subscribe: Posts | Comments | Email

GrandCanals Announces Launch of Fulfillment Intelligence Cloud

1 comment

There is little question that the growth of online B2C or B2B2C commerce provides a magnitude of different challenges for retailers, wholesalers, and logistics providers. In the age of Amazon, customer demands for timely fulfillment across multiple channels coupled with affordable shipping adds a far different dimension of required capabilities, not the least of which are the notions of more intelligent, analytically-driven fulfillment processes. Just this week, business media has reported that Amazon is making a new strategic thrust into bulky household furniture fulfillment.

Product producers are increasingly faced with online merchandising and selling decisions to either place products within the Fulfilled by Amazon program, or go direct to consumers via an individual online presence. In today’s online universe, going direct requires much higher levels of knowledge and intelligence relative to fulfillment costs for individual orders coupled with anticipated product demand.

This analyst recently had the opportunity to speak with the senior management team of technology start-up Grand Canals. This Silicon Valley based provider has developed what is described as a purpose-built direct-to-consumer fulfillment support application that has been designed to support needs to drive the most informed customer fulfillment decisions that can satisfy both customer and line-of-business needs. The management and development team includes a lot of acquired experience in online fulfillment, data science, analytics, and supply chain technology capabilities in companies such as Apple, Target, Flex, E2open and others. What is different about GrandCanals is its direct application of customer analytics to customer fulfillment decisions. The technology itself has been designed to also allow online merchandisers the ability to collect better data and improve on fulfillment costs.

Today, GrandCanals launched Fulfillment Intelligence Cloud 3.0 in conjunction with closing a $4.6 million Series A financing round led by Cloud Apps Capital Partners and AllMobile Fund. While in its pre-development stage, this provider has supported a number of consumer brands such as Holler, Krave Jerky, LaTavola, Specialized Bicycles and others. Several third-party logistics providers (3PL’s) are also users of the technology.

Proceeds of this Series A funding will allow GrandCanals to further its go-to-market and development needs.

More intelligent, Cloud-based analytics-driven customer fulfillment is a growing need, with vendors such as GrandCanals now addressing such needs.  We anticipate there will be other players in this area as-well.

 

Bob Ferrari

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


A Commentary on Proposed Surge Pricing for Online Retailers

0 comments

Earlier this month, United Parcel Service announced a new variation in surge pricing.  The global parcel carrier wants to charge the top retail shippers for inaccurate forecasting of shipments during peak holiday periods. In other words, if a retailer either floods the system with unplanned shipments, or does not produce expected planned shipments, there will be a surge financial penalty.

According to reports, the charges will apply to the typical peak holiday shopping periods such as the pre-Thanksgiving, Black Friday, Cyber Monday holidays extending thru the Christmas. It could also apply to other peak shipment holidays such as Valentine’s Day or Mother’s Day.

UPS CEO David Abney told reporters that this new surcharge is not meant to be punitive, but part of a broader negotiation with retailers over pricing during peak times. The carrier has cautioned that conversations with retailers have just begun and yet to be finalized. They are an obvious understatement since many competing carriers such as FedEx have not weighed-in on such an approach.

As a supply chain management social media voice, we felt compelled to weigh-in.

We suppose it could be stated that a carrier having the benefit to be compensated for both upside and downside risks is the best of all worlds.

It presents a very slippery slope from several dimensions.

We all get it in that adding augmented capacity and people during peak periods is expensive, but then again, UPS has been aggressive in added prior rate hikes and dimensional package surcharges to boost revenues, especially during peak periods. The carrier has dipped many times into the rate hike well in this new era of online and Omni-channel shopping.

It’s no secret that the traditional hub and spoke networks configured by both UPS and FedEx have been stress tested during the past peak holiday periods, to the extent that changes had to be made to offset obvious choke points.

There is also the presence of the new logistics industry disruptor, which is Amazon, and the new reality of being a logistics and transportation provider as well as a retailer.

The online shopping provider has implemented logistics and customer order fulfillment capabilities that have also exposed the weaknesses of traditional hub and spoke networks. Amazon often delays bulk air shipments of goods to various regional customer fulfilment centers until way after midnight, sometimes flying half-full aircraft if needed, to maintain overall logistics scheduling. Yes, Amazon’s peak volumes currently do not match those of UPS, but the online retailer has found creative ways to address bottlenecks, including fulfilling same-day or hourly delivery even during the height of peak shopping periods. Yes, Amazon partially funds its significant transportation and network costs via individual customer subscriptions to Amazon Prime. Customers however get in-return, many more services than Free or Guaranteed Shipping during the year, including access to other content services and benefits.

Amazon consistently demonstrates that customer agreements imply mutual win-win benefits for both parties. If UPS wants additional compensation for inaccurate planning by retailers, then the parcel carrier should be willing to step-up and commit to insuring its own performance, regardless of volume.

