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Kinaxis- A New Named Sponsor for Supply Chain Matters in 2015

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We are pleased to announce to our global based Supply Chain Matters readership audience that Kinaxis has returned to be a Named sponsor of this blog in 2015. Kinaxis was one of the very first sponsors of this blog upon our founding in 2008, and we look forward to a renewed relationship during the coming year.  KinaxisRegLogo-jpg-large

With origins that date back to 1984, and with its founding in 1995, Kinaxis and its flagship RapidResponse supply chain planning and rapid response technology has been adopted by industry-leading companies across multiple industry verticals, including aerospace & defense, automotive, high tech, industrial, and life sciences. Kinaxis delivers a collection of highly-configurable cloud S&OP and supply chain applications which are at the very heart of supply chain planning and decision making for large manufacturing companies with complex supply chains and volatile business environments. Kinaxis recently completed a successful initial public offering and is now a public company listed on the Toronto Stock Exchange.

As part of this new sponsorship arrangement, this author will be featured as a periodic guest blogger on the Kinaxis 21st Century Supply Chain blog where I will be contributing thought leadership on timely topics. Supply Chain Matters will additionally feature periodic thought leadership provided by select Kinaxis executives.

Join me in welcoming Kinaxis as our new Named sponsor of Supply Chain Matters.

For further information regarding Kinaxis and its technology capabilities, click on the logo included in our Named sponsor panel.

Bob Ferrari, Founder and Executive Editor

 


ThinFilm Electronics and Diageo- A Noteworthy and Cool Joint Prototyping of Smart Label Technology

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Today marks yet another milestone announcement concerning the development and application of next generation smart item-level labeling technology that can be applicable for either supply chain business process or product branding and marketing needs.

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Thinfilm Electronics ASA and global alcohol beverages producer Diageo jointly announced the intent to unveil a prototype smart label that has the potential to completely change both the role of a bottle along with the consumer experience.

Supply Chain Matters readers may recall our previous commentaries related to Thinfilm’s ongoing development efforts in the next generation of smart item-level labeling.  Specifically we call reader attention to our May 2014 commentary that noted demonstration of a printed NFC-enabled smart label that demonstrated a label that combines printed electronics technology with real-time sensing and near-field communications (NFC) technology.  We were informed by Thinfilm that this new joint announcement involves a modified passive-tag application of this technology.Johnnie Walker Blue Label Smart Tag Enabled

This concept of “the connected smart bottle” will be prototyped in conjunction with Diageo’s Johnnie Walker Blue Label® brand.  The Thinfilm developed smart label will be printed with an object identifier during the bottling and labeling process. The label itself has a rather unique physical appearance that includes a narrow tail (note the photo). This tail provides the ability for the label to sense whether the individual bottle is in a sealed or opened state after the label is affixed. The breaking of the tail does not impair the label’s capability to be read or transmit information. Once encoded at the point of manufacturing, the label cannot be copied or electronically modified.

In its sealed state, the label can transmit via NFC its object identifier for supply chain physical tracking or tracing purposes. Once more, the label can provide added protection to combat counterfeiting or rouge product. When the label is triggered to an unsealed state, it provides the opportunity for the consumer to gather via individual smartphone, added information regarding the product experience.  Such information could include recommendations for further enjoyment of the product, added offers or promotions or other brand loyalty efforts.

Thus, this singular smart label opens-up the possibilities of multiple supply chain related business process and/or brand marketing loyalty use cases. Once more, the reading or sensing of the label can be accomplished with NFC enabled devices, such as smartphones or other mobile devices, which opens up further opportunities to be able to leverage such capabilities without the addition of more expensive infrastructure or proprietary networking or reading technologies as was the case with the initial phases of RFID labels.

In conjunction with joint announcement with Diageo, ThinFilm further announced the launching of its line of Open Sense ® sensor tag technology that has applicability not only within food and beverage but pharmaceutical, cosmetics, health and beauty and automotive industry areas.  As noted in the release, the interest levels and the potential use cases of such advanced smart item-level labeling technologies is rapidly increasing.

As noted in our prior Supply Chain Matters commentaries, the current evolution of smart labeling is indeed the dawning of a new era for item-level tracking, one that will harness the potential of the Internet of Things as well as the abilities to bring together the physical and digital aspects of supply chain management, and now, the added ability to enhance the brand experience.

Consider the possibilities. While some of these developments are prototype in nature they have the strong potential to be game changers in specific industry settings.

In the meantime, consumers and loyalists of Johnnie Walker Blue Label® can anticipate a really cool experience in the not too distant future.

