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Supply Chain Matters Summary Impressions: JDA Software FOCUS 2015 Conference

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Last week, Supply Chain Matters attended the JDA Software FOCUS 2015 conference in Orlando Florida providing a number of live update commentaries regarding this conference. In this final commentary related to this year’s FOCUS, we provide our summary impressions.

To view our prior observations and commentaries, please click on the below links:

Update One- Day One Keynote Impressions

Update Two- Day One Afternoon Sessions and JDA Cloud Strategy

Update Three- Day Two Customer Keynote Sessions

Update Four- Conference Awards and Announcements

 

In our view and in the view of others we spoke with, this was a far different JDA conference, one presenting a much broader cross-industry focus, a more succinct strategic agenda for customers and a less arrogant tone. For industry analysts such as this author, the sessions were far more open without restrictions and JDA executives were more open and willing to discuss strategic direction. It was fitting that the conference represented the 30th anniversary for JDA as a software firm.

As noted in our initial commentary, we were especially honed-in on the opening welcome address from JDA’s Chairmen and CEO, Bal Dail who outlined a three point strategy for JDA that included its plans to deliver for existing customers, continued corporate investments in technology and in partnerships. From the podium, he acknowledged that in the past, JDA had not especially listened to customers.  He also acknowledged a culture of past arrogance in the persona of JDA.  There were messages related to commitments for responding to customer needs for advanced technology, much broader partnerships with other providers, including the announcement of a new partnership with Google and the Google Cloud Platform for cloud services. Further emphasized was the ongoing partnership with IBM in Retail industry intelligent fulfillment needs.

We were further impressed with our 1-1 interviews with Jean-Francois Gagne, Chief Innovation Officer, Razat Gaurav, Executive Vice President, Global Industries, Fab Brasca, Vice President, Solution Strategy, Global Industries.  As a reference, Gagne arrived at JDA with the acquisition of Red Prairie while Gaurav and Brasca in a long-time veterans. We touched upon a number of technology strategy and industry adoption topics and this author came away with even more reinforcement that JDA is indeed far more focused and aligned toward bringing more leading-edge technologies to its various industry customers. The takeaway for our readers is that JDA is far more focused on leading-edge cloud development and that should pay dividends in time-to-value down the road.

The day two customer keynote theme was important and powerful, especially since it featured PepsiCo’s supply chain transformation journey that dates back to the early nineties and including the former Manugistics and i2 Technologies technology applications. The relationship of PepsiCo with JDA technology is a 20 year legacy, which is somewhat extraordinary in the supply chain best-of-breed technology industry. That was the missing reinforcement that JDA supports manufacturing and distribution intensive supply chains, in addition to retail.

This year’s FOCUS indeed included a special emphasis on the needs to support Omni-channel customer fulfillment needs, especially the various aspects of JDA’s Intelligent Fulfillment and JDA’s Flowcasting applications. Suffice to indicate that we were impressed by the depth of functionality.

We were also updated on the progress of JDA’s partnership with IBM to address the needs to process and fulfill retail industry Omni-channel orders. The partnership calls for combining the elements of JDA’s warehouse management, demand and workforce planning support capabilities with IBM’s Sterling Distributed Order Management network platform. JDA communicated to conference attendees that the initial release of this functionality will become available in June.

That was indeed a rewarding conference and it reminded those several years past where a broad variety of customer, industry and vendor specific supply chain management business process and IT focused topics were presented, discussed and talked about among attendees.

Bob Ferrari

Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters© blog.


UPS Q1 Operating Results Imply Renewed Focus on Profitability- Implications for Online Fulfillment

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Earlier this week, global package delivery provider UPS reported its first quarter operating results and provided a succinct message to online e-commerce customer fulfillment providers that the provider will protect its profitability in servicing this segment. The results were far different than the disappointing news delivered for the end-of-year quarter and an indication that last-mile delivery strategies associated with online commerce are subject to increased cost changes and implications.  These results are a further indication of the revenue and profitability boost brought about by the change to dimensional pricing of shipments, along with other operational changes.

