No sooner had the dust begin to settle on the December blockbuster announcement that Gartner would acquire supply chain industry analyst firm AMR Research, (you can read all about it at this Supply Chain Matters link) the word comes forth that Gartner has also acquired industry analyst firm Burton Group for the tidy sum of $56 million.

As you can note from the Gartner press release, Burton is a well respected research and advisory firm that provided in-depth technical advice to front-line IT professionals.  Somewhat different than the AMR announcement, Gartner has actually completed the acquisition of Burton, and apparently chose not to announce the deal when originally consummated.  I suppose one could speculate that Gartner did not want to take away from the news on the AMR Acquisition.

You can view some interesting perspectives on the Burton acquisition on both Carter Lusher’s Sage Circle and Phil Fersht’s Horses for Sources blogs.   The bottom line consensuses on the implications for these series of announcements are further consolidation of the industry analyst world and limited choices for alternative opinions.  Phil Fersht’s also hits the nail on the head with his statement: “While Big G has picked up some superlative minds from its latest acquisitions, its new challenge is going to be maintaining those edgy opinions, and not having them toned down under the glossy corporate veneer of the billion-dollar brand.”

As for AMR Research, I learned today that Gartner completed the acquisition just before Christmas, ahead of its original schedule.  Gartner is obviously moving rather quickly to solidify the new AMR business model.  Kevin O’Marah, former Chief Strategy Officer will now report directly to Peter Sondergaard, Senior Vice president of Research for Gartner, and direct all AMR research activities under the Gartner umbrella.  Contrary to what was announced in December, Gartner supply chain analysts Dwight Klappich and Tim Payne have moved over to be part of the AMR research team, which in-effect leaves limited supply chain research coverage if you are an existing Gartner supply chain research customer.

From my perspective, Gartner’s strategy and motivation in these moves is to expand its reach and make a major push towards dominating more end-user and practitioner advisory needs.  So far, these efforts indicate coverage for supply chain and IT communities.  Of course, if you seek all of these services, be prepared to pay-up for all three.  No doubt, the Fortune 100 types will have the clout to negotiate their own deals, but not so for others.

As far as I’m concerned, I am more than willing to fill the existing supply chain advisory void and provide a second supply chain voice when needed.  If you are in need of such services, you can check out my consulting website, since we just added advisory services package options.

Bob Ferrari

No sooner has 2010 begun and we find evidence of large industry influencers embarking on the first steps toward what could ultimately become significant disintermediation and power change within industry supply chains.

This week’s two significant evidence points were a Wal-Mart announcement related to how it intends to cut additional billions of dollars of costs from its supply chain, and Google‘s announcement concerning its newly launched Nexus One smartphone.

Significant supply chain implications tend to always start with Wal-Mart, since its initiatives often cascade to other industries related to consumer goods.  According to a Financial Times article, (promotional free sign-up account may be required) the retail giant intends to combine its store purchasing efforts across major geographic boundaries.  The effort is described as a plan to consolidate global sourcing of supplier purchases by going supplier direct rather than utilizing third-party procurement companies or suppliers.  Wal-Mart plans to leverage purchase volumes for global distribution to its stores, rather than a current country-by-country approach.  The report notes that Wal-Mart has already established four global merchandising procurement centers for clothing and general goods, and is in the early process of shifting to global-wide direct purchasing of fresh fruit and vegetables, starting with North America.

Google, well known for its disruptive tendencies, who has of late muscled its way into branded smartphones, announced this week that it plans to sell phones directly to consumers, bypassing major wireless carriers and electronics retailers.  By establishing its own online store, Google will offer an “unlocked version” of its new Nexus One phone for $529, which consumers can directly purchase and later enable with a wireless carrier of choice that supports Google’s wireless technology.  Of course, there will be options to purchase “subsidized” Nexus phones, starting with a $199 plan offered by T-Mobile, but the initial blogsphere consensus is that Google’s intent is to ultimately challenge the traditional mobile phone distribution model through wireless carriers. One of the better initial analyses comes from Renay San Miguel in an Ecommerce Times article, What’s Behind Google’s Strange Nexus One Sales Strategy?

I’m sure that Supply Chain Matters readers can provide more than enough commentary regarding the pros and cons related to either of these noted initiatives. 

