Monday, November 20, 2017

KEY POINTS OF E-COMMERCE

Omnichannel E-commerce.  The New Selling.  The New Supply Chain that drives its success.

Disruption. Chaos. Change. Transformation. Amazon Effect. Being Amazoned.

The risk of disintermediation for retailers and wholesalers/distributors.

The size of the B2B e-commerce market is larger than B2C.

Global revolution of selling and supply chain management that crosses industries, markets, and borders.

How well are you doing with e-commerce and the supply chain that drives it and meets customer expectations?

Leaders and laggards.



TRADE FINANCE--HAVES AND HAVE NOTS

The Haves and Have Nots for Finance


All I ever hear about is Gaps in Finance. This creates our haves and have nots.  There is:
  • The SME funding gap – According to World Bank, more than 50% of SMEs lack access to finance, which hinders their growth.
  • The Infrastructure Shortage gap- Asian Development Banks says Asia needs to invest $26tn by 2030 to resolve a serious infrastructure shortage
  • The Trade Finance Market gap - The Asian Development Bank (ADB) runs a survey that quantifies the market gaps for trade finance and its impact on jobs and growth. They claim that Financial Institutions failed to provide $1.6 trillion in needed capital.
  • And then there’s the US$1.5 trillion trade finance Small Business gap according to Harvard.

What is driving these Gaps?

According to the ADB, there are three forces driving the US$1.5 trillion trade finance gap:
  • High number of rejected trade finance applications from the Asia Pacific (APAC) region
  • High rejection rate of applications from SMEs and midcap organizations
  • Reduced lending by banks to SMEs due to perceived risk (Know-Your-Customer issues) and declining profitability in trade financing
Banks are also cutting the number of correspondent banking relationships due to KYC regulations and the cost of being in compliance in each country. Between 2013 and 2016, the number of correspondent banking relationships declined globally by a large amount, from 360,785 to 223,247, representing a 38% decrease. The second reason relates to Basel costs and the costs of liquidity and restrictions on leverage. Smaller banks and emerging market banks are more challenging to serve under new capital guidelines.  This is evidenced by the Top 4 banks and new capital surcharges for systemically important institutions, the Federal Reserve’s annual bank stress-testing regime, and the enhanced enforcement of anti-money-laundering rules.  Add to this the costs to serve SMEs and their relative high loss rates, and you see why small business lending has declined at big banks.
I am really starting to wonder the potential drag on the economies with all these gaps. And we haven’t even felt the impact from the Fed’s tightening program on banks shrinking their assets, or the impact of rising rates on hurdle rates and therefore approval rates for loans, or the impact of a downturn in the credit cycle.
So yes, these gaps exist and are painful for those that are finding it difficult to access credit.
And while FinTech has started to help – crowdfunding options help raise cash, dynamic discounting from P2P networks, new digital lending options for invoice finance, and of course the small business lending solutions from the likes of Kabbage, OnDeck, Prosper, etc. it is still a very small market.

LOGISTICS AND SUPPLY CHAIN CHANGE

With all the happenings in logistics and Supply Chain Management--disruption, chaos, change, and transformation--the gap between leaders and laggards is interesting. Why is that? Digitization. Inventory Velocity. Much more.




E-COMMERCE--UPSTREAM VS LAST MILE

The Supply part of the e-commerce Supply Chain begins upstream. So why is there so much talk about the downstream Fulfillment and Last Mile?  Think about it.




SUPPLY CHAIN VISIBILITY

E-commerce Supply Chain Visibility must be end-to-end. From suppliers through to end-customer. No gaps.




Friday, November 17, 2017

RETAIL STORES FOR E-FULFILLMENT


Retailers using stores and store personnel for e-commerce fulfillment. Big risk?  Enough staffing to do both store work and online orders?  Needed Inventory velocity?  Have Supply chain visibility—entire supply chain?  Transformed total supply chain?  What do any “no’s” mean?




B2C VERSUS B2B E-COMMERCE MARKET

B2B e-commerce market is 235% larger than B2C, per Statista. Yet manufacturers have limited supply chain capability to speed the order-velocity cycle. What are they waiting for?




