In August, ERP provider Infor announced that he had entered into an agreement to acquire supply chain logistics and commerce network provider GT Nexus for $675 million. This Supply Chain Matters posting provides updated information regarding the acquisition as a result of an analyst briefing held earlier this week.
At the time of the acquisition announcement in August, the deal was expected to close within 45 days, pending regulatory approval. On Monday, Infor informed analysts that the acquisition has now closed, somewhat ahead of schedule. Once more, Charles Phillips, CEO of Infor outlined a rather aggressive schedule of planned technology enhancements related to GT Nexus. This is typical of Infor’s model related to acquisitions.
Three separate development teams have now been dedicated to GT Nexus integration and enhancements, including the additional of 40 new developers.
GT Nexus technology supports the ability of buyers to transmit order information across a connected supply chain business network, linking various suppliers, logistics providers and financial institutions. In the latest briefing, Infor executives reiterated the attractive opportunities among traditional ERP customers to implement broader supply chain business network support. Further communicated was that Infor and GT Nexus customer feedback has been universally positive.
There was a candid admission that GT Nexus software was not the most user-friendly, and to little surprise, there are now plans to convert GT Nexus screens to the newly designed Infor user experience. Further outlined were plans to deploy a robust security model along with a plan to deploy Infor S&OP on the GT Nexus network. Another cross benefit opportunity was noted as the opportunity to augment Infor’s existing warehouse management and transportation management functionality with technology within GT Nexus.
While GT Nexus is now a stand-alone operating unit of Infor, executives did indicate a co-mingling of sales teams over the next 6-9 months. Infor’s fiscal year ends in April which is more than likely the target for a singular sales team.
There is little doubt that Infor views GT Nexus as a significant market opportunity for adding multi-industry support in deploying more robust supply chain business networks for both large and mid-market firms. While Infor’s marketing message declaring the “first global commerce cloud” is somewhat over the top, it should not negate the need for this level of supply chain technology support. Adding more robust planning and analytical decision-making components to the GT Nexus platform provides even more industry attraction. The open question however, is Infor’s pricing strategy and approach.
Customers with technology from either or both of these technology providers should expect accelerated integration and aggressive up-sell strategies in the coming months.
Supply Chain Matters has long advocated that today’s more globally based supply chains require end-to-end business network technology support in supply chain execution, customer fulfillment and more integrated business planning dimensions. From our lens, Infor’s plans related to GT Nexus will motivate other initiatives and/or acquisitions in this area.
With today’s ever increasing clock-speed of business, there should be little question that the overall planning, execution and synchronization of supply chain operational processes and resources has become far more complex and demanding. Yet, it is becoming more essential.
Industry market change is constant, customers are more-demanding and risk or disruption is a constant threat. These past two months alone, we have called reader attention to the severe typhoon that impacted Taiwan and coastal China, the sudden de-value of China’s currency and the significant warehouse explosions occurred in Tianjin China. Global equity markets continue to react to deep concerns about China’s economic growth and export economy.
Supply chain business and operational intelligence is not solely about business reporting, but increasingly focused on the ongoing performance, uncovering hidden risk factors and synchronizing performance of the entire supply chain.
Supply chain teams thus require intelligence capabilities appropriately configured and tuned for analysis of root causes of bottlenecks or supply and demand shortfalls.
Traditional Business Intelligence (BI) technology has evolved from a termed vertical design principle that allows users the ability to compare plans with actual results. The architectural approach stemmed tapping centralized data warehouses, where business software applications feed their data and information.
However, the success and uptake of these traditional BI approaches has been frustrating since more than often, effective use or specialized intelligence needs require the direct assistance of IT. The ability to leverage hidden intelligence is often constrained because of the resource limitations of IT, or the complexity of the centralized information warehouse.
Newer, horizontal approaches anchored in data discovery and more de-centralized business process or predictive analytics concentration such as supply chain and product management have since made their presence in technology markets. The design principle of this approach is root cause analysis, to tap important data and information existing in specific applications such as supply chain planning, operational execution, fulfillment and product management applications. Their premise is to identify bottlenecks and provide early warning to operational process outliers and exceptions.
As one can imagine the fundamental determinant of termed horizontal BI user uptake and adoption rests with user friendliness and empowerment. It is about empowering business users to support more informed decision-making predicated on operational intelligence and appropriate business process context.
Major ERP vendors are caught in the middle of this changing paradigm. As an example, older version of SAP ERP supported information architecture that fed operational data and information to SAP Business Warehouse (BW), where either SAP or external BI applications tapped that data for general business reporting needs. The flexibility to hone-in on specific root cause and supply chain operational business process needs was limited to the innovation and resources of IT or system integrators. Such requirements often came with a high cost in terms of resources and time-to-value.
