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A New Round of Reported Job Cuts at Wal-Mart- Part of a Singular Leadership Model Directed at Integrated Online and Store Customer Fulfillment


Last week, word began to leak out that global retailer Wal-Mart was planning to cut nearly 1,000 corporate jobs before the end of this month, the close of the retailer’s fiscal year. These cuts are in addition to previous job cuts announced in 2016. Part of this effort is to continue to streamline and centralize leadership and goal-setting across Wal-Mart’s online and physical store strategies. The latest move is being headlined as the largest round of corporate level headcount cutbacks in some time.  Wal_Mart Store

Several published reports by The Wall Street Journal citing Wal-Mart internal communications indicate many believed executive changes underway. They include existing CIO Karenann Terrell departing the retailer in mid-February. SAP technology focused readers might recall that SAP’s 2015 Sapphire customer conference featured Ms. Terrell in an on-stage keynote delivered by SAP’s CTO and senior board executive Bernd Leukert. Ms. Terrell provided a humorous moment as she quipped to Leukert that she hoped that Wal-Mart could complete its SAP S4 HANA implementation sometime in her lifetime at the retailer.

Other reported executive moves include existing Chief Marketing Officer Tony Rogers assuming leadership of both online and digital marketing initiatives to include marketing. Existing head of Wal-Mart Labs engineering Jeremy King, will reportedly be promoted to U.S. Chief Technology Officer, directly reporting to both the chief of U.S. stores and the chief of U.S. online. Scott Hilton, existing Chief Revenue Officer for will reportedly assume the role of Chief Revenue Officer for all E-commerce operations.

The WSJ further indicates that Michael Bender, existing COO for E-Commerce will likely leave the company. A separate Wal-Mart securities filing indicates that Rosalind Brewer, current Executive Vice President, and CEO of the Sam’s Club business segment plans to retire effective February 1st. John Furner, current Chief Merchandising Officer for Sam’s Club will assume Ms. Brewer’s leadership role. Other reported headcount reductions include human resource staff and other support staff.

These latest organizational and headcount reduction moves follow a pattern for providing singular leadership in Wal-Mart’s effort to take on Amazon by initiating an online capability supported and complimented by physical store presence. In September, 7000 store focused back office jobs were eliminated and in November, because of the prior announced acquisition of, founder Marc Lore was appointed to lead all U.S. online operations, causing several existing online executives to depart the retailer. In January of 2016, existing corporate IT and @WalMart Labs Silicon Valley development groups were merged together into one singular group to focus on singular technology deployment strategies.

Wal-Mart has invested a reported $10.5 billion in new information technology to enhance its online web presence and fulfillment capabilities.  The retailer is planning to invest an additional $2 billion over the next two years to further springboard its online fulfillment channel, not to mention the $3 billion acquisition of the online platform. That implies a commitment and an accountability to get it right.

These latest moves come in the shadow of the latest restructuring and headcount reduction announcements from multiple other retailers, all a result of the more apparent implications of online Omni-channel forces continuing to impact the retail industry.

Bob Ferrari

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

Deep Dive on 2017 Prediction Four: Increased Anti-Trade Geopolitical Forces Provide Added Global Sourcing Challenges


The following Supply Chain Matters blog is part of our ongoing series of deep dives into each of our previously unveiled ten 2017 Predictions for Industry and Global Supply Chains.

At the start of the New Year, our parent, the Ferrari Consulting and Research Group along with our Supply Chain Matters blog as a broadcast medium, provide a series of predictions for the coming year. These predictions are shared in the spirit of assisting industry specific and global supply chain cross-functional teams in helping to set management objectives for the year ahead. Our further goal is helping our readers and clients to prepare supply chain management and line-of-business teams in establishing impactful programs, initiatives, and educational agendas.

The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and customer service management.

In an earlier Supply Chain Matters blog postings, we provided deep dives related to:

Prediction One- Subdued World Economic Outlook and Heighted Uncertainty to Test Industry Supply Chain Agility.

Prediction Two- A Challenging Year in Procurement

Prediction Three- A Supply Chain Talent Perfect Storm

In this deep-dive series posting, we drill down on Prediction Four.


