Published reports from the Financial Times, Bloomberg and American Shipper report that two high profile ocean container shipping lines, Germany based Hapag-Lloyd and Chile based CSAV, are in talks concerning a potential merger. These discussions had not led to any agreement and both lines were compelled to issue statements indicating existence of these talks. Bloomberg reported that the initial news came from the Die Welt newspaper and later acknowledged by company statements after CSAV shares spiked 27 percent. CSAV itself has lost 86 percent in the past three years according to Bloomberg.
According to rankings from Alphaliner, Hapag currently ranks globally as the sixth largest container ship fleet while CSAV ranks 20th. If both lines merge, the combined fleet would rank fourth globally. Just about two years ago Hapag had merger talks with Hamburg Sud, but those discussion talks broke down.
Hapag-Lloyd became a member of the G6 Alliance in 2012 in an effort to pool multi-carrier capacity on select global routes. On Tuesday, American Shipper issued a newsflash indicating that the G6 Alliance is now planning to expand its cooperation to Asia-United States West Coast and transatlantic trade lanes, pending regulatory approvals.
After many rants regarding proposed rate hikes involving global ocean lines, Supply Chain Matters declared in July that the implications for structural changes involving global transportation were compelling. This latest news of a potential merger of lines should therefore not be of great surprise. One of our upcoming 2014 predictions will call for even more re-structuring of global transportation networks. Manufacturers and retailers will need to continue to keep a keen eye out for the implications to their ongoing sourcing and supply chain strategies.
This author had the opportunity to listen in on two webcasts this week from IDC regarding that industry analyst’s firm’s information technology predictions for the upcoming year. Both webcasts were rather interesting and provided thought provoking predictions, especially when one considers that the bulk of the listening audience consisted of many well-known information technology and service providers.
As I pen this commentary, we are in the process of completing our Supply Chain Matters 2014 Predictions for Global Supply Chains which will be shared in just a couple of days. In the meantime, I did want to share for our reading audience important takeaways from IDC’s IT focused predictions.
Last year’s predictions from IDC were all about the termed 3rd Platform, the combined technologies of cloud, mobile, social and big data computing making a significant presence in overall IT spending. In 2014, IDC now predicts that the battles for IT industry dominance and indeed survival are focused on further investments in 3rd Platform technologies. They go on to declare both an explosion in innovation and industry consolidation, namely a small number of big “winners” in mobile platforms, cloud infrastructure and solution marketplaces as the big vendor players vie for control and long-term revenue growth.
IDC quantifies 3rd Platform momentum as driving 29 percent of forecasted 2014 IT spending and 89 percent of market growth, which is significant momentum. Cloud spending alone is predicted to exceed $100 billion, and skewing toward public cloud services. Of even interest, IDC predicts that in emerging markets such as China, smart connected devices, cloud and big data applications will outpace overall market growth and shape strategies.
If some readers are tending to tune out at this point, thinking that this does not apply to me at all, kindly read on as we share our two most important takeaways from what IDC shared.
The first was IDC’s validation that the IT buyer profile continues to shift to business executives. The firm estimates that 61 percent of technology focused projects will be business funded. The implication is that procurement and supply chain leaders, along with business and sales and operations planning (S&OP) teams have to continue to be far more technology-savvy in their understanding of IT technologies options and available marketplace solutions. It’s now two edged coin with the business holding far more influence on required business process and associated technology investments. On the one hand, business and functional executives now have greater leverage in articulating the need and benefits of systems investments, either behind-the-firewall or cloud-based in scope. Technology and services vendors will accelerate their efforts of directly knocking on your doors knowing this market influence shift. Best that you accommodate those requests and sponge as much information as you need. It further implies that accountability for desired and timely business results comes with this new influence, so the technology decision needs to be sound and well grounded. Gone are the days of fuzzy notions as to who is accountable for the timing and delivery of an end result. President Obama is living that reality right now with the healthcare.gov rollout.
The second important takeaway is one that we have continued to resonate on this blog, namely that decisions related to B2B network platform adoption and expansion are far more critical and need to take on much broader perspectives. That implies functionality and business process support that extends not only in procurement and supplier based management, but deeper dimensions of supply chain response management, supply chain analytics, logistics, supply chain control tower and other supply chain wide decision-support needs. By our view, the B2B backbone, along with its supporting infrastructure and support tools, are the most critical strategic technology decision business and functional executives will make. The good news is that the CIO along with his/her technology team are not going away anytime soon, and can immensely help with the network evaluation from the technology infrastructure and architecture lens. Their new role is to be your partner in innovation, and your expanded role is the bigger-picture view of the supply chain backbone network, translated to manageable tactical steps of desired functionality.