DIGITIZATION AND DISINTERMEDIATION FOR LOGISTICS PROVIDERS


Will digitization create disintermediation for freight forwarders and other logistics providers? This is in addition to the disruption, chaos, and transformation happening with logistics firms from the Amazon Effect, Being Amazoned, and other change drivers.



E-BOOK ON OMNICHANNEL E-COMMERCE AND SUPPLY CHAIN MANAGEMENT

New E-book. Omnichannel E-commerce and the New Supply Chain.  At www.ltdmgmt.com



E-COMMERCE AND DISINTERMEDIATION

Does e-commerce create the risk of disintermediation for not only wholesalers, but also retailers?




Thursday, November 16, 2017

E-COMMERCE ORDER DELIVERY VELOCITY

E-commerce order delivery velocity requires inventory velocity. All are driven by the New Supply Chain.




E-COMMERCE RETURNS

Missing stat in stories on e-commerce returns . Returns on orders delivered in max of two days, aka Amazon Effect, vs returns on orders taking longer to deliver. Buyer remorse is a factor in longer order delivery times.




Wednesday, November 15, 2017

LOGISTICS BEING AMAZONED

Logistics providers are Being Amazoned as they are slow to transform for the New Supply Chain that drives aggressive e-commerce.  It opens up market to new providers.




SUPPLY CHAIN INVESTMENT

Investment in technology, warehouses, and other elements for e-commerce Supply Chains represent 1) the new selling reality that supply chain management drives success and 2) catching up for the time when needed investments were not made.  SCM




Tuesday, November 14, 2017

CEVA LOGISTICS

Analysis: a more positive quarter for a leaner-looking CEVA Logistics


Ceva warehouse
CEVA Logistics churned out positive core free cash flow (FcF) of $9m in the third quarter, after almost three years of negative FcF, its trading updated revealed today.
This a key milestone on the road to positive FcF generation next year, which “remains the target” for the US-based 3PL owned by Apollo, chief financial officer Peter Waller told The Loadstar in an interview today.
“The third quarter was another good quarter,” Mr. Waller insisted, “with top-line growth, much better working capital management, and much improved cash flows. So, we are pretty pleased.”
This is the first time that core FcF – which can used to pay down debt as well as for other financing and investing activities – was positive since Mr Waller was appointed as chief financial officer in October 2016.
(Note for the reader: FcF is the main value-driver with this corporate story, because as CEVA continues to look for a buyer, it must prove its operations are properly managed and its cash flow profile is sound. As a reference, the last time CEVA reported positive recurring FcF after financing costs and capex, or core free cash flow, was in the fourth quarter of 2014, and that excludes its performance in the fourth quarter last year, which is not comparable on a recurring basis due to the reversal in net working capital, CEVA told us.)
CEVA financial snapshot and free cash flow
CEVA financial snapshot and free cash flow
CEVA cash flow statement
CEVA cash flow statement
On a cash flow basis, its performance was even more remarkable “if you consider the improvement over the past nine months”, which were characterised by a rise in adjusted ebitda and core cash flows, despite challenging market conditions, particularly in air.
“There is pressure on ocean, but much more on air… for the full year, and even more in the third and fourth quarters,” Mr Waller said.  “It’s a very volatile environment, with rates up tremendously due to a shortage of capacity.
“From our perspective, trading conditions in air are difficult, and the fourth quarter will be even more difficult than previous quarters, but our ‘excellence programme’ makes me feel quite optimistic about the period.”
