Retail and Consumer Products Supply Chain Report

A brief analysis of eyefortransports recent survey 2010

Co-Sponsored by:

For further details, please contact: Chris Saynor CEO, eyefortransport World phone: +44 (0)207 375 7529 US Toll Free: 1 800 814 3459 Ext. 7529 Canada Toll Free: 1 866 996 1235 Ext. 7529 csaynor@eft.com

Retail and Consumer Products Supply Chain Report 2010

Table of Contents
I. Introduction ............................................................................................. 4 II. Methodology and Approach ............................................................... 5 III. Profile of Respondents ......................................................................... 6 IV. Expected Performance for Retail Sector V. Logistics Strategies ..................................... 8 10 13 15 16 18 28 30 31 32 33

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VI. Garment on Hanger Logistics VII. Time Dedicated to Programs VIII. Supply Chain Executives IX. Supply Chain Concerns X. Supply Chain Objectives

........................................................... ............................................................... ..............................................................

XI. Methods of Marketing to Retail or Consumer Product Manufacturers ...................................................................... XII. Conclusions ..................................................................................

XIII. About Nygard 3PL............................................................................ XIV. About eyefortransport ................................................................

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Retail and Consumer Products Supply Chain Report 2010

List of Charts
Annual Revenue ($) Geographic Region .............................................................................. .............................................................................. ................................................. ........................................ .................. 6 6 7 8-9 10 10 11 12 12 13 13 14 14 15 16 17 17

Categories of Goods Sold/Produced

Expected Performance for Retail Sector

Taking Control of Inbound Transportation for Suppliers Outsourcing to 3PLs

............................................................................ .................................................... ........................

Plans to Increase 3PL Outsourcing

Changing Transportation Modes to Reduce Costs Forecasting Capabilities

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Need for Garment on Hanger (GOH) Logistics GOH as a Percentage of Logistics Needs Use of Specialized GOH Facility Use of 3PLs for GOH Logistics Time Dedicated to Programs

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........................................................ ............................................................. ............................................................ ................................................... ............................ ..........

Position of Supply Chain Executive

Position that Supply Chain Executives Report to

Use of Chief Supply Chain Officer or Chief Logistics Officer Supply Chain Concerns Supply Chain Objectives

................................................................... 18-27 ................................................................ 28-29 30

Methods of Marketing to Retail or Consumer Product Manufacturers ......................................................................

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Retail and Consumer Products Supply Chain Report 2010

I. Introduction
The retail and consumer product goods sector is arguably the most important market segmant in the World. The sector was severely affected by the recession which began in 2008, and which may still be ongoing. The unfavourable personal economic situation of consumers, coupled with supplier failures and fluctuating demand trends have all put different stresses on to both retailers and consumer product manufacturers supply chains. This survey aimed to take a snapshot of some of the major decisions and issues that supply chain executives face today. We also looked at how the role of the Chief Supply Chain Officer is currently being recognized within a companys management structure.

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Retail and Consumer Products Supply Chain Report 2010

II. Methodology and Approach

This survey was conducted in May/June 2010 with responses solicited by targeted e-mail lists, select trade association memberships, various related-industry databases and other targeted methods. The survey looked at a range of issues affecting retailers and consumer products manufacturers. No individual responses were analyzed, but rather all responses were consolidated.

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Retail and Consumer Products Supply Chain Report 2010

III. Profile of Respondents

Over 650 professionals responded to the survey, a large percentage of whom (33%) represented companies whose annual revenue exceeds $1 billion.

The majority of respondents were either based in Europe (31%), Asia Pacific (30%), or North America (29%). Only a small minority were based in the Middle East & Africa (7%), and Central or South America (3%).

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Retail and Consumer Products Supply Chain Report 2010

Of the respondents representing retailers or consumer products manufacturers, 20% of respondents sold or produced grocery goods, 18% sold or produced fashion goods, while 74% sold or produced nonfood goods (respondents could choose more than one category, so the figures total more than 100%)

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Retail and Consumer Products Supply Chain Report 2010

IV. Expected Performance for Retail Sector

All respondents were asked how they expect the retail sector to perform in the next year. The overall results were generally positive, with the majority of respondents (65%) expecting to see slow growth, and a notable percentage (21%) expecting fast growth. Only a small minority (3%) expect the retail sector to decline over the next year.

When looked at by region, the overwhelming majority of respondents from North America and Europe expect slow growth for the retail sector over the next year, while a far greater percentage expect to see fast growth in Central or South America, Asia Pacific, or the Middle East & Africa.

