SUPPLY CHAIN

What I Did on MyVacation

BY Kevin Coupe

“I think about Paris when I’m high on red wine, I wish I could jump on a plane …”—Jimmy Buffett, “Changes in Latitudes, Changes In Attitudes”

This summer, I did.

Not only did I travel to Paris and northern France this summer for a 10-day vacation, but I also had the opportunity to spend five days in Shanghai, China, on business—which was timely since it seemed like many of the headlines at home were about food-safety issues related to a lack of vigilance on the part of Chinese manufacturers.

These trips to two very different countries on opposite sides of the world taught me a lot about their cultures and what their prospects and challenges may be in the early part of the 21st century.

While China often is portrayed in the media as one of just a few Communist countries left on the planet, you’d never know it from a visit to Shanghai, where capitalism seems to be in full force—in some ways, it appears to have run amok, as heavy levels of pollution from industrial facilities tend to create an oppressive amount of heat and humidity. As I looked out my hotel window at the skyline, there were neon signs for major and minor companies everywhere.

In visiting one of the city’s “wet markets,” I caught a glimpse of yesterday’s Chinese retail scene—it was a bustling hodgepodge of small shops and independent merchants selling all sorts of fresh foods—dominated by produce that at least looked incredibly enticing. In one corridor dedicated to cooked foods, the smells of frying food were everywhere and hunger-inducing, though the approach to sanitation and food-safety issues seemed a bit…lax. Illustrating this in vivid fashion was the room at the end of the corridor where shirtless men stood behind cases of live chickens; local women would come in, feel various chickens to see which ones seemed plump enough for cooking, and once they’d chosen a bird, the men would go to work—and the blood-splattered walls told the rest of the story in stunning color.

It was interesting the extent to which three global retailers looking to get a foothold in China—Tesco, Metro and Carrefour—were trying to emulate some of the wet-market experience while educating the Chinese about why it is important to transition to more modern sanitation procedures. At the Metro store, for example, I was impressed by the level of food safety and supply chain information provided to consumers through signs and charts. Clearly, there is an effort to keep the consumer informed. I’m told that part of the reason for this is that, as citizens in an emerging economy, the Chinese are demanding greater transparency.

At the Tesco store, dozens of women competed over a case of dead, skinned chickens, feeling them to see which ones seemed freshest for cooking. Around the corner, people were using nets to choose their own live fish for dinner, while others chose from a case of live frogs and eels. As a friend of mine said in surveying the scene, “They live a lot closer to the earth here than we do at home.” That’s true—and while closer to the earth has its downside, there is something refreshing and energizing about the way food is sold there. At the same time, these global players—Wal-Mart also is being highly aggressive in China—are bringing a new focus on efficiency to the country’s retail scene.

During my visit to Shanghai—I was attending the always-provocative annual CIES World Food Business Summit—I had a chance to speak with a number of retailing and manufacturing CEOs about the food-safety issues that seem to be popping up every day in China. Almost to a person, they said that they were convinced—based on their conversations with local officials—that the Chinese government was serious about making the kinds of changes necessary to assure that China’s link in the supply chain is not negatively affected in the long term. (Serious is right. Shortly after my return from Shanghai, a food-safety official who was convicted of taking bribes and of “purposeful neglect” of his duties was executed by the government.)

The atmosphere in France couldn’t have been more different mostly because, while I’m sure that the supply chain there is plenty efficient, the real emphasis seems to be on the wonderful food culture, the way you can walk into a small restaurant in a small town and have the most delicious crepe you’ve ever tasted—until you go to another town and another restaurant. Often these places have kitchens in which only one person is working, so there is a sense of hand-crafted, lovingly prepared food—not fast-food, lowest-common-denominator burgers that depend on size for their appeal. From the northern countryside of Brittany and Normandy, to the small streets and alleyways of Paris, we never had a bad meal or a bad glass of wine.

Ironically, there was a movie out this summer that exactly caught the tone and the texture of the French food scene—“Ratatouille,” an animated film from Pixar about a rat that wants to learn how to cook. There is a moment in the movie where a crusty old food critic tastes a freshly made ratatouille, and he is transported back to his mother’s kitchen where, as a boy, he first learned to love food. In that magical movie moment, the film captures what is best about the French food culture.

My trip to France, coming just a week after my Shanghai sojourn, was particularly interesting because of the way effectiveness seemed so much more important than efficiency. In most of the restaurants we visited, there seemed to be little interest in “turning the tables,” and often the hardest thing about ordering was getting management to give us the bill. They were in no hurry for us to leave— which was annoying at first, then refreshing, and finally, comforting. I’ll have another glass of wine, please…

It seems to me, however, that the comparison between the two cultures is worth noting in a broader sense, because New World countries like China, as it grows in both population and influence, will challenge Old World countries like France—and even the United States, which itself is Old World when compared to China. In order to compete, more traditional countries will have to figure out how to keep up with nations that have been bred to move fast, move efficiently and simply roll over any resistance.

That will be a challenge. But I hope that even as Old World nations figure out how to keep up, there will still be a place in the back alleys of Paris for restaurants where one can get a flavorful crepe, a delicious bottle of wine and enjoy them leisurely while watching the world go by.

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Sears Holdings ceo unhappy with 2Q

BY CSA STAFF

HOFFMAN ESTATES, Ill. Sears Holdings today reported net income of $176 million, or $1.17 per diluted share, for the second quarter ended Aug. 4, compared with net income of $294 million, or $1.88 per diluted share, for the second quarter ended July 29, 2006. The company attributed the decline in its second quarter results from the same quarter last year to lower operating results at both Sears Domestic and Kmart, which were partially offset by improved operating results at Sears Canada.

“We are disappointed with our second quarter results. Our gross margins came under pressure from sales declines and increased promotional activity, and as a result, our net income was significantly below last year and our expectations,” said Aylwin Lewis, Sears Holdings’ ceo and president.

Sears Domestic’s comparable-store sales declined 4.3% for the quarter, while Kmart’s comparable-store sales declined 3.8%. Total domestic comparable-store sales declined 4.1%. The company reported lower sales across most merchandise categories at both Kmart and Sears Domestic, partially offset by increased sales of women’s apparel at both Kmart and Sears Domestic, as well as within consumer electronics and footwear at Sears Domestic. For the quarter, total revenues declined $0.6 billion to $12.2 billion in fiscal 2007, as compared to $12.8 billion for the second quarter of fiscal 2006.

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Lane Bryant pres. joins Christopher & Banks

BY CSA STAFF

MINNEAPOLIS Former Lane Bryant president Lorna Nagler will join Christopher & Banks as president and ceo effective Aug. 31. She will replace Matthew Dillon, who resigned from his position as president and ceo and as a member of the board of directors today. Nagler has also been elected as a member of Christopher & Banks’ board of directors effective Aug. 31.

Nagler most recently served as president of Lane Bryant, a division of Charming Shoppes. Before joining Charming Shoppes in April, 2002, Nagler served as a senior vp and general merchandising manager for apparel and jewelry at Kmart Corp.

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