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Crystal-Ball Predictions

BY Connie Robbins Gentry

Writing about current news events and emerging trends is interesting, but talking with industry leaders and learning about your insights and visions is the magical part of my work. Particularly, when we are dedicating an entire publication to an issue such as sustainability, the most exciting aspect is hearing the crystal-ball predictions of what green will likely mean in three to five years. Relative to the greening of the global supply chain, here are my top two conclusions:

Be green or be gone: Retailers are going to require their suppliers, vendors and service providers to practice sustainable processes. Companies that leave a large carbon footprint will be told to take a hike. Two surveys conducted in June and July by research divisions of London-based First Conferences Group (FC) support this theory.

From a survey of supply chain executives, FC’s EyeForTransport reported that 59% of the 271 respondents ranked green issues as important or very important to their companies’ strategies.

In another survey taken this summer, FC’s EyeForProcurement found that 98% of the 188 participating procurement professionals believed green procurement will continue to expand—despite the fact that only 51% were willing to pay a premium for eco-friendly products.

Although 55% of the procurement respondents indicated that green products or services represented less than 10% of their current sourcing, I predict the adoption of sustainability in global sourcing will come closer to replicating the ubiquitous e-commerce boom than the restrained deployment of RFID.

Bring it back home: The second shift I believe we’ll witness in the coming three to five years is that the tide will gradually turn away from outsourcing to manufacturers on other continents. Geopolitical insecurities, product recalls, inventory delays, plus fuel costs are contributing to a renewed consideration of alignment with trading partners based closer to home. If not domestic manufacturers, then certainly North American suppliers should see increased demand from U.S. retailers.

Curtis Greve, executive VP of Pittsburgh-based Genco, predicted, “Five years from now, the biggest example of sustainability will be the building and reengineering of domestic-manufacturing plants.”

The cost differential between low wages and fuel, he suggested, will drive manufacturing back to this hemisphere. “In many cases, I expect we’ll prefer paying the prevailing U.S. wage for manufacturing, and I think the next China or India is going to be Mexico.”

Already, there are subtle indications that his predictions may come to pass. Earlier this year, IKEA announced it will open a manufacturing plant in Danville, Va., to build furniture for its U.S. stores, rather than relying solely on imported inventory.

At the Supply Chain Summit conference hosted by Chain Store Age in June, Ellen Martin, VP, supply chain information systems for Greensboro, N.C.-based VF Corp., said retailers should be working to achieve “the right mix of off-shore and near-shore suppliers.” VF Corp., both brand manufacturer and retailer, owns a number of plants in Mexico, which provide faster replenishment of its fashion merchandise.

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Winn-Dixie team honored for turnaround

BY CSA STAFF

JACKSONVILLE, Fla. The team that lead Winn-Dixie Stores’ successful turnaround initiative is being honored by the Turnaround Management Association for the best ‘Mega Company Turnaround’ for 2007. Comprised of financial experts from The Blackstone Group, Skadden, Arps, Slate, Meagher & Flom and Smith Hulsey & Busey, the team helped Winn-Dixie regain the market share and profits it started to lose in the mid 1990s and early 2000s to competitors Publix and Wal-Mart.

Winn-Dixie filed for Chapter 11 bankruptcy in early 2005 after reporting  year-to-date losses of $552.8 million or $3.93 per share of common stock and a decline of 4.9% in identical-store sales in its second fiscal quarter over the same period in 2004.

 

Despite the difficulty of achieving a succesful turnaround, Winn-Dixie began its reorganization effort, while still continuing to operate its core business and preserving jobs. According to the Turnaround Management Association, it created new common stock for five classes of unsecured creditors, with recoveries ranging from about 96% to 53%. The company emerged from bankruptcy on Nov. 21, 2006.

For its fiscal year ended June 27, Winn-Dixie reported adjusted EBITDA of  $85.9 million compared to a loss of $27.8 million last year and an identical-store sales increase of 1.6% 

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Sears ends deal with maternity retailer

BY CSA STAFF

PHILADELPHIA Sears and Mothers Work, the world’s leading maternity apparel retailer, will not be renewing their agreement, Mothers Work announced today. Under their current agreement, Mothers Works operates the maternity apparel department in 502 Sears stores through the sale of its Two Hearts Maternity branded merchandise.

Mothers Work said it expects its partnership with Sears to end on June 20, 2008, when it current deal with the company is expected to expire.

Rebecca Matthias, president and ceo of Mothers Work, noted, “While we are disappointed about the end of our relationship with Sears, we feel the decision not to proceed with a renewal is in the best interest of our stockholders since we were unable to reach terms on a renewal which would be favorable for Mothers Work and our stockholders. “

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