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Wal-Mart’s Laundry Detergent War- A Shot Across the Bow to a Longstanding Collaborator

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Last week. The Wall Street Journal reported that there is: “a war bubbling up in laundry aisles of Wal-Mart” (paid subscription of free metered view), and it involves two global giants in the consumer product and household goods area, namely Procter & Gamble and Henkel and their respective premium-priced laundry detergent branded products.  This story is yet another example of how Wal-Mart can leverage the power of any supplier, even one with a long-lasting and presumed highly collaborative relationship.

Wal-Mart recently decided to stock and feature Henkel’s Persil laundry detergent along-side the iconic Tide branded detergent. According to the report, Tide currently accounts for 60 percent of all U.S. sales of laundry detergent along with an estimated 85 percent of the profits. The brand received a prior sales boost with the introduction of Tide Pods in 2012, but that came after an uncharacteristic and visible supply stumble involving the product’s initial introduction.

Persil itself has generated over a billion dollars in annual sales and is available in 60 countries. However, the brand was not featured in the U.S., at least not till Wal-Mart’s recent actions. Last year, to drive more revenue and profitability, P&G elected to raise the consumer price of Tide while reducing the amount of detergent and number of loads per container.

The WSJ cites as spokesperson for Wal-Mart as indicating that the stocking of Persil provides U.S. customers another laundry detergent option and that the brand is already stocked in the retailer’s other global based stores. Another spokesperson indicated to the WSJ that competition is good for the category and good for consumers.  Who can argue with that.

However this new development involving the marketing and availability of laundry detergent is from our lens, a clear “shot across the bow” among two previous strong collaborators. It is therefore keen to keep abreast of how this U.S. laundry detergent war eventually turns-out.

If there was any supplier more experienced in working with and collaborating with Wal-Mart, it was P&G. Their collaboration in joint marketing, supply chain stocking and promotional initiatives was the basis of many a consumer product goods marketing case study in win-win. Now that relationship may have suffered a setback.  However, Henkel and its Persil brand stands to gain a rather powerful U.S. presence, one that can be leveraged to other retailers down the road.

Supply Chain Matters has featured recent commentaries relative to the tectonic market shifts occurring in the consumer goods market, and their associated supply chains.  Those shifts are predominantly on the demand and cost pressure side. This latest development involving Wal-Mart and two laundry detergent giants is an indication of perhaps other dynamics involving prior long-standing relationships among key retailers. Then again, we are discussing Wal-Mart, and this global retailer gets to play by its rules.

Bob Ferrari


Technology Responds to Consumer Demands for Specific Knowledge of Food Supply Chains

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Just about two weeks ago, this author had the opportunity to be the opening speaker at the Intesource 2015 Innovation Best practices in Sourcing Conference held in Las Vegas.  Intesource’s customers generally reside within various tiers of food and beverage supply chains either as retailers, wholesalers or restaurant services providers. Besides addressing significant converging industry, IT and people skill megatrends impacting supply chains, I also addressed the needs for greater levels of multi-tiered visibility and transparency across food supply chains. Consumers now demand quality choices in the food they consume and branded products can no longer stand on just presence but on the composition of the products offered and served by the brand.

I was therefore pleased to read in the Wall Street Journal CIO Blog (paid subscription or complimentary metered viewing) that Bumble Bee Seafoods is planning to launch a website that allows consumers to trace the origins of their tuna utilizing specific codes printed on cans.  Information will reportedly consist of where and how the fish was caught and by which fisheries. According to this report, much of the data for this traceability initiative already exists in the company’s procurement and supply chain systems.

The same article makes note that Whole Foods has technology projects underway to provide shoppers with information such as animal welfare ratings, whether a food contains genetically modified products (GMP’s) or modified ingredients.

