reported by firms. Longer lead times mean more working capital and pose challenges for forecasting, because firms have to decide how much to produce well in advance. In fact, in this paper I argue that retail sales forecasts (and inventory budgeting) for the next year are done 6 to 12 months before it starts. Anyways, because lead times are so tricky, I always welcome first hand data that documents them.

In this case the data comes from two product labels – one from Ikea and the other is CB2. Both related to furniture bought by me in the beginning of February. It turns out that Ikea manufactured that product (it was a chair) on May 26, 2011 in Mexico. Moreover the cover for that chair was made on the 16th week in 2011 (that is around Apr. 20). The chairs from CB2 were made in Taiwan by vendor Elegant Products and shipped from there on Aug. 4, 2011. Which gives almost 9 months lead time for Ikea and 6 months for CB2. Again these are the lead times after the product is manufactured. Actual decision about manufacturing them had to be done before that.

Give or take, it seems that Ikea’s lead times are about 50% more than CB2’s. And it makes sense, given that Ikea’s assortment rarely changes (aside from seasonal items) and CB2 tries to follow the contemporary trend.