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Retail and Consumer Products Supply Chain Report 2010

When looked at by the industries represented, there seemed a fair degree of consensus. One notable point was the majority of respondents expecting a decline in the retail sector, or no growth, were respondents representing press/associations/academics.

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Retail and Consumer Products Supply Chain Report 2010

V. Logistics Strategies
The next few chapters of this report focus on questions that were aimed only to respondents representing retailers or consumer products manufacturers. Walmart have recently announced that they are going to take control of the inbound transportation of their suppliers. In light of this, respondents were asked to identify their stance on taking control of inbound transportation for suppliers. The majority (58%) are currently managing some of their suppliers' inbound transportation, though more than a quarter still have no plans to do so.

The majority of respondents outsource the majority of their logistics needs to 3PLs. 41% outsource over 75% of their needs, while 20% outsource between 50% and 75%. Only 11% do not outsource their logistics needs to 3PLs.

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Retail and Consumer Products Supply Chain Report 2010

The majority of respondents expect to increase the amount they outsource to 3PLs over the next 2 years, with 21% expecting a significant increase and 34% expecting a small increase. A notable number do not expect to increase their levels of outsourcing, while a higher number of respondents already outsource 100% of their requirements compared to respondents expecting to reduce their levels of outsourcing.

When viewed by industry, the number of retailers expecting an increase or no change in their logistics outsourcing levels was very similar to the expectations of consumer products manufacturers. A higher number of retailers expected to reduce their outsourcing levels, while conversely, a higher number of consumer products manufacturers already outsource 100% of their requirements.

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Retail and Consumer Products Supply Chain Report 2010

Respondents were also asked if they have moved more transportation to slower/cheaper modes such as Rail or Ocean to reduce costs, as a result of the recession. Opinion was divided on this strategy, with 46% having changed transportation mode and 54% having not.

Forecasting is an area where most respondents still feel that they have room for improvement. Only 22% of retail and consumer product supply chain execs rated their forecasting capabilties as either good or excellent. Indeed, 30% rated their forecasting as less than satisfactory or very poor. Or, put it another way and one can report that 78% of respondents would not rate their forecasting capabilties as anything better that satisfactory.

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Retail and Consumer Products Supply Chain Report 2010

VI. Garment on Hanger Logistics

We asked those resondents who retail or manufacturer fashion goods a number of specific questions about Garment on Hanger Logistics. Half of these respondents identified a specific need for garment on hanger (GOH) logistics.

GOH logistics is only a small percentage (less than 10%)of the total logistics needs for the vast majority (80%)of respondents. No respondents to the survey had more than 75% of their logistics needs requiring garments on hangers.

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Retail and Consumer Products Supply Chain Report 2010

A sizeable 38% of respondents have their own specialized garment on hanger facility, while 71% do not currently use 3PLs for their garment on hanger requirements.

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Retail and Consumer Products Supply Chain Report 2010

VII. Time Dedicated to Programs

The report also looked at a series of supply chain programs, and the amount of time that retailers and consumer products manufacturers are dedicating to them. Overall, a greater amount of time was dedicated to product safety initiatives, than was dedicated to security regulations and environmental compliance, whilst labor regulations had the lowest priority.

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Retail and Consumer Products Supply Chain Report 2010

VIII. The Seniority of Supply Chain Executives

The next part of the report looked at the roles of supply chain executives. Firstly, respondents were asked if their top supply chain executive is on their company management board. Overall, the majority (61%) had their top supply chain executive on their company management board, though, when viewed by region, this situation was far more prevalent in Europe, Central or South America, and Asia Pacific, than in North America and the Middle East & Africa.

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Retail and Consumer Products Supply Chain Report 2010

Respondents were also asked to identify whom their top supply chain executive reports to. Exactly half of the respondents said that their top supply chain executive reports to their CEO/President, while only 8% said their top supply chain executive reports to a senior executive below board level.

Opinion was divided on the use of a Chief Supply Chain Officer or a Chief Logistics Officer. Slightly more than half of the respondents (52%) reported that their company does have either a Chief Supply Chain Officer or a Chief Logistics Officer.

