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Report That Amazon Has Already Captured Significant Online Holiday Revenue Share

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Business network CNBC is reporting new analytical data made available by Slice Intelligence indicating that Amazon captured nearly 31 percent of all online spending for the period spanning the Thanksgiving through Cyber Monday shopping days.

If this trend is corroborated by other reinforcing market intelligence data, it would represent yet again the significant online dominance of the Amazon shopping platform. Keep in mind that we still have another 22 days of shopping activity remaining before the celebration of the Christmas holiday and Amazon’s reach could well expand.

Other noteworthy findings indicate that online sites of Best Buy and Target Stores made significant online sales gains while Wal-Mart’s online site fell back in the rankings despite having a record number of initial visits.  Macy’s suffered a significant site outage for much of Black Friday and that was reflected in online sales performance.

Data related to just the Cyber Monday period provided by analysis firm ComScore indicates that Amazon, EBay, Wal-Mart, Kohl’s and Target were the most visited retail sites among shoppers utilizing desktops and mobile devices.

The CNBC report further points to major retailers seeing an uptick in the number of shoppers electing to take advantage of the in-store merchandise pick-up option.

Last year, online shoppers waited until the December period to make their purchases, hoping to snag more attractive merchandise discounts and promotions. Going into this year, retailers have generally cut-back on overall inventory investment with the implication that consumers may well experience some stock-out conditions for the most in-demand merchandise.


Airbus Announces Corporate Restructuring and Headcount Reductions with Some Supply Chain Management Implications

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Airbus announced plans to trim its overall workforce by as many as 1164 positions in a new iteration of a corporate-wide restructuring initiative. These positions were described as support and office roles and the company hopes to make such cuts relying on voluntary departures, early retirements and relocations. Airbus currently employs upwards of 136,000 people globally.  Airbus A319neo

According to a report by the Financial Times, duplicate functions will be eliminated in research, communications, human resources and other group services.  The multi-nation firm further indicated that it would transfer 325 positions to complete the relocation of headquarters staff from former centers in Paris and Munich to Toulouse. The Associated Press quotes an Airbus spokesperson as indicating that 640 of the job cuts will be in France, 429 in Germany and the remainder in Britain and Spain.

Also announced is that 230 new positions would be created to help this aerospace manufacturer embrace digital technologies. As Supply Chain Matters highlighted in previous commentaries, Airbus is aggressively moving toward broader visibility and quicker decision-making related to its overall supply chain. Initiatives such as the Airbus Digital Control Room now serve as the heartbeat of its supply chain, providing a singular information and resolution control hub to manage issues occurring across the multitude of multi-tier suppliers that support Airbus’s production volumes. Other efforts related to digital supply chain and Internet-of-Things (IoT) enabled active devices are also underway.

Airbus CEO Tom Enders indicated that the restructuring would quicken overall decision-making, provide additional cost savings and narrow the profitability gap with rival Boeing. Airbus must develop a final plan with respective labor unions which is expected to occur by the middle of next year.

The current restructuring is part of a multi-year, shareholder backed initiative to reduce French, German and Spanish government involvement in company decision-making. Fabrice Bregier, who heads the commercial jetliner unit now serves in the role of chief operating officer that includes leadership responsibilities for overall supply chain efforts supporting both aircraft and other group activities.

Principal rival Boeing had previously announced headcount reductions in February and March amounting to 4500 positions, also involving a corporate-wide restructuring.


WTO Rules Against Boeing Production Related Tax Incentives

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A World Trade Organization (WTO) panel has ruled that upwards of nearly $6 billion of prior tax incentives provided to Boeing improperly excluded foreign competition. According to a report by the Associated Press, these incentives that were set to be awarded between 2024 and 2040 apply to the production of the wings to be part of Boeing’s new 777x wide-body aircraft. Boeing 787 production line

In late 2013, Boeing issued RFP’s among multiple U.S. states seeking proposals to source final production and assembly of the new 777x aircraft, which is being designed to carry upwards of 400 passengers on long-haul flights. At the time, Boeing’s threat to source design engineering and production outside of Seattle was part of an effort to seek supplemental longer-term concessionary agreements from various labor unions on longer-term wage and benefit costs. Lobbying efforts were also initiated with the State of Washington which resulted in a package of tax and other incentives valued at $9 billion through 2040 to keep the bulk of the 777x program activities in the state.

This development represents the latest round of commercial aircraft related trade disputes among the United States and the European Union with Boeing and Airbus being the major accusers. The EU voiced its concerns to the WTO over the State of Washington’s tax incentive benefits to Boeing shortly after they were announced, claiming that a total of $8 billion in incentives were prohibited subsidies and needed to be rescinded by the WTO.

In its most recent ruling, a WTO panel opted to deny the overall EU claims, but did focus on the specific incentives related to the aircraft’s wing production. The Financial Times reported that this is only the fifth time in the WTO’s history that it has defined a subsidy as “prohibited.” Two months ago, the WTO found that the EU had failed to unwind billions of dollars in unlawful subsidies to Airbus. That ruling could allow the U.S. to impose tariffs on European goods.

A statement from the EU Trade Commissioner indicated: “We expect the U.S. to respect the rules, uphold fair competition and withdraw these subsidies without any delay.” Boeing on the other hand indicates it will appeal the ruling and again characterized Airbus as being non-existing without “$22 billion in illegal subsidies from the EU.”

This ruling comes on the immediate heels of the unexpected election of Donald Trump as PresidentElect of the United States, with a platform for the U.S. to become more hard lined on global trade policies. That will likely amplify the rhetoric and subsequent actions related to this recent WTO ruling.

