More Requirements for Manufacturers of Children's Products

As if manufacturers of toys and other children’s products don’t have enough product safety rules from the federal government to contend with, the state of Washington is developing a program that will require these manufacturers to report whether their products contain any one of a list of chemicals that it considers harmful.

Under the state’s Children’s Product Safety Act (CPSA) - which passed in 2008 - Washington’s Department of Ecology (DOE) must enact a program to identify a list of potentially harmful chemicals. The DOE has listed 66 chemicals that are designated as harmful to children. Under the program being developed, children’s product manufacturers will be required to provide notice if any of the listed chemicals is contained in their products.

Currently, the program is being implemented via a pilot with voluntary participation by some children’s product manufacturers. The manufacturers are being asked to provide feedback that will help the DOE implement final rules. They are being asked to comment on which chemicals should be added or removed from the list, suggestions for improving the chemical selection process, information about the costs of compliance and the time it takes to reformulate products, and information about specific chemicals used in children’s products.

Once the DOE issues final rules, children’s product manufacturers will be required to declare if their products contain any of the chemicals on the final list. The initial list of 66 chemicals serves as a starting point. Chemicals on the list are said to be toxic and have either been found in children’s products or have been shown to be present in human tissue (blood, breast milk, etc.); however, the fact that these chemicals are found in products does not necessarily indicate that there is a risk of exposure.

The requirement will be phased in based on manufacturer category and product type. Manufacturers will be categorized by business volume.

The pilot test phase is expected to be completed in April, after which the DOE will assess and summarize results. Adjustments, if any, to the draft rule will be made based upon the pilot’s findings. Rules will then be finalized and adopted and then makers of children’s products will be required to report to the DOE if chemicals on the list are in their products.

The state of Washington’s CPSA also contains limits to the amount of lead, cadmium and phthalates that are permissible in children’s products but these standards were preempted by the passage of the Consumer Product Safety Improvement Act by Congress in July 2008. This Act, which contains strict limits on lead and phthalate content, is being enforced by the federal Consumer Product Safety Commission.

The Positive Impact of the GXS/Inovis Merger

The industry has been abuzz about the potential ramifications of the planned merger of GXS and Inovis and whether it will be a benefit to companies seeking solutions for supply chain transaction automation, order lifecycle and logistics visibility, data validation, and supply chain compliance. A recent article from a former GXS insider Bryan Larkin had an interesting take of the planned merger and what it will mean for the B2B space.

First off, he indicates that this may not be the only merger in the next year because companies are increasingly demanding “complete, holistic, end-to-end” B2B solutions that no one company can currently offer. The consolidation of solution providers with different capabilities might be the quickest and most cost effective way of creating a company with a total package.

He adds that the GXS/Inovis deal is good for customers and for the market as a whole and will form a company with offerings that C-suite residents are seeking to move their businesses forward. Of particular significance, both companies share a common vision about where the industry is heading. “GXS showed significant vision with their managed service offerings several years ago – a vision that was rapidly adopted by Inovis. I don’t think Inovis’ move to follow GXS was just flattery or trying to pick of the GXS scraps. They quickly realized GXS was heading down the right path. Inovis understood that outsourcing the processing of supply chain transactions was where the market would go.”

Moreover, as discussed above, both sides bring different and complimentary offerings to their customers, which would enable a combined company to offer end-to-end capabilities. GXS has expertise on “information accuracy at the front and back end of the transaction process, while Inovis has focused more on the middle and on compliance.” As a result of the merger, customers can expect capabilities such as:

· Product data quality before any transactions occur, which means fewer errors down the pike, better on-shelf availability, fewer product line stoppages and decreased inventory
· Translation of business documents between back office formats and trading partner preferred formats – so all data is formatted in a way that each party can utilize
· Transporting messages between organizations using standardized, secure methods to ensure timely delivery of data
· Validation of messages to ensure order acknowledgements, shipping notices, invoices and other documents align with the original order and any change orders
· Validation that orders and shipments align with business rules
· Strong compliance management to ensure the right product is on the store shelves at the right time
· Global availability of services

“A comprehensive solution that ensures accurate, timely and comprehensive communications – and subsequent accurate, timely and complete shipment delivery – is the cornerstone of a leading supply chain,” Larkin writes. To date, no one company has been able to build a comprehensive solution from scratch, but the GXS/Inovis deal may yield the single solution companies are looking for.

Moreover, the combination of so many value-added capabilities via the merger comes at a time when companies are pursuing environmentally sustainable practices, which is forcing them to consider better supply chain practices. There is a stakeholder interest in sustainability, which is inextricably tide to the supply chain. This means efficient and sustainable supply chain practices are increasingly moving under the C-suite radar and could make this merger very timely.