2017 Prediction Four: Increased Anti-Trade Geopolitical Forces Will Provide Added Sourcing Challenges for Industry Supply Chains

In our predictions concerning 2016, we stated that major developments surrounding global trade policies would occupy the attention of many industry supply chain organizations during the year. Our context was the potential adoption of major global trade agreement such as the Trans Pacific Partnership (TPP), China’s competing One Belt, One Road (OBOR) initiative, and the Transatlantic Trade Investment Partnership (T-TIP).  Geopolitical events turned quite negative in terms of expanded global trade and thus the attention of industry supply chains never materialized.

For 2017, our prediction remains that major developments surrounding global trade policies will occupy the attention of many industry supply chain organizations during the year, but now from a far different and perhaps opposite perspective.

Across the globe, growing gaps in income inequality and rising political discontent against elements of domestic and international status quo are fueling a growing backlash towards global trade and unfettered open markets. With heightened global tensions now turning toward more anti-trade and possibly more protectionist rhetoric among developed nations, industry supply chains must now be prepared to deal with potential near and longer term implications that such policies will bring about.

A global environment that begins to turn hostile toward open global trade policies could result in increased import tariffs and added protectionist measures among trading nations, particularly China and the United States. According to the IMF’s October 2016 World Economic Outlook: “In short, turning back the clock on trade can only deepen and prolong the world economy’s doldrums.”

As we pen this prediction in early January, the World Bank declared that political and policy uncertainty in China, Europe, and the United States and in other major global economies are at unprecedented levels. There are fears that the Administration of Donald Trump could trigger a trade war with China and Mexico with threats to impose higher import tariffs for components and products entering the United States. The bank cautions that such a trade war may offset any gains from corporate tax cuts for U.S. businesses.

Further as we pen this prediction, proposals being floated by the Republican Party dominated U.S. Congress that are being directed at corporate tax reform feature border adjustment concepts. Essentially, the concept is applying taxes based on where a product is sold rather than where it is made or where the producer’s operations or executives are based. Imports would not be deducted as a cost of doing business, while exports would be exempted from taxes. The Wall Street Journal and other business media have already raised awareness as to the potential impact on industries that sell most their products domestically while sourcing most production externally in lower cost manufacturing regions. Examples are toys, consumer electronics, apparel and footwear and other products. Such concepts, if enacted, will place a far different financial perspective related to lower-cost production sourcing.

We anticipate that industry supply chain network models will undergo continuous analysis and scrutiny in the coming year as respective supply chain teams assess various changing landed cost and tax factors among product management models. That will likely require a lot of analytical modeling to ascertain impacts to product margins and line-of-business financial metrics.  They could further impact today’s contract manufacturing services model in the notions of where bill-of-material components originate from and where final products are shipped to.

Global trade issues indeed percolate in the coming year and they will likely be complex and confusing to sort out in terms of which will ultimately come to fruition. We concur with the IMF and the World Bank assessments that the Trump Administration could well be part of the epicenter of anti-trade disruption rhetoric to fulfill the political promise of Make America Great Again, and that may well include heightened trade tensions involving China or other lower-cost manufacturing nations.

Global trade advisory firms and consultants will be quite busy in 2017 in advising clients of potential implications of more protectionist trade policies or the heightened risk factors for certain global markets.

As noted in Prediction One, the ability to analyze and share important information, and to educate the business and C-Suite executives on supply chain impacts and/or risk tradeoffs of changed trade policies that potentially impact existing global and product innovation sourcing will be an important differentiator and competency throughout 2017. Collaboration among product sourcing, product development and supply chain strategy teams is essential. Organizations should further consider the value of organizing centralized, dedicated sourcing strategy and impact teams responsible for ad-hoc analysis while fostering a common foundation of analysis data and information. In essence, the task may be more of multiple scenario based analysis predicated on different input and output factors.

Our takeaway is that an assumed static global sourcing strategy could prove to be rather risky in 2017.  Technology supporting more analytically focused analysis and decision-making will likely play a very important role in the coming year.

This concludes our Prediction Four drill-down. In our next posting of this series, we will dive into Prediction Five that predicts continued turbulence across global transportation networks.

