This Supply Chain Matters blog posting serves as an update to our prior mid-February posting regarding supply chain B2B platform provider E2open’s announced merger with sales and operations planning (S&OP) and supply chain planning technology support provider Steelwedge. This latest deal follows prior acquisitions of icon-scm for supply chain planning simulation technology, Terra Technology for deeper levels of business intelligence and data management, and Orchestro for product demand sensing support.
This week, we had the opportunity to view an online webcast, anchored by E2open CEO Michael Farlekis, which was directed at both customer communities to serve as an update on strategic direction.
Both tech providers come together to serve a combined installed base of 160 customers with some stellar nameplates and diverse industry supply chain settings. The E2open side includes Cisco, Dell, HP, Kimberly Clark, Mondelez International, P&G, Unilever, Kraft-Heinz, among others. With the merger of Steelwedge, added industry vertical presence includes Nissan and Land Rover in automotive as well as some common customer among high-tech supply chains.
CEO Farlekis described the combined value proposition as universal cloud connectivity of the extended supply chain supported by a broad offering of applications. He reiterated that scale matters citing a host of numbers related to platform users, countries supported and volumes of transactions and item categories now supported.
With Steelwedge’s S&OP and baseline continuous planning support capabilities, E2open goal is for customers to be able to extend this process to include the inclusion of supply chain partners including key customers, suppliers, and trading partners.
SVP of Product Management and Strategy, Pawan Joshi, outlined the full application and user-centric capabilities of E2net platform and confirmed our prior belief that Steelwedge will provide augmented S&OP support capability, and that the existing technology will be fully integrated into E2open’s technology and platform stack over time, including the E2open Harmony Dashboard.
Plans call for integrating the Steelwedge data model and functionality into that of E2open’s, supported by the current singular platform sign-on and user interfaces. Regarding anticipated integration timelines communicated, initial data interface and user interface integration is expected to occur during 90-day release timelines this year, with full integration and rationalizing of planning functionality expected by early 2018. CEO Farlekis indicated there will be no change in existing support contracts with Steelwedge customers.
Given the above, the presenters declared that all existing Steelwedge customers will have access to the combined product portfolio and that E2open account managers will now serve Steelwedge accounts in their broader end-to-end platform support needs. We have learned that E2open plans to sell Steelwedge as a stand-alone offering until the integration process is completed, but that may present somewhat of a challenge given that prospective customers will want to understand the broader product integration.
There are subsequent individual briefings being planned with existing Steelwedge accounts and it would behoove these customers to seek more specifics regarding access to E2open’s platform capabilities, expected changes in functionality as well as the full integration timeline. Long-time pricing is another consideration, along with E2open’s ongoing efforts to improve its balance sheet.
Our prior observation that Steelwedge clearly needed an infusion of new capital and thought leadership coupled with more savvy marketing and sales execution resources was obviously reinforced by this customer update. Privately-held E2open seems to communicating the flexibility to be able to undertake this effort and hopefully, in an aggressive timeline. With its expanding B2B Business Network platform capabilities supporting procurement replenishment, continuous planning, execution, and collaboration, E2open will likely gain added market attention.
Before closing this commentary, this supply chain industry analyst would like to share an additional thought or two. We have long advocated that an S&OP process should be able to include and support the participation of key external partners in the overall process and in shared decision-making. That stated, such a capability does require some maturity in accurate master data and information management, scenario and what-if planning methods, collaborative based practices, and joint decision-making. With E2open’s platform, the opportunity exists to extend S&OP to extended supply chain partners, but change management and process readiness are important considerations to not overlook.
Supply Chain Matters will feature additional updates on E2open as developments warrant.
© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Quantification of 2016 Holiday Related Customer Fulfillment Adds Compelling Evidence to Inescapable Trends
The market performance numbers surrounding the holiday fulfillment period that spanned November and December of 2016 are in and the headline takeaways are twofold. The first is that U.S. retail shoppers were very optimistic in spending and very shrewd in their shopping habits. Second, the tide towards online and Omni-channel customer fulfillment is once again profound, and implications are even more impactful and inescapable for some traditional retailers.