These are just two examples of how consumers are fundamentally changing the product demand and consumption dynamics of food and beverage supply chains.  On Supply Chain Matters, we have called attention to the next wave of smarter item-level tagging that not only traces product identity and movement but monitors the state, genealogy and condition of products. More discerning and informed consumers who are increasing health conscious continue to elicit greater levels of visibility and smart sourcing and sustainability of animal, farm, fishery and food products. I certainly look forward to utilizing such applications when they become available and I suspect that I will not be alone in that effort.

Sourcing and procurement professionals as well as brand and product management teams must continue to be on the forefront of these advanced technology efforts.

Bob Ferrari                         


Airbus and Boeing Both Declare Another Year of Outstanding Operational Performance in 2014

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In the commercial aerospace sector, both Airbus and Boeing both declared that they each exceeded operational targets for 2014.  However, the supply chain ecosystems for each of these manufacturers have continual challenges to perform even better in the months to come.

Today, Airbus announced that it achieved a new record of 629 aircraft deliveries in 2014, representing an increase for the 13th consecutive year. That compares to the 626 aircraft delivered during 2013.

The breakdown of deliveries consisted of:

490 A320 model aircraft

108 A330 aircraft

30 A380 super jumbo aircraft

Initial A350 XWB to launch customer Qatar Airways

Airbus was challenged at the last minute in delivery of the launch A350 but overcame issues of customer customized equipment needs to make its 2014 milestone.

On the inbound customer demand side, the aerospace provider booked 1456 net orders from 67 customers making its year-end backlog to be 6386 aircraft valued in excess of $919 billion. If the Airbus supply chain were to continue to support and sustain its current shipment volume performance, the current order book represents in excess of 10 years of production.

Airbus program development highlights in 2014 included the maiden flight of the rather popular A320neo which is currently scheduled for operational certification in Q3, and first customer delivery in Q4 of this year.

Last week, Boeing announced that it had achieved delivery of 723 aircraft, a record for the most commercial aircraft delivered in a single year. That compares to 648 aircraft delivered in 2013. The breakdown of deliveries included:

485 737 program aircraft

99 777 program aircraft

114 787 Dreamliner program aircraft including the first 787-9 launch model.

Similar to Airbus, Boeing was challenged with December deliveries of 787’s and other wide body aircraft because of a supplier shortage of premium seating. All three of Boeing’s final assembly facilities each set new milestones for aircraft delivery volume. On the inbound side, Boeing booked 1432 net orders bringing its year-end backlog to 5789 aircraft, a declared all-time high. The company recorded 1355 net orders in 2013. If the Boeing supply chain were to continue to support current shipment volume, the current order book represents in excess of 8 years of production.

Boeing program development highlights included the launch of the 787-9 in 2014 and the planned assembly of the first 737 MAX scheduled for this year.

No doubt, the supply chain and product management teams and ecosystems of both Airbus and Supply Chain Matters Tip of the Hat AwardBoeing went the extra mile in successfully achieving each of the 2014 operational milestones.  We extend our Supply Chain Matters Tip of the Hat recognition for their efforts, and hopefully, bonus goals were achieved and compensated.

Moving forward, 2015 brings expectations of even greater operational performance coupled with the needs to scale-up delivery cadence to even higher levels. As noted in a previous commentary, commercial aerospace supply chains exist in good and not so good news realities. All of the current backlogged customer orders need to be delivered to airline customer expectations for timing, anticipated reliability and performance.  Once again, there is a very strong reliance on the performance of the extended supply network and in solid operations and risk management.

Congratulations to all.

Bob Ferrari


Top Ten 2014 Supply Chain “E” Lessons from a Process Industry Lens

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Throughout 2014, Supply Chain Matters has provided a number of insights related to the increased importance of B2B business networks among multiple industry settings.  We were thus rather pleased to read of the top ten supply chain “E” lessons of the year from the lens of Elemica, a process industry focused B2B supply chain network technology provider. The lessons were assimilated from real customer experiences and Elemica’s involvement to help businesses move forward in the New Year.