Bob Ferrari

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

The Implications of Online Omni-Channel Retail Invokes Additional Consequences and Actions


In August of 2016, this blog’s parent, The Ferrari Consulting and Research Group, published a research advisory titled: The Beginning of a New Phase of Online and Omni-Channel Fulfillment for B2C and Retail Supply Chains. The prime takeaways from that advisory was that 2016 marked the beginning of the newest phase of B2C online retail fulfillment, namely the consequences of permanent changes in consumer shopping habits beginning to impact the long-term presence of brick and mortar retail and their supporting supply chain strategy frameworks.

In a commentary, earlier this week, we highlighted how the Amazon effect continued to make a profound presence over the past holiday fulfillment quarter.

Over a period of two days this week, significant announcements from well-known U.S. retailers, Macy’s, Kohl’s, and Sears, adds more evidence to the reality of a disrupted and quickly changing retail industry.


Yesterday, Macy’s again alerted investors to disappointing holiday sales indicating that comparable sales declined 2.1 percent in November and December and warned of even lower full-year earnings. The broad-based full line retailer announced a series of actions to streamline its retail store presence, intensify cost reduction efforts and execute a revised real-estate strategy.

Included is the closure of 68 retail stores, part of the 100 retail store closings previously announced in August 2016. Most of the store closures are expected in early 2017. The total retail store count for Macy’s was 730 stores prior to this week’s actions. The planned store closures will be accompanied by the reorganization of the retailer’s field structure that will manage remaining retail stores. An additional 3900 workers are expected to be displaced or reassigned because of such closures.

The retailer’s ongoing strategic real estate strategy calls for securing added value from existing store real-estate. Macy’s remains under pressure from activist investor Starboard to garner more cash from its real-estate holdings. To that end, this week’s announcement points to upwards of $95 million in cash proceeds already garnered from real-estate transactions involving stores. That is further validation of our conclusion that declining foot traffic makes the cost, service impact and financial value of the physical store the new determinant of long-term presence.

Additional actions initiated are elimination of current layers of management and other efforts to reduce non-payroll costs. Reports indicate that upwards of an additional 6200 employees will be impacted by job cuts, bringing the total impact from actions taken to upwards of 10,000 jobs.

These combined actions are expected to generate annual expense savings of $550 million beginning in 2017, enabling the retailer to invest an incremental $250 million in existing online retail platforms. Retiring Chairman and CEO Terry Lundgren indicated in the announcement: “Our omnichannel strategies continue to evolve based on the changes in our customers’ shopping behaviors, including a focus on buy online, pickup in store and mobile-enabled shopping. In addition, we have invested in and enlarged our customer data and analytics team, which will help drive our new marketing strategies for 2017.”

Sears Holdings

In a prior Supply Chain Matters blog posting in December, we questioned whether there was s more immediate financial crisis involving Sears after the sudden departure of two high-ranking executives and increased speculation among internal employees and suppliers that this retailer may soon file for bankruptcy.

Today, Sears Holdings announced that retail sales have continued to be challenging during the quarter to date. Same store sales at Sears and Kmart branded stores for the first two months of Q4 reportedly declined in the range of 12-13 percent, which is rather significant in the most critical sales period.

Hedge-fund manager and Sears Holdings Chairman Edward Lampert disclosed a series of actions to infuse an additional $1 billion of cash to revive operations and execute a revised strategy. The additional financing includes a $500 million loan secured by mortgages on 46 existing properties, a $300 million secured letter of credit, and a $200 million unsecured loan from Seritage Growth Properties, a real-estate trust that was previously spun-off that predominately consists of Sears and Kmart retail properties.

Sears Holdings further announced a series of additional strategic actions to increase its financial flexibility and improve long-term operating performance. The actions were billed to facilitate the transformation of Sears from a store-based, asset-intensive business model into a membership-focused, asset-light business model. Actions include:

  • Intentions to close an additional 108 Kmart and 42 Sears unprofitable stores over the next few months, as the holding firm looks to stem its operating losses. These retail stores collectively generated about $1.2 billion in sales over the past 12 months.
  • An agreement to sell the iconic Craftsman tools business for a cumulative $775 million, together with use of a perpetual license for the Craftsman brand, royalty free for 15 years, coupled with a 15-year royalty stream on all third-party Craftsman sales to new customers.
  • The formation of a special committee reporting to the Board of Directors tasked to market certain real estate properties with the goal of raising over $1 billion.