For the March ending quarter, UPS reported an overall 1.4 percent increase revenues and an 11 percent increase in operating profit to $1.7 billion, demonstrating profitability increases across all operating segments. Results for U.S. based operations reflected a 5.3 percent increase in revenues while profits rose over 10 percent to $1.02 billion. U.S. Domestic Package revenues, where dimensional pricing went into effect, experienced a 3.8 percent increase in revenues.

Total shipments increased 2.8 percent to 1.1 billion packages reportedly led by European export growth of 9.4 percent.  No doubt, that was an indication of a positive impact from the increasing value of the U.S. dollar, allowing European goods to be more price-attractive in export markets such as the United States. For the quarter, UPS generated $2.4 billion in free cash flow. UPS raised rates and increased fuel surcharges across the board at the beginning of the year.

Brown further announced that it has declined to renew contracts with “a couple of substantial customers” whose business was not profitable enough, especially concerning e-commerce shipments. While UPS executives declined to name any specific customers, in its reporting, The Wall Street Journal indicated that children’s toys retailer Toys “R” Us was one of those customers. Reportedly, UPS raised it rates, prompting this retailer to move to FedEx in February.  We would surmise that other customers were well-known e-tailors as well.

Further announced was an increase in the number of Access Point locations where online customers can pick up their purchases themselves, thus decreasing the number of overall package trips for UPS’s last-mile delivery efforts. UPS executives were quick to point out that the carrier’s business goal was not to just increase costs for its customers but rather to facilitate improved efficiencies in shipping methods and packaging of shipments. Obviously, industry supply chain teams accountable for transportation costs and delivering cost reduction goals will likely have a far different perspective.

As Supply Chain Matters observed in our June 2014 commentary, dimensional pricing implied a major revisit of packaging and transportation practices for bulky items as well as policies related to free shipping. With recent operating results from both FedEx and UPS now indicating a renewed focus on carrier profitability, the implications are indeed broader from both shipper and carrier perspectives, especially in the light of online consumer preferences for same-day or Sunday delivery.  Shippers and especially e-tailors will be responding with revised practices to protect their operating costs and margins.  The overall effect can either be a different, more efficient delivery fulfillment process that emphasizes customer pick-up or the development of more innovative delivery strategies.  The U.S. Postal Service as well as up and coming logistics disruptors may well benefit.

Supply Chain Matters continues to anticipate that major online retailers will initiate a different form of planning for the 2015 holiday fulfillment surge later this year, and that will be how to balance continuing consumer preferences for free shipping with the new realities of higher parcel shipping and logistics costs. New or different business models and strategies will continue to emerge in the coming months as this dynamic unfolds and both B2B as well as B2C shippers need to be prepared for such industry changes.

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group LLC and the supply Chain Matters© blog. All rights reserved.

 


Supply Chain Matters Update Four- JDA Software FOCUS 2015 Conference

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Supply Chain Matters pens this commentary from JDA Software’s FOCUS 2015 conference wrapping up today in Orlando Florida. To view our prior observations and commentaries, please click on the below:

Update One

Update Two

Update Three

 

For the past ten years, in conjunction with the FOCUS customer conference, JDA’s Real Results Awards recognizes noteworthy customer demonstrations of innovation and business process excellence among six categories. The winners announced this year were:

Best Cost Savings- Edwards Lifesciences who decreased inventory by 13 percent and reduced its global expedited logistics costs by $2.8 million from 2011-2013. This customer presented its experiences during yesterday’s customer keynote sessions.

Best Partner Project- El Palacio de Heirro for its partnership with netLogistiK, a JDA alliance member to transform outdated infrastructure into a modern and robust WMS platform.

Best Collaboration- Fiat Chrysler Automobiles for improved collaboration between commercial and manufacturing teams for production planning and scheduling processes, enabling the identification of capacity issues earlier in the process, and improvements in order-to-delivery processes.