Mr Waller would not disclose the projected target for working capital intensity as a percentage of revenues, but claimed the company could improve it significantly.
“There is more that we can do over the next 12 to 18 months,” he added.
CEVA Chart 2 working capital/others
CEVA working capital/others
While revenues rose in the first nine months, so too did costs of third-party services (labelled in the P&L as “work contracted out”), which outpaced top-line growth by several percentage points, impacting gross profits.
This is a common problem in the freight forwarding industry, but CEVA appears to be coping well while managing to keep a lid on personnel costs and other operating expenses, which fell on a comparable basis, helping the company grow adjusted operating income and, subsequently, core cash flows.
“Operating costs are down $40m in absolute terms, and we have reduced that while growing the business.”
“As you grow contract logistics, for example, you need more people, but we have reduced costs on a like-for-like basis for staff and other expenses.”
CEVA revenues, costs, operating income and others
CEVA revenues, costs, operating income and others
The operational breakdown (see tables four and five below) shows that the freight management (FM) unit grew at a steeper pace than contract logistics (CL) activities, although more profitable volumes remain challenging at the former.
CEVA Freight Management vs Contract Logistics revenues
CEVA Freight Management vs Contract Logistics revenues
CEVA 5 Chart FM vs CL revenues and Ebitda
CEVA FM vs CL revenues and ebitda
Further margin dilution in certain areas (see tables six and seven below) cannot be ruled out on a consolidated level, which again is a problem that all the main players in the freight forwarding industry face through to 2018.
Mr Waller said: “We already had that for the year – peaks can be tough but we are prepared to face continued margin pressure.”
CEVA FM vs CL three-month margins
CEVA FM vs CL three-month margins
CEVA FM vs CL nine-month margins
CEVA FM vs CL nine-month margins
Before certain adjustments, economic losses widened in the third quarter and in the first nine months of the year, but net earnings “do not reflect the actual performance” of CEVA, as there are charges which are one-off and non-cash in nature.
The other aspect worth considering, Mr Waller argues, is that tax considerations also impacted the bottom line, which remains a much less effective metric than ebitda, which is on its way up. In short, for the time being, investors as well as trade buyers should focus on other metrics, such as ebit, ebitda and cash flows.
As far as its weighted average cost of funding is concerned – net debt, defined as total principal debt less cash and cash equivalents, was $2.15bn as at 30 September 2017 (31 December 2016: $1.95bn and 30 September 2016: $2.1bn). Mr Waller noted that an appropriate figure would be between 6% and 7%, so there is an obvious opportunity for would-be suitors after interest rate arbitrage (replacing high-yielding liabilities with cheaper debt) now that, at least operationally, CEVA is on the right path to become a leaner entity.
“First, in any exit strategy, you would reduce the leverage and the total debt, and we just recently extended the US ABL [asset-based lending] facility from December 2018 to August 2020 at the same rate,” which proves CEVA has more cards to play before it is taken over,” Mr Waller said.
“And then if you look at our bond prices, they have strongly improved this year and now trade several percentage points higher than previously, so the yield we would have to pay has come down.”
Under various exit scenarios, a new owner essentially would pay down some of the outstanding debt with new equity, thus securing a much lower cost of funding.
“That is what we are working towards – improving the business, core profits and cash flows to achieve an exit either via a sale or an IPO,” Mr Waller said.