For example, UPS extends some of its stated expected delivery times to customer addresses during peak periods such as the holiday fulfillment quarter.  Coast to coast shipments are extended an extra day or two in customer expected delivery tracking to overcome network bottlenecks. While the customer might believe that the shipment is on-time, it is a longer transit interval than normal periods, and retailers must factor that delivery time in securing the customer’s order.  Likewise, if UPS fails to deliver at the guaranteed time, then retailers should have the ability to have an automatic credit applied to the entire shipment. UPS shields its exposure to guaranteed delivery by dynamically adjusting expected delivery times. If this new surge pricing proposal were to be adopted, UPS would be willing to commit to guaranteed delivery 7 days a week.

Retailers are now more than ever, acutely aware of the increased costs associated with online and Omni-channel online fulfillment.  The notion of a new twist on peak surge pricing adds more cost exposure, and plays right into the hands of ongoing industry disruptors such as Amazon and Alibaba. We do not profess to dictate to large volume retailers such as Wal-Mart, Target, or others, on how to negotiate with the likes of UPS. But something tells us that these negotiations are likely to be tense.

Either way, retailers will have to invest in more accurate surge planning, deeper levels of customer intelligence, augmented third-party logistics and last-mile transportation services including postal delivery.

Brown may be the gorilla in logistics but if one growls too much, one could get smarted by counteracting forces.

Bob Ferrari

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


Two Interrelated Events: United Airlines and Jeff Bezos Tenet’s of Business

0 comments

This week, general media headlines and social media commentary was totally dominated by the images of the United Airlines incident of a passenger being forcibly removed from an aircraft because of an overbooking situation. The experience had to be frightening for all involved and the video is very painful to watch.

Also, this week, business and social media has been echoing the latest Amazon shareholder letter authored by Jeff Bezos.

Whether by design or by chance, the two events are very much linked and serve as timely reminders, but in different degrees.

Most all of us are quite familiar with Amazon, both as online shoppers and as a collective supply chain community.  As customers, it seems that almost all of this online retailer’s persona centers on finding ways to constantly delight customers in the most hassle-free way, whether in searching products, ordering, or returning products, or consistently making good of any screw-ups, regardless of fault.  Loyal Amazon customers consistently return because of these demonstrated business traits.

This week, social media has been echoing the latest Amazon shareholder letter authored by Jeff Bezos. In that letter, Bezos states that making quick decisions and obsessing on customer outcomes are key to avoiding stasis within companies. If the term “stasis” is unfamiliar, do not be alarmed. Our Cortona inquiry indicates the term was derived from modern Latin and Greek meaning “to stand” a state of inactivity or equilibrium.

Bezos goes on to describe “Day 1” companies that are at the beginning of their potential with that of what he describes as “Day 2” companies, which he essentially describes as stasis, followed by irrelevance, followed by excruciating painful decline.

It is an insightful commentary from a noted visionary business leader who from the beginnings of Amazon, set a direction and focus for long-term growth and market penetration over short-term financial rewards for investors. Amazon suffered much initial abuse from Wall Street regarding its longer-term view and its obsessions for investment in the customer experience.

In the context of a business mission, Bezos observes that mission and focus can be competitor, product or technology focused. His charge for Amazon has always been an obsessive customer focus.

The above statement alone is a very important takeaway for supply chain leaders and practitioners and could have been the entire focus on this Supply Chain Matters blog commentary.

Instead, let’s dwell on today’s airline industry.

Many of us who fly frequently, which likely includes many of our blog readers under the broad supply chain umbrella have witnessed first-hand, the deterioration of customer service. It is fairly clear that the business focus changed from a customer focus to a bottom-line focus. Business decisions are now driven by relentless needs to improve profits, either by charging all forms of supplemental fees to driving all forms of efficiencies that could be garnered by either employees, operating equipment, or technology. Today as airline travelers, we are forced to endure the byproducts of strategies that have taken-on too much dominance. We pay extra fees for services that were once included as a given in airline travel to a point where most of the industry is now obsessed with charging added fees. There have been frequent incidents of airline IT systems failures, driven perhaps by too many changes applied to aged technology or developers rushed for time to make needed software fixes. We could go on to mention aircraft that is over-scheduled, not allowing proper response times for unplanned weather or other schedule disruptions, let alone required preventative maintenance.

The latest absurdity are so-termed basic fares that do not include the privilege of either a carry-on bag, checked luggage, and absent any reserved seat. Just show-up, pay, and will try to figure it out.

However, this week’s United Airlines incident was a far starker reminder of a business and industry environment that has now completely lost its customer focus.

In his letter, Bezos describes a state of customer obsession:

There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.

He then observes the tendencies for Day 2 companies to fall back on managing proxies, particularly those related to the process:

Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.

That, by our lens, is the depiction of this week’s incident- United employees following the process without the context of the outcome, which was incurring needless physical harm to a paying customer and a public relation beating that will do damage to an already battered brand.