Our readers are already dealing with the effects of more rapid change, skill gaps and other challenges. In your New Year’s resolutions, best you think about adding more IT, cloud and network technology knowledge to your skills base in the coming year. You thank us later.
Bob Ferrari, Executive Editor
Report that Boeing has Initiated RFP’s for 777x Production Sites
This is a brief follow-up commentary associated with Boeing’s current efforts in exploring a production site for the newly announced 777x aircraft which is being developed and planned to transport upwards of 400 passengers. Our last specific commentary related to the new 777x noted Boeing’s threat to source design engineering and perhaps production outside of Seattle unless the company could get a supplemental longer-term agreement from its labor unions on wage and benefit costs. Reports further indicated that lobby efforts with the State of Washington resulted in a package of tax and other incentives valued at $9 billion through 2040 in order to keep the bulk of the 777x program activities in the state Washington.
We were reviewing our various Internet focused content alerts earlier in the week and ran across an Associated Press syndicated report that indicates that the Governor of the state of Missouri is calling back legislators to consider additional governmental incentives in hopes of persuading Boeing to source 777x production in that state. The report indicates that the state faces a December 10 deadline to submit its proposals to Boeing. Obviously other states are bidding for the same massive prize, and the AP article quotes a Boeing spokesperson as indicating that requests for proposals were sent to a dozen locations. The states of Alabama, California, South Carolina, Texas and Utah are among states reported as having discussed efforts to recruit Boeing. The process kind of smacks of an auction, namely who will provide the most lucrative cost incentives.
Another irony is that the majority of the states mentioned already have a significant presence from Boeing, including Missouri, which is where portions of defense related production reside. A previous report from the Wall Street Journal cited Huntsville Alabama, Long Beach California, Charlstown South Carolina and St. Louis Missouri, among two other locations as designated design engineering sites for the new 777x program. That list seems to correlate with the listing of potential states bidding for production, thus co-location of design engineering and production appears to be under consideration.
One of messy and perhaps bitter aspects of the 787 Dreamliner program was Boeing’s decision to open a second production facility in Charlstown South Carolina because of needs to dramatically step-up production in a three year delayed program. Upon the announcement, Boeing’s principle Seattle based labor unions filed a petition with the National Labor Relations Board (NLRB) alleging that Boeing was sourcing to avoid a union workforce and collective bargaining. The NLRB later ruled in favor of union arguments and that apparently remains as an overhang of tensions among both parties.
Let’s hope that this type of scenario does not again play out with the 777x. In any case, the drama as to what the supply chain of 777x turns out to ultimately be has many chapters to follow.
Since our inception in 2008, Supply Chain Matters and our parent, The Ferrari Consulting and Research Group has researched and produced annual predictions for global supply chains for the upcoming year. Our predictions are generated from synthesizing developments that have occurred in current and prior years, researching various economic, industry and other forecasting data, along with input from clients and supply chain teams.
The complete listing along with specific commentary related to our 2014 Predictions for Global Supply Chains will initiate on Supply Chain Matters starting on Friday, December 6, and continuing through the month of December. Do keep Supply Chain Matters on your browser Favorites as we review each of projections for the upcoming year.
Readers will recall that in previous years, we have initially scorecarded our current year projections before outlining our projections for the upcoming year. We are changing the order this year because reader and other feedback indicated some confusion with upcoming vs. current year predictions. Therefore, we plan to scorecard our 2013 projections as to actual events after we complete the unveiling of our 2014 projections.
Also as in previous years, our 2014 predictions will be provided in a far more detailed research report available for complimentary downloading or email distribution in early to mid-January. If you are interested in receiving a copy, please send an email to: info <at> supply-chain-matters <dot> com. Please include in the request the following:
We pen this posting in the middle of Cyber Monday and already, reports of both physical and online holiday sales levels for the all-important Thanksgiving and Black Friday weekend are confusing. However, one conclusion is clearer, supply chain, online fulfillment and logistics teams need to be prepared for a wild ride in the following 4 weeks.
Today’s published edition of the Wall Street Journal headlined (paid subscription or free metered view) that holiday sales lagged despite the blitz of deals, reporting that weekend sales dropped for the first time in at least seven years. While retailers such as Best Buy, Macy’s, Target and Wal-Mart opened physical stores on the afternoon of the Thanksgiving holiday and aggressively promoted deals, preliminary sales estimates point to sales across both holiday days as not equivalent to previous years. The WSJ opined how retailing has become a zero-sum game as sales growth comes at the expense of another retailer. It cites National Retail Federation (NRF) preliminary estimates that total spending over the Thanksgiving weekend fell to $57.4 billion, down 2.7 percent from a year ago. However, NRF forecasts total holiday through year-end to increase by 3.9 percent.