The battle among both aircraft manufacturers on opposite sides of the ocean has been long noted as the most contentious rivalries involving global trade and the overall sales of commercial aircraft among multiple foreign countries. All came to a head in 2011 when the WTO ruled that both companies had collected billions in unlawful assistance and incentives. In the wake of a rising threat from China’s heavily subsidized aircraft sector, Airbus CEO Enders has since called on his U.S. rival to initiate talks on a new global settlement for government support which would benefit both sides of the Atlantic.

The announcement further comes on the heels of the sudden departure of Boeing’s overall head of the Commercial Aircraft business unit to be replaced by a General Electric Aerospace executive. Business media reports regarding this sudden senior executive move point to deep animosity among Boeing’s labor unions over the process of 777x production sourcing and ultimate plant selection.

 


Initial Indicators for the 2016 Holiday Customer Fulfillment Period

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As we pen this Supply Chain Matters posting on the occurrence of the 2016 Cyber Monday shopping holiday, retail focused supply chain teams already know the obvious. Consumers continue to migrate toward online ordering channels and that presents an added cost challenge for customer fulfillment. The added test for this year will also be which internal teams, supply chain or brand creativity and marketing hold the dominant voice.

Once again, preliminary shopping data from this year’s Thanksgiving and Black Friday shopping holiday periods indicate a continued preference by consumers to avoid crowded shopping malls and physical stores. Most media outlets are currently citing data released by Adobe indicating that online shopping increased 8 percent during the recent shopping holidays. That data is supported by preliminary data from the National Retail Federation that monitored foot traffic among U.S. wide shopping malls. No doubt, other more rigorous quantification data may add more credence to the magnitude of this ongoing permanent channel shift.

Retail focused supply chain teams already know from previous year’s activities that online fulfillment presents added cost challenges in inventory and other logistics costs. This year, many teams have focused on multi-channel inventory optimization and combination ship from physical store fulfillment strategies. Likewise, investments have been made in more automated customer fulfillment centers that can serve both digital and physical channels.

Today’s edition of The Wall Street Journal features a report noting the Gap’s CEO Art Peck’s views regarding the industry’s long fascination with creative brand marketing executives, and that in the end, they have turned out to be “false messiahs.” Instead, the new head of Gap’s business unit is Sonia Syngal, former head of the retail division’s supply chain.  The new focus is now on decentralization in merchandise management, enhanced product demand sensing  and strategies focused more on supply chain agility and response.

Another test for this year will be how much more dominance online retailer Amazon gains in online market share via the combination of Amazon owned inventory and Fulfilled By Amazon online channels. The open question is whether the hosted online fulfillment capability provides a more cost effective channel for small and mid-sized online retailers.

Teams will certainly have more informed data over the coming weeks.

Bob Ferrari

© 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


Boeing Appoints New Senior Executive for Commercial Aircraft Group

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Boeing made a senior management change this week, recruiting a General Electric Aviation Services executive to be the new head of the Commercial Aircraft division. This executive move, which is effective immediately,  likely has manufacturing, supply chain and services management implications from two perspectives.

Kevin McAllister previously served as the head of GE’s Aviation Services business unit which is the customer support arm of the aircraft engine unit. Thus, McAllister brings an aftermarket services perspective. His background is one of design engineering, having served in roles of engine component development and services sales.

According to statements from Boeing CEO Dennis Muilenberg, the aerospace manufacturer sought an executive with “fresh ideas” to lead in efforts to triple services related revenue over the next decade. In conjunction with this executive change, Boeing further indicated that it plans to centralize management of the service businesses related to defense and space operations as well as commercial aircraft.

Supply Chain Matters believes that the above moves signify intent by Boeing to expand revenue and profitability growth across managed services and such efforts will likely include leveraging of Internet of Things (IoT) and connected devices as technology underpinnings of such efforts.  Boeing had previously announced its intent to leverage more revenues from service parts which decreases revenue opportunities from certain suppliers.

As the new head of Commercial Aircraft, McAllister will oversee all of Boeing’s manufacturing and internal supply chain resources. He represents the first outsider hired for a senior management position since 2005 when former GE executive Jim McNerney was recruited to be CEO. We believe that his prior background in product engineering, services and manufacturing will surely help in the continuing challenge to ramp-up Boeing’s existing aircraft production cadence to meet backlogged product demand. Boeing previously

According to a report published by the Seattle Times, during his tenure, former Commercial Aircraft CEO Ray Connor had precipitated a sharply negative turn in Boeing’s relationships with its various labor unions. Much of this animosity came during plans to source manufacturing and supply chain related strategies for Boeing’s next generation 777X aircraft. In a January 2014 blog commentary, we had highlighted the effects of Boeing’s strong-willed collaboration efforts with the State of Washington, with prospective suppliers, and with Boeing’s labor unions. Other sour relations remain in the shared manufacturing responsibilities for the 787 Dreamliner aircraft among Seattle based, unionized manufacturing workers and predominate non-unionized workforce at its Charleston South Carolina production facility. Mr. McAllister must now direct some of his leadership efforts at addressing these sore areas.

The announcement of this new external executive hire comes after a corporate supply chain management announcement in March. Pat Shanahan, the former head of Commercial Airplane Programs was appointed as Senior Vice President for Supply Chain Management and Operations companywide.  According to that announcement, Shanahan was provided direct responsibility for oversight of manufacturing operations and supplier management functions, including implementation of advanced manufacturing technologies and global supply chain strategies.  At the time of his appointment, Shanahan reported directly to Boeing CEO Dennis Muilenburg. There will obviously be some shared collaboration and leadership with both McAllister and Shanahan moving forward.

Bob Ferrari

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

 

 


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