2 5 2011 Retail Cpg Industry Report2011

Retail and Consumer Products
Supply Chain Report
A brief analysis of eyefortransport’s 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 ..................................... 8

V. Logistics Strategies ........................................................................ 10

VI. Garment on Hanger Logistics ..................................................... 13

VII. Time Dedicated to Programs ..................................................... 15

VIII. Supply Chain Executives ........................................................... 16

IX. Supply Chain Concerns ............................................................... 18

X. Supply Chain Objectives .............................................................. 28

XI. Methods of Marketing to Retail or Consumer
Product Manufacturers ...................................................................... 30

XII. Conclusions .................................................................................. 31

XIII. About Nygard 3PL............................................................................ 32

XIV. About eyefortransport ................................................................ 33

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List of Charts

Annual Revenue ($) .............................................................................. 6

Geographic Region .............................................................................. 6

Categories of Goods Sold/Produced ................................................. 7

Expected Performance for Retail Sector ........................................ 8-9

Taking Control of Inbound Transportation for Suppliers .................. 10

Outsourcing to 3PLs ............................................................................ 10

Plans to Increase 3PL Outsourcing .................................................... 11

Changing Transportation Modes to Reduce Costs ........................ 12

Forecasting Capabilities .................................................................... 12

Need for Garment on Hanger (GOH) Logistics ............................... 13

GOH as a Percentage of Logistics Needs ...................................... 13

Use of Specialized GOH Facility ........................................................ 14

Use of 3PLs for GOH Logistics ............................................................. 14

Time Dedicated to Programs ............................................................ 15

Position of Supply Chain Executive ................................................... 16

Position that Supply Chain Executives Report to ............................ 17

Use of Chief Supply Chain Officer or Chief Logistics Officer .......... 17

Supply Chain Concerns ................................................................... 18-27

Supply Chain Objectives ................................................................ 28-29

Methods of Marketing to Retail or Consumer
Product Manufacturers ...................................................................... 30

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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 company’s
management structure.

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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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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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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 non-
food goods (respondents could choose more than one category, so
the figures total more than 100%)

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

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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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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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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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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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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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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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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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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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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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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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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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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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XIII. About Nygard 3PL

Nygard 3PL (aka N3PL) serves the "Fashion Industry".

Leverage our technology and supply chain expertise

Nygard’s “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

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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 eyefortransport’s 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

2 5 2011 Retail Cpg Industry Report2011

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