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The Tech Twist to the Amazon-Whole Foods Acquisition

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Over the coming days Supply Chain Matters will feature both our own and invited guest commentaries regarding last week’s blockbuster announcement that Amazon intends to acquire the Whole Foods grocery chain for $13.7 billion.

In this posting, we update our readers on rather interesting added developments, to state the obvious. Whole Foods Austin The Tech Twist to the Amazon Whole Foods Acquisition

A report published by The Wall Street Journal, Get Off Amazon’s Cloud, (Paid subscription required) once again reinforces the extent of the cutthroat competition that Wal-Mart and other retailers now have with Amazon. The report indicates that Wal-Mart is instructing software and other technology suppliers to the global chain to refrain from utilizing Amazon Web Services (AWS) as the backbone Cloud platform. The report notes:

Wal-Mart , loath to give any business to Amazon, said it keeps most of its data on its own servers and uses services from emerging AWS competitors, such as Microsoft Corp’s Azure.”

That is certainly an unexpected boost for Microsoft as well as AWS competitors such as Oracle, Blue Cloud, IBM and others. Other technology providers catering to retailer software technology needs further confirmed specific retailer requests to prefer Cloud platforms other than Amazon’s.  We have similarly heard of such concerns shared by certain vendors in their retail customer interactions.

The concern is access to sensitive customer or other fulfillment or supply chain related data. That makes sense. However, AWS, along with other Cloud platform vendors must adhere to certain regional and global data security standards associated with certification standards. But that is not going to appease retailers who after last week’s announcement, are not going to trust anything related to Amazon supported services.

The obvious benefactors are software and Cloud applications providers catering to retail industry needs who elected to outsource Cloud infrastructure to providers other than AWS. That would include B2B Business Network and EDI messaging support providers as well as transportation and logistics Cloud-based providers. After today’s WSJ report, product marketing teams of Cloud infrastructure platform provider will likely re-double their efforts for targeting retail industry, including all its supporting elements.

Another Whole Foods Suitor?

While on the subject of Wal-Mart, JP Morgan indicated in an investment advisory that this retailer is likely the only other retail chain that can make a counter-bid to acquire Whole Foods, but there are likely other overriding factors such as clashing corporate cultures, Whole Foods customer whiplash and a potential bidding war with Amazon that would likely make such a move unlikely.

A posting published by Business Insider provides added details of the JP Morgan analysis. The sum total of the JP Morgan argument is why play defense when it’s better to stick to offense:

Given Walmart’s 20%+ share in grocery, why should the company spend $14B+ on what it’s already good at (selling food via brick-and-mortar) when the money instead could be used to expand and improve Jet.com and Walmart.com? Jet.com is Walmart’s urban/millennial alternative to Amazon Prime, and Walmart.com is in many ways the ‘forgotten man’s’ alternative to Prime.”

From our lens, that is a powerful argument and a likely indication that there will not be a counter bid.

Many of the post-announcement opinion commentaries speculate what Amazon will do to leverage a well-respected grocery retail chain.  From our lens, we advise readers to consider all the supply chain, customer fulfillment and customer intelligence capabilities of Amazon applied to a leveraged online and physical retail grocery presence. Picture a Whole Foods store augmented with an added, automated customer fulfillment storeroom complete with Kiva robots sorting and staging online orders for parking lot pick-up. Think of the possibilities of the virtual Amazon fulfillment button affixed in our kitchens that electronically transmits the grocery shopping list to an online order available for one-hour pickup.

The possibilities are endless and the threat is real.

Stay tuned for continuing commentary.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Marked Increase in Supply Chain Technology M&A Activity

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Within the past few days, there has been a marked uptick in merger and acquisition activity involving business process and decision-making support surrounding the broad umbrella of what is today supply chain management. Three different announcements, each involving OpenText, Descartes Systems and JAGGAER demonstrate various strategies being played out for augmenting technology, business services and vertical industry depth.