Responding to the compelling market changes outlined above where users require more user-friendly, self-service operational BI tools, SAP continues to evolve its overall approach to accommodate such needs. And there lies a growing tide of confusion. The stated migration from Business Objects BI, Crystal Reports, and now SAP Lumira has both IT and business functional teams confused as to which strategy to employ. Least we mention the other elephant in the room, that being SAP HANA, and its foundational relationship to leveraging data and information across the entire SAP landscape.
In the light of this product strategy confusion, innovative best-of-breed players have gained additional attention and deployments.
In a prior posting, we called Supply Chain Matters reader attention to Every Angle Software, which provides a self-service and operationally focused business intelligence tool designed to leverage information within SAP R3, SAP ECC, and SAP Business Suite environments. What impressed this author about Every Angle was not only its ability to add in-process logic and sophisticated calculations that adapt to an SAP operations management configuration, but customer testimonials testifying to the end-user friendliness of the software itself. The software comes with built-in adapters for SAP, includes hundreds of pre-configured templates and built-in, configurable business rules, and accommodates access by end-user device of choice including mobile devices. The software can be deployed for either on premise, cloud, or outsourced hosted needs.
Functional supply chain teams have a lot on their plate right now with little patience nor tolerance for having their IT teams figure out the long-term BI product strategy, architecture and functionality of a large ERP provider such as SAP. That is why many continue to opt towards filling-in such technology needs with experienced best-of-breed specialists.
Disclosure: Every Angle Software is one of other sponsors of the Supply Chain Matters blog.
While Slowdown in China Attracts Attention- Focus on a Holistic and More Predictive Planning Perspective
These past few weeks, there has been a lot of business and general media attention focused on the threat or existence of a considerable economic slowdown across China. The reasons are obvious. Today, when China sneezes, the rest of the world feels the effects, especially in specific industries such as commodities, alternative energy, high-tech and consumer electronics.
A significant slowdown in China threatens global economic growth prospects. This week, the International Monetary Fund (IMF) indicated that it plans to once again downgrade its outlook for economic growth prospects, which would position its October outlook to be the weakest growth indicator since the financial crisis.
Industry supply chain and sales and operations (S&OP) planning teams should already have first-hand knowledge of these trends, and are obviously preparing various supply chain scenarios to be able to meet specific business revenue and growth objectives. There are now clearer signs that growth prospects are slowing not only in China, but in other emerging markets. Once more, industry and product trends may be compounding the current picture, and there lies the most important trends to decipher.
Within our Supply Chain Matters Quarterly Newsletter, we track the trending of important country and regional PMI indices which are key indicators of global supply chain activity. This week, we reviewed actual reporting numbers through August, and certain trends are becoming obvious.
We have been tracking the China PMI reporting conducted by Markit Economics. Below, we provide a trending graph that spans the years 2013 to date. The important 50 point differentiating expansion or contraction is highlighted.
First, the slowdown in China, which really began in early and mid-2014, has become much more discernable. Readers should observe that the since the beginning of 2015, while with some variation, the slope of the decline in manufacturing is now increasing. Even an economist at China’s National Bureau of Statistics has indicated that: “There is insufficient growth momentum in the country’s manufacturing sector.” Since China continues in its efforts for its economy to be more consumption vs. export driven, the recent PMI trending could be a reflection for both domestic and global export demand trending.
However, it is not just China that is showing signs of supply chain activity decline, and teams need to focus beyond just China to decipher other industry related trends. As an example, a similar analysis of PMI trending for Taiwan, a global hotspot for semiconductor, high tech and consumer electronics industry, shows more acute declining supply chain and manufacturing activity.
Supply chain teams in the smartphone sector are certainly aware that product demand, of-late, has been slowing, product pricing points are falling falling and inventory levels are building. Similarly, PMI indices for Malaysia, Singapore, South Korea, and to some extent Vietnam, all of which are rooted in high tech manufacturing, are similarly on the decline. These market declines have an obvious ripple effect on the cascading tiers of high tech supply chains.
The Wall Street Journal recently quoted Lenovo’s CEO as indicating earlier this month that this past quarter was possibly the “toughest market environment in recent years.” Samsung Electronics executives have indicated a slowing in smartphone and other consumer electronics sectors. Hewlett Packard in its recent financial results reported a rather challenging past quarter for PC and laptop sales. Today’s WSJ features a report indicating that some analysts are now questioning whether Apple can sustain its iPhone volume output growth rates.
