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An Important Milestone Reached in RFID Enabled Item-Level Tracking

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It was nearly 10 years ago when the initial hype of item-level tracking enabled by RFID began to emerge across retail and other consumer and industrial focused supply chains. The vision for the ability to connect the physical and digital aspects of the supply chain was within grasp and the hype cycle was extensive. Our readers might recall Wal-Mart’s highly visible corporate initiative for mandating RFID-enabled tracking across its supply chain as well as the U.S. Department of Defense efforts to do the same. But something happened, namely learning that seems to be rather consistent with advanced technology initiatives.

In the early days of RFID, there were challenges involved with the economic cost of individual RFID tags. Recall the threshold number of tags eventually costing less than 5 cents each. The IT infrastructure of required mobile and fixed readers, antennae, and database systems was more expensive than vendors were communicating.  Industry-wide consistent information transfer standards development was elusive because either technology vendors continued to advocate for certain proprietary standards, hoping to cash in on the new technology wave, or specific industry groups themselves favored certain standards.

It is therefore very noteworthy to reflect on results of a recent survey conducted by GS1’s US Apparel and General Merchandise Initiative. For those unfamiliar, GS1 is a global information standards based organization that fosters trading-partner collaboration through adoption of global-wide consistent item numbering and identification electronic information exchange. Keep in-mind that apparel and merchandise supply chains operate on narrowest of product margins, with cost, inventory and shrinkage being prime challenges. Apparel and general merchandise was one of the prime targets of the early RFID mandates.

Last week the organization released the results of a 2014 survey providing indicators for how apparel and general merchandise manufacturers and retailers are utilizing item level Electronic Product Code (EPC) enabled RFID tracking. That survey indicates that nearly half of the manufacturers surveyed now indicating that they are currently implementing RFID, with a further 21 percent planning to implement within the next 12 months.

Of the retailers surveyed by GS1, more than half reported current implementation efforts underway with another 19 percent planning to implement in the next 12 months.  Retail respondents indicated that on average, 47 percent of items received in their supply chains have RFID tags. In the news release, an Auburn University researcher indicates that retailers are garnering greater than 95 percent inventory accuracy, decreased out-of-stocks, increased margins and expedited returns.  That phrase should sound familiar since it was the original declared benefits of the prior mandate efforts.

In the current clock-speed cadence of business where results are measured and expected in weeks and short months, 10 years is a lifetime. Yet, that it what was required for the technology maturity and economics of RFID item-tracking to reach what appears to be the dawn of mainstream adoption.  This GS1 survey announcement should be viewed in that light.

For RFID enabled item-tracking, the early innovators have paved the way of learning and economics, as well as what worked and what did not. We at Supply Chain Matters have already brought to light the next wave of item-level tracking, sensor tags that can monitor the composition, state and movement of products across the global supply chain utilizing today’s mobile technologies and near-field communications (NFC). These tags will eventually provide for use cases in supply chain settings requiring higher levels of monitoring and detailed visibility such as fresh foods, pharmaceuticals, aerospace and others.

What is ever more important is that as a community, we learn from previous technology adoption curves where elements of business process adoption, standards and cost-effective technology all interplay.  One obvious conclusion is that supplier mandates for technology implementation will not work if these elements have not been realistically evaluated.

Beyond all the hype are the inherent realities. Advanced technology does provide meaningful business benefits when applied to well-understood business process needs, challenges and cost factors. Technology adoption is not driven by vendor product marketing but by business education, process maturity, people and process realities.

Bob Ferrari

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


Announcing an Upcoming Webinar: Supply Chain Segmentation- The Key to More Predictable and Profitable Business Outcomes

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Supply Chain Matters Lead sponsor JDA Software recently released the results of its first annual JDA Vision 2015 study of supply chains. This study provides a detailed quantitative look at the top supply chain issues facing various industry supply chains today and includes collected responses from executives across a wide range of industries company sizes and geographies.

Within this report’s Executive Summary there are conclusions related to the support of today’s customers. Whereas, not long ago, firms focused on operational efficiencies, today, it is all about the customer and meeting ever more demanding customer expectation and service needs. The summary notes in part: “Saving time and money remains important, but the name of the game now is how to meet customers’ ever changing expectations and keep them coming back.”

From this author’s lens, one of the more important strategies for supply chain and sales and operations teams to consider within today’s unprecedented aspects of supply chain complexity is the continued realization that one size fits all supply chain fulfillment strategies do not add to the need for meeting higher customer expectations while delivering on expected business outcomes.  This is why considerations for supply chain segmentation strategies have become more important.

