No sooner had we published our Supply Chain Matters commentary, Palm Reaches the Crossroad, than the announcement came that Hewlett Packard will be acquiring Palm for an estimated $1.2 billion.

I had not planned to revisit my two previous conclusions so soon, but the temptation is too great not to.  Conclusion one noted that Palm can no longer remain an independent company. Never underestimate the power and influence of private equity and venture capitalists when they begin to cast the nets of a company looking for an acquirer.  The question in my mind was whom, and I must admit that HP was somewhat of a surprise. Then again, the networks of silicon valley are deep, sometimes to the detriment of Asia based companies. Conclusion two noted that end-to-end supply chain capability must always be aligned to the needs of the overall business.  While Palm badly stumbled, HP is an entirely different story.

There is no doubt that there is lots of speculation on the merits of HP as the potential new player in the smartphone market.  HP officials note that they plan to leverage Palm’s webOS operating system in a host of mobile devices which could include tablet computers, netbooks as well as smartphones, and this strategy makes lots of sense to this blogger.  Where Palm was weak in integrated marketing, HP is superb.  Where Palm didn’t quite understand the power of leveraging channel partners, HP surely does.  While Palm might have struggled with the planning and ramp-up of suppliers and contract manufacturers, HP does not.

Some industry observers are already noting that when this deal is consummated, HP will have a lot of catching-up to do.  This blogger is looking forward to noting how HP jumps into the battle of Apple, Google, Microsoft, Samsung, LG, Lenovo and others to come.  It is about time that a new global savvy player now competes with the ‘magnificent arrogants’.

What’s your view? Are you surprised that HP turned out to be the suitor?  Is HP a viable competitor in this market?

Bob Ferrari

One of the most visible incidents within the U.S. this week concerns the aftereffects of a tragic fire that eventually completely destroyed and sunk a drilling platform in the Gulf of Mexico.  Eleven workers are still reported as missing.  The offshore accident involving a platform owned by BP PLC has marshaled an all out effort by BP and other governmental agencies to control a spreading spill of crude. Some U.S. governmental officials are noting that if the oil spill is not contained soon, it may result in one of the greatest ecological disasters to ever hit the U.S.

While the fallout and ultimate implications for BP, the oil industry, and related marine and agricultural industries that rely on the Gulf are yet to play out, I thought it would be important to initially note one important tenet of supply chain disruption and crisis management, that being initial  accurate risk assessment.

Last Friday (April 23) I watched a number of U.S. media outlets reporting on this incident, including CBS News.  Coast Guard Rear Admiral Mary Landry, commander of the government response noted in a CBS Early Show interview that she had received assurances that no oil was leaking from either the ocean floor or the well riser.  She described this as good news, and that recovery efforts on the weekend would concentrate on containing the oil that had already spilled.

Obviously, that information was not accurate, and precious time may have been lost in mounting a proper response to the disaster.  It turns out the oil was indeed leaking from the damaged well, now estimated to be at a rate of 42,000 gallons per day. BP and Coast Guard personnel continue to scramble to ward off an environmental disaster, including today’s strategy of actually attempting to burn off the oil.

One of the most important aspects of managing risk at a time of crisis and disruption is the initial gathering of accurate assessment information.  That information often needs to be validated and corroborated, since people who are scrambling tend to rush too soon to judgment. Whether the crude was leaking initially or after the initial rig sinking, accurate information gathering, testing and assessment remains the most important need in times of disruption.

Bob Ferrari

As a follow-up to my attendance at the recent Sterling Commerce Customer Connection 2010, I had the opportunity to provide a more detailed overview of my impressions and conversations held at the conference, particularly in the perspective of the current state of global supply chains.

You are welcomed to view this commentary in my guest posting on the Infosys Supply Chain Management Blog.

Bob Ferrari

Multiple months of global recession have presented significant supply chain challenges for many organizations, but the most prevalent has been inventory management and the crucial need for optimizing overall inventory levels.  As we have noted many times in this blog, advanced inventory optimization technology has been instrumental in helping companies save significant money in overall inventory investment.  Up to this point, this technology generally was available to large businesses, but that situation is changing, and mid-market manufacturers, retailers and wholesales should take note.

In a recent posting, we noted that inventory optimization provider Optiant was acquired by Logility, a supply chain technology provider that specializes in mid-market planning needs.  (Disclaimer: this author was a former Vice-President at Optiant). Logility has indicated that it will offer Optiant’s inventory optimization applications as Voyager Inventory Optimization within the existing Logility Voyager Solutions Suite.