The takeaway for our commentary is that supply chain teams need to view the full global demand and supply picture, beyond a single country, even if that country is a primary hub of global manufacturing and a major source of current and future product demand.
Do not fall into the trap of a singular focus. Now is the time for deeper visibility and more informed context in decision-making.
The J.P. Morgan Global Manufacturing PMI for August fell to its lowest level since July 2013. At 50.7, the index hovers close to the all-important 50 mark that differentiates global expansion from contraction. Yet because of the continuing increases in the currency value of the U.S. dollar, the Eurozone is experiencing growth in exports to the U.S.
Senior executives are becoming increasingly concerned about global economic trends and S&OP teams need to be prepared to provide informed, insightful analysis and scenarios of impacts and/or opportunities to current near-term and longer-term business and resource plans.
All of this points to the importance for exercising more active and frequent business and supply plan chain plans, scenarios and operational intelligence over the coming months.
Supply Chain Matters will provide further analysis in upcoming commentaries as well as in our upcoming quarterly newsletter reflecting on Q3 developments.
The Renaissance of Available-to-Promise Capability to Support Retail and Online Omni-Channel Fulfillment
Supply Chin Matters has featured prior commentaries exploring the supply chain impacts of Omni-channel and online customer fulfillment for retail supply chains. Such impacts are many, but one of the more important relates to the needs for efficient overall inventory management while exceeding more demanding customer fulfillment and satisfaction needs.
In B2C retail, and in online B2B, inventory investment has a major impact on margin and profitability, and Omni-channel strategies that allow customers different fulfillment options can cause havoc with the proper balance of inventory.
Consumers increasingly prefer to buy online, and at the same time, seek flexibility to either have their orders ship direct, or pick-up or return in a local retail store or outlet. This new paradigm is why so many Omni-channel retailers are seriously re-visiting inventory management strategies. Some are building dedicated online customer fulfillment centers to directly support online order volumes while allocating separate inventory to support brick and mortar retail needs. Other Omni-channel retailers have rightfully determined that the same inventory has to be efficiently managed to support fulfillment needs across all channels. This changes the role of the brick and mortar store to be an added node within the fulfillment network with the ability to support in-store pick and pack.
Within this increased retail business challenge, available-to-promise capability (ATP) has taken on a new significance as a key capability to assist in more efficient and responsive inventory management. As Supply Chain Matters sponsor JDA Software describes it, ATP is experiencing a new renaissance.
Last week, The Wall Street Journal provided further evidence of the business importance of efficient inventory management. In the article, Retailers See Gains in Serving E-Commerce Supply Chains (Paid subscription or free metered view), the WSJ reports that while retailers view online shopping as a boon to sales, it can provide a drag on profits especially in the light of parallel delivery networks. Some retailers, however, may be on the way toward figuring out the logistics and profitability potential of Omni-channel. Examples cited was that Home Depot which grew online sales 25 percent in the second quarter while improving overall logistics, including higher efficiencies in its distribution network. Target, grew online sales 30 percent and reported a small increase in margins.
Last week, Supply Chain Matters contrasted the financial results and supply chain strategies of Wal-Mart and Target. Wal-Mart’s financial results were perceived by Wall Street as disappointing. To address Omni-channel, the global retailer is currently implementing a new inventory management system. That strategy includes shifting inventory to regional and dedicated customer fulfillment centers, rather than from the retail store backrooms. That would allow the flexibility to meet both online and in-store demand from a distribution center centric inventory strategy. The downside is a de-emphasis of the retail store as a fulfillment node and a greater potential for stock-outs at retail store locations as online orders consume available inventory.
Target on the other hand, has recently demonstrated improving financial results, but at the same time has been candid to Wall Street that balancing inventory across its network and leveraging resources at store level are an integral part of strategy. Senior management candidly admitted that in-stocks within physical stores have been unacceptable so far this year, but a newly appointed role of Chief Operations Officer will have as an initial priority, beefing up the capabilities and responsiveness of the supply chain. Target’s strategy includes the retail store as a direct fulfillment node. Thus far the retailer’s is shipping online orders direct from 140 stores with plans to enable 450 ship-from locations by the end of this year. Target senior management further noted that an important enablement of ship-from-store will be will be testing and deployment of a new ATP system that provides specific online customer delivery commitments.
On JDA Software’s Supply Chain Nation blog, Kelly Thomas writes on the renaissance of: Order Promising and Demand Shaping in a Segmented, Omni-Channel World. Thomas observes that ATP married with demand shaping provides an increasing number of fulfillment options as well a means to determine profitability profiles for fulfillment channels. It provides a basis in making the most informed decision on the source of inventory for a given customer order line and the pick-up or delivery location of the online customer.