As 2017 began, one of our ten annual predictions called for a renaissance in supply chain focused business services and technology investments supporting augmented and ever-changing business process and decision-making needs. We anticipated that investment areas would include digital supply chain transformation, data visualization and more predictive analytics and broader end-to-end supply chain visibility.  Boardroom 300x200 Marked Increase in Supply Chain Technology M&A Activity

We anticipated that with a continued robust investment cycle, merger and acquisition activity would accelerate among technology and services providers, particularly in the notions of blending technology, software, and managed services.

OpenText to Acquire Covisint Corporation

Enterprise Information Management and Supply Chain Business Network provider OpenText announced this week that the provider has entered into a definitive agreement to acquire Covisint Corporation, an automotive industry focused Cloud platform providing digital connectivity of business processes and Internet of Things (IoT) enabled processes. The reported transaction purchase price is approximately $103 million of market value or $75 million on enterprise value.

According to the announcement, the acquisition is expected to deepen Open Text’s EIM offerings with the addition of a cloud-based IoT platform, as well as expand the Canadian firm’s presence within Automotive industry supplier relationships and supply chain business process collaboration. The announcement indicates that Covisint will be integrated into the OpenText Business Network, a portfolio of cloud technology and software applications that facilitates B2B network messaging and compliant information flows.

Our automotive readers may well have knowledge of Covisint’s legacy dating back to the late nineteen-nineties as one of the first industry-specific B2B marketplaces. Of late, this provider has been messaging capabilities for building a portfolio of capabilities to support digital transformation that includes B2B messaging and process orchestration, identity, and verification, and IoT enablement.

The OpenText Business Network has provided a special emphasis on Automotive industry B2B business network needs and in May of this year, closed on the $100 million acquisition ANXeBusiness Corp. (ANX), a provider of cloud-based information exchange services to US Automotive and Healthcare industries. That acquisition was focused on simplifying relationships among the global automotive trading community, and now with the addition of Covisint, should strengthen such capabilities. This latest acquisition is expected to close in the third quarter, subject to customary closing conditions.

 

Descartes Systems Acquires PCSTrac Business

Descartes Systems Group and its associated Global Logistics Network (GLN), announced this week that it has acquired substantially all the assets of the business of PCSTrac, Inc. including certain related assets of Progressive Computer Services Inc. dba PCS Technologies (collectively referred to as “PCSTrac”). The reported acquisition price is $11.25 million.

US-based PCSTrac helps specialty retailers and their logistics service providers collaborate to improve carton-level visibility for shipments from distribution centers (DCs) to stores. PCSTrac’s technology provides visibility and insight into the store replenishment supply chain, helping increase sales, enhance loss prevention, and improve inventory control. Like Descartes’ Bearware platform, PCSTrac also supports pool distribution, which helps retailers reduce logistics costs and minimize store disruptions by eliminating unconsolidated direct shipments from suppliers and retailer distribution centers.

According to the announcement, pool distribution has become an increasingly important strategy in leveraging a growing community of retailers and pool carriers to lower distribution costs, increase delivery frequency, and improve overall replenishment performance. Effective pool distribution requires a common technology system for participants that helps standardize the process and provides carton level visibility across the entire store replenishment lifecycle.

Similarlyarly, Descartes had previously acquired BearWare to augment capabilities to manage the increasingly complex omni-channel retail supply chain environment. Both acquisitions plan to augment the Descartes Global Logistics Network with carton-level tracking and pool distribution support.

 

JAGGAER And POOL4TOOL Merger

U.S. based procurement Source to Pay (S2P) provider JAGGAER, (formerly known as SciQuest), has merged with European-based POOL4TOOL, a specialized direct procurement technology provider. According to this specific announcement, this merger is designed to provide a global footprint of support for both indirect and direct procurement spend processes, and allow the combined entity to execute on a vision of a complete Cloud-based digital procurement platform.