Included in these 2014 lessons learned are observations that supply chains are becoming more of an ecosystem, rather than disparate parts and that an outside-in perspective that integrates and synchronizes product, demand, and supply networks to optimize joint value have become important alignment objectives. Other lessons included are the movement away from a sole manufacturing, to more of a supply chain view linking end-to-end supply and demand visibility. From our lens, that is a rather noteworthy important learning among process based manufacturers.

Other noted lessons include building better relationships with B2B social collaboration methods, more emphasis on predictive and prescriptive analytics and a concentrated effort toward a single view of business via unified master data management (MDM).

Bob Ferrari


General Motors Attempts to Turn to a New Chapter of Growth, Customer Loyalty and Supply Chain Practices

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The public relations teams supporting General Motors have been in high gear these past weeks for obvious reasons.  Lapses in product design and quality management practices, and what has been billed by business and general mediaas the worst U.S. product safety crisis in recent memory has led to a series of product recalls among multiple GM brands involving upwards of 2.6 million vehicles.

GM desperately needs to move beyond its current state and restore confidence in its brands and in its business management model.  Suppliers and partners associated with supporting this U.S. based OEM need to also move on to more collaborative and win-win relationships, but that requires a different GM perspective.

When Mary Barra was appointed CEO of General Motors, this author communicated our Supply Chain Matters elation for this announcement. Our enthusiasm came from the dual fact that not only was Barra the first senior female executive ever to lead a global automobile manufacturer, but more importantly, because her 35 year background included plant management, manufacturing, product design and development leadership experience. She is also an engineer by training. Barra likely understands the elements of producing high quality cars and trucks and the important contribution of the GM supply chain ecosystem in achieving that goal.

If readers want to gain a candid perspective on Mary Barra’s current challenges in transforming GM, we recommend the recently published Time article, Mary Barra’s Bumpy Ride at the Wheel of GM. Author Rana Foroohar pens an insightful perspective on Barra’s management style and her efforts to change a rather in-bred corporate culture built around functional fiefdoms and little accountability. She describes Barra as the consummate “outsider-insider” with a far different style from most of her CEO predecessors. She has been put in charge to become the change agent and apparently has the support of many of GM’s employees in that task.  In our previous commentary in December 2013, we called attention to the Wall Street Journal characterizing Barra as “having a reputation for speaking her mind, a trait that hasn’t always been appreciated in GM’s executive suite.”

This week, business and general media are featuring reports of GM’s latest earnings announcement. The WSJ reported that after nine months, Barra wants to switch gears towards a multi-year strategy to deliver increased revenues and profits while restoring consumer trust. She explained to a group of GM’s top 300 executives that the company must do what it takes to be the “world’s most valued automotive company”.  The going forward strategy leans heavily on reliance on planned new models expected to come to market, many of which were shepherded under the leadership of Barra when she previously led new product development. A goal is to have 47 percent of global sales to be fueled by these new models by 2019. It further includes market expansion and growth within China through investing in five additional auto assembly plants and he introduction of nine new Cadillac models in that country.

GM will further focus on the broader supply chain’s contribution to its renewed business goals.

According to a recent WSJ report, there is an internal belief that GM pays more than its competitors for materials and technology because the company bases parts purchases on unrealistically high forecasts that burden suppliers with high fixed costs when ultimate demand falls short. Our community is more blunt in such an explanation: it is lousy forecasting predicated on achieving functional stovepiped goals. The WSJ quotes some analysts as indicating that the automaker could save upwards of $1 billion a year with smarter purchasing practices, which as we know, is a typical Wall Street short-term perspective these days. Squeeze those suppliers!

GM’s existing product development chief, Mark Reuss, actually met with executives representing 700 suppliers indicating that the company is ready to share more financial risks if sales projections are high. At that same meeting, GM’s purchasing boss, Grace Lieblein indicated that the supplier base will likely need to add capacity to support growth plans. In a Detroit Free Press published report, she is quoted as stating: “we just have to be cautious and strategic about how we add that capacity and not move too fast.” Lieblein further communicated that an important strategy is convincing suppliers to locate closer to GM assembly plants to reduce transportation costs.