Industry watchers and this blog itself question how long Sears Holdings can continue to stem the tide of declining sales and the loyalty of consumers who now shop online.


Kohl’s Corporation today reported that its comparable sales decreased 2.1 percent in the fiscal months of November and December 2016 combined, compared with the prior year period. Total sales for the combined fiscal November and December period decreased 2.7 percent. The retailer further lowered prior guidance on earnings and margins as a result of the announced holiday sales declines. Kohl’s had already undertaken store closures in 2016.

As a consequence of today’s news, Kohl’s stock plummeted 19 percent to mark their biggest-ever one-day decline.


Our August Advisory outlined the tenets and impacts of the current new phase of an omni-channel driven retail business model. This week’s news, and similar type news to follow will add additional evidence as to the implications of an industry that is increasingly impacted by disruptive market forces that challenge prior strategy.  Consumer preferences and desires have permanently changed in retail, and online platforms and consumer loyalty programs such as that of Amazon are rapidly garnering consumer loyalty and dependence.

With the accelerating trend toward the closing on non-performing brick and mortar retail stores, supply chain strategy and tactics must now align around unified organizational leadership. Investments need to support capabilities geared to a digitally-driven retail customer fulfillment business model driven by demand-driven response vs. traditional merchandising linked to bulk store replenishment.

Today’s online world requires analytics-driven planning, agile marketing and multi-channel customer fulfillment capabilities, supported by advanced inventory management with flexible and adaptable logistics. The physical store is now the virtual store, merchandising is now about analytics-driven knowledge of customer needs, and inventory management is anchored in more sophisticated item-level planning and pooling algorithms.

The industry implications and trends are compelling as well as inescapable.

Bob Ferrari

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


Amazon Again Shines in Holiday Online Customer Fulfillment


While retailers and their associated supply chain teams are still in the process of recovering from the 2016 holiday fulfillment period, and while the final retail sales numbers are being assessed, some takeaways have become apparent.

The first and foremost, was the continuing preference among various consumers to do their holiday shopping online. The prime beneficiary of that activity was once again the Amazon online shopping platform, but some inroads were made by other online retail platforms as well.

Amazon has already declared its best holiday season ever indicating that more than 1 billion items were shipped on a worldwide basis with both the Amazon Prime and Fulfillment by Amazon programs. More than 72 percent of Amazon online customers shopped utilizing a mobile device which is a remarkable statistic regarding changed shopping habits. fba_sized

In terms of Amazon’s operations, December 19 was declared as the peak worldwide shipping day during the 2016 holiday season which was contrary to earlier industry expectations that shoppers would opt to seek more deals during the Thanksgiving to Cyber Monday promotional weekend period in late November.

The 2016 fulfillment period was also the test of Amazon’s augmented order to last mile fulfillment capabilities which appeared to perform well despite visible labor unrest including a brief walkout by ABX Air pilots in late November. Pilots of Amazon’s leased air carriers subsequently took to a social media campaign warning of missed holiday deliveries due to overworked pilots.

A published report by Reuters cited air freight payload data among Amazon’s leased fleet of cargo aircraft indicating that most Amazon Prime flights flew with full cubic payloads but with lighter than average weight loads than traditional air freight. That would imply smaller, low density parcel type shipments. According to the Reuters analysis, Amazon leased aircraft handled between 37 percent and 52 percent of their maximum weight loads as contrasting to FedEx and UPS air cargo averages of between 53-56 percent. Reuters did indicate its data analysis did not include the November-December period when contractor ABX Air paused flights after a pilot work stoppage.