Best Result in Retail- Grupo Marti for automating its retail sports equipment replenishment processes through more accurate forecasting, factoring seasonality and sales promotional programs, while substantially improving inventory management and retail store replenishment.

Best Time to Value- Kenco for its joint efforts with JDA Consulting Services in going live with a specific 3PL customer’s JDA Warehouse Management System in just nine months, achieving full productivity within two weeks from go-live.

Best Result in Manufacturing- Tyco in its leveraged use of warehouse management applications to automate and standardize its distribution centers resulting in 36 percent reductions in warehousing costs at installed locations while dramatically improving lines shipped per hour.

Supply Chain Matters echoes our well-done and congratulations to the implementation teams representing each of these award winners. For further details regarding each of these awards, our readers can review the JDA press release related to the 2015 Real Results awards.

This year’s FOCUS indeed included a special emphasis on the needs to support Omni-channel customer fulfillment needs, especially the various aspects of JDA’s Intelligent Fulfillment and JDA’s Flowcasting applications. This year’s FOCUS included the unveiling of new capabilities to the JDA Intelligent Fulfillment and Transportation portfolios, including more granular, warehouse aware item definitions to improve load building, support for dynamic shipment splitting and prioritization, as well as other enhancements to integrated fleet and transportation management. This author had the opportunity to view sessions on each of these applications and will provide separate impressions commentaries at a later date.

Suffice to indicate that we were impressed by the depth of functionality.

We were also updated on the progress of JDA’s partnership with IBM to address the needs to process and fulfill retail industry Omni-channel orders. The partnership calls for combining the elements of JDA’s warehouse management, demand and workforce planning support capabilities with IBM’s Sterling Distributed Order Management network platform. JDA communicated to conference attendees that the initial release of this functionality will become available in June.

In our final commentary, we will summarize our overall impressions and takeaways from FOCUS 2015.

Bob Ferrari

Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters© blog.


Will Wall Street’s Patience with Amazon Soon Expire?

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Today’s business headlines include the reporting of Amazon’s latest operating results for the March-ending Q1 quarter. The global online provider and Omni-channel disruptor reported a net sales increase of 15 percent to $22.7 billion, but also a net loss of $57 million. There was a $1.3 billion unfavorable impact related to foreign exchange rates throughout the quarter. Operating expenses increased nearly 75 percent, prompting The Wall Street Journal to opine that: “Amazon again spent nearly all the money it took in.”

In essence, Amazon is spending and investing in all forms of projects and today’s predominantly short-term focused investors are growing ever more impatient with the timing of a big reward. Once more, Amazon has forecasted the potential of an operating loss, or small profit gain for its upcoming quarter.

An area that has captured Wall Street’s attention is revelations about the often secretive cloud computing support Amazon Web Services (AWS) business operating unit which was finally revealed. AWS revenues were reported as $1.57 billion in the quarter, up a whopping 49 percent, and at an annual run rate of nearly $5-6 billion for the year. Once more, this has been in a fiercely competitive sector with many global enterprise technology players duking it out for market-share dominance. Once more, operating margins for AWS are tracking at nearly 17 percent compared to nearly 4 percent for retail online fulfillment.  Retail fulfillment continues to have pressures related to distribution center rollouts as well as the net effects of free shipping offered to Amazon Prime customers.

The high AWS product margins categorizes this business as growing faster than Amazon’s online fulfillment business, although considerably smaller overall, but the difference in margins have now captured the interest of Wall Street, and most likely the community of activist investors.

Among online customer fulfillment highlights for the march-ending quarter were:

  • The launching of both Amazon Dash Button, a small button that Amazon Prime customers can place in their home to automatically reorder frequently used products. Supply Chain Matters recently called attention to Procter & Gamble as one key participant in this program, which might have prompted a reaction from Wal-Mart.
  • A complimentary offering, Dash Replenishment Service (DRS) enables connected devices to directly order replenishment supplies. Early participants in DRS include Brother, Brita Quirky and Whirlpool.
  • The launching of Amazon Home Services, a new marketplace for on-demand professional pre-packaged services
  • Amazon’s Prime buying service celebrated its tenth anniversary with tens of millions of members across the globe.
  • The opening by Amazon China of an Amazon International retail store on Tmall, featuring thousands of imported products and an expansion of Amazon Global Store offered in China to over one million items.