JAGGAER had previously announced its intention to provide deeper vertical industry support. With this newly announced merger, JAGGAER’s footprint in Europe, Asia and the Middle East can expand as well as deliver a global presence for its data centers and customer support. It also adds direct material capability in the North American market. The merger further enables JAGGAER to extend its leading position in higher education procurement process support to expand within Europe.

POOL4TOOL, an admittedly different name for a direct procurement tech provider, brings over 300 customers to the merged entity. The direct procurement provider has further built bidirectional data and information integration capabilities with SAP. Both providers have footprints in automotive, manufacturing, chemical, pharmaceutical and sciences, along with retail industry processing a reported $65 billion in annual indirect or direct procurement spending.

As is often the case, mergers of this type are highly dependent on the timing and integration of two different technology platforms.

Thus, within a period of week, evidence, and demonstrations of individual technology vendor’s strategic positioning points to increased strategic activity. In addition, private equity and other investment firms continue to invest hundreds of millions of dollars in start-ups focused on hot emerging areas including digitalization of end-to-end supply chain capabilities.

However, at mid-year, still missing is the consummation of our prediction of a blockbuster M&A announcement.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Summary Highlights of the 2017 ISM Conference

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This author had the opportunity to attend the annual conference of the Institute for Supply Management (ISM) annual conference held in Orlando Florida this week. This conference brings together supply management professionals spanning areas of direct and indirect supply sourcing and procurement. In this blog posting, we touch upon highlights and some important takeaways and learning expressed by those attending.  ISM2017 logo 002 Summary Highlights of the 2017 ISM Conference

This year’s conference drew a rather large number of attendees, much more than last year’s event.  We estimate attendees were more than 2500, and sensing from some hallway discussions, many came to seek added knowledge and understanding to rapidly changing industry and business environments.

The ISM organization deserves praise for recruiting two keynote speakers that spoke first-hand to the current wave of geo-political and economic events that could well impact industry supply chains in the months to come.

General Colin Powell, former U.S. Secretary of State and Chairmen of the Joint Chiefs delighted the conference audience with his comments on topics related to global events, politics, and industry supply chains. Regarding the latter, General Powell noted that Operation Desert Storm was won by superior logistics, and he shared some rather humorous stories relative to the challenges of moving vast amounts of material, supplies and personnel. He described today’s global landscape as a pressure cooker in the notions of the rise of populism, accelerated by the information revolution. General Powell voiced his view that the U.S. rejection of the Trans Pacific Partnership was an “unfortunate decision”, one that can likely benefit China as a larger influencer in global trade.

Former UK Prime Minister David Cameron’s address came on the morning of the tragic terrorist attack at a concert in Manchester England. Mr. Cameron spoke of the long struggle to defeat terrorism across the globe and on the renewed resolve of his country to march on. On the topic of supply chain management. Mr. Cameron observed: “What you do is extremely important to the global economy.” The Prime Minister later noted that he is a huge supporter of global trade, yet acknowledged that the rising tide has not lifted all boats. He noted that societies must reject tendencies toward protectionism because they failed miserably in the nineteen-thirties. He also addressed the rising tide of populism in observing that the pace of change has perhaps been too-fast, the scale of immigration too great, causing many to be fed-up with mainstream political parties. Addressing specific supply chain topics, he observed that ethical and sustainable supply chains are good for the brand and for society.  During a Q&A sit-down with ISM CEO Tom Derry, Mr. Cameron spoke of the implications of Brexit and what supply management teams can expect in scenarios of a hard or soft Brexit. Finally, responding to the question of what countries will likely be economic stars in the next five years, Mr. Cameron specifically mentioned India and Vietnam as emerging global commerce leaders.