A More Optimistic Retail Consumer in the Final Quarter
The National Retail Federation (NRF) released its final tally of holiday focused retail sales in the November thru December time-period, declaring a 4 percent increase over the previous period in 2015. According to the NRF, holiday retail sales, not including autos, gasoline, and restaurants, amounted to $658.3 billion, exceeding the organization’s prior forecast of $655.8 billion reflecting a 3.6 percent increase. U.S. Commerce Department data similarly reflected an overall 4 percent increase in retail sales for the three months ending in December. And a 3.6 percent increase for all of 2016. On the plus side, online retail sales increased 12.6 percent while retail sales at health and personal care retailers increased 6.7 percent. Retail sales at department stores decreased significantly at a 7 percent rate, while sales at clothing and accessories and electronics and appliances retailers decreased 2.5 percent and 2.3 percent respectively.
Market quantitative analysis firm comScore reported final 2016 holiday sales originating from desktop computers climbed 12 percent from the year-earlier period to reach $63.1 billion. While the firm’s quantification of mobile-based online sales is still in-process, the latest update based on initial mobile data indicates that online holiday sales will likely come within comScore’s original forecast range of a 16-19 percent increase overall. Further reported was that for the seventh consecutive year, Cyber Monday (November 28), and November 29, the day after ranked as the busiest online shopping days with $2.7 billion and $2.2 billion in daily online spending. In total, there were 10 $1 billion plus shopping days in the 2016 holiday period based on desktop sales. When the mobile-based numbers are finally tallied, the numbers will be even larger.
Such activity levels are a testament to the responsiveness of B2C and B2B-to-B2C supply chain customer fulfillment teams. And then there is the elephant in the room, the continued dominance of the Amazon online buying platform. Preliminary data would indicate another stellar year of Amazon performance in many online sales and customer fulfillment dimensions.
Automobile and truck sales further contributed to holiday spending as U.S. consumers took advantage of rather attractive promotional discounts offered by automakers.
More Compelling Impacts for Brick and Mortar
As we have noted in prior Supply Chain Matters postings, the compelling impacts surrounding 2016 online shopping trends became ever more compelling for traditional department stores and brick and mortar retailers. Macy’s, Kohls, Sears, JC Penny and Target, among others, have each announced declining physical retail store revenues, with many indicating additional store closings. Regarding Target, Business Network CNBC host commentator Jim Cramer observed that while that retailer’s online sales grew a healthy 40 percent during the holiday period, it most likely cannibalized physical retail store sales which declined 3 percent in this same period. Cramer characterizes Target’s performance as the best indicator of the existing fundamental problem of Omni-channel retail and the consequent destruction of prior retail business strategy models predicated on physical foot traffic. We concur.
Wal-Mart itself has announced further organizational restructuring and a headcount reduction involving corporate level staffing to add additional leadership focus to the global retailer’s online growth strategies. Wal-Mart’s strategy direction is now one of predominate online with physical stores serving as an adjunct supporting strategy for pickup and pay or physical shopping needs.
As noted in earlier commentary, the physical store is now the virtual store, merchandising is now about intimate knowledge of customer needs and buying tendencies, and inventory management that is anchored in more sophisticated item-level planning and pooling algorithms.
From the supply chain customer fulfillment lens, today’s online world demands analytics-driven planning, agile marketing, and multi-channel customer fulfillment capabilities, supported by advanced inventory management with flexible and adaptable logistics.
The industry implications and trends are compelling as well as inescapable.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
The following is a Supply Chain Matters blog guest commentary contributed by Cory Margand, Co-Founder and CEO of SimpliShip.com, an online marketplace connecting international shippers directly with qualified, dedicated NVOCC’s and freight forwarders. We feature this point-of-view guest commentary as a sidebar to our 2017 Prediction of continued global transportation industry turbulence.