E-COMMERCE AND CHANGE

Instead of transforming their Supply Chains and selling for the Amazon Effect, many companies seem to be arranging deck chairs and positioning themselves to Being Amazoned.  Why?  The challenge of change?




E-COMMERCE CUSTOMER SERVICE

E-commerce Customer Expectations are really about service.  Service from the customer perspective.  Delivering the order complete, accurate, and on-time.  Driving the ability to meet those expectations is Supply Chain Management.




Monday, November 13, 2017

COSCO FINANCIALS

View COSCO financially or as a component in China’s Belt Road / Silk Road strategy?  Big difference.



Analysis: with OOCL buy, Cosco is growing, but it's also burning more cash

dreamstime_s_87843830
© Vladimir Serebryanskiy
China’s state-owned Cosco Shipping Holdings will likely reach record revenues of Rmb90bn ($13.5bn) this year, based on a nine-month performance that validates projections for 2017.
But, as it continues to grow the size of its business, so too its net leverage continues to rise.
Cosco record revenues (Source: 4-traders.com)
Cosco record revenues (Source: 4-traders.com)
Is that a good or a bad thing? And, what might it lead to?
Pre-OOCL deal
Even excluding the pending consolidation of Orient Overseas International (OOIL) and its container shipping arm, OOCL – which recently received the green light from anti-trust regulators in the US and will be substantially funded by new debt – the pro-forma net leverage of the Chinese group in 2017 is already projected to be over 4x, which will likely rise significantly once the OOCL deal is completed, given the target’s cash flow profile and the limited synergies it offers, one reason being that OOCL is already a very well-run company.
(Note for the reader: net leverage is calculated as net debt divided by adjusted operating cash flows. Anything above 3.5x for up to six quarters in a row should be considered risky at this economic juncture, not just for Cosco, but all the main players in the industry.)
Picking a fight
Cosco is not a beast that can be analysed only by the numbers, because there are so many strategic implications derived from the relentless reshuffling and managing of its corporate tree and subsidiary structures that today’s loss could soon become tomorrow’s gain. On this basis, however, its latest trading update, released on 31 October, was truly encouraging.
Its latest presentation highlighted a “profit of Rmb2.7bn ($405m) during the reporting period”, with earnings per share (EPS) of Rmb0.27, up from a net loss of Rmb0.9 a share one year earlier, on a comparable basis.
Cosco revenues and EPS (Cosco Q3 presentation)
Cosco revenues and EPS (Cosco Q3 presentation)
Its asset base has changed significantly since 2015, and so far this year assets have grown slightly more than liabilities – which, in turn, were outpaced by the rise in equity in the first nine months.
This provides little help in isolation, I admit, but the balance sheet looks in good order – although it is hard to be upbeat about the income statement, and my consideration here would be the same even if Cosco had reported twice the amount of net income and EPS than it has generated so far this year.
Both these metrics, in fact, can be easily manipulated under normal circumstances in terms of corporate activity, and even more so when a corporate restructuring of this size takes place.
Cosco balance sheet (Cosco Q3 presentation)
Cosco balance sheet (Cosco Q3 presentation)
Stock investors are bullish nonetheless, I gather, but it is the cash flow that really matters – and on this basis Cosco is growing; but it is also burning more cash than in the past, with cash balances lower against one year earlier.
Cosco cash flows (Cosco Q3 presentation)
Cosco cash flows (Cosco Q3 presentation)
Nothing to worry about, particularly if you debate these issues with the local analysts.
I have worked with several Chinese analysts boasting equity research expertise during my career and, while they are among the best in the world on the number-crunching side of research, they often tend forget that debt is actually a liability that has to be taken into account when valuing any business.
“I think you are right, but Cosco has plenty of room to raise additional funding,” one sell-side analyst based in Hong Kong told me this week. Another, based in mainland China, argued that its growth rate and “revenue figures were more important than other factors”.
I think they both had a point to prove, which they did in private conversations.
After all, some liabilities can be heavily discounted, or even discarded, when your owner and employer is the Chinese government – all you have to do as an analyst is to acknowledge the liabilities, put them in your model and forget about them until they are no longer problematic.
An associated point to consider (at a time when Cosco’s rivals are also levering up), is that the Chinese are quick learners. In corporate finance terms, this means they can be more aggressive when they deploy new capital in the container shipping industry – in any industry, in fact.
Financial discipline
I previously argued in favour of financial discipline as being the way forward for Cosco, but given latest development in the industry, I am not so sure anymore. I haven’t made up my mind yet about the harm that ballooning leverage can cause, but when the competition, led by the Japanese carriers, time and again proves that, in dealing with cyclical swings, little or no attention is paid to economic returns, you just need to have a plan B if your plan A is destined to fail, for whatever reason.
Cosco is now emerging as a serious threat to European dominance in global container shipping, in a world where certain trades and habits are changing, while the financials of many of its rivals are a bit… well, scary would be an understatement.
Moreover, on this basis it seems Cosco has a clear competitive advantage, which supports the Chinese analysts’ biases.
In this context, the results released by Maersk Line last week point to a bearish view that may apply to the Danish company rather than the entire industry: some analysts’ notes have suggested Maersk is doing great, while others point to market share erosion as a risk that should not be underestimated.
(You’ll have my take next week.)
More debt, come on!
We know little about Geneva-based MSC’s books; its decision to disclose little, if any, financial detail is very smart, by the way. But we do know that lines such as Maersk, CMA CGM and Hapag-Lloyd are stretching their balance sheets to reach ever greater heights of scale.
Either way, I ended up feeling relieved with Cosco’s numbers, and I am willing to speculate beyond what they actually mean – in fact, I am willing to bet that by early 2020 there could be another asset to consolidate for the Chinese powerhouse.
First, the figures
Net cash flow from operating activities was Rmb5.2bn ($780m) in the first nine months, which means it will likely end the year churning out adjusted operating cash flow (AOCF) of about $1.1bn. Before OOCL is consolidated – the stock price of the parent company currently reflects a near-100% probability that the deal will go through – Cosco carries Rmb32bn of net debt ($4.8bn), which implies net leverage of 4.3x, which is well outside our comfort zone, and it will rise much higher with OOCL.
OOIL share price (Source: Financial Times)
OOIL share price (Source: Financial Times)
OOCL key 3Q figures (Source: OOCL)
OOCL key 3Q figures (Source: OOCL)