A combined news conference featuring ISM CEO Tom Derry, Hans Melotte, Executive Vice President, Global Supply Chain for Starbucks Corporation, and Kristopher Pinow, Vice President and Chief Procurement Officer for B/E Aerospace, addressed some common themes impacting the supply management area. One was clearly the area of technology, described as quickly changing the current and future practices in supply management, which have typically been more transactional in-nature. Mr. Melotte observed that many in the profession are underestimating the impact of new technologies on processes, which he feels are coming sooner rather than later. CEO Derry observed that procurement managers are becoming much more aware of the importance of the Sales and Operations Planning (S&OP) processes, and the expansion of scope that it implies. This author had a later discussion with Jim Barnes, ISM Professional Services Director who shared feedback from various ISM regional chapters has reinforced the need for added education and involvement in S&OP, and why that involvement pulls procurement into the scope of the end-to-end supply chain.

Another top-of-mind topic remains talent management with an acknowledgement that absolutely, supply management does not have the talent to be able to leverage the tide of new technologies impacting the profession. Melotte noted- “We need to learn how to ask different questions as well as to sharpen our intellectual curiosity as to technology trends impacting our businesses.” Mr. Pinow noted- “We have to recognize that we do not know everything” and he quoted Shelly Stewart, Vice President, and CPO at Dupont in his observation that procurement leaders need to be more actively curious, including what is occurring external to procurement.

While attending other conference sessions, we further noted some rather consistent themes, especially from several panel discussions addressing timely topics. Addressing the challenge of CPO’s in making B2B networks work better together, Beverly Gaskin, Executive Director, Global Purchasing at General Motors observed that procurement has to improve practices in the science of marketing, namely how well procurement leaders sell and influence value to the business and to suppliers. Thomas Linton, CPO and Supply Chain Officer at Flextronics noted that procurement needs to understand the different management cultures of both internal and external partners and can build successful alliances based on different cultures. Many panelists addressed the need for leveraging knowledge and talent in today’s business environments, and that knowledge extends across the product value-chain to include close collaboration with supplier teams.

There were other common themes and takeaways and we will be sharing some of them in subsequent Supply Chain Matters commentaries.

A final note- after attending two subsequent ISM conferences, this author has noted a rising tide of desire and zeal among supply management professionals to become more recognized providers of business value, beyond procurement cost savings. It behooves other teams that make-up today’s broad supply chain management umbrella that spans product design to after-market services to include supply management in collaboration and to recognize suppliers for the partnership value that they can provide. That obviously includes S&OP teams.

Yes, the reality of increased supply chain cost saving needs is not going away and must be accommodated. However, it remains important that supply chain wide teams jointly recognize what capabilities in process, technology and people skills need to be preserved or augmented by trading-off cost savings for key investment needs.

 

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Jabil Raises the Bar in Providing Supply Chain Cloud Platform and Decision Support Needs

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This week, product solutions provider Jabil Circuit made a significant announcement, one that places this company as a supply chain Cloud based technology provider in addition to its other product value-chain design and manufacturing contract services (CMS).

As an independent supply chain advisory service, we have long ago predicted that large volume contract manufacturers would have to broaden their services models to grow market-share and profitability. Jabil is about to demonstrate the notions of providing an end-to-end supply chain focused decision support platform to support product value-chain management needs.

Jabil’s InControl SaaS is described as a multi-tenant, intelligent supply chain cloud platform that provides network wide connectivity, advanced analytics, and built-in machine learning capabilities to optimize near real-time decision-making.

Earlier this month, this analyst had the opportunity to speak with Jabil’s executive team to review highlights of InControl SaaS, and candidly, the full functionality would rival that provided some existing supply chain best-of-breed software providers in today’s tech marketplace. The other important difference is the coupling of specialized managed services in addition to what appears to be a sophisticated B2B network platform.

In its entirety, support encompasses five supply chain focused applications, a decision support platform, coupled with bundled procurement and supply chain focused managed services. The latter managed services include areas that span strategy, procurement sourcing, procurement business process outsourcing, supply network optimization and social responsibility. From our view, the target customers are those that are seeking their supply chain sourcing, operational and decision-making needs focused in a singular integrated platform, especially up and coming product companies that cannot afford the up-front or ongoing expense of investing in complete product value-chain needs.

