subscribe: Posts | Comments | Email

U.S. Auto Producers to Idle More January Production Amid Market Inventory Oversupply

0 comments

As we pen this Supply Chain Matters commentary in the week just after the Christmas holiday, many thoughts turn towards objectives in the year 2017. For the U.S. auto sector, those thoughts currently reflect on a situation of building oversupply of certain models.

Just before the holiday, reports surfaced that all three U.S. auto domestic manufacturers have scheduled additional idle time at some factories in response to building finished goods inventories of some models of sedans and minivans. There is additional caution that light vehicle demand will cool in the coming year. ford-f150_450

General Motors indicated it would idle production at several factories in January accompanied by some additional job cuts. According to media reports, GM is expected to cut 3000 jobs in the first quarter due to slackening product demand and building inventories. According to a report by The Wall Street Journal, GM entered December with upwards of 870,000 vehicles on dealer lots, 26 percent more than the same period a year earlier.

Fiat Chrysler indicated plans to temporarily idle two Canadian plants, each responsible for producing the Pacifica model minivan, during the first week of January. According to WardsAuto.com, four brands of Chrysler vehicles had the equivalent of 92 days of supply and the end of November, 13 days higher than the year earlier period.

Likewise, Ford Motor plans to idle a Kansas City truck plant for a week in January to curb a reported rising of model F-150 pickup truck components and work vans inventories.

According to various auto dealerships providing background color to industry reports, the current industry challenge is reflected by continued high demand for pick-up trucks and large SUV’s, resulting in burgeoning inventories of standard and fuel efficient sedans.  This period of lowered gasoline prices has made the U.S. consumer somewhat hyped on acquiring the largest, most expensive vehicles, while gasoline prices remain low. Obviously, the days of $3-$4 per gallon fuel costs have taken a back seat in consumer memories, even as gasoline prices now begin to climb again.

Perhaps the good news is that U.S. auto producers are taking more timely proactive steps to manage the buildup of certain model inventories and to set realistic production schedules for the coming year.  The not so good news, however, is an industry that is content to keep promoting sales of the largest, most expensive vehicles to boost bottom-line margins, while defeating efforts to spur sales of more fuel efficient and environmentally friendly vehicles. The result may well be U.S. consumers with rather large, multi-year auto loans that could dampen overall industry demand for many future years to come.

One wonders if any lessons from prior years have been absorbed.

Bob Ferrari

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


Delivering on Customer Promises in both Automotive and Retail Industries

0 comments

At the Council of Supply Chain Management Professionals (CSCMP) Annual Conference held in late September, this author had the pleasurable opportunity to moderate two very informative panel discussions. These sessions were jointly sponsored by The Washington Post and Ryder Inc.

Panel One: How a refreshed distribution strategy revs up savings in the automotive industry, featured Steven Crowthers, Director of Distribution North America, FRAM Filtration, and J Steven Sensing, President, Global Supply Chain Solutions, Ryder System, Inc. Our discussion touched upon several challenges impacting automotive supply chains today, the impact of on-line, Omni-channel commerce.

Panel Two was titled: Is it possible to achieve high touch deliverables with lower costs?, featured Abhinav Shukla, Senior Vice President and Chief Operating Officer, True Value Company along with John Diez, President of Dedicated Transportation Solutions, Ryder System, Inc. This panel focused on how a traditional retailer is meeting the challenges of online commerce, particularly in relationship to transportation and inventory replenishment needs.

The videos recorded for both panel discussions are now available and can be viewed by clicking on this Washington Post Brand Studio web link.

 

As a reminder, if your organization is in need of noted and knowledgeable speaker or interactive panel facilitator please check out our speaker services web page.

Bob Ferrari, Founder and Executive Editor

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


Is There More Immediate Financial Crisis Involving Retailer Sears?

0 comments

Late last week, a published report by web-based Business Insider indicates that retail chain Sears is on the brink of financial catastrophe. This report cites both the sudden departures of two of the retail chain’s highest ranking executives along with speculation among internal employees, suppliers and several banks fearing that the retail chain may soon file for bankruptcy.

Sears has consistently and repeatedly dismissed such speculation.

The report notes that a recent SEC filing indicates that Executive Vice President Jeff Balagna departed the company last week, a highly unusual move for any retailer during the absolute peak of the holiday sales period. A further executive departure was Sears President and Chief Member Officer Joelle Maher which Sears confirmed to the online publication, but declined to indicate reason for the departure.

Sears will formally report third-quarter financial results later this week.

Further noted is that the retail chain’s Sears Hometown and Outlet Stores business unit has been experiencing significant inventory availability challenges along with reinforcement that a least six suppliers have “significantly’ reduced inventory shipments to Sears over broadening concerns related to financial health. In October, Supply Chain Matters highlighted reports that toy supplier Jakks Pacific suspended inventory shipments to the Kmart business unit due to concerns for overall financial health. Also in that month, Fitch Ratings identified Sears as one of seven retailers at risk of going bankrupt in the subsequent 12 to 24 month period. In August, Sears indicated that its overall cash balance had fallen to $276 million from $1.8 billion over the last 12 months.

Business Insider notes that Sears CEO Eddie Lampert has many other financial levers yet to be exercised to keep the retailer alive including the sale of additional real estate or major private brands. More news will likely come to light later this week when Sears makes its financial report to investors.

Each of these financial lifeline steps weaken consumer’s and supplier’s confidence in the longer-term financial sustainability of Sears as an influential national retailer.

In our revisit of our 2016 Predictions for Industry and Global Supply Chains, we indicated that the B2C Retail sector with include several financial casualties because of the ongoing compelling effect for consumers opting for online buying. Casualties this far in 2016 have included the bankruptcy and liquidation of Sports Authority along with athletic goods retailer Finish Line having to shutter upwards of 600 retail stores. Candidly, we can also disclose to our readers that when we formulated this prediction at the start of this year, we were of the belief that Sears would also succumb. We suppose some credit should be extended to Sears management for continuing to financially prevail, but any recent visit to a Sears retail outlet is a remainder of a very scaled-back retail operation with far more limited merchandise options. Once more, there are visible signs of degrading inventory management.

How Sears ultimately performs in this critical holiday fulfillment quarter will be crucial, but the current signs of senior executive departures and widening supplier concerns already point to downward spiral.

Bob Ferrari

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


Report That Amazon Has Already Captured Significant Online Holiday Revenue Share

0 comments

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.


Initial Indicators for the 2016 Holiday Customer Fulfillment Period

1 comment

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.

 


« Previous Entries