I will not bore you with the nitty-gritty of the calculations, but based on the main figures in the table above, and assuming constant profitability in line with the past for OOCL activities, the AOCF of a combined Cosco/OOCL entity could rise to $1.7bn, while net debt will likely be as high as $8.8bn. Excluding synergies, the net leverage of the combined entity surges to 5.1x, which is ok only if Cosco acquires another carrier after OOCL, raises new debt and pushes back refinancing risk to late 2020.
On top of that, it also has to hope that the market’s current recovery doesn’t fade away.
CCFI trends (Cosco Q3 presentation)
CCFI trends (Cosco Q3 presentation)
More CCFI trends (Cosco Q3 presentation)
More CCFI trends (Cosco Q3 presentation)
However, even if the momentum vanishes, remember that Cosco and CMA CGM are the key members of the OCEAN Alliance… A takeover of the French carrier would make a lot of sense for both companies at a time when some key investors want out of CMA CGM and an IPO doesn’t seem to be on the horizon.

LOGISTICS PROVIDERS AND INVESTORS

Logistics providers and Investors are Being Amazoned by the disruption, chaos, and transformation. The risk of uncertainty. The times they are a changing.




Friday, November 10, 2017

OMNICHANNEL E-COMMERCE--MORE THAN B2C CONSUMER GOODS

Omnichannel e-commerce is more than B2C Consumer Goods. It crosses markets, industries, and borders. Manufacturers need to lead here. Laggards may struggle with surviving. It is about the New Supply Chain that drives e-commerce success.




Thursday, November 9, 2017

WITH THE RETAIL DISRUPTION, WHAT ABOUT DISTRIBUTORS?

As manufacturers look for alternatives with retail disruption, will they go direct e-commerce or depend more on distributors?  What will distributors do that requires transforming their supply chains?




SECRET OF E-COMMERCE SUCCESS

E-commerce is about meeting Customer Expectations.  Expectations are about the speed of order delivery.  E-commerce success is driven by Supply Chain Management. Too many retailers and manufacturers have not transformed their outdated supply chains. Why?




Wednesday, November 8, 2017

OCEAN FREIGHT AND ITS FUTURE IN E-COMMERCE SUPPLY CHAINS

E-commerce Supply Chains require velocity. Ocean transport deliberately slows itself and skips sailing.  Bad practices for new SCM reality. What does it mean for its role in the new Supply Chain Management and with its mega ships needing volume?




OCEAN CONSOLIDATION/DECONSOLIDATION IN E-COMMERCE SUPPLY CHAINS

Consolidation and/or deconsolidation have a strong future in e-commerce supply chains.  Present operations though are slow and awkward--which counter the velocity need of SCM.  Can operators change their practices and become a needed logistics player?




AIR FREIGHT AND E-COMMERCE SUPPLY CHAIN MANAGEMENT

Air Freight can have a vital role in e-commerce omnichannel supply chains. Can logistics providers and operators change themselves to not be premium cost freight?  And instead be integral.




BLOCKCHAIN AND DIGITIZATION--SUPPLY CHAINS

Important for omnichannel Supply Chain transformation is blockchain and digitization of logistics components.  For velocity and visibility.




Tuesday, November 7, 2017

RETAILERS AND HOLIDAY INVENTORY

Lean Supply Chain with velocity and time compression should be year-round to do omnichannel, not just stores.


November 7, 2017 / 1:09 AM / 

U.S. department stores tap brakes on stocking for holiday season

CHICAGO (Reuters) - This holiday season, retailers are making a list, checking it twice, and then ordering less for U.S. shoppers.