The title of my commentary seems to be a very hot topic in today’s transportation industry both domestic and international. I felt I needed to share my point of view (as well as SimpliShip‘s) with the global logistics and Supply Chain Matters community.
Let’s first discuss how transportation pricing actually works. Below, I’m only specifically discussing those brokers and forwarders/NVO‘s (non-vessel operating common carriers) who negotiate contracts with carriers. For the sake of simplicity, I will refer to both international and domestic as brokers.
Each broker negotiates rates with their carriers whether it be air, domestic, parcel etc and then resells to their customers at a higher price. This is how they make money. Sure, there’s a lot more that goes into it but that’s the basic concept. The reason this takes place is that carriers get the benefit of large volume from one customer and they don’t have to worry about the small customers that they simply are not set up to do business with from both an operating and pricing stand point.
Interestingly, Maersk recently announced that they will be integrating Damco’s (their freight forwarding arm) product range into their own to sell in certain add on items like customs brokerage and cargo insurance. The question is whether this is a step towards carriers servicing the SMB’s which have largely previously been serviced by brokers. Or, is it simply to sell in Damco’s products to their current target customers. Maersk also announced that they are integrating with Alibaba. However, it’s unclear as to whether Maersk is simply making their rates available online (most likely at a premium) or they are truly going to be managing the relationship directly with the customer.
Now, to the point that really “grinds my gears”.
This topic of Techies vs Brokers is simply coming from two points of view that do not, from my view, understand each side of the business. Technology solutions aren’t always meant to disrupt- some are built to enable. In other words, we view the SaaS (Software-as-a-Service) and marketplace opportunities as a way for both the customer and the broker to create more efficient solutions.
Our team at SimpliShip is experienced at procuring freight spanning both large and small to medium size businesses. On the other side of things, we have moved freight both as a 3PL and carrier all around the world and domestically. We are now laser focused on the technology side of the industry.
Historically, carriers and brokers have a more than outdated tech infrastructure especially from the customer’s perspective with heavy reliance on static databases, EDI, or email/phone calls. This isn’t a surprise as most large carriers and brokers are putting resources into improving the user experience. This is where tech startups can really create value if they can successfully bridge the gap between tech and the industry. At this point and until carriers change the way they do business there is no threat to brokers. A technology solution that is executed correctly will create a more efficient process for all parties involved.
As a challenge to both sides, with an understanding of the above, is to think critically about your current process and ask yourself is this the best way for my organization or business to procure rates and sell to my customers especially in a transportation marketplace that is highly volatile? If not, it’s time to look at tech solutions critically as a way to enable your business.
It really is as simple as that.
In reference to global logistics, a true SaaS platform should be completely carrier/broker neutral. These platforms will become smarter and smarter but initially will offer a simple way for shippers to make decisions based on their ability to get rates and other information faster and from a larger network. A lot of the “techies” that are being discussed in industry publications or other outlets are not true SaaS platforms. These are in fact brokers. So, it’s misleading, at best, to say they are trying to eliminate brokers.
Technology will prevail when it’s created to solve specific challenges in the industry. It will enable both buyers and sellers of freight to work more efficiently and move towards a superior customer experience. Given that, our point of view is that there is no question the supply chain is going to be digitized. Those companies that embrace technology will survive and those that do not will not.
Have any insight, comments on feedback on this topic?
Please drop me a line, I’d love to hear from you.
Cory Margand, Co-Founder & CEO, SimpliShip
Once again, both Airbus and Boeing declared that they each exceeded operational performance targets in 2016 but the numbers would indicate an industry inflection point is at-hand, one that has implications for the collective industry supply chain ecosystem for the next several years.
