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Delivering on Customer Promises in both Automotive and Retail Industries


At the Council of Supply Chain Management Professionals (CSCMP) Annual Conference held in late September, this author had the pleasurable opportunity to moderate two very informative panel discussions. These sessions were jointly sponsored by The Washington Post and Ryder Inc.

Panel One: How a refreshed distribution strategy revs up savings in the automotive industry, featured Steven Crowthers, Director of Distribution North America, FRAM Filtration, and J Steven Sensing, President, Global Supply Chain Solutions, Ryder System, Inc. Our discussion touched upon several challenges impacting automotive supply chains today, the impact of on-line, Omni-channel commerce.

Panel Two was titled: Is it possible to achieve high touch deliverables with lower costs?, featured Abhinav Shukla, Senior Vice President and Chief Operating Officer, True Value Company along with John Diez, President of Dedicated Transportation Solutions, Ryder System, Inc. This panel focused on how a traditional retailer is meeting the challenges of online commerce, particularly in relationship to transportation and inventory replenishment needs.

The videos recorded for both panel discussions are now available and can be viewed by clicking on this Washington Post Brand Studio web link.


As a reminder, if your organization is in need of noted and knowledgeable speaker or interactive panel facilitator please check out our speaker services web page.

Bob Ferrari, Founder and Executive Editor

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Report that Global Container Shipping Leader Maersk Looking to Acquire Hamburg Sud


The Wall Street Journal is reporting that based on it sources with knowledge of the matter, global container shipping conglomerate A.P Moeller Maersk is looking to acquire German based shipping line based Hamburg Sud. The latter owns and charters upwards of 130 container ships it had nearly 6000 employees and $6.7 billion in revenues in 2015.

The WSJ report indicates that Maersk has interest in acquiring the entire business of seventh ranked container line Hamburg Sud to boost its transportation presence in global trade routes across Latin America. The publication had earlier reported that the Oetker family was considering the sale of its shipping interests.

In late 2012, Hamburg Sud had explored a merger with Hapag-Lloyd but those talks subsequently collapsed over pricing and management issues.

In September, parent A.P. Moller-Maersk announced that it would split its current business operations into two separate operating businesses. Maersk Line, the world’s most dominant ocean container carrier would be the center point for a new container transport and logistics division that will consist of other owned businesses such as APM Terminals, Damco and Maersk Container Industry businesses.

If this rumored acquisition of Hamburg Sud were to occur, it would represent yet another definitive sign of more accelerated occurrence of industry consolidation with influence and global scale flowing to the top-tier shipping lines. In a prior Supply Chain Matters commentary we echoed reports indicating that industry leader Maersk would be interested in acquiring another line if the opportunity presented itself.

Labor Strike at ABX Air Comes at Most Critical Time


Yesterday, a labor strike among 250 cargo airline pilots working at ABX Air, a subsidiary of Air Transport Services Group (ATSG) grounded more than 75 flights contracted for both Amazon and DHL Worldwide Express. The move came just before the start of busy Thanksgiving, Black Friday and Cyber Monday holiday shopping events.

As we pen this posting, reports indicate that just before 5 p.m. Wednesday, U.S. District Court Judge Timothy Black granted a temporary restraining order against the strike involving the pilots. That would allow for a temporary reprieve in the labor action if the pilots adhere to this order and continue negotiations over grievances.

Readers will recall that last year, Amazon contracted with ATSG to lease a total of 20 Boeing 767 air freighter aircraft to move Amazon Prime shipments from various customer fulfillment centers across the U.S. and other regions. A posting from, noting court documents indicates that ABX is a contractor to DHL, which employs 2,400 at its North American hub at Cincinnati/Northern Kentucky International Airport in Hebron. It operates about 35 flights a day for Amazon and 45 for DHL. Grounded flights may have affected as many as 20,000 individual customers for each aircraft affected.

Striking pilots claimed that ABX’s flight schedule demands have forced pilots to work an excessive number of emergency assignments because of limited flight staff, with little time for rest. Obviously, the timing of the work action, coming just before the busiest period of the year, is added attention mechanism.

Amazon officials have stressed to business media that their ability to do business is not beholden to a single cargo carrier. Reports from The Wall Street Journal and other publications indicate that the backup plan includes reliance on both FedEx and UPS air assets. But, in the case of UPS, airline maintenance workers who maintain UPS’s fleet of aircraft have announced that they have authorized a labor strike affecting the global parcel carrier after contract talks remained deadlocked over the issue of health-care benefits. That situation may come to a head after the ATSG action, as both actions involve chapters of the Teamsters labor union.