To explore such needs, JDA Software and Supply Chain Matters will be hosting an upcoming webinar: Supply Chain Segmentation – The Key to More Predictable and Profitable Business Outcomes, where this author will provide perspectives on the increasing importance of linking supply chain segmentation and more predictive planning and analytics capabilities. I will further address how elements of supply chain advanced technology that can aide in linking supply chain segmentation efforts.

This complimentary webinar is scheduled for Wednesday, April 1st at 11am Eastern. Joining me in this webinar will be Puneet Saxena, Vice President, Manufacturing Planning at JDA Software.

Readers can register for this webinar at this registration link.

Join us as we discuss today’s process and business requirement needs related to supply chain segmentation.

Bob Ferrari, Founder and Executive Editor


Global Currency Movements Causing More Widespread Industry Supply Chain Concerns

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Today’s front page headline article of The Wall Street Journal, Weaker Euro Ripples Around the World, reflects far deepening foreign currency headwinds for producers whose supply chain costs and operations are weighted in U.S. dollars.  For senior supply chain, procurement and sales and operations planning (S&OP) process leaders, it is further compelling evidence that existing supply chain cost and product sourcing strategies will come under enormous scrutiny and pressures in the weeks and months to come.

Supply Chain Matters has already called reader attention to recent corporate quarterly financial results reflecting substantial impacts to earnings as a result of the strengthening U.S. dollar against major foreign currencies.  B2C and consumer product goods companies are especially impacted, but so are many other industries as well. The headwinds are strong and concerning.

To cite but a few examples, Procter & Gamble recently reported a 31 percent drop in profit as the stronger U.S. dollar diluted the effects of a modest 2 percent organic sales growth. Foreign exchange pressures had the effect of reducing net sales by a significant 5 percentage points. Mondelez International recently reported that foreign currency headwinds delivered a $149 million hit to its operating income in its prior quarter, in spite of recently rising prices across the board. Conversely, globally diverse CPG firm Nestle was able to sustain a 4 percent organic sales growth in that company’s first-half.

The European Central Bank (ECB) has embarked on its own form of quantitative easing, similar to what the United States embarked on after the severe global economic crisis that began in 2008-2009. The ECB is prepared to print upwards of €1 trillion to buy the bonds or assets of various Eurozone countries to boost their economies and keep European interest rates low. The immediate result is that value of the Euro against the U.S. dollar reportedly has declined by more than a fifth since June, and has now reached its lowest point since 2003. That is obviously good news for European manufacturers and service providers, as well as other foreign based producers not pegged to U.S. dollar costs. This situation is expected to continue for many more months.

Companies whose supply chain and operational costs as well as product pricing is anchored in U.S. dollars now face considerable financial headwinds, motivating some U.S. based firms to quickly raise prices within foreign markets.  Many U.S. based manufacturers have upwards of half of existing revenues stemming from export markets.

The compounding effect is added costs and potentially lower export sales as foreign based manufacturers take advantage of a pricing advantage within their export markets. According to the WSJ, business leaders, economists and policy makers are becoming convinced that the Euro’s drop is helping to turn the tide in Europe’s favor. There is further concern that the U.S. Federal Reserve will have to ultimately raise interest rates as well.

For procurement, supply chain and sales and operations planning process leaders, the current financial challenge to the business requires that various planning scenarios and subsequent options be developed to ascertain ways and means to reduce costs or mitigate currency impacts in cost of goods sold (COGS) or in back-up sourcing strategies that are anchored in other than the US dollar.  Teams need to able to assess various options to meet quickly and considerably changing sales and product margin goals. Without such plans and subsequent supply chain actions, previous cost and productivity savings efforts can be neutralized.

As to how long this current challenge continues it very much an individual industry or corporate decision. One thing is clear, however.  This is a period where analytical and data-driven decision-making capabilities will prove to be rather important.

Bob Ferrari

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


Steelwedge Software Announces Supplemental Funding Round

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Supply chain technology provider Steelwedge has announced today that it has received $22.5 million in new growth capital in a funding round led by Baltimore based private equity firm Camden Partners. Other participants in this latest round of funding included San Francisco based Mainsail Partners, Shea Ventures and the firm’s CEO, Pervinder Johar.

Founded in 2000, Steelwedge is an integrated business planning and Sales and Operations Planning (S&OP) technology support provider which has gained significant momentum in the supply chain technology arena. Named global customers include Applied Materials, HP, Hospira, Jaguar Land Rover Europe, Monsanto, Lenovo, Nissan, Republic Wireless, among others. Current key partners include Salesforce.com, KPMG and PwC.