Airbus announced the delivery of 688 completed commercial airliners among 82 customers in 2016 representing an 8 percent increase over 2015 delivery performance. Of the total, upwards of 79 percent of total deliveries originated in the A320 aircraft line-up, including 68 of the new, more fuel-efficient model A320neo (new engine option).
During 2016, Supply Chain Matters highlighted some significant challenges related to delayed deliveries of the innovative new Pratt & Whitney geared turbofan engine featured on the neo model. Pratt had to cut back its original delivery commitment of 200 to 150 because of several supply and production challenges. With announcement of the final delivery number, we can now estimate that customer deliveries of 71 percent of the A320 family aircraft came in the second-half of the year. In the month of December alone, 66 A320 model aircraft were delivered, 45 in the new engine option. That would seem to imply that Pratt made the bulk of its revised engine delivery commitments promised for the end of the year. In its year-end announcement, Airbus indicated that it has now commenced deliveries on both engine variants of A320neo, to include the CFM International LEAP 1A as well as the Pratt PW1100G model engines.
Another noteworthy data point related to deliveries was the 49 A350 XWB aircraft delivered in the year. This model was dogged with component supply shortages related to interior seating, lavatory, and other interior components throughout the year. The fact that Airbus actually delivered just short of its 2016 goal of 50 A350’s in 2016 is a testament to detailed planning and collaboration with key suppliers.
The European aircraft producer further achieved a total of 731 net orders from 51 customers, eight of which were new. That included a mix of 604 single-aisle and 124 wide-body aircraft.
At the close of 2016, Airbus’s overall order backlog stood at 6874 aircraft valued at $1,018 billion at list prices.
U.S. based Boeing announced the delivery of 748 completed commercial aircraft among 100 customers, taking the industry title of highest delivery number. Of that total, 65 percent of deliveries (490) originated in the 737 single-aisle model. The 2016 delivery performance of 748 represented a decrease of 762 aircraft delivered in 2015. Boeing made a management decision earlier in the year to throttle-back the production delivery rate for 2016 to control costs and boost profitability.
A continued challenged program remains that of the 787 Dreamliner, which recorded a total of 137 completed aircraft in 2016, two more than the 135 total delivered aircraft in 2015, despite achieving break-even profitability of this program. Keep in-mind that airline customers pay the bulk of an aircraft’s negotiated price at time of delivery. The leading-edge designed 787 Dreamliner was first unveiled in 2007 representing the most fuel-efficient aircraft at the time, and a planned more innovative replacement for aging 777 operational aircraft. The aircraft was originally planned to enter service in 2008, but first flight did not occur until late 2009. After a series of highly visible snafu’s related to explosions with its lithium-ion batteries resulting in a several month FAA grounding, the Dreamliner did not enter full operational service until 2011, and today, two separate production facilities produce finished aircraft. Boeing has now elected to shelve plans to increase monthly delivery rates from 12 to 14 monthly.
Chicago based Boeing reported a total of 668 net orders in 2016 worth $94.1 billion at list prices, well below the 768 net orders booked in 2015. This represented the company’s weakest year for new order growth, a sign taken by Wall Street that the prolonged boom in aircraft sales may be waning. Boeing actually secured gross orders for 848 new jetliners but experienced cancellations of 180, the majority of which were from customers switching from wide to narrow aisle aircraft. The company’s new order rate considerably lagged in the second-half of the year, and ultimately led to sudden senior management leadership change for the Commercial Aircraft business arm.
Our stream of Supply Chain Matters commentaries related to commercial aircraft supply chains have painted a picture of an industry that is designing and manufacturing new generations of more technology laden, far more fuel efficient new aircraft. This led to the enviable position of having order backlogs of upwards of $1.5 trillion that extend outwards of ten years. At the same time, an industry with a track record of prior challenges in its ability to more rapidly scale-up overall aircraft production levels is clashing with the industry dynamics of both Airbus and Boeing in their desire to deliver higher margins, profitability and more timely shareholder returns. Smack in the middle of these dynamics are relationships among suppliers, who need to continue to invest in higher capacity and capability, but of-late have had to respond to key customer requirements for larger cost and productivity savings.