February Sales Heat up as Shoppers Push Snow Aside

In what defies the negative consumer confidence indicators out there, Americans got out their snow shovels last month and dug a path to the shopping centers, giving retail sales a lift in February - the first month of the fiscal year for many chains. If not for several major snowstorms that blanketed the Northeast and Mid-Atlantic states, sales would likely have been higher (Bon-Ton estimated that the storms robbed it of several percentage points in sales). However, while the results suggest that retail is emerging from its long hibernation, they were in comparison to very weak results in February 2009, when the recession was bottoming out. Retailers across various sectors - including Nordstrom, Limited Brands, TJX, Ross, Target, Costco, Kohl's and Abercrombie - posted solid gains. The International Council of Shopping Centers said its index of major retailers showed a 3.7% comp store sales increase in February, the third straight monthly gain. Retailers are hoping that shoppers will sustain the momentum in March and April, which are bigger sales months than February.

Linking Demand with Planning and Execution

A recent article points out that despite exhortations by industry experts that supply chain functions are too fragmented, most organizations remain siloed which inhibits supply chain collaboration and results in missed sales and profit opportunities.

In particular, many companies are successful at optimizing demand planning, transportation planning and supply chain execution functions independently, but are failing to integrate or link these functions to match demand to supply. Failing to let the results of demand planning influence transportation planning and supply chain execution translates into out-of-stocks, or over-stocks. Also, as demand – particularly of fast-moving consumer goods products – is constantly shifting, flexibility must be built into transportation planning and execution. Missed opportunities are an inevitable result when these business processes are not integrated.

The solution lies in linking real time data that captures demand and supply chain visibility. If a retailer and supplier have an understanding of inventory position (in stores, DCs, in transit, on containers) and understand real time demand they can plan the outbound and inbound logistics processes with greater precision. Real time supply and demand snapshots can allow for the effective reallocation of supply to areas of demand – thus boosting sales and reducing out-of-stocks.

Planning and execution must also be integrated, which also involves the capture of real time information. Planning systems must be able to sense and assess the impact of unforeseen events (i.e severe weather, traffic delays) on the supply chain execution phase and deliver a revised plan.

Ultimately, the best solution lies in technology offered on a single platform that supports multi-party, end-to-end, integrated processes that enables companies to link demand to transportation planning and execution, using real time data.

To hear more collaborative solutions for planning, forecasting allocation and smart inventory management that can increase the bottom line for all trading partners, don’t miss the upcoming VCF Conference on March 16-17 in Manhattan Beach, CA – Smart Inventory: Selling More With Less. Click here to learn how you can attend and find out more about SKU optimization, driving revenue from Smart Inventory, Collaborative Planning & Forecasting Analytics, fill-rate best practices and ways to reduce cycle time in a recovering economy.

Gap, Inc. Has Duel Strategy For Growth

Gap, Inc. appears to be pursuing a duel strategy for sustained profit and sales growth. Solid inventory management, fewer markdowns and a sales resurgence at its Old Navy division enabled the apparel company to boost 4Q profits by a whopping 45%. But, saturated markets in the U.S. have kept it from posting the type of sales gains it desires, so the company is turning to international markets for new avenues of sales growth.

Gap’s 4Q net income grew to $352 million from $243 million a year earlier. Sales increased 4% to $4.24 billion. Comp store sales grew 2%, compared with a 14% decline the year before. Comps at its Old Navy unit climbed 7%, following a 17% plunge a year earlier. Comps at the Gap chain in North America fell 1%, and they declined 2% at Banana Republic.

To further its growth this year, Gap said it plans to remodel 200 Old Navy stores – currently its top performing unit. It also plans to open its first stores in Italy and China and add more outlets in Canada, Europe and Asia as part of its international expansion while making it possible for customers in Canada, Britain and nine other European countries to shop online by the end of this year. Similar to a strategy recently outlined by Abercrombie & Fitch, Gap is looking well beyond the domestic front to sustain its growth rate.

Walmart Leaning on Suppliers to Curb Emissions

Walmart is once again taking an industry-leading role, and this time its focus is on environmental sustainability. This means suppliers should sit up and take notice because they are going to be asked to rethink their sourcing initiatives, manufacturing processes, packaging methods and materials and how they transport goods to help Walmart meet its goals. True, Walmart won’t force suppliers to change their practices, but you can bet it will incorporate its vendors’ sustainability record into its buying decisions. Suppliers would be wise to look upon this as a major vendor compliance initiative.

