Not to be undone in a week filled with supply chain technology news, SAP announced this afternoon that its SAP America, Inc. subsidiary has entered into an agreement to acquire Ariba for an estimated value of $4.5 billion, or $45 per share.  The transaction represents a 20 percent premium over Ariba’s closing stock price yesterday. Ariba’s board of directors has already approved the this deal and the transaction is expected to close in the third quarter of calendar year 2012, subject to Ariba stockholder approval, clearances by relevant regulatory authorities and other customary closing conditions. According to SAP, the transaction is expected to be accretive to SAP’s non-IFRS earnings per share in 2013.

The announcement itself will provide some shock to the procurement technology market, especially on the heels of IBM’s December acquisition of principal Ariba competitor Emptoris.  The interesting aspect at the closing of the transaction is the likes of SAP, IBM and Oracle competing in the area of sourcing, procurement technology and supplier networks.

With the addition of Ariba, there will be considerable overlap among existing SAP procurement and SRM functionality which will have to rationalized for customers in addition to value-added procurement technology and services provided by SAP SRM partner’s, Hubwoo and Crossgate. In our Supply Chain Matters commentary related to SAP’s recent Sapphire conference, we noted bold vision but confusing messaging and execution.  The Ariba acquisition, at face value, obviously adds to those internal challenges, not to mention that some Ariba customers are also SAP customers who passed on SAP SRM.

Stay tuned for further Supply Chain Matters commentary and insights as more definitive information becomes available.

A final thought relates to Oracle, who may have to consider beefing-up its procurement capabilities for customers in the light of these two significant moves from both IBM, and now SAP.   One wonders if Oracle was also involved in Ariba’s courting dance.

Bob Ferrari

In our previous dispatch commentary we provided general impressions from this week’s Oracle Industry Analyst World Spring event being held at the company’s corporate campus in Redwood Shores California.  In this Supply Chain Matters dispatch, we focus on briefing highlight elements of Oracle’s supply chain management support strategies.

Rick Jewell, Oracle’s senior vice president of supply chain applications development delivered an update on supply chain applications strategy, some of which we can share, and some we cannot because of non-disclosure agreements.

The core attributes of Oracle SCM remain, namely:

• Providing a complete suite of supply chain management support.
• Being ERP agnostic, including the support of other major ERP backbones via open applications integration architecture.
• Providing modular applications that can be matched or mixed to customer needs.

The core Value Chain Planning (VCP) grouping of applications has undergone 8 point releases in the last 3 years. Four new planning applications have been added including service parts planning.  The Oracle Rapid Planning application has been augmented with integration to S&OP support, inventory optimization and collaborative planning needs.

Oracle Value Chain Execution has also undergone its share of enhancements including 95 new releases to Oracle Transportation Management (OTM) since the acquisition of G-Log.  By the end of the year, OTM is planned to include mobility support for information and business function access across smartphone and mobile platforms. Oracle Warehouse Management has added 42 new features including 2 industry specific solutions. Oracle Global Trade Management is a recent addition to this grouping.

Oracle Supply Chain Management’s 12.2 Release was described as imminent and includes some rather interesting new functionality including an expanded Advanced Planning Control Center, an equivalent to support for an executive-level S&OP process.  It is designed to bring together the product hierarchy dimensions of Demantra S&OP with supply and distribution planning capabilities.  The new release will also feature some long overdue simulation capabilities for Oracle Rapid Planning to support intra-day simulations of supply and demand plans.  The 12.2 release was also positioned for Oracle enhancements related to support of asset intensive industry SCM needs.

Oracle PLM and Product Value Chain comes under the umbrella of Oracle’s SCM and includes PLM/PDM support utilizing Agile PLM and Agile PLM for Process. Since the original acquisition of Agile, Oracle indicates that there have been over 500 customer-driven enhancements added.  A neat new feature is the ability to analyze the product development pipeline or simulate product demand scenarios from PLM within an overall S&OP process framework. One other highlight of Product Value Chain is the addition of enterprise quality management functionality, soon to be enhanced with the addition of some Endeca powered information discovery capabilities. Jewell was not shy in naming recent Oracle customer acquisitions in competing with SAP.

Another important highlight to share with our readers is the current direction concerning Oracle’s Fusion or cloud-based SCM offerings. Fusion is the Oracle strategy to allow applications to run in a public/private cloud as well as on-premise.

Dispatch three will address this element of Oracle’s direction.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group and Supply Chain Matters blog.  All rights reserved.

Disclosure: Oracle has no current financial or sponsorship interests in this blog or our consulting services business.

These past two weeks have been rather active in terms of supply chain developments, not the least has been the announcement by UPS on its intent to acquire European based TNT Express.  The all-cash deal, valued at $6.8 billion is headlined as the biggest in UPS history, and has global shipping implications. It represents what we believe is a means to block rival FedEx and others from expanding their own ground transportation services within Europe.

In its coverage of the UPS acquisition, the Wall Street Journal characterizes the deal as allowing UPS to capitalize on further long-term economic growth in Europe while FedEx remains better positioned to take advantage of long-term growth across Asia. In essence, both global providers are making different strategic bets on future value-chain growth and global shipment volumes.

FedEx capabilities servicing Europe currently lie in air express capabilities while UPS now has the potential to leverage both air express, ground transport and rail networks. Because Europe is more compact from an overall geographic perspective, ground transportation is a viable shipping alternative in terms of time and cost.