With foot traffic at their stores in decline, department stores that would have stocked up for the biggest shopping season of the year months ago are still in the process of placing new orders, according to nearly a dozen sources including company officials, vendors who work with the retailers and consultants who advise such chains.
The strategy is aimed to keep their inventory costs down and avoid the experience of previous holiday seasons, when large piles of unsold stock led to deep markdowns that eroded profits. But these retailers risk losing sales if supplies run out at a time when many are struggling to keep up with Amazon.com Inc and a steady shift towards online shopping.
Macy’s Inc, J.C Penney Co Inc Kohl’s Corp Nordstrom Inc, Dillard’s Inc and Hudson Bay Co’s Lord & Taylor are among the retailers buying in smaller batches with shorter lead times this year and relying on a more dynamic demand forecasting process than in the past, according to sources familiar with these companies’ practices.
Macy‘s, Kohl‘s, Nordstrom, J.C. Penney declined to comment. Lord & Taylor said it is working on preparing a carefully selected merchandise assortment for the holiday season but did not share anything specific. Dillard’s did not respond to a request for comment.
Keeping inventory levels low helps manage costs, and may also instill urgency in consumers to spend now rather than hold off on purchases in search of a better deal, according to the sources. But it also risks alienating customers who may end up having less choice, and is also putting strain on vendors to deliver on shorter lead times, the sources added.
The high-stakes strategy takes a page from the playbook of Inditex SA-owned Zara, Hennes & Mauritz AB (H&M) and other so-called “fast fashion” retailers that consistently keep low inventories of trendy clothes and try to win customers with cheap prices.
For a graphic, click reut.rs/2lEBkkT
“I think in some sections the choice is limited this year like cashmere sweaters and sweaters in general,” said Dakota Whitlow, a 46 year old marketing executive as she shopped for winter clothing at Macy’s State Street store in Chicago.
“But limiting choice is in many ways better than overcrowding the store with clothes, which makes it harder to shop,” she added.
Traditionally, retailers lock in most of their purchases nine months to a year in advance. This year, retailers started placing a large portion of their holiday orders three to four months before the holiday season, and are refreshing fast-selling items within as little as six to eight weeks, vendors and consultants said.
“There is a big push from department stores across the board this year to cut down lead times and manage inventory tightly,” said Robert D‘Loren, chairman and CEO of U.S.-based Xcel Brands, which supplies branded apparel to chains like Lord & Taylor and Dillard’s and private label clothing to other department stores.



FILE PHOTO: The entrance to a Macy's department store is seen in Austin, Texas, U.S., January 5, 2017. REUTERS/Mohammad Khursheed
“We are delivering orders on weekly cycles with plans that are six weeks out.”
The risk for department stores is whether suppliers can keep up with the new approach.
Department stores rely on vendors whose traditional supply chains are not built for a fast turnaround, because they handle orders for several brands. Fast-fashion chains, on the other hand, have designed their supply chain to shift on a week to week basis versus the traditional four for department stores and work with vendors who can deliver quickly on private label items they stock.
As a result, some smaller vendors of traditional department stores struggle to adapt to request for shorter lead times.
“We are refusing to take (last-minute) orders. We just don’t have that kind of idle capacity in our factories, our production lines. Cargo delivery contracts are not built to react that way,” said a Bangladeshi supplier to J.C. Penney and Kohl‘s, who would only be quoted on condition of anonymity.

WILLING TO LOSE A SALE

So far this year, retailers have been willing to sacrifice some orders for tighter inventory management.
“Between the risk of a lost sale and the risk of a loss of margin, department stores are willing to lose the sale this year,” said Greg Portell, a consultant with AT Kearney who advises retail chains on strategy.
Retailers are optimistic about their new strategy. Macy’s expects a ”marked difference this holiday versus last“ in the way it buys stock, Chief Executive Jeff Gennette said on an earnings conference call in August. ”We definitely are buying closer in... to make sure we have the right goods in time for holiday, but not too far in advance.
To be sure, ordering closer to demand can help a retailer cope with weak consumer spending, but it cannot offset its negative impact altogether.
While consumer confidence has improved overall, the National Retail Federation cautioned in October that U.S. consumers will remain hesitant to spend until there is more certainty about policy changes on issues such as taxes and trade. The trade group estimated holiday sales for the U.S. retail industry will grow between 3.7-4.2 percent in 2017, from 3.75 percent in 2016.
“(Retailers) simply don’t want to be stuck with excess stock. It takes up working capital and that was okay when times were good but not when things are this tough,” said Neil Stern, partner at McMillan Doolittle, a consultancy who works with retailers including department stores.
Reporting by Nandita Bose in Chicago, Additional Reporting by Richa Naidu in Chicago; Editing by Greg Roumeliotis and Edward Tobin
Our Standards:The Thomson Reuters Trust Principles.