Jabil’s market messaging emphasizes that the technology has been- built for practitioners, by practitioners, in-essence providing an emphasis on the company’s built-up process and technology development experiences in supporting various aspects of manufacturing and supply chain management needs of its over 250 existing customers, including some of the most complex yet highly recognized supply chains.

While the product was announced this week, the timetable for full functionality currently extends through the first-half of 2018. General availability of the InControl SaaS platform and applications begins in the third quarter, with various other elements planned for latter stages. Pricing is noted as a per-month/per application model with on-boarding, integration and implementation priced separately. Jabil’s go-to-market strategy includes its in-house supply chain, procurement, and professional services team, along with an external partnership with professional services firm PwC.

Included in our 2017 Predictions for Industry and Global Supply Chains was our belief that B2B network platform and managed services providers would provide enhanced supply chain focused analytics and intelligence capabilities, and Jabil’s InControl platform strategy and an existing example of that trend. The interesting twist for the market is the ability to select from either existing supply chain and manufacturing contract services providers, B2B network platform providers, or best-of-breed or ERP software providers. The ultimate decision for which partner will thus be highly dependent on individual business need, existing system landscape and future needs.

Our takeaway is that industry supply chain teams gain the benefits of added choices and of specific expertise, including that of actual on the ground practitioners.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Supply Chain Matters Shares Our Top Ten Blog Postings in 2016

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An annual tradition for the Supply Chain Matters blog has been to look back to the prior year’s readership uptake and share with our readers the top ten blog postings of the prior year.

Admittedly, we are a bit late in compilating all of our 2016 readership data but we did want to publish this for readers, clients and sponsors.

The list provides a sense of what particular topics were of the most interest in our over 300 blog postings published in 2016.  SCM 250 76 Supply Chain Matters Shares Our Top Ten Blog Postings in 2016

In the Dave Letterman style, we start with number ten and work our way down to the number one topic of readership uptake.

Number 10:

Observations on the Rankings for Supply Chain Planning Technology (February 5, 2016)

After industry analyst firm Gartner published its Magic Quadrant Rankings for Supply Chain Planning System of Record applications in mid-January, this commentary shared observations regarding the rankings of vendors. Our takeaway was that the current landscape of supply chain planning, sales and operations planning (SO&P) and B2B supply chain network planning technology was far more influenced by line-of-business and supply chain leadership input needs and requirements. Hence many other sources of information support the buying decision beyond industry analyst rankings.

Number 9:

The Value Proposition for Cloud Computing is Broader in Scope and in Business Implications (January 22, 2016)

This Supply Chain Matters commentary explored the implications of a full Cloud-based technology suite in supporting broad supply chain business process needs after industry analyst Bob Ferrari completed nearly two days of briefings and conference presentations related to Oracle’s Cloud based technology offerings. One takeaway provided was to view Cloud from the perspective of a broader focus on an engineered suite of pre-integrated software applications that are continually updated to reflect changing business needs. Why settle for business application innovation every 1-2 years when every 6 months is an option, and with lower capital and overhead costs.

Number 8:

Sports Authority- A Disturbing Twist to Consignment Inventory Management Practices (March 17, 2016)

Characterized as one of the largest sporting-goods retailers, Sports Authority was weighted down with debt from a prior leveraged buyout a decade ago. We called attention to a disturbing development in the ongoing bankruptcy process, as the retail chain filed lawsuits with more than 160 suppliers challenging supplier claims to consigned inventories. We opined that this development had significant ramifications for supplier collaboration practices within retail as well as other consumer goods focused supply chains.

Number 7:

A Disruptor is About to Enter the Heavy Truck Equipment Market (June 20, 2016)

Supply Chain Matters has continuously provided our readers visibility to emerging industry disruptors who are leveraging advanced technology and platforms directed at supply chain related business process and asset needs.  Such visibility included the entry of Uber and Lyft and their potential to move beyond people transportation. In this posting we provided visibility to start-up Nikola Motor Company and its ongoing development of a Class 8, 2000 horsepower electric powered semi-tractor truck that will be named the Nicola One.  The actual unveiling occurred in early December.