All of these developments are obviously disconcerting to B2C providers, online and traditional retailers.  The air cargo industry has a long history of labor concerns given the constant demands for longer overnight flights and constrained staffing levels. It would now seem that the industry has entered a period of increased assertiveness among employees to include labor actions to gain maximum action.

Supply chain transportation and logistics teams should continue to monitor ongoing developments since each of these actions, if they continue, will obviously have cascading effects. Rest-up for tomorrow’s Thanksgiving holiday since the coming days look to be challenging.

Bob Ferrari

Critical Holiday Fulfillment Period is About to Begin and its All Hands on Deck

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Next week officially kicks-off the holiday buying frenzy with the celebrations of the Thanksgiving Holiday in the United States as well as the Black Friday and Cyber Monday shopping events that extend out to the following week. In its recent update on the U.S. online retail economy, analytical firm ComScore predicted that based on prior year sales and order volume trends, both the Black Friday and Cyber Monday periods will represent this year’s expected highest peak in shopping volume, perhaps more so with Black Friday.

In previous Supply Chain Matters commentaries we have advised online and traditional as well as B2C focused supply chain planning and customer fulfillments team to take a cautious but diligent perspective to daily customer buying actions over the coming few weeks. This diligence includes paying close attention to overly optimistic forecasts of expected retail sales among various channels and especially diligent in working with brethren sales and marketing teams in managing what is turning out to be a lighter inventory positioning heading into the prime holiday period. Forms of product demand sensing capabilities are obviously essential.

As business media has pointed out, third-quarter financial reporting by major retailers indicates a consistent theme of reduced inventory levels with expectations for higher margins and lower costs for the all-important and most profitable Q4 holiday period.  The added costs of online fulfillment needs are a special consideration for managing costs. Lower inventory directives compel planning teams to determine the best consensus as to which merchandise will experience the highest sales volumes and when. Such bets were established weeks ago and hopefully monitored continuously. This upcoming period will be the time where tight collaboration with marketing and merchandising focused on the timing and seamless execution of targeted promotions will pay the most dividends.

For the first time, Amazon is charging sellers of the Fulfilled by Amazon program a hefty premium for storing inventory during the November and December timeframe, while offsetting some of these costs by lowering holiday focused fulfillment fees. All Black Friday and Cyber Monday focused inventory was due to Amazon warehouses last week. The cutoff for Christmas holiday focused inventory is December 2nd. That is another weighting for the stakes related to accurate inventory planning. Reports indicate that Wal-Mart has shifted more than half its inventory supporting Black Friday to its dedicated online fulfillment center warehouses. Once more, this retailer has made plans to have thousands of more items from its online catalog available for same-day in-store pickup.

The reality that many Sales and Operations (S&OP) teams often know is that over the next two-week period, there is little time to re-plan, especially with overall inventory levels being low. However, senior management expectations for higher margins and profitability are very high and thus many hopefully well informed decisions will need to be made in a very short time interval. Replenishing hot selling items runs the risk of insuring that this merchandise arrives in time or better, there are enough firm back orders from customers willing to wait. Electing not to replenish implies a plan to make-up any revenue shortfalls with all other existing inventory, thus the need for on-the-fly collaboration in merchandise promotions.

One other critical data point from ComScore’s latest update is that for online buying, the data concerning the correlation of Free Shipping to actual shopping cart completion is compelling.  During the full 2015 holiday period, Free Shipping accounted for 68 percent of all online transactions vs. 55 percent in 2014. Online retailers hoping to preserve margins by allocating more of the shipping expense to customers may experience a challenge. Thus, S&OP teams will be educating and influencing senior executives with data indicating the predictive buying tendencies related to Free Shipping along with the importance that timing has to optimized inventory management.

The other wild card and implied white knight for the next few weeks will be responsive suppliers, transportation carriers and logistics fulfillment networks. We surmise that best-in-class teams have already collaborated with key suppliers on responsive back-up contingency supply plans to be able to quickly replenish hottest selling inventory. The question is what may be sometimes defined as “key supplier.” Is the supplier domestic or internationally based in terms of transportation lead time?  Is the supplier one that we always pay on-time and has consistently made good on commitments? Does the supplier or distributor really have that on-hand inventory?