In anticipation of a world of more expensive energy, the company will seek to eliminate 20 million metric tons of greenhouse gases (GHGs) by the end of 2015. This represents “one and a half times the company’s estimated global carbon footprint growth over the next five years and is the equivalent of taking more than 3.8 million cars off the road for a year.”

Calling energy efficiency and carbon reduction “central issues in the world today,” Mike Duke, Walmart CEO and President noted that “We’ve been working to make a difference in these areas, both in our own footprint and our supply chain.”

Walmart has partnered with the Environmental Defense Fund in its greening effort and will collaborate with other advisors, including PricewaterhouseCoopers, ClearCarbon, Inc., the Carbon Disclosure Project and the Applied Sustainability Center at the University of Arkansas. The team will identify projects, engage suppliers, ensure proper procedures are followed for each GHG reduction claim and quantify GHG reductions.

The ambitious project will begin by focusing on popular product categories with the highest embedded carbon — such as milk, bread, meat and apparel. It will then determine that for something to be part of the project it must “reduce GHGs from a product in either the source of the raw materials, manufacturing, transportation, customer use or end-of-life disposal.” Lastly, suppliers and Walmart will jointly account for the reduction, with ClearCarbon conducting audits to ensure claims are correct.

There will be critics who contend that rather than change its business model, Walmart will shift the entire burden on suppliers to change theirs, and absorb the costs. And, the costs could be heavy since suppliers are being asked to examine the entire carbon lifecycle of their products – from sourcing through recycling. However, Walmart has noted that for all actions taken under the sustainability initiative, “Walmart must demonstrate it had direct influence on the reduction and show how that reduction would not have occurred without Walmart’s participation.”

While costs related to making products more energy-efficient will be the responsibility of each supplier, Walmart also believes steps to redesign packaging, improve sourcing, or use materials that are environmentally friendly will make supplier operations more efficient and will improve their brands’ image among consumers – resulting in better sales and profits.

Jim Stanway, who oversees Walmart’s supplier initiatives involving energy, told the New York Times that suppliers would be willing to spend money if “it’s an investment where everybody’s sure it makes the supplier more profitable.”

Moreover, steps to reduce their carbon footprint should help suppliers, and Walmart, stay ahead of cap-and-trade type legislation that may be coming down the pike.

Whether suppliers believe this initiative is good for Walmart, consumers (who benefit from Walmart’s efficiency initiatives via lower pries) and Mother Earth only, or a win for suppliers as well, they would do well to start the process of examining their products’ carbon lifecycle with the goal of developing a sustainability plan. Major suppliers such as Kimberly-Clark, Dean Foods and Procter & Gamble have already been working on sustainability initiatives with Walmart.

Yesterday’s announcement follows Walmart's plan, unveiled last July, to develop eco-ratings for products it sells. Again, suppliers will not be forced to take steps to ensure they achieve high ratings, but the consequences of poor ratings cannot be ignored. Ultimately, the giant retailer is making it clear that it is interested in doing business only with suppliers that share its goals.

ATA Tonnage Index Jumps 3.1% in January

Trucking activity serves as a good barometer of the U.S. economy and according to The American Trucking Association (ATA), truck loads were a lot heavier in January, a sign that the budding economic recovery has wheels.

The ATAs’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index jumped 3.1% in January, following a revised 1.3% in December 2009 and a 2.6% advance in November. The latest gain boosted the SA index to 110.4 (2000=100) in January, its highest level since September 2008 – when the economy tanked and freight nosedived.

On a year-over-year basis, SA tonnage surged 5.7% from January 2009, which was the best year-over-year reading since January 2005 and the second consecutive increase. The gain in recent months was encouraging, particularly since the SA tonnage index was down 8.7% for all of 2009 - the largest annual decrease since a 12.3% plunge in 1982.

The ATA also noted that its not seasonally-adjusted index (NSA), which represents the change in tonnage actually hauled by fleets prior to any seasonal adjustment, was 99.5 in January, up 2.3% on a year-over-year basis, but down 3.3% from December’s 103 reading.

ATA Chief Economist Bob Costello said that the latest tonnage reading, coupled with anecdotal reports from carriers, indicates that both the industry and the economy are clearly in a recovery mode, following months of sluggish volumes due to weak demand, sub par retail sales and tight credit availability. “While I don’t expect tonnage to continue growing as robustly as it did in January, the industry is finally moving in the right direction. Although there are still risks that could throw the rebound off track, the likelihood of that happening continues to diminish.”

Trucking represents nearly 69% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, the ATA said, making it a good barometer of the U.S. economy.