Bob Ferrari

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


Breaking Tech News- Kinaxis Reports Significant Deal as Part of Fiscal Q4 and Full Year 2014 Results

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Supply chain planning and response management technology provider Kinaxis today formally reported fiscal Q4 and full year 2014 financial results.  Beyond the rather positive growth and financial performance results, the most significant news was the landing of a $20 million five-year supply chain planning deal.

On the financial side, full fiscal year 2014 revenues were reported as $70.1 million, up 15 percent from the year earlier.  Gross profit was $49.3 million, also up 15 percent and adjusted earnings before interest and taxes (EBITDA) totaled $16.1 million, up 7 percent. Kinaxis reported nearly $57 million in its end of December cash balance, mainly from the proceeds of its recent IPO activity.

For its fiscal fourth quarter, Kinaxis reported total revenues of $18.8 million including $13.9 million of subscription revenues. Gross profit was $13.4 million while adjusted EBITDA totaled $3.8 million.

However on the Kinaxis earnings briefing call, many equity analysts wanted to hone-in on the reported $20 million “mega-deal” booked in Q4.

Kinaxis executives were very careful to respect customer confidentiality and hence had measured responses to analyst queries. However, Supply Chain Matters was able to garner from the Q&A back and forth that this was a five-year, cloud-based deal involving a new customer described as a large global enterprise.  The customer elected to pre-pay the $20 million up-front, and that number will be reflected in Kinaxis fiscal Q1-2015 performance. The deal was brought to Kinaxis from an unnamed large systems integrator.  We suspect the deal involves one of the existing vertical industries that Kinaxis currently supports.

Upon further probing, it was disclosed that the customer had an existing backbone systems footprint involving a combination of Oracle and SAP systems, and apparently elected to pursue a Kinaxis strategy for various supply chain planning technology needs. Kinaxis executives hinted that the customer had “given-up” on both the timetable and future promises of the incumbent vendors.

Supply Chain Matters highlights the reporting of this “mega-deal” because, by this author’s recollection, it represents one of the largest deals involving supply chain planning, and further, it appears to be totally cloud-based.

A trend that we continue to pick-up from other supply chain planning vendors is that their pipelines increasingly include both large and emerging enterprises that are becoming more and more impatient with the overall commitment of larger ERP and enterprise vendors to support today’s line-of-business and supply chain needs for added predictability, responsiveness and more informed decision-making.  Time-to-benefit, quicker implementation and industry track record have become very important criteria. With the option of cloud applications, such enterprises are exploring methods to surround existing ERP based supply chain systems with more advanced, outside-in facing technology. From our lens, such a deal is an endorsement for needs and desires for fusing supply chain planning, execution and customer fulfillment processes as much as possible toward a single data model approach.

While it is not likely that the broader market will garner more specifics regarding this significant deal until later within its implementation phases, it will serve as an important milestone of continued market shifting favoring more nimble, cloud-based technology approaches.

In full disclosure, we share with readers that Kinaxis has been a prior sponsor of this blog, and we are in the final stages for having Kinaxis as a Named sponsor for 2015. That aside, this is a significant watershed development for the supply chain planning market, and should be referenced as such.

Congratulations to all involved.

Bob Ferrari

 


Added Evidence to Structural Business Changes Impacting Consumer Goods Producers

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Supply Chain Matters provides added rather important data point concerning the ongoing significant business challenges associated with many large consumer packaged goods providers and their associated supply chain teams. Multiple U.S. based food producers continue to serve up grim financial and operating news from their latest quarter. Most all of these ongoing challenges are attributed to the industry’s abilities to adapt to fundamental shifts in consumer tastes, changes in previous market growth assumptions and now, the added significant financial implications related to foreign currency effects.

This week, the largest globally focused food manufacturer by revenues, Nestle SA, reported its slowest annual sales growth since 2009 and 2015 will likely provide added challenges. Nestle’s organic sales growth for all of fiscal 2014 was reported as 4.5 percent, a number that perhaps most other large CPG producers would relish at this point.  But, that number fell below Nestle’s declared growth target of five to six percent organic growth. Real internal sales growth was noted as 2.3 percent while operating profit was up 30 basis points in constant currencies but 10 basis points in net.  In terms of quantification, Overall sales in 2014 were down 0.6 percent and Nestle executives indicated that negative foreign exchange shaved that number by 5.5 percentage points, which is a very significant amount.