E-COMMERCE SUPPLY CHAIN MANAGEMENT

Much of e-commerce omnichannel Supply Chain Management is what SCM was supposed to be from the beginning. We are not reinventing it; we found it.




Monday, November 6, 2017

E-COMMERCE, FULFILLMENT, AND LAST MILE

If you think fulfillment and the last mile are e-commerce supply chain management, then you do not know e-commerce SCM.




AMAZON PRIME WEAKNESS

It shows that Amazon's strength is its supply chain.  Few retailers and manufacturers transform their supply chains to compete.  Why?




Brief

Weaknesses in Amazon Prime leave openings for rivals


LOGISTICS FIRMS WAKING UP TO TRADE FINANCE

Are Logistic Companies Waking up to Trade Finance?


The logistics industry has a complex structure of players that enable products sourced globally to get to the last mile destination. There are freight forwarders, Regional and Global Ocean Carriers, air freight, Non Vessel owning 3PLs and others that provide a range of services.
Most logistic providers have not progressed with supply chain finance solutions. Until recently, UPS was the only game in town.  Few people know that UPS bought a bank back in 2001, First International Bancorp, and got into the factoring business. Today, they focus on three finance solutions:
  1. Global Asset Based Lending
  2. Small business lending through their partnership with Kabbage
  3. Provide in transit inventory finance

Global Asset Based Lending

When a U.S. based customer has internationally located inventory (owned, operated or managed by UPS), UPS Capital is able to lend against that inventory, if the inventory is positioned in a UPS distribution center, or is in transit using UPS transportation capabilities.  Global Asset-Based Lending enables the borrowing base to increase because advances can be made against foreign receivables. If a firm has $5M of inventory located in the USA, and $5M in non US locations, many financial institutions would calculate the total availability of funds to be $5m  and provide an advance rate of 70% or $3.5m.  With UPS, the US and non US inventory would be included, so the advance rate would be $10M x 70% or $7 million.

Small Business Partnership with Kabbage

UPS partners with Kabbage to do small business credit lines. Kabbage has recently increased their small business credit lines up to $150,000 as long as you have a UPS account.

Cargo Finance

UPS also offers Cargo Finance, where you can borrow against your in-transit inventory on an unsecured transactional basis with credit lines up to 1M and advance rates up to 70% of the in-transit inventories value.
These finance solutions are focused on ways to preserve or enhance transportation spend with clients and are typically focused on small and medium customers.
Now Maersk Line, part of A.P. Moller-Maersk , is offering to finance shipments and remove the paper trail from financing deals. Maersk takes security over goods shipped through any shipping line under A.P. Moller Maersk, so your containers are the only collateral need because it is carrying the goods on its vessels.
Maersk will receive an assignment of proceeds from the buyer upon the release of their purchase order. In many ways, this is similar to how networks finance suppliers, ensuring they will get paid direct from the buyer. Maersk will finance up to 80% advance to the shipper. For Maersk the business is still in its early days with a total of $140 million in trade finance since early-2016 to customers in India, Singapore, UAE, Spain, the Netherlands and the United States.

Core to any transactional trade finance product is information richness and the potential ability to manage collateral.   Logistic companies play a critical role here because they have data around physical moves, control information (eg. pending orders, pending receipts, etc.) and can manage collateral.
But logistic companies are not banks. And while they may have access to capital markets, they may not want to use that access to fund a growing book of finance.  Banks and non banks may be better suited here as partners given their inherent advantages.
Its been a combination that has never quite materialized, but perhaps with Maersk’s recent push, and some of the innovations around tracking and digitization, solutions are not far off.