The initial response from United Airlines when the video went viral was that the airline followed the process for bumped passengers, after all, it’s all written in our customer contract.  It was not the second response from the CEO, which was do anything to make the situation right.

Not all airlines have deteriorated to such a state. But for the many that have, the context is no way that of Day 1, perhaps not that of Day 2, but very much akin to excruciating painful decline, at least for airline passengers.

And yes, there is a broader takeaway for the supply chain community.

Do not let your organization lose its focus on decisions that achieve positive customer or partner outcomes. As this blog has noted in prior commentaries, activist investors focused on near-term vs. longer-term financial results tend to force a changed context, one that is financial outcome driven. Much of that context eventually impacts supply chain resources and capabilities, including process and decision-making.

Keep a copy of the Jeff Bezos 2017 letter to shareholders prominently displayed and electronically accessible as a continual reminder of the differences in what customer ethos and stasis really mean.

Bob Ferrari

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


Report that Chinese Logistics Provider is Planning a $1 Billion IPO in the U.S.

0 comments

Citing people familiar with the situation, The Wall Street Journal reports (Paid subscription required) that Best Logistics, a China based services provider backed by both Alibaba Group Holdings and Foxconn, is planning to raise $1 billion in an IPO in the United States later this year.

According to the report, this offering could be one of the biggest listings for a Chinese company this year.

We would add, from our Supply Chain Matters lens, that such an offering would be another indicator of the future value that investors would place on an Asian based logistics provider closely linked to Alibaba. According to the WSJ, last year, Best Logistics was valued at $3 billion after raising $700 million from several investors.

Founded in 2007 by a former Google China executive, this logistics provider currently operates a reported 400 logistics centers across China along with three warehouses in the United States and one in Germany. The firm has expanded services to also include Australia, Japan, and Thailand.

Of more interest is the report that Alibaba now holds 22 percent of Best Logistics after multiple investments, while Cainao, the logistics arm of Alibaba has also acquired a reported 5 percent stake. Another current investor is global manufacturing services firm Foxconn.

According to the report, the IPO is being planned in September or October, at the earliest.

This planned event will obviously be one to watch since it would be another indicator of the value investors place in the ongoing growth of online Omni-channel fulfillment and supporting logistics services within China and in adjacent areas of Asia.

 

Bob Ferrari

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

 


Amazon Makes a Strategic Investment in Fuel Cell Technology

1 comment

Last week, Amazon.com announced that it had made a major investment in fuel cell provider Plug Power, Inc. contingent on the company making major milestones.

The deal reportedly concerns the development of a new generation of hydrogen powered electric forklifts and other equipment services, and is valued at upwards of $600 million. The CEO of Pure Power indicated to media sources that his company plans to work more closely with the online giant in collaboration of the application of fuel cell technology, including faster charge times of powered industrial trucks in Amazon’s customer fulfillment centers. Both companies have been working together for a year now in installing the technology. amazon e1429905152262 Amazon Makes a Strategic Investment in Fuel Cell Technology

Pure Power reportedly had nearly $85 million in total revenues in 21016, and with this agreement, Amazon plans to invest $70 million in equipment purchases this year. With the agreement, Amazon has been granted warrants which will vest when certain spending is met, and if fully vested, Amazon would gain a 19 percent stake in Pure Power.

In the case of material handling equipment, charging of conventional lead acid batteries can take considerable hours of electrical power draw, along with dedicated chargers. Fuel cell technology can fuel equipment in a matter of minutes, saving on energy costs and they do not require dedicated chargers.

In its reporting of the Amazon move, The Wall Street Journal indicated that Wal-Mart has invested heavily in Plug Power’s technology.  In 2016, the global retailer was the only customer contributing more than 10 percent to Plug Power’s top-line revenue. It will be interesting to observe how the Wal-Mart relationships fares now that Amazon has invested in the company.

This deal has parallels to that of 2012, when Amazon acquired warehouse robotics technology provider Kiva Systems for $775 million.  At the time, there was considerable speculation as to why Amazon would pay so much for such technology. Since that time, Kiva robots now proliferate Amazon distribution centers in assisting with picking operations and fulfillment center space optimization. Kiva became an in-house fulfillment center automation innovator for Amazon. The Kiva technology was essentially removed from the market and solely dedicated to Amazon’s internal operational deployment needs. In 2014, a security equities analyst estimated that Amazon was reaping $400-$900 million in annual cost savings as a result of Kiva technology deployment, more than compensating for the investment.

Last year when Amazon began leasing air freighters for dedicated operational support, it also took equity investment positions in the air transport carrier firms providing and operating the air freighters. This is consistent with an Amazon policy for having equity interests in strategic partners. As technologies and services become more mainstream to Amazon’s operational plans, it can leverage its equity investments to secure additional leverage in negotiations.

Bob Ferrari

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

 


« Previous Entries