From a geographic perspective Nestle’s organic growth was described as broad-based and included 5.4 percent for the Americas, 1.9 percent in Europe and 5.7 percent in Asia, Africa and Oceania.  Business media noted that growth in developed and emerging markets is moderating.  The CPG producer indicated the need to adapt with the fast-changing expectations of the Chinese consumer.  In fact, throughout its earnings release, there is a constant theme of continuous product innovation, re-formulation and re-launching, which all impact the underlying supply chain.

Other noteworthy financial numbers were that Nestle’s cost of goods sold (COGS) fell by 30 basis points driven by product mix and pricing actions along with savings generated by Nestle’s Continuous Excellence program which more than offset increases in raw material costs. Distribution costs were up 10 basis points. The global CPG producer has further established a Nestle Business Excellence initiative at the executive board level in an effort to aggregate line-of-business support services. Thus, the pressure on costs, added efficiencies and productivity continue along with needs for continuous innovation and resiliency to global market changes

Campbell Soup also reported financial results this week, along with added plans for a multi-year zero-based cost focused initiative to slash costs and restructure certain operations. CEO Denise Morrison provided another profound quote: “We are well aware of the mounting distrust of so-called Big Food, the large food companies and legacy brands on which millions of consumers have relied on for so long” and further noting that changing consumer tastes remain a key challenge for the industry. Campbell’s has plans to re-organize its businesses by product category as opposed to geographic regions. According to reporting from The Wall Street Journal, Campbell’s has hired Accenture, the same consultancy that assisted 3G Capital with its efforts to consolidate the operations of HJ Heinz, ant those of Mondelez International, to assist in the Campbell initiative.

Supply Chain Matters reiterates that rapidly shifting industry markets and consumer preferences imply a critical need for increased product innovation and quicker introduction of new products. These capabilities need to be obviously enhanced, in spite of continued pressures to reduce costs. Volatile and rapidly changing global markets require that Sales and Operations Planning (S&OP) teams be more responsive and anticipate such changes.  The focus clearly turns toward an outside-in perspective, allowing the supply chain to quickly sense changes in product or regional demand and respond as quickly as possible to market opportunities or threats. Finally, supply chain segmentation strategies, those that orient supply chain resources to the most influential customers, most profitable market segments or highest customer growth opportunities are now ever more essential.

Bob Ferrari

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


Crisis Among CPG Producers and Their Associated Supply Chains Continue: Three Important Strategies

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Supply Chain Matters continues in our efforts to update readers on the extraordinary market challenges and headwinds impacting large consumer goods packaged food producers. In August of 2014, we called attention to a profound week of statements and blunt reality impacting this industry and specifically, blunt statements from the CEO’s of prominent packaged foods producers. In our predictions for this year, we again cited this sector for continued industry supply chain turbulence.

Unfortunately, the challenges and the implications have once again become rather visible.

Today’s published edition of The Wall Street Journal again reports (paid subscription or free metered view) that several top U.S. based food producers served up grim financial and operating news this week. Once again, all is attributed to the industry’s abilities to adapt to fundamental shifts in consumer tastes.  However, there is far more at-play.

The wave of bad news has battered the stock of Kellogg and Kraft Foods but the news was not all that optimistic from Campbell Soup, ConAgra Foods and Mondelez International.

Kraft, which recently replaced its CEO, indicated that its CFO and a senior R&D development manager were leaving the company. The new CEO of Kraft indicated that his company was not moving fast enough to shift its business to cater to consumer needs for healthier, less processed foods. It was reported that Kraft lost market share in 40 percent of its food businesses in 2014.

Kellogg reported a 7.7 percent drop in comparable U.S. breakfast related sales while its U.S. snacks segment fell by 3.1 percent. Kellogg has subsequently reduced its long-term revenue growth by two percentage points, which is significant for this sector.

Campbell’s has now indicated that it may have to once again reshape its brand portfolio in favor of more organic choices. ConAgra recently indicated to Wall Street that increased market competition, lower prices and customer service issues with its prior acquisition of private-label food producer Ralcorp has motivated that company to lower expectations for the current year.

Supply Chain Matters has further provided reader attention to business challenges at industry stalwarts Procter & Gamble and General Mills, each of which has had cascading impacts related to each of their supply chains.

As noted in our earlier commentary, foreign currency headwinds and specifically the strong U.S. dollar have become an added challenge for U.S. based companies. One of the most stark aspects of this challenge came from Mondelez which reported this week that foreign currency headwinds delivered a $149 million hit to its operating income in it prior quarter, in spite of recently rising prices across the board.  Operating income dropped 42 percent. The WSJ reported that Mondelez currently garners 80 percent of its revenues in currencies not pegged to the dollar, and has further attributed its challenges to increasing commodity costs. Mondelez’s supply chain production and manufacturing resources are much more globally-focused which raises additional concerns. The global convenience foods producer continues with efforts directed at reducing operating costs by $1.5 billion by 2018, incremental to previous wide-spread cost savings including those directly related to its global supply chain. From our lens, Mondelez may well be another candidate for a subsequent CEO change.