This week brings another important announcement that should capture the interest of mid-market companies. Inventory optimization provider ToolsGroup, a previous competitor to Optiant, and Italian based MHT are announcing a new demand planning and inventory optimization application alternative for Microsoft Dynamics AX suite. This application which has the funky name of SO99AX is being positioned as a replacement or enhancement for Microsoft Dynamics AX Demand Planner 2.0, and combines demand planning, inventory optimization and replenishment planning in a single planning application. It incorporates a rather unique ToolsGroup probability engine that addresses variability, randomness and lumpy demand, the same type of planning engine in use at many large scale customers of ToolsGroup. In essence, this application can provide mid-market companies with complex demand and inventory challenges in a singular planning application that can oversee both demand and inventory optimization. While I have not had the opportunity to actually view this application, I’m told by Jeff Bodenstab, Vice President of Marketing for ToolsGroup that the application provides rather sophisticated capabilities along with a very user friendly user interface.

I have long advocated that mid-market manufacturers and retailers would benefit by an integrated planning application that provides essential yet more sophisticated supply chain demand and inventory planning capabilities, and it is great to observe that there are now new options available in the market.  While ToolsGroup would not discuss pricing and deployment strategy, I trust that they will price this new application within the reach of mid-market enterprises.

For readers who are speculating on the funky name, I was informed that the name SO99AX is supposed to represent service levels of 99% with Dynamics AX. I suppose this is what happens when software developers get carried away with acronyms.

If any Supply Chain Matters readers are attending the current Microsoft Convergence 2010 conference in Atlanta, it would be great if you could share any of your initial impressions of SO99AX.

Bob Ferrari

The name of Palm has been frequent in business news of late.  Our last Supply Chain Matters commentary regarding Palm was at the time of the long-awaited big-bet announcement of the Pre smartphone in June of 2009, complete with a new webOS operating system.  It was deemed the best potential competitive offering to the Apple iPhone.  We noted the importance of Palm’s supply chain capabilities to be able to ramp-up to support a goal to have one million units shipped by the second half of 2009. Palm had brought in an entirely new leadership team with both Apple and mobile device manufacturing experience and the hope was that this experience would translate to brighter fortunes.

A short ten months later presents a far different picture. In March, Palm indicated that it had shipped 960,000 phones for the fiscal third quarter that ended February 26^th, an almost 300 percent increase from the year earlier.  Unfortunately, only 408,000 of these phones were actually sold, leaving the company with a sizeable inventory overhang.  Palm’s CEO noted in the Q3-2010 earning press release: “Our recent underperformance has been very disappointing, but the potential for Palm remains strong.” Now, several weeks later, the company is fielding acquisition offers.  On the GigaOM network featured by Bloomberg Businessweek, Kevin Tofel notes how Palm slipped in marketing and advertising strategies related to the Palm Pre. “instead of marketing Pre smartphones as high-value handsets, the (Palm’s) carriers are holding fire sales to rid themselves of excess inventory.”

Optimism apparently has its limits when your products lack traction in the market.

On April 12^th, news spread among the Silicon Valley crowd that Palm was quietly putting out feelers for a buyer.  Initial speculation as to potential buyers looked to the Pacific Rim, as well as RIM, the company.  Speculation ran high that Taiwan’s HTC, a high volume mobile phone producer, and best known lately for its Android phones, might be the best buyer for Palm. HTC’s production and supply chain scale, coupled with the Palm brand, could add a stronger competitive dimension.  Another speculated buyer was China’s Lenovo, which of late has been moving toward broader diversification in its product offerings beyond laptops and PC’s. As I pen this posting, a Reuters news story indicates that HTC has dropped out of the bidding and Lenovo is now emerging as the leading candidate to buy Palm.  Other potential acquirers are noted to be Chinese telecom companies Huawei Technologies or ZTE, but they may face intensified governmental scrutiny.

Palm faced many insurmountable obstacles in its quest to be the potential iPhone alternative.  We can all speculate as to which of these obstacles turned out to be the Achilles heel.  It could be the initial choice of carrier distribution and channel partners, difficulties in initially scaling-up production capabilities, or the fact that Apple’s momentum in the market is insurmountable at this point. 

In my view, two conclusions are obvious regarding the current state of Palm. First, in spite of its current independent focused bravado, Palm can no longer remain an independent company.  There is also a strong likelihood that a current U.S. multinational brand will be assumed by some Asian acquirer, and timing could not be more ideal. Second, as we often point out, end-to-end supply chain capability must always be aligned to the needs of the overall business.  In the case of Palm, supply chain ramp-up was not aligned to sales and marketing execution.

What is your view?  Where did Palm’s supply chain strategy falter?  Which company will benefit most from acquiring Palm and which is the most likely to actually pull-off an acquisition of Palm?

 Bob Ferrari