Obviously that’s a tall order for suppliers since transportation cost savings do not necessarily weight themselves to the benefit of the supplier. Adding production capacity to support additional volume and spreading that capacity further across the globe requires a significant financial investment. Add some history of throwing suppliers “under the bus” when quality plans go south because of component design flaws, well, you get the picture of legacy trust.

The new era of GM obviously requires what Barra has described as bold thinking and leadership. What this author was hoping to read is that goal of GM’s supply chain going forward is to support continued product innovation while controlling costs and accelerating productivity. Perhaps that will be articulated in the coming months.

It is this author’s view that such thinking can benefit by a broader and deeper perspective by GM’s executive leaders on how more modernized supply chain business practices, new product introduction (NPI) practices incorporated to supply chain impacts, more collaborative based inventory and supply chain planning practices  have led to benefits among other industries as well as other automotive OEM’s. Today’s supply chain and B2B business network technology capabilities can further link the global end-to-end supply chain with more granular levels of planning and supply chain execution synchronization.  

The business practices and enabling technology are available but it requires a good dose of change management infusion before real benefits can flow. We trust GM will hence forth nurture the leadership to set such perspectives.

Bob Ferrari

© 2014 The Ferrari Consulting and Research Group LLC and Supply Chain Matters. All rights reserved.


First Airbus A320neo Completes Important Maiden Flight

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This week, a significant milestone occurred for the global supply chain ecosystem of the new generation Airbus A320 aircraft. The first Airbus A320neo completed its maiden flight at 2:22pm local time yesterday after its two-and-a-half test run flown by Airbus’s experimental test pilots over southern France. The maiden flight comes weeks ahead of prior program expectations. Video and a complete program overview can be viewed via the Airbus web site

Airbus A320neo

The Neo (new engine option) of the workhorse A320 includes newly designed more fuel-efficient aircraft engines with incremental innovations in aerodynamics and updated cabin features. That aside, the most significant customer feature for the Neo and its promised, more enhanced fuel burning efficiency expected to be upwards of 20 percent more efficient. The A320neo family will consist of A319 and A321 variants as well, the latter offering seating up to 240 passengers. Airbus touts the A320 as the globe’s best-selling single aisle aircraft and thus the program stakes are especially high. To date, the A320neo has garnered 3200 orders involving 60 customers and thus more innovative, stepped-up production cadence will be an important requirement for the end-to-end supply chain.

The aircraft for the maiden voyage was powered by two of the newest Pratt and Whitney PW1100G-JM engines which features that supplier’s new geared-turbofan technology. According to Pratt, the engine successfully completed its first development flight in May of last year and has completed 11,000 hours of testing across the supplier’s PurePower engine family. The stakes for Pratt are additionally high with its newest innovative geared turbofan technology. The Neo is also offered with CFM International’s LEAP-1A power plant as an airline customer option. The LEAP-1B engine was selected as the prime power plant for Boeing’s planned 737 MAX aircraft, which is the prime competitive offering in contrast to the A320neo. According to CFM, there are already orders amounting to 6770 LEAP family engines.

This maiden flight milestone kicks-off 3000 hours of rigorous flight test process involving upwards of eight aircraft with various options and engine options. As Supply Chain Matters has noted in many prior aerospace industry highlighted commentaries, many things can be discovered in the flight testing process, some with reverberations up and down the supply chain. The A320neo with Pratt engines is currently planned to enter service in the fourth quarter of 2015, with the first airline customer being Qatar Airways.

Supply Chain Matters Tip of the Hat AwardOnce again, we tip our hat to the entire Airbus A320 supply chain ecosystem and team members for reaching this significant milestone.

 


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