All of this is about to change and a declared industry inflection point is at-hand. We will dive deeper into this inflection point when we drill down on 2017 Prediction Ten– Industry-Specific Predictions coming at the end of this month.
For the industry’s respective multi-tier supply chain, the implications of this inflection point are sobering in terms of planning windows through the year 2020. The decline of new order flows for higher margin wide aisle aircraft place the major emphasis on narrower margin single-aisle aircraft that must produce higher volumes to meet financial business objectives.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
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, traditionally provide a series of predictions for the coming year. These predictions are provided 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.
We are admittedly and purposefully late in our usual unveiling of these 2017 predictions. We made a conscious decision in mid-November to delay after the sudden and widely unexpected results of the 2016 U.S. Presidential election coupled with the similarly unanticipated results of the Brexit referendum across the United Kingdom.
To reiterate once again, our predictions process includes a re-look at all that occurred in the current year, a reflection of future implications, and soliciting input from clients and other various industry supply chain participants and observers. Unlike others, we incorporate a lot of thought and perspective into our annual predictions and take the time to scorecard our annual predictions at the end of the year.
Readers are welcomed to review our scorecard series of our 2016 predictions that occurred in November. We are further planning to make available the scoring evaluation of all of our prior 2016 predictions in a report to be made available in our Research Center later this month.
In this initial blog, we will unveil our complete listing of our ten predictions for the coming year along with some introductory takeaways. In subsequent postings spanning the month of January we will dive further into each of our predictions.
In late- January or early February, we anticipate publishing the complete Ferrari Consulting and Research Group research report, 2017 Predictions for Industry and Global Supply Chains that will incorporate all our predictions along with even more details and supporting data related to each prediction. This report will be made available to all our consulting clients and blog sponsors and will additionally be made available for no-cost complimentary downloading in the Research Center of Supply Chain Matters, also in February.
Let’s therefore begin the process with the unveiling of our ten 2017 predictions.
2017 Prediction One- A Subdued World Economic Outlook and Heightened Political Uncertainty Will Test Industry Supply Chain Agility
There is little doubt that the year 2017 will present even more uncertainty and increased volatility for many industry supply chains. Organizations will once again need to be prepared.
2017 Prediction Two- A Challenging Year in Procurement with Renewed Emphasis on Strategic and Technical Skill Needs
Unlike 2016, what is becoming near certain is that in 2017, multi-industry supply chains will be managing a period of rising inbound component and service costs. The role of the CPO will further have to evolve in 2017 to one of strategic business advisor along with a continuing agenda of tactical procurement challenges, most notable a potential global volatile global sourcing environment peppered by continuous anti global trade forces. One of the most significant challenges in the coming year will be in skills development and filling-in skills and talent gaps.
2017 Prediction Three- A Supply Chain Talent Perfect Storm
For all functions that make up the umbrella of today’s supply chain management capabilities, we predict a supply chain talent perfect storm, one that is sure to occupy more of the management attention of supply chain and business senior leadership. The perfect storm is increased skills demand meeting limited available skilled talent supply. As Bloomberg BusinessWeek declared in late December 2016: “Right now the problem isn’t too many workers who can’t find jobs. It’s too many jobs that can’t find workers.” The coming year may well provide a period where lack of skills and talent will take on a discernable and visible impact on required competences.
2017 Prediction Four- Increased Anti-Trade Geopolitical Forces Will Provide Added Sourcing Challenges for Industry Supply Chains
Major developments surrounding global trade policies will occupy the attention of many industry supply chain organizations during the year, but now from an opposite perspective. 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. We anticipate that industry supply chain network models will undergo continuous analysis and scrutiny in the coming year as individual supply chain teams assess various changing landed cost factors among product management models. Global trade issues will once again 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.