Regarding transportation networks, a learning that came out of last year’s holiday fulfillment surge was that there were bottleneck vulnerabilities to large carrier’s hub networks. Both FedEx and UPS labored during and after the peak periods to dig out of volume bottlenecks. Likewise, air freight carriers have removed a lot airlift capacity from their networks, and the fallback position appears to be more and more parcels flying in the bellies of commercial airlines. We all know that expedited shipping implies unplanned expensive freight costs and  throw-in any occurrence of severe winter storms and the expense line grows further.

The coming two weeks will be the most stressful among B2C retail teams and this will be the test where the previous investments in people, process and technology are proven.

For our part, Supply Chain Matters will be monitoring ongoing events and providing periodic insights as the surge period unfolds and as the results are tabulated. For those of you working long nights and weekends who need a respite as to the big picture, check us out.

Stay tuned.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Infor Gains a Major Investment and Endorsement


There was a rather stunning announcement concerning the world of Cloud based ERP and B2B systems technology this week.

Infor announced yesterday that it has received an additional equity investment of more than $2 billion from Koch Equity Development LLC, the investment and acquisition subsidiary of Koch Industries, Inc. According to the announcement this incremental investment “will provide Infor access to additional growth capital to accelerate innovation, expand distribution, and continue disrupting the enterprise applications industry.”

The investment transaction is expected to close in early 2017 and represents the largest ever made by Koch Equity Development involving another firm.

The name Koch may have resonance with readers, and yes, ladies and gents, this is the same privately owned Koch Industries that reported $100 billion in revenues in 2015. The Koch conglomerate of industry presence stems from brothers Charles G. Koch and David H. Koch who have garnered a fair amount of visibility in U.S. political discourse.

Under CEO Charles Phillips, Infor has undertaken a new phase of growth and innovation that is clearly leveraging Cloud based technologies. This new $2 billion infusion obviously represents a significant boost in such efforts, representing the equivalent of what the company has invested in product design and development in the previous five years. In its recent last fiscal year, Infor recorded total revenues of $2.7 billion and invested $422 million in research and development in FY16 alone. The closing cash balance in Q4 was $705 million, and that position immediately climbs to near $3 billion when the Koch infusion occurs.  That represents a lot of firepower in the world of mid-market ERP technology.

Infor has been private equity owned by Golden Gate Capital and Summit Partners, and both firms will retain control of the company. However, Koch Equity will be granted four of the total nine Board of Directors seats.

There will be lots of initial speculation as to what areas will be leveraged by this investment. Some executive quotes from the announcement point to co-innovation efforts involving various Koch multi-industry businesses. That would imply Infor’s movement up-market to support larger enterprise Cloud ERP support needs, while connecting seamlessly with operating subsidiaries or external supply chain partners. It would thus likely include further conversion of current Koch business units to Infor based technology.

Infor’s prior acquisition of GT Nexus, a B2B network supporting customer global transportation and logistics transactional and business process support needs may well be another area of added investment in either further network and applications development or leveraging growth by added acquisitions that can support process needs beyond logistics and transportation, including procurement and planning.

A third area could be in direct ownership of Cloud infrastructure, since Infor currently contracts with Amazon Web Services (AWS) for most of its cloud hosting needs. Of the largest players in the ERP market today, Oracle has invested and deployed its own Cloud applications and IT infrastructure network while SAP has elected a hybrid model that features both SAP hosted for HANA Cloud based technology and partner owned Cloud infrastructure for hosted ERP applications.

Our initial view is that Infor stands to gain more by added investment in all three areas, but in different scope. Our bias points to a lost opportunity if Infor does not take the opportunity to expand its capabilities to be a unified Cloud ERP, supply chain B2B network and managed services provider and GT Nexus is the key to such strategy.

This Infor announcement comes on the heels of Oracle’s July announcement to acquire Cloud ERP provider NetSuite for an estimated $9.3 billion. That acquisition also presented various possibilities but in different dimensions.

The initial takeaway from this week’s Infor announcement is that a thunder bolt has been heard in the Cloud ERP landscape, one that will certainly play out in the months to come. It serves yet another indication of serious money being invested in Cloud based applications and technology and on the customer adoption attractiveness of these technologies.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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