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Retail and Consumer Products Supply Chain Report 2010

IX. Supply Chain Concerns

This chapter focuses on respondents biggest concerns for the next 12 months, though results were not included for the Middle East & Africa, as the sample size was too small for meaningful observations. Respondents were asked to pick only their top 3 concerns. Overall, increased transportation rates were the biggest concern, closely followed by tight transportation capacity and the fear of a sudden weakening in demand. Supplier failures, increased government regulations, currency fluctuations, and volatile energy prices were also notable sources of concern, though respondents were less worried about the prospects of new environmental compliances or disruption caused by natural disasters.

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Retail and Consumer Products Supply Chain Report 2010

The level of concern for increased transportation rates was remarkably uniform (generally around 50%) across all regions and industry sectors.

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Retail and Consumer Products Supply Chain Report 2010

The level of concern for tight transportation capacity was also markedly similar (again, generally around 50%) across all regions, though a slightly larger number of consumer products manufacturers expressed concern, in comparison to retailers.

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Retail and Consumer Products Supply Chain Report 2010

The level of concern for a sudden weakening of demand was much more keenly felt in North America and Europe than in Central or South America and Asia Pacific. On this topic, greater concern was expressed by retailers than by consumer products manufacturers.

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Retail and Consumer Products Supply Chain Report 2010

When it came to supplier failures, Central or South America was the most notable source of concern, whilst least worry was felt in North America. On this occasion, a greater degree of consensus was seen between the responses from retailers and consumer products manufacturers.

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Retail and Consumer Products Supply Chain Report 2010

The greatest amount of concern for increased government regulations was seen from North American respondents, though notable numbers were also seen in other regions. Again, a fair degree of consensus was seen between the responses from retailers and consumer products manufacturers.

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Retail and Consumer Products Supply Chain Report 2010

Currency fluctuations were not suprisingly a lesser concern for North American respondents, while it was a more notable problem in other regions. Slightly greater concern came from consumer products manufacturers than from retailers on this issue.

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Retail and Consumer Products Supply Chain Report 2010

Volatile energy prices were a notable concern for respondents in Europe and Asia Pacific, but only a lesser one for respondents from North America. None of the respondents from Central or South America expressed a concern for this issue (small sample size in these regions). 28% of retailers and 27% of consumer products manufacturers were concerned by volatile energy prices.

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Retail and Consumer Products Supply Chain Report 2010

Concern for new environmental compliance was only a minor concern for most respondents, though it was most keenly felt by respondents in North America, and worried about the least by respondents in Central or South America. This time, less than 20% of retailers and consumer products manufacturers were concerned.

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Retail and Consumer Products Supply Chain Report 2010

When it came to concern about disruption caused by natural disasters, this was more keenly felt by respondents from Central or South America and Asia Pacific, and by consumer products manufacturers rather than retailers.

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Retail and Consumer Products Supply Chain Report 2010

X. Supply Chain Objectives

The final section of the report aimed at retailers and consumer products manufacturers looks at the biggest supply chain objectives in the next 12 months. Lowering overall supply chain costs and aligning supply chain & business strategy were the most notable objectives, though distribution network optimisation, reducing logistics/transport costs, efficient planning and forecasting tools, reducing waste and inefficiencies, and reducing inventory were also popular choices.

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Retail and Consumer Products Supply Chain Report 2010

When looked at by industry, little correlation was seen between the answers from retailers and those from consumer products manufacturers. On the whole, consumer products manufacturers had more objectives than retailers, with lowering overall supply chain costs and reducing logistics/transport costs being particularly notable in this regard. The main exceptions to this trend came with warehousing optimisation and lowering procurement costs, which were more popular with retailers than with consumer products manufacturers.

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Retail and Consumer Products Supply Chain Report 2010

XI. Methods of Marketing to Retail or Consumer Product Manufacturers

The final question asked of respondents was answered by those companies who market products/services to retailers and consumer product manufacturers, and looked at which methods of marketing they utilize. Travelling to one-on-one sales meetings was the most notable response, though speaking at conferences, lead generation campaigns, attending industry events as a delegate, brand awareness campaigns, research and publishing white papers, and hosting internal networking events were also popular choices. One of the more interesting points was the slight increase in popularity for online advertising as compared to print advertising.