Asia increasingly represents the focal point for today’s component and finished goods manufacturing activity.  The region represents a much wider geographic footprint traversing large bodies of water. Manufactured goods generally enter other supply chains by either ocean transport or air freight.   Ocean container carriers invested far too much in container ship capacity, causing gross overcapacity, little profit that have resulted in an erosion in transit times to Europe or the U.S.. Thus for any shipments that are time-sensitive, shippers have little choice but to bite the expense bullet and opt for air express.  That is why both FedEx and UPS have benefitted in their Asia investments in air freight capacity. FedEx’s fiscal 2011 full year earnings announced last June noted a 6 percent increase in daily international package volume driven primarily from export volume originating from Asia.  In yesterday’s announcement of Q3 results, FedEx reported a 1 percent decline in international shipment volumes and announced that it would temporarily idle some of its international freighters.  The company also reflected a rather cautious international and U.S. economic outlook for the remainder of 2012. Asia exports and imports have obviously slowed.

It is the view of Supply Chain Matters that the final commentary related to UPS’s strategic move to acquire TNT comes later as global economies and supply chain activities shift to accommodate changing sourcing patterns, value-chain footprints and commerce fulfillment models.  Both UPS and FedEx can continue to benefit or one, or the other, may feel the effects of a wrong bet.

Bob Ferrari

Supply Chain Matters is pleased to announce to our readers that supply chain technology provider Kinaxis continues as one of the Lead sponsors of this blog.

Kinaxis was the very first sponsor of this blog in 2008, and we look forward to continuing our close relationship during 2012.  Kinaxis recognized early on that supply chain professionals would increasingly turn to social media channels for their educational needs and that blogs such as Supply Chain Matters would play an increasing role in how technology users seek out thought leadership and gather insights on business process and technology needs.

Kinaxis has successfully designed and continues to support a highly successful supply chain focused social-media community. The Supply Chain Expert Community web site garners multiple accolades and is approaching 6000 registered members. This author is pleased to provide continued weekly guest blogger commentary in this community throughout 2012 that will be simultaneously published on this blog as well.

Founded in 1995, Kinaxis and its flagship RapidResponse technology has been adopted by global industry leaders such as Cisco, Flextronics, Honeywell, Panasonic, Research In Motion, Qualcomm and others to manage and respond to their supply chain resource planning needs within volatile and rapidly changing business environments. This author’s familiarity with the company’s capabilities began in 1999-2000 when the company was initially named WebPlan, and as an industry analyst I have witnessed an incredible growth path since.  The year 2011 was an incredible year for Kinaxis that included double-digit sales growth and sustained profitability. Besides having its corporate headquarters in Ottawa Ontario, Kinaxis now has offices in the U.S., Japan, China and the Netherlands and has executed a global presence.

Today, the RapidResponse application is often utilized as a decision hub for supply chain planning, sales and operations planning, and collaborative planning processes across an extended, global based supply chain.  The value of the technology is in its ability to allow customers to plan a coordinated response to supply, capacity or demand variances that often occur. In 2011, RapidResponse Control Tower was introduced as a cloud based offering to assist manufacturers and brand owners in securing broader visibility and process control across the extended global supply chain.

If your organization has needs for extended supply chain visibility, control tower, or sales and operations planning process support capabilities that can be implemented in a very timely manner, I recommend you place Kinaxis on your short list.

Bob Ferrari, Founder and Executive Editor

The following commentary can also be viewed and commented upon on the Supply Chain Expert Community web site.

Financial media is abuzz with the announcement of Google’s intent to acquire Motorola’s cellphone business in a deal valued at $12.5 billion.  The acquisition of Motorola Mobility Holdings Inc. is being touted as a response to Apple’s momentum in the smartphone markets and eventual possession of an arsenal of 17,000 patents held by Motorola in mobile technology. The deal, if approved, is expected to close in early 2012.

Another important implication however is Google’s access to a global supply, channel and supply chain fulfillment capability to produce and distribute smartphones and tablet devices. Readers will recall Google’s previous stumbles in late 2009, when it attempted a direct entry into the smartphone distribution channel by announcing the availability of the then announced unlocked Nexus One phone via an Internet ordering web site.  In our Supply Chain Matters commentaries at the time, we characterized Google’s effort as an attempt to dis-intermediate existing smartphone distribution and selling channels.  As anticipated, Google ultimately experienced multiple issues related to consumer difficulties in purchasing, activating and servicing their mobile phone purchases.  Contract manufacturer HTC, whom Google coerced into playing the role of global supply chain distribution and fulfillment, was placed in a rather challenging position. Eventually, Google pulled the plug on the grand experiment and withdrew that version of the Nexus One.  The intent was noble and classic Google, but the execution was naive.

With the acquisition of Motorola Mobility, Google has the opportunity to strongly influence the design of Motorola smartphones and tablets for tighter integration with the Android operating system. The deal opens the door for more options for search and online commerce, along with mobile computing needs for consumers and business. The path of innovative product introduction directly to consumers and businesses has the potential to become a lot quicker. Google also gains a global channel distribution network of mobile carriers which can help it compete with the likes of Apple or other competitors.  Consumers may have the option of an alternative to the likes of an iTunes online ordering site. Motorola could also become the premiere provider of Android mobile devices, while other manufacturers are offered different versions.

Congratulations to Google and Motorola on a savvy deal.  Supply chain and fulfillment capabilities may well prove to be instrumental for the combined companies in the coming years.

Bob Ferrari