Today’s Business Day column of The New York Times features a front line article, Cargo Ships Treading Water off Singapore, Waiting for Work. I found this a rather sobering reminder for our community as to how much of supply has been taken from global supply chains.

The article provides a picture depicting 735 cargo ships sitting idle off the coast of Singapore, awaiting some form of cargo.  It also points to 300 idle ships outside the port of Rotterdam and around 150 in the Straits of Gibraltar.  So many ships have congregated around Singapore, that shipping lines are becoming rather concerned about the potential for collisions. This is sobering news when you consider that many of these vessels had facilitated a rather robust global movement of goods from manufacturing centers in Asia to North American and U.S. ports.   The manufacturing engines of Asia has stalled, and we have a long way yet to go toward full recovery.

I suppose we can take a glass half-full view of this situation.  As the article points out, shipping lines have no choice but to dramatically reduce their rates in order to just cover their fixed expenses. An example cited, the cost of shipping a 40 foot container from southern China to Europe has tumbled from $1400 to as little as $300 USD.  If you are still importing goods from China, that is good news for your transportation budget. From a sustainability view, we also have up to 1000 ships limiting their greenhouse emissions.

On the other hand the news does not bode well for future capacity.  The article notes that eight small shipping companies have gone bankrupt in the last year and one industry observer believes that at least one of the major carriers is likely to fail.

Let’s hope that recovery comes soon, for everyone’s sake.

Bob Ferrari

To continue my live dispatches from this year’s Sapphire / ASUG Conference, there are two news items related to the SAP supply chain management.  The first is the emphasis on the release of SAP Business Suite Release 7 from February, which includes the SAP SCM suite as well as a number of end-to-end integrated processes that involve supply chain business processes.  In later posts, I am planning to provide more detailed analysis and commentary related to how the various applications are performing for users.

The second SCM announcement relates to SAP’s partner ecosystems program. SAP Enterprise Inventory Optimization provided by SmartOps has now been elevated to be part of the SAP solution extension program.  I had the opportunity to catch-up with Michael Godshall, the Vice President of Partner Management for SmartOps on the show floor to get a broader perspective.

This announcement has several implications for SAP supply chain customers and prospects.  Achieving solution extension is the highest level of partnership with SAP.  The application is now fully branded by SAP and appears on the SAP price listing.  SAP Enterprise Inventory Optimization will be pre-configured with SAP connectors to SAP APO and other applications for more streamlined implementation, with application training, first and second level customer support being provided by SAP.  SAP sales representatives also receive credit for sales and can sell the application with full commission, like any other SAP application.  From my view, this is a plus for the SAP sales team, since multi-echelon inventory optimization is a high demand attraction in the market, given the current economy, and the application can be a lead into other selling opportunities.

I also asked Michael about the implications of this announcement on the existing MIPO application from SmartOps.  Michael assures SmartOps customers that innovation will continue with this product, along with other SmartOps application offerings.  Do expect, however, that MIPO will now be targeted for non-SAP installed prospects such as Oracle and other legacy supply chain planning systems.

For SAP customers seeking multi-echelon inventory optimization, this announcement offers one-stop shopping.  But be prepared to pay the price that comes with a SAP solution extension. With other best-of-breed inventory optimization vendors also aggressively competing for sales, SAP customers can continue to leverage in price negotiations.

Bob Ferrari