The fact that this weekend’s shopping activity spans an earlier promotional and shopping horizon seems to be either confusing media outlets or these outlets are in competition for the most click-through headlined content regarding holiday sales. Yesterday, Bloomberg reported that Black Friday online spending increased a record 15 percent to a record $1.2 billion. It cites ComScore online data going back to November 1 as well as Thanksgiving and Black Friday holiday online sales. What the authors failed to qualify was that last year, the majority of retail outlets were not open for business during Thanksgiving, and thus comparisons to last year are exaggerated to state the least. In its reporting, the WSJ cited NRF data and noted: “ On Thanksgiving Day, 45 million people went shopping, up 27% from last year, but traffic on Friday increased only 3.5% to 92 million..”
Readers who were monitoring social media probably viewed the many ugly images of shoppers fighting at a Wal-Mart to secure a promoted television model, or other images of shoppers stampeding into stores and malls to secure their bargains. One report we read indicated that Wal-Mart authorized its store managers, at their discretion, to announce hourly door busters, to add even more frenzy.
All of these reports and images should be of concern for sales and operations planning and supply chain teams planning supply and inventory resource requirements for the remainder of the month. While many product promotions are planned well in advance and inventory availability is managed to a concerted plan, it would initially appear that two trends are occurring.
First, consumers are clearly price and bargain focused, and thus sales for the remaining days and weeks will be driven by aggressive pricing and sales tactics that drive loss leaders but at the same time capture consumer eyeballs for other products, both brick and mortar and online focused. Second, as noted in our earlier commentary regarding what to expect, online sales activity may indeed peak later in the month, if it peaks at all. That implies a extremely keen eye on real-time inventory sales and inventory management across all fulfillment channels and having daily conversations with your online and traditional sales and marketing team members as to the most up-to-date promotional and sales fulfillment activities. The more those conversations can be collaborative as to what has been planned and what to expect, the less firefighting and ultimate lost sales.
Now more than any other period during the year, near real-time analysis of operational fulfillment and inventory data will differentiate the winners for this year’s holiday buying surge. This will be the keen test of any or all demand sensing and supply chain response capabilities.
On Friday, ThyssenKrupp AG announced that it would sell its troubled but state-of-the art Calvert Alabama steel finishing plant to the 50-50 joint venture of ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion. The announcement concluded an 18 month effort to sell two packaged facilities, in essence a vertical integrated supply proposal. The price garnered in this sale was considerably lower than the $5 billion that Germany based Thyssen originally invested in the Alabama steel rolling facility.
Three years ago, the Calvert plant was paired with Thyssen’s other raw steel producing plant in Brazil in an effort to provide auto manufacturers located in the southern region of the United States a more technology laden supply of fabricated rolled steel for product design and supply purposes. It was an effort to benefit from the resurgence of auto manufacturing in the U.S., but ran astray because of the rising production costs involved in the Brazil facility, and lower than expected global steel demand. Thyssen initial attempts for sale involved both the Brazil and Alabama plants as a package, but that resulted in lack of attractive bids. Thyssen later agreed to sell the Alabama facility itself, and managed to garner five different bids for the facility, including U.S. based Nucor.
For the potential new owners is the ability to utilize raw steel supplies from other U.S. or Mexico based steel fabrication facilities. However, the deal reportedly includes a pledge to annually procure a minimum of two million tons of raw steel from Tyson’s Brazil facility over a 6 year horizon. The new owners can further leverage the higher capacity and productivity that the Alabama plant provides along with a shorter logistics chain for manufacturers with plants in the southeast U.S. region.
The deal itself is still subject to regulatory approvals. According to reports published in business media, AccelorMittal currently accounts for roughly 40 percent of the steel supplied to the North American market and that may be a sticking point for regulators. Nippon-Sumitomo currently operates a 2.9 million square foot finishing facility in Indiana that supplies U.S. Midwest auto and appliance manufacturers with rolled steel products.
Because of possible concerns, reports now indicate that the review process is not expected to be completed until at least July of next year. One would hope that regulators would have a strategic sourcing perspective for insuring that the current resurgence of auto, appliance and other steel focused manufacturing in the southeastern United States continues with an Alabama plant that now has other options for vertical integration.