A common and troubling theme in today’s U.S. business climate has been activist investors surrounding well-recognized internally focused producers including names such as Apple, DuPont, Procter & Gamble and others.  The HJ Heinz-Kraft Foods acquisition announcement continues to have far reaching implications for other consumer product goods producers and their respective supply chains.

The question now becoming apparent is whether Amazon’s growth track record contrasted to profitability performance opens the door to activist actions as well, particularly when it concerns the potential of AWS.

What’s your view?  Will Wall Street activist investors surround Amazon as-well?

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group and the Supply Chain Matters© blog. All rights reserved.


Survey of Retail and CPG CEO’s Reflects Today’s Realities of Higher Costs Associated With Online Customer Fulfillment

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A new joint study of senior retail and CPG industry CEO’s conducted by PwC under the sponsorship of JDA Software confirms what many in our supply chain community have believed; the increasing profitability challenges being brought about by the higher costs associated to today’s online customer fulfillment demands.

This study, The Omni Channel Fulfillment Imperative, reinforces that an enormous amount of money, energy and time is being spent by retailers and consumer goods manufacturers to improve their Omni-channel fulfillment capabilities. While this may not be surprising given the current business environment, the report reveals an unexpected and disturbing fact: only 16 percent of companies openly indicate that they can fulfill Omni-channel demand profitably.

The survey itself included a reported 410 retail and consumer goods companies from eight different countries. The authors included some CPG company’s views in order to gain perspectives from both ends of the customer fulfillment supply chain, along with the reality that may CPG firms have increased their direct online fulfillment presence. Nearly 51 percent of responses were reportedly weighted toward the classification of top 250-1000 retailers, while 22 percent represented the top 250 retailers.

Supply Chain Matters had the opportunity to speak with Wayne Usie, Senior Vice President of Retail Industry at JDA Software about this study and its messages. Usie aptly pointed out that most retailers remain optimistic for top line revenue growth, they are acknowledging that their firms originally designed their supply chains around the bulk movement of goods from suppliers, through distribution centers and eventually to stores and consumers. Today’s business demands of Omni-channel and online customer fulfillment require a far different set of capabilities. The other important insight is that in their original design that emphasized distribution center centric flows, retail supply chains can often mask the true source of customer channel demand. That has a significant influence on how to plan and efficiently position inventory associated with today’s Omni-channel dynamics.

From our lens, other important perspectives brought forward by this study was the indication by 71 percent of CEO’s polled that Omni-channel fulfillment was a top priority for retail business. Keep in mind that merchandising and sales strategies have often been top priorities for retail businesses.  This different perspective, we believe, is the new reality of online and Omni-channel reflecting that the fulfillment supply chain has become an important focus.

Other profound findings were the indication that 67 percent of CEO’s believe that the cost to fulfill orders across channels is increasing, and that 88 percent (a near total consensus) cited transportation and logistics as a fulfillment capability that needs the most attention.  Supply Chain Matters believes that this is a reflection of the continued high costs trending of free or same-day shipping that is impacting retail supply chains, especially those with lower product margins. Much of the survey data reflects the threats brought about by global online retailers such as Amazon, Wal-Mart. The major global package carrier’s increase in rates and the shift to dimensional-based freight pricing this year has not helped and probably added even more concerns and needs for alternative methods.

Question 9 of this survey queered on likely internal challenges likely to occur over the next 12 months. Indications were remarkably equally balanced and also from our lens, point to many supply chain related implications including inventory management, effectively integrating physical stores with online business models and failing to consistently meet customer expectations across all channels. Reflecting on such a listing, we believe that the data is yet another revealing indication that not all customers can have the same fulfillment service-level dimensions, hence the need for more discernable supply chain segmentation strategies, aligned to expected customer service and business profitability needs.