Number 6:

Chipotle’s Consumer Trust Crisis Enters a New Critical Phase (February 9, 2016)

One of our early blogs in a series of ongoing commentaries we outlined from a supply chain lens regarding the business, brand and supply chain crisis that impacted Chipotle Mexican Grill after hundreds of consumers were sickened by a series of varying incidents ranging from E-coli outbreaks to norovirus that date back to the summer of 2015. We opined that too much attention was being applied to corporate marketing vs. supply chain and restaurant risk mitigation efforts. It is now April 2017 and the challenges to restore brand trust remain.

Number 5:

Look to the Cloud to Support the Modern B2B Network (September 1, 2016)

This blog commentary addressed an organization’s journey toward mature B2B information integration and how this is made possible by today’s advanced cloud-based platforms, applications and infrastructure. We opined that there is no question that analytics and broader, more predictive business insight capabilities are opportunities to transform B2B business and supply chain business networks. The opportunity — and indeed the necessity — is to leverage an end-to-end business network to synchronize planning, execution, customer fulfillment and more predictive decision-making needs.

Number 4:

Gartner 2016 Top 25 Supply Chain Rankings- Supply Chain Matters Initial Impressions (May 19, 2016)

Our annual commentary related to analyst firm Gartner’s Top 25 Supply Chain Rankings.  Our annual commentaries reflect our beliefs that ranking criteria can be misconstrued, especially when it tends to favor supply chains that avoid major ownership of assets and inventory, or tend to weight other criteria lower, such as sustainability and social responsibility practices.

Number 3:

A Tour of Healthcare Supply Chain Innovation in Action (February 4, 2016)

Executive Editor Bob Ferrari shared impressions and insights regarding a November 2015 visit to the Cardinal Health Healthcare Supply Chain Innovation Lab located in Concord Massachusetts.  The lab served as a hub to explore innovative technology approaches such as smart sensors and near-field communications (NFC) in addressing healthcare supply chain product demand and supply inefficiencies.

Number 2:

What are Specific Skill Needs and Gaps in Supply Chain Management? (February 26, 2016)

Supply Chain Matters highlights results and an infographic from a supply chain skills survey conducted by Canadian based Argentus Supply Chain Recruiting outlining what specific hard and soft skills are organizations looking for in their hiring and recruiting efforts. Supply chain skills and talent development content has consistently drawn reader interest.

 

And now, a drum-roll for our most read 2016 blog:

 

Airbus and Boeing Continue to Experience Supply Chain Scale-Up Challenges (May 2, 2016)

After announcing Q1 financial and operational performance results, both Airbus and Boeing addressed ongoing challenges related to their supply chains and expected performance for 2016 total aircraft delivery commitments. We shared candid comments from Airbus’s CEO as to the global producer’s most critical new product introductions and clear signs of concerns related to various supply chain challenges. We also called attention to comments from United Technologies regarding the new Pratt and Whitney geared turbofan engine, which turned out to be the weakest link in the Airbus supply chain. Finally we concluded that for the two dominant manufacturers of commercial aircraft, supply chain challenges have once again come back as concerns amid an environment of robust order backlogs. Each has different manifestations and supplier challenges, and each reflects on internal operational scale-up as well. We opined our belief that challenging product design among the most critical supply components, including aircraft engines would continue to be the linchpin towards achieving required production scale-up milestones.

 

Thanks again to all globally located Supply Chain Matters readers for your continued readership and frequent visits.

Thanks as well to our sponsors, clients, and network contacts for their continued support. We will no doubt, have yet another set of different topics of reader interest throughout 2017.

A final thought, why not consider having your company’s brand appearing as a designated sponsor or advertiser on this blog. Send us an email at info <at> supply-chain-matters <dot> com and we will respond with all of the information.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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