2017 Prediction Five- Continued Global Transportation Industry Turbulence
For the past three years, we have predicted industry turbulence among global and certain domestic transportation networks. Our predictions turned out to be fairly accurate but then again, the industry signs were obvious. In 2017, firms should plan for further industry turbulence and change occurring on many modal fronts. As the Washington Post, has recently observed: “industry change is indeed sweeping from all directions.”
2017 Prediction Six- A Renewed Renaissance in Business and Technology Investment
As industry supply chains enter 2017, there are distinct signs of a renewed renaissance in business and technology investment that will surely include the need for supporting augmented supply chain related business process and decision-making needs. An initial pro-business environment fostered by the election of Donald Trump and a Republican Party dominated U.S. Congress looks to lead to lower corporation business taxes and repatriation of overseas profits. There are now signs that after multiple years of plowing excess cash into stock buybacks or increased stockholder dividends, businesses may be ready to shore-up needed investments in critical areas such as increased productivity, manufacturing, and broader supply chain automation along with needs for more informed, analytical-driven decision making anchored in predictive decision-making methods. At the same time, a renaissance in multi-industry business process and technology investment activity will surely lead to further merger and acquisition activity involving either the enterprise software, supply chain, IoT, and management decision support technology vendor community.
2017 Prediction Seven- Enhanced Decision Support Capabilities Among B2B Network and Managed Services Providers Will Pay Added Dividends for Customers
There will exist increased industry specific needs for deeper and wider levels of customer, product, physical object, and supply network focused information visibility, capture and analysis. This need is coupled to building multi-industry supply chain requirements for more predictive, analytics data-driven decision making competencies that involve outside-in insights. The objective is a literal 360-degree view of supply chain wide data and information, horizontally spanning the end-to-end supply and vertically coupling high level enterprise to shop-floor decision-support needs. A means to achieve such a capability are analytics and business intelligence engines that are now being embedded across supply chain focused B2B network platforms, edge systems and production shop floor transactional and information transfer flows. B2B business networks and edge platforms are today the prime opportunity for digitizing the horizontal and vertical flow of information and analytics across end-to-end supply chains.
2017 Prediction Eight- Amazon and Alibaba Position for Global Online Platform Dominance
Similar to 2016, Amazon and Alibaba will continue to position for being the dominant global online retail platform. This competition has been civil with each respecting the other entities capabilities and strengths. Each has certain weaknesses or vulnerabilities. The head-to-head competitive battle ground in 2017 will likely be India, the next big online retail market opportunity that will test both provider’s capabilities to adapt to local requirements.
2017 Prediction Nine- Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Initiatives
Despite the declarations by U.S. President Donald Trump that climate change is a hoax, business and supply chain self-interest needs, requirements and benefits to date will fuel continued sustainability initiatives and momentum. The goal is beyond supply chain sustainability, and remains sustainability of the business itself.
2017 Prediction Ten- Unique Industry-Specific Supply Chain Challenges in 2017
Each year we call out industry-specific supply chain challenges that are unique and dominant challenges. In 2017, we are including the following industry sectors for mention:
Automotive Supply Chains Existing Across North America
B2C and Online Retail
Consumer Packaged Food and Beverage
Global Based Pharmaceutical Supply Chains
Keep your browser pointed to Supply Chain Matters as we dive into each of the above 2016 predictions in more detail. Our next Predictions posting will provide added detail for our first two predictions. Subsequent posting will dive into the remaining eight predictions.
Our series will also feature some invited guest commentaries reflecting more on the topic area.
If readers or clients require further clarity, or wish to contribute additional thoughts related to what to anticipate in the coming year, you can contact us via email: feedback <at> supply-chain-matters <dot> com. Our final blog commentary of the series will include a summation of additional contributed thoughts for what to expect.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved. Content appearing on Supply Chain Matters® may not be used by any third party without written permission of the author and our parent, The Ferrari Consulting and Research Group.