Supply Chain Matters has featured a number of prior commentaries related to this provider, and Steelwedge has been a prior Named sponsor of this blog. In December of 2013, we highlighted efforts to extend demand planning with the front-end social aspects of product planning through this provider’s Sales Pipeline Bridgeapp”, developed to tap the Salesforce platform.

According to the announcement and the company’s blog, this latest round of funding will be utilized to accelerate product development, expand sales, marketing and customer service.  The supply chain planning provider has plans to open a new technology, sales and services hub in Austin Texas.  Plans for that facility include an R&D co-innovation lab where product managers and software engineers will work directly with customers on new applications.

From our Supply Chain Matters lens, this announcement from Steelwedge is another indication of the increased interest among investors in the growing supply chain technology segment, especially upon providers offering cloud-based options.  This Steelwedge announcement follows the recent successful IPO efforts of Kinaxis which raised $65 million in incremental growth funding, along with the planned private equity acquisition of E2open which was estimated to be $273 million. Each of these funding events involved building market interest for cloud-based supply chain technology offerings and provide continued signs of added activity within this segment.

We extend our congratulations to Steelwedge on this latest milestone.

Bob Ferrari

Disclosure: Kinaxis and E2open are among current sponsors of the Supply Chain Matters blog. Steelwedge was a former sponsor.


SAP to Trim Additional 2200 Jobs

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Business media is reporting that SAP is about to undertake this providers second round of headcount restructuring. The current cutbacks are reported to involve upwards of 2200 positions following similar restructuring last year.

A published Bloomberg report cites SAP’s personnel chief as indicating that the total number of jobs affected will amount to about 3 percent of SAP’s worldwide workforce of 74,000. However, SAP spokespersons are quick to point out that the job cuts are more to do with internal business changes rather than cost savings. The Bloomberg report cites Ralf Herzog, the chairman of SAP’s works councils, as indicating: “that groups received information Thursday afternoon about “a very high level” of job cuts. Since the program is “apparently voluntary,” SAP “seems to have learned from its experience” with last year’s job action.”

In its reporting, The Wall Street Journal pointed to SAP’s ongoing transition to being more of a cloud services provider as prompting workforce changes, namely less emphasis on installation and update of software. That article indicates that SAP staff deemed redundant will either be trained in new responsibilities and those unwilling or unable to make the change being asked to leave or in the case of European based employees, offered early retirement or other compensation.

As Supply Chain Matters and others continue to point out, the effects of cloud computing adoption and rapidly changing market realities are indeed real for existing enterprise software providers and they are attempting to adjust their business models to deal with such realities. We have heard undertones of similar job cuts emanating from other enterprise software providers as well.


Global Trade Management Technology Provider Amber Road Acquires ecVision

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Global trade technology provider Amber Road has announced its acquisition of cloud-based global sourcing and collaborative supply chain platform ecVision for a reported net cash value of $24 million, along with $9 million in future incentives.

With primary offices in the United States and Hong Kong, ecVision has a niche industry support concentration servicing apparel, footwear and retail related supply chain processes. The provider describes its technology as creating a single collaborative application for private label brands, retailers and their trading partners. Named customers are Brown Shoe Company, Coach, Li&Fung, New Balance, PVH Corporation, among others. The cloud based provider has been funded by Fung Capital USA, the private equity partnership among Victor and William Fung of Li and Fung Limited. Li and Fung itself is often characterized as the global logistics go-to firm within the apparel industry offering retailers nearly 15,000 global suppliers in over 60 countries.

Amber Road is a provider of cloud based global trade management (GTM) applications that automate import and export processes to enable goods to flow across international borders in in a compliant and profitable manner. According to the announcement, the combination will extend Amber Road’s presence in the Asia Pacific region while providing more services at lower tiers of the industry supply chain.

At initial glance, the sum of $24 million for a cloud-based B2B supply chain collaboration platform is quite low by today’s M&A standards, considering an industry rule-of-thumb of current software company acquisitions averaging in the range of 3x-4x future earnings, and B2B platforms, much higher. In early February, supply chain business network cloud provider E2open was taken private for a reported sum of $273 million.

That obviously provides Amber Road the opportunity to considerably grow ecVision’s platform revenues applications in broader industry coverage and depth of applications.

Bob Ferrari

Disclosure: E2open is one of other named sponsors of the Supply Chain Matters blog


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