In the Wal-Mart case, there can be comments related to the overall risk of global-level procurement, risk related to consistency of quality, adherence to governmental inspection standards for fruits and vegetables, or responsive processes in the event of a product recall.  What happens for instance if a salmonella infected fruit or vegetable needs to be backward traced through the supply chain? Will Wal-Mart assume primary risk as the primary purchaser and distributor of goods?

In the case of Google, we can certainly debate the success or reward factors of any upstart who attempts to alienate the existing distribution thinking or network realities.  How will consumers be able to test-drive a phone, where does one go to repair or return a phone after you literally own that phone, and will global consumers be willing to shell out a large initial sum of money in order to avoid being locked into a specific carrier’s plan? Most important of all, how or who will Google partner with to deploy a worldwide order fulfillment network that can rival the likes of Amazon or Apple?

And let us certainly not forget a mention of what happens to all of the people employed by current intermediaries, since they represent the consumers of each of these vendors’ products in the long term. 

Many industry observers can point to the fact that major economic downturns, such as the recent global-wide recession, can often lead to new industry disrupters, companies who ride the recovery in an entirely different business model.   The first week of January 2010 should be referenced as the initial thrusts from two global giants to again be industry disrupters.  There will likely be others who follow, and time will tell how successful these efforts will become, or how disruptive they actually turn out to be.

We will no doubt have frequent updates during the year.  In the meantime, chime in with your own comments on how do you view these announcements?

 Bob Ferrari

There was a lot of uplifting news in financial markets this week regarding hopeful sign among the U.S. and global automotive industry.  China’s car market exploded in 2009, to a rate of almost 50%, fueled by highly targeted governmental buying incentives and a more optimistic customer base.  Automakers in the U.S. experienced their worst year in almost three decades, but there were hyped-up signs of a potential sales rebound that began in December. In the U.S., Wall Street traders reacted rather positively with a feeling that the worst may be over and consumers will once again be in an auto buying mode.  What bunk!  Knowledge of the state of health among the automotive supply chain tells a far different story.

This week, The Detroit News ran a story titled Tight credit, sales slump threaten auto suppliers, which should once again heighten awareness to the very precarious state of U.S. based auto suppliers. While a wholesale supply base collapse may have been averted, perceptions remain that there is too much capacity, and too much financial instability among this supplier base, in an industry that the government feels is strategic to long-term prosperity. 

Many of the large Tier one suppliers have been financially struggling for many months, if not years, and were saved when the U.S. government allowed the major OEM’s to accelerate trade payments to these suppliers.  But among other suppliers, the picture continues to be precarious.  The article quotes the Original Equipment Suppliers Association noting that almost 60 suppliers sought bankruptcy protection, and as many as 200 turned off the lights.  More troubling however is the perception that the Obama administration, specifically Ron Bloom, the President’s advisor for manufacturing, has made it clear that industry consolidation, by as much as 30 percent, needs to happen. 

Since the beginning of the financial meltdown, I have been penning my view that to save a key industry, you need to focus on all the strategic elements of its value-chain.  I even advocated for the financial rescue of both Chrysler and General Motors for the sole purpose of saving jobs among the supplier base.  Twelve months later, while GM is looking somewhat better from a financial perspective, the industry supply base is not. 

In March of 2009 I penned a posting, Prescriptions for Detroit’s Supply Chain Crisis that cited feelings among industry observers that collapse of this industry would be far more harmful if it occurred from the bottom, rather than top-down.  In that March posting, I highlighted a quote from Laura Macero of Grant Thornton’s Corporate Advisory and Restructuring Services team: “Without a structured approach of consolidation to the benefit of the entire supply chain, the industry may lose critical partners with the technology, scale and geographic footprint that are linchpins in the viability equation.”  That prescription remains just as meaningful, but the industry has lost precious time and confidence.

Automotive industry and government leaders speak to America’s new growth industries including smaller hybrid and electric powered automobiles.  They speak to the need to have these newer technologies and supply capabilities sourced within the U.S to insure global competitiveness. In case anyone forgot, the billions of dollars spent to save GM and Chrysler did not obviously help the multitudes of key suppliers to this industry prepare for this new generation of technology. Instead, attrition seems to be the prescription

I repeat my rant on manufacturing just before the close of 2009, namely that Ron Bloom should view his job as not the special advisor for manufacturing but rather an advisor for building and sustaining competitive supply and value-chain networks, including the entire U.S. based automotive value-chain.  Mr. Bloom, broaden your horizon and think holistically.  Industry leaders, help your suppliers’ position themselves for long-term capabilities as well as financial survival.

 Bob Ferrari