Rightfully noted is that nearly 20 years ago, elements of what is today JDA Software (i2 Technologies) pioneered and patented allocated-driven ATP functionality for discrete manufacturing and other industry supply chain environments. Today’s JDA Order Promiser application is now being applied to the evolving needs of Omni-channel retailers for facilitating more responsive online fulfillment as well as improved inventory investment and bottom-line profitability.
The technology has come a long way and has found new meaning in more efficiently managing inventory in a B2C and B2B Omni-channel world.
Disclosure: JDA Software is one of other current sponsors of the Supply Chain Matters blog.
Reflecting on the Application of Social Enabled Supply Chain Processes- Bob Ferrari Guest Commentary
In March of 2011, I had the opportunity to join two fellow supply chain management bloggers in a thought-leadership webcast focusing on the potential of the social supply chain. Four years ago, the concept of the social supply chain was relatively new, not well understood, and lacking many specific examples to cite.
Indeed after much market education and early adopter successes, leveraging social supply chain applications to enhance business processes has far more meaning and applied uses. That is especially pertinent to today’s reality of increasingly complex and fast moving globally based supply chain networks.
On the 21st Century Supply Chain blog I provide a guest posting reflecting on what has occurred in this area and how the power and potential of many is being increasingly leveraged within supply chain business processes.
Have a read and share your perspectives and views regarding what has transpired regarding this area of technology.
Bob Ferrari, Founder and Executive Editor
Yesterday, after the stock market closed, Apple announced its fiscal third quarter financial performance and Wall Street’s headline was immediately one of disappointment. This was despite reporting that profits had surged 38 percent from the year earlier period along with total revenues that grew 33 percent. Gross margin was reported as a whopping 39.7 percent which is extraordinary for the majority of today’s consumer electronics providers. Yet within minutes of the earnings report, Apple’s shares plunged 7 percent in after-hours trading and today, dropped as low as 21 points before a small rebound.
What the investment community is primarily concerned with is a perception that Apple is trending toward a one-product company, that being the iPhone, which with the latest results, accounts for 63 percent of Apple’s overall sales. That is a ten percentage point increase from a year ago, prompting concerns that other products such as the iPad are declining in sales, while new products such as the Apple Watch have yet to provide an offset. Unit sales of the iPad are believed to have declined 18 percent in the latest quarter, making a sixth consecutive quarter of year-over-year declines. Once more, the previously touted partnership among Apple and IBM, designed to provide more business applications leveraging the Apple tablet, do not appear to be stemming the declining trend.
In the fiscal third quarter, while Apple reported shipping 47.5 million iPhones, an increase of 35 percent from the year earlier quarter, that number was 23 percent lower than shipped units reported for fiscal Q2. According to a report by The Wall Street Journal, analysts noted previous quarter-on-quarter iPhone volumes fell by 19 percent and 17 percent respectively, and remain concerned for a steeper rate of decline. Apple attributed unit shortfall to the lowering overall inventory by 600,000 units during the quarter. Fiscal Q3 has traditionally been Apple’s slowest volume quarter.
In an interview with the WSJ, CEO Tim Cook indicated that he refuses to accept the thinking that Apple cannot sustain its existing growth rates. He further indicated that Apple has pried open the door to untapped markets such as China, and that the company is sensing a larger conversion rate from Android powered devices to iPhone.
Apple did not provide any breakdown of Apple Watch performance but CEO Cook indicated to analysts that the “sell-through” of the Watch was better than the iPad and iPhone at their product introduction phases. We will have to wait and observe what that means over the next two critical quarters.
From our supply chain lens, the upcoming quarters will provide Apple’s planning teams with added challenges. Earlier this month, we highlighted that Apple is now actively planning the ramp-up of the planned next release of iPhone. Reports indicate that the company is requesting suppliers to support between 85 million and 95 million iPhones for the all-important end-of-year holiday buying season that ends at the end of December, This is despite anticipated modest hardware changes.
Planners are obviously reducing existing model inventories but must be diligent to not impact Apple fiscal Q4 results. With expectations for increased sales of the Watch, as well as a newly introduced iPod Nano, additional effort will be focused on ramp-up production milestones. An added challenge has got to be focused on what to plan for inventory and fulfillment needs for the iPad, given that there may well be a product change coming.
And then there is that mega “elephant in the room”, what to do with $200 plus billion in cash.
The adage for Apple’s and indeed many other global supply chain teams is often, not what you did yesterday, but what are you going to do tomorrow, next month, and next quarter.
Does that resonate?