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Retail and Consumer Products Supply Chain Report 2010

XII. Conclusions
The retail and consumer products industry is not thriving in 2010, but it is surviving in both Europe and North America whilst there are indicators of strong growth in Asia-Pacific, Africa and South America. In terms of the supply chain, lowering cost is not suprisingly the number one objective of executives. The use of 3PLs is widespread, and still growing; but there are still gaps that 3PLs can fill, especially by broadening their product offering and sales efforts towards medium and small enterprises. The garments on hanger sector is also grossly under-represented by the use of 3PLs. An encouraging sign is the fact that half of all respondents stated that they have either a Chief Supply Chain Officer or Chief Logistics Officer in their organizations. And with 60% of respondents reporting that the most senior supply chain executive in their company is on the management board (although North America is lagging behind Europe and other regions with a figure of around 40%) we can confidently report that the supply chain function is now very well recognized and respected in the retail and consumer products industry.

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Retail and Consumer Products Supply Chain Report 2010

XIII. About Nygard 3PL

Nygard 3PL (aka N3PL) serves the "Fashion Industry". Leverage our technology and supply chain expertise Nygards Fashion Industry logistics leadership spans 40 years: Immediate N3PL benefits:

Fast To Market Delivery Reduction in Overhead, Freight and Handling Higher Gross Margin / ROI Market Introductions Expertise and Experience in Supply Chain Management Sourcing Logistics Technology Proven Technology for Logistics NR5X IT System TMS & WMS Functionality Direct to Store Capability Full Visibility Glass Warehouse Infrastructure Buildings Configured for GOH and Cartonized Product Lower fixed cost structure

3PL Services:

Logistics Receiving Pick/Ship GOH Cross Dock/Consolidation Shipping Inventory Management Value Added Services (Re-ticketing, Changing Hangers) Fully Integrated IT Solution with Client visibility Supply Chain Management Order Planning Manufacturing Plan Warehousing Full Inventory management

For more information visit our website at http://3PL.nygard.com www.eft.com 32

Retail and Consumer Products Supply Chain Report 2010

XIV. About eyefortransport

Established in 1998, eyefortransport has become one of the leading providers of business intelligence, independent research, news and executive level events for the supply chain & logistics industries. eyefortransport has two primary focuses. 1) To provide executive networking opportunities in the supply chain & logistics industries via the more than 15 events we annually organize and host in North America, Europe and Asia and online via the tens of thousands of users of www.eft.com. The events are designed to compliment and enhance the business connections available through our online network, and bring together the industry elite. Regularly attended by CEOs and senior management from the transport and logistics industry and Heads of Supply Chain of major companies, the events focus on current developments and latest trends, and are enhanced by high level, exclusive networking opportunities. 2) To deliver industry education through dozens of industry reports, surveys, newsletters, webinars and senior-level presentations at leading events. For the list of current research, news and events we produce please visit www.eft.com If you are interested in receiving more information about the upcoming Retail and Consumer Products Supply Chain Summits in London, New York or Chicago and Hong Kong in 2011 then please contact Chris Saynor on csaynor@eyefortransport.com

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Want more?
At eyefortransports Retail and CPG Supply Chain Summit June 20-21, 2011 London - hear expert speakers share their success stories and strategies for improving their supply chain and logistics operations in 2010. Make sure your knowledge is at the forefront of industry thinking and that your company leads the way to the retail and CPG supply chain of the future. Give your company the competitive edge in an increasingly competitive market, and prepare your supply chain to serve the Consumer of the Future. Complimentary Passes with Accommodation (worth 2500) are available to Supply Chain and Logistics Executives from Retailers and CPG manufacturers. Visit the website today to save one of these LIMITED PLACES: http://events.eyefortransport.com/retail/index.shtml

2011 Key Topics: Supplying the Future Consumer - From technology to the economy, the way that consumers shop has changed dramatically in recent years forcing huge supply chain adjustments to keep pace. Hear which trends and changes supply chain executives should prepare for - and which tools and technologies will lead the way. The customer obsession- how retailers can keep up with an increasingly demand-driven environment. New Channels- As the supply chain faces a massive shake up, how will relationships with suppliers change? How to manage a new selling arena. Battling against a fragmented supply chain- how achieving an integrated supply chain can cut costs and lead times. Sustainability- meeting legislative requirements and cutting costs in the process. Horizontal Collaboration- is this the way forward for companies wishing to reduce transportation costs in the retail & CPG sectors? Forecasting, S&OP & Flexibility - how suppliers and retailers can work together to produce accurate forecasting and operational excellence in an industry where promoted demand is prevalent.

Visit the website to register or learn more: www.eyefortransport.com/retail LEARN MORE: Retail and CPG Supply Chain Summit, June 20-21, 2010 London www.eyefortransport.com/retail Or call Sarah Reynolds - Tel: + 44 (0)207 375 7243