The complete PwC Survey as well as a summary infographic can be accessed at this web link. (some registration information required). A further perspective of the survey can be garnered in a posting authored by Wayne Usie on JDA’s Supply Chain Nation blog.

Supply Chain Matters will reflect more on the effects of Omni-channel retail in our live coverage of the upcoming JDA FOCUS 2015 conference occurring later this month.

Bob Ferrari

Disclosure: JDA Software is a Lead sponsor of the Supply Chain Matters blog and a client of its parent, The Ferrari Consulting and Research Group LLC.

 

 


Predictive Commerce as an Enabler of Distribution Sensitive Industry Supply Chains

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The term Predictive Commerce has been brought forward in the context of connecting up and downstream, Omni-channel product demand sensing with an integrated, single-model, end-to-end supply chain planning and execution. In some sense, it can be viewed as an enhanced iteration of demand-driven supply chain response capability for complex distribution and long-tail product demand environments. hands-typing-2 Supply Chain Matters is of the view that this capability warrants further consideration by supply chain and sales and operations planning (S&OP) teams, in the context of a transformative effort requiring careful thought and investment.

Predictive Commerce was most recently brought forward in a recent published white paper from supply chain planning technology provider ToolsGroup, titled Predictive Commerce: Helping Companies Return to Growth.

This paper defines such capability as:

Predictive Commerce is a strategy that enables this shift (in planning methodologies) and revolutionizes the way companies think, see and plan their end-to-end supply chain. It connects supply chain strategy, planning and execution into an end-to-end planning process. The key technology enabler is a single underlying model”

This paper describes examples of predictive commerce applications that include real-time product demand sensing linked to dynamic replenishment processes. The example brought forward is a large coffee shop brand, namely Costa Express, leveraging machine telemetry feeds from 3000 self-dispensing coffee machines to trigger coffee bean, cups and flavored syrup replenishment needs among supporting distribution replenishment centers. In another retail industry example, product demand sensing is linked to dynamic replenishment and product segmentation to minimize last mile delivery costs by utilizing existing channel inventories. A further example is connecting product demand sensing and predictive orders with the needs for transportation capacity and optimization.

We concur and re-iterate that the most important takeaway for industry supply chain teams to ponder is that Predictive Commerce or other similar type capabilities that fuse supply chain planning and execution in a single information model require a transformative strategy that brings together such capabilities.  This is particularly important in an environment where  legacy applications or ERP backbone systems were implemented under the notions of planning and execution being two separate hierarchical processes and data sets that fed different  information streams back and forth. Today’s Omni-channel and online fulfillment demand streams are far more concentrated in SKU level and location specific planning and execution dimensions. That implies a single data model with far more granular data and information streams as well as requirements to plan inventory investments at multiple tiers of the supply chain.

The good news is that advanced information technology now available in today’s marketspace can provide such capabilities in a less disruptive manner.  A single data model approach opens far more enhanced capabilities in leveraging analytics and deeper supply-chain wide intelligence. It further paves the way for the ability to leverage more predictive and prescriptive planning methods for supporting near real-time customer fulfillment execution requirements.

In addition to technology, there are important people and business process elements to consider in such a transformation.  Business processes, whether internal or externally focused, need to be well understood by all participants and have an “outside-in” perspective.  Deep collaboration among customers and suppliers is essential.  Do not neglect the change management and skills impact for people in managing an overall supply chain environment. Especially those that are driven by complex by faster-moving, exception-driven events vs. day-to-day sequential business processes.

Predictive Commerce can indeed be a meaningful competitive differentiating capability for distribution and online fulfillment sensitive supply chains. Such a capability requires a transformative strategy, often aligned with supply chain segmentation. It is indeed a “crawl-walk-run strategy anchored in people, process and advanced technology.

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog.  All rights reserved.

Disclosure: ToolsGroup is a current client of Supply Chain Matters ® parent, the Ferrari Consulting and Research Group LLC.


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