Amazon’s flight scheduling reportedly favored scheduled shipments later in each day, with direct routing to at least 10 airports closest to major population centers across the United States. Many of the online retailer’s chartered eastbound flights departed U.S. West Coast airports well after midnight local time, arriving direct to nearby Amazon logistics fulfillment centers. Thus, Amazon has elected to overcome the scheduling limitations of traditional parcel carrier hub and spoke networks through direct flight routing to major fulfillment population centers. While the online retailer continues to deny that is directly competing with either FedEx or UPS in parcel delivery, its fulfillment strategy appears to be directed at overcoming the time and logistics limitations of a hub and spoke air freight network.

As was the case in 2015, Amazon warehouse and fulfillment center employees in Germany once again initiated a series of labor stoppages as part of a long running dispute dating back to 2013 over local compensation levels. Amazon has once again claimed no disruption in holiday delivery commitments within that country.

There are some indications that the combination of and might have had some impact on competing with Amazon on price, but at this point, we have not seen enough quantitative evidence to support that observation.  One report we reviewed indicated that had a high inventory stock-out rate with nearly 29 percent of the most popular items in out-of-stock status.

Obviously, more definitive data will be forthcoming regarding the recent holiday fulfillment period but the continuing trend favoring online buying and Amazon’s platform dominance in market share seen inescapable.

Bob Ferrari

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


Pilots of Amazon’s Contracted Air Freight Carriers Take to Social Media

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Today, a published report from Bloomberg indicates that pilots working for Amazon’s leased air freight contractors Air Transport Services Group (ATSG) and Atlas Air Worldwide Holdings have taken to social media to warn that Amazon might not be able to deliver last-minute holiday packages.  Amazon One Cargo Jet_Sized450

Advertisements on Facebook and Goggle targeting Amazon online customers provide a web link to the website:, which has sponsorship from the Airline Professionals Association, Teamsters Local 1224. Readers may have already encountered such postings and links.

The dedicated web site asserts that both leased carriers had taken on Amazon contracted work despite known pilot staffing problems. Further asserted is that many of the existing pilots are seeking new jobs because of excessive duty hours. As Bloomberg points out, the broader issue is ongoing contract negotiations with over 1600 pilots employed by both contract carriers. More than likely those negotiations include provisions related to pilot work hours.

In mid-November, a work stoppage among 250 cargo airline pilots working at ABX Air, a subsidiary of ATSG grounded more than 75 flights contracted for both Amazon and DHL Worldwide Express. The move came just before the start of busy Thanksgiving, Black Friday, and Cyber Monday holiday shopping events. That action was quickly stopped by a court order citing provisions of the National Railway Labor Act that prevents labor disputes from disrupting commerce. Thus, pilots have opted to utilize other methods to gain bargaining table leverage including this social media campaign declaring that there may not be enough pilots to deliver for Amazon in the coming days.

We have previously highlighted a prior strike vote among UPS maintenance workers who maintain UPS’s fleet of aircraft after contract talks remained deadlocked over the issue of health-care benefits. Our stated view was that it does not seem likely that a labor strike will occur during the crucial holiday fulfillment period essentially because of the criticality of moving freight volumes for the next 8 days.

However, what should be of concern is a potential air lift capacity bottleneck in the coming days that could impact certain retailers and last-minute shippers.

First, Amazon has already made contingency airlift backup plans that likely include FedEx and UPS as a fallback. As noted, UPS maintenance workers could conceivably enact a work slowdown, especially since the UPS air fleet will operate at maximum capacity in the coming days, requiring inevitable maintenance issues. FedEx will have its own issues having to support Amazon, customer contracted or UPS contingency backup.

What this likely means is that airlift capacity will be highly restricted or overbooked next week. Retailers planning on last-minute holiday promotions, and there may be lots of them, that assume that air will be the fallback option to assure delivery by the Hunukkah and Christmas holidays should be re-validating available air lift capacity.

As has been in prior years, Amazon’s sheer scale and dominance will prevail and its contingency options will either consume any remaining air capacity, or FedEx and UPS will say no and honor last-minute retailer needs. The clear takeaway for online retailers is to plan and validate on a daily basis all of next week. The takeaway for online consumers is to consider completing all online holiday related shopping now and do not wait until later next week if you want your merchandise by the holiday.

Bob Ferrari

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