Supply Chain View from the Field

This week I had the opportunity to attend the BVL (Bundesvereinigung Logistik) conference in beautiful Berlin, Germany.  Berlin in the fall is a beautiful time of year, with the leaves changing in the nearby Tiergarten Park.  For those not in the know, BVL is the largest non-profit logistics organization in Europe, and the conference this year even surpassed in size (3200 people) the CSCMP Conference in Atlanta (which I attended earlier this month).  BVL is composed largely of German logistics organizations, but also includes major German organizations such as Daimler-Benz, BMW, Siemens, and of course, SAP.

I’ll be sharing with you some of my observations and insights from the conference, based on discussions.  The first of these was one that took place at the reception last night.  The reception of course featured typical Berlin fare (sausages, pork shoulder, potatoes, etc…)…not for the cholesterol conscious!  I had an interesting discussion with a gentleman from a company called TCHIBO.  This is a company of more than 4 billion euros (about $5B) that started out as a coffee seller.  The original business model was to sell coffee by the pound in a convenient location, and the business had over 4000 outlets in Germany and other parts of Europe.

Then somebody came up with a crazy idea.  “Let’s sell one new thing every week at every store!”  This sounds exactly what it is – crazy.  But Tchibo went ahead.  The idea was to bring in large contain-loads of a single large product every week.  One week it’s bicycles.  Another week it’s sandals.  Then it’s watches.  You name it.  But whatever it was, it was sold dirt cheap (think “quantity discount”)  The idea was to surprise people, and keep coming back.

Believe it not, the idea took off.  Tchibo’s revenues soared.  People couldn’t wait for the next shipment of “stuff” to arrive, and kept wondering what it would be.  Some people delayed purchases in anticipation of being able to buy something cheaper that might come in next week.  Logistically, this became much more complicated for Tchibo, as they were now managing multiple trans-ocean containers coming in from China every week!

But then they made a mistake….they started selling the stuff on their websites.  As anyone who has dabbled in e-commerce knows, this now becomes more complicated.  You are not shipping pallets of product into stores,  you are now shipping individual packages to consumers.  Worse yet, people stopped coming into the stores, so coffee sales dropped.  They preferred to buy it on the internet.  And once you’ve given consumers a taste for something, it’s awfully difficult to take it back away from them….so they’re trying to sort this out at the moment…

More tales of logistics to come!