The CEO’s of CPG as well as other industry manufacturers are currently caught in an incredible vice. On the one hand, dramatic changes in consumer tastes and a collection of smaller, emerging industry disruptors leveraging advanced technology and more efficient cost structures are rapidly impacting the industry landscape. Activist investors have surrounded industries such consumer packaged goods extracting demands for more short-term stockholder financial benefits, vis-à-vis aggressive stock buyback, higher dividend or increased merger and acquisition efforts. An earnings crisis brings on more activist or short-term oriented investors looking for market opportunities.

Obviously, the ongoing implication to associated supply chain organizations is immense and often painful. On the one-hand strategies to spur revenue and profitability growth in untapped global markets extracts a toll of shuddering U.S. based production or distribution facilities and staff.  The new strength of the U.S. dollar and other currency movements dilutes revenues from overseas operations causing additional pressures for increased profitability and reduced costs. The cycle can often become disabling.

While every company certainly has its own unique challenges, the takeaway for CPG supply chain teams is three-fold.  Rapidly shifting industry markets and consumer preferences imply a critical need for increased product innovation and quicker introduction of new products. These capabilities need to be obviously enhanced, in spite of continued pressures to reduce costs.

Volatile and rapidly changing global markets requires that Sales and Operations Planning (S&OP) teams be more responsive and anticipate such changes.  The focus clearly turns toward an outside-in perspective, allowing the supply chain to respond as quickly as possible to market opportunities or threats.

Finally, supply chain segmentation strategies, those that orient supply chain resources to the most influential customers, most profitable market segments or highest customer growth opportunities are now ever more essential.

Supply chain leaders should insure they educate senior management to these important priorities including the current new wave of CEO’s.

We provide a final editorial note. Our observation is that on many current occasions within today’s CPG industry landscape, new or changed leadership stems from leaders coming from consumer goods financial or sales and marketing backgrounds.  That stands to reason given that in times of business crisis, corporate boards favor such leadership skills. However, as the adage often goes, crisis can present opportunity for new thinking and fresh perspectives brought by those with other backgrounds. By our lens, that would include those with an operational, supply chain and advanced technology backgrounds who understand customer, business and technology investments, tradeoffs and/or rewards.

Bob Ferrari

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


Announcing JDA Software as a Lead Sponsor of the Supply Chain Matters Blog

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I am thrilled to announce to our Supply Chain Matters readers that JDA Software is our new Lead level sponsor of this blog in 2015.  JDA_250_124

We are pleased that this innovative technology provider has chosen to associate itself to the ongoing global supply chain focused thought leadership being provided by Supply Chain Matters to our global-based supply chain and IT focused community of readers.

JDA Software is a well-recognized best-of-breed provider of end-to-end, integrated supply chain planning and execution applications for more than 4,000 customers worldwide. Since its founding nearly 30 years ago, JDA’s unique applications have empowered various industry supply chain customers to achieve more by optimizing costs, increasing revenue and enhancing time to value.

This Editor and supply chain industry analyst has been following JDA and its collection of technology applications since the late 1990’s from the early notions of dot.com online commerce, to the market explosion of Omni-channel online and brick-and-mortar retail. With the past acquisitions of the former i2 Technologies, E3, Manugistics, RedPrairie and other supply chain planning, execution and technology providers, JDA has consistently increased is multi-industry capabilities in supply chain planning, execution, multi-channel customer fulfillment, collaboration and more predictive planning capabilities.

A timeline depicting the history, profile and capabilities of JDA today can be viewed at this JDA web link.

In conjunction with JDA’s 2015 sponsorship, we are further pleased to announce an upcoming series of blog commentaries hosted by both the Supply Chain Matters and JDA’s Supply Chain Nation blogs that will focus deeper into industry-specific supply chain planning, execution and customer fulfillment challenges, a market education series introducing new supply chain advanced technology and predictive analytics concepts including the opportunities for integrating planning and execution processes for more timely decision-making. We have additional plans to feature an interview series where this Editor will speak with supply chain industry as well as technology focused executives on how technology is delivering value within different industry settings.

We extend sincere appreciation to JDA for recognizing Supply Chain Matters as a destination of independent thought leadership in supply chain management, manufacturing and product lifecycle management focused business process and information technology.

Bob Ferrari, Founder and Executive Editor

 



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