Tuesday, October 31, 2017

SUPPLY CHAIN VALUE

Transforming Supply Chains for omnichannel and e-commerce is also about unlocking lost and hidden value in the supply chain.




DISRUPTION. LOGISTICS.

Disruption.  Chaos.  Transformation.  Logistics.  Supply Chain Management.




THE INVENTORY PROBLEM

The problem.  Manufacturers and Retailers. Inventory rich and having stockouts. Not the customer experience. The solution. The new Supply Chain.




Monday, October 30, 2017

IS THIS WHY MANUFACTURERS AND RETAILERS STRUGGLE WITH E-COMMERCE?

Is how manufacturers and retailers view Supply Chain Management a factor in a failing e-commerce strategy? That SCM has strategic role!




INVENTORY RICH

Is your company inventory rich and addicted to inventory. Break the habit with the new supply chain.  Inventory velocity. Time Compression.




ERP AND THE PERFECT ORDER

How well does ERP work between locations with meeting the  Supply Chain performance metric of the Perfect Order?




Thursday, October 26, 2017

AMAZON FOOTPRINT GETS LARGER--WHOLESALE PHARMACY

October 26, 2017 / 3:33 PM / Updated 3 hours ago

Amazon gains wholesale pharmacy licenses in many U.S. states: report

(Reuters) - Amazon.com Inc has gained approval from a number of state pharmaceutical boards to become a wholesale distributor, St. Louis Post-Dispatch reported on Thursday, citing public records.
An Amazon.com Inc driver stands next to an Amazon delivery truck in Los Angeles, California, U.S., May 21, 2016. REUTERS/Lucy Nicholson
The news send the shares of U.S. pharmacy chains, drug wholesalers and pharmacy benefit manager Express Scripts down.
An Amazon spokesperson said it doesn’t comment on rumors or speculation.
Earlier this month, a source-based report by CNBC said Amazon would decide before Thanksgiving whether to move into selling prescription drugs online.
The ecommerce giant is reported to be in talks with mid-market pharmacy benefit managers and has been hiring talent to assess the drug retailing market for its entry, brokerage firm Leerink had said.
Reporting by Munsif Vengattil in Bengaluru; Editing by Arun Koyyur

SUPPLY CHAIN DESIGN FLAWS

The design of traditional supply chains contain the flaws from letting also do e-commerce supply chain management.




SUPPLY CHAIN MANAGEMENT REPOSITIONED

E-commerce has repositioned Supply Chain Management from cost center to strategic.




Wednesday, October 25, 2017

RESISTANCE TO AMAZON

Is this how some manufacturers and retailers see Amazon a what it is doing to selling and supply chains?




Tuesday, October 24, 2017

LOGISTICS CHAOS


Forget blockchain or digitization or other terms for the logistics future, think chaos, disruption, transformation.  Are you ready?



E-COMMERCE AND LOGISTICS

How will e-commerce supply chain management with its velocity transform logistics and providers?  SCM   3PL




E-COMMERCE IS NOT FULFILLMENT

Defining e-commerce supply chain management as fulfillment is shortsighted and a risk for failure by unforgiving customers.




MANUFACTURERS DEMAND SUPPLIERS

Manufacturers across industries are overdue to demand fast supplier order delivery like when buying online.  Are you and your supply chain ready?




CONTAINER LINES VS E-COMMERCE

What is the role and long term future of cancelled sailings, slow steaming sea freight in the velocity e-commerce supply chain?




Monday, October 23, 2017

FREIGHT FORWARDERS AND DIGITALIZATION

With digitalization, what is the future for forwarders and other logistics and trade intermediaries?




E-COMMERCE VELOCITY

If this is not how you have designed your e-commerce supply chain, you are in trouble--now and/or down the road.  Velocity squared.




Sunday, October 22, 2017

E-COMMERCE FULFILLMENT

Defining e-commerce supply chain management as fulfillment is myopic and a risk for failure.




IS YOUR INDUSTRY READY FOR THE CHANGE?

Few industries are immune from demanding that suppliers speed up order delivery like buying online. Are you and your supply chain ready?




Saturday, October 21, 2017

E-COMMERCE VERSUS CONTAINER LINES

E-commerce supply chains require velocity.  Versus blank sailings, slow steaming container lines.  See a problem?




SUPPLY CHAIN INVESTMENT

E-commerce supply chains are strategic and are getting investment priority.  This is also is catchup for low invest priority before.




Friday, October 20, 2017

SUPPLY CHAIN MANAGEMENT AND LOGISTICS TRANSFORMATIONS

The next 5 years will be about supply chain and logistics transformations.  Blockchain.  Digitalization.  IoT.  Accelerated velocity.  More.  Where do you want to be while all this is happening?






E-COMMERCE AND SMALL FORWARDERS

E-commerce and smaller forwarders.  Good idea. But how do they transform to new biz reality? Not a matter of wishin and hopin. It can be done if...


E-commerce will benefit the smaller, local forwarders that can deliver

parcel delivery china Tonyv3112 |
© Tonyv3112
E-commerce has become the biggest driver of change for freight forwarders –some seeing estimates of 30% growth, year on year.
Head of the WCA e-commerce network Alex Allen said the sector had mushroomed over the past five years, far exceeding the growth of traditional freight movements.
“Growth has been happening over the past 10 years, but gaining real traction over the last five, with incremental growth as a global aggregate roughly 30%,” said Mr Allen.
“The emergence of cross-border e-commerce will provide opportunities to all players in the field, provided they have made, or are making, the necessary changes required to evolve.”
However, Mr Allen said with the majority of a complex cargo industry “quite fragmented”, it tended to be reactive to changes. He believes this will lead to supposed “slow movers” being left behind in what he describes as the race to enter the new economy that will lead to longer-term survival.
“The biggest challenge the industry faces is not understanding the exact needs of the clients – the guys causing the shift and generating new e-commerce volumes,” explained Mr Allen.
“The e-tailers measure success around the first delivery, especially when it comes to the likes of Amazon Prime which talks of delivery within hours of receiving the order.”
This presents smaller operators with opportunities, while Mr Allen suggested that the more mature providers were still struggling to understand the market.
In particular, he said, there is a chance for forwarders to provide cross-border solutions with a “local flavour” and expertise in their own regions to capture gaps in the market.
“They are closest to customers in a majority of cases and can provide flexibility in scale and service better than the big players,” he added. “This will have a positive impact when e-tailers and industry seek to engage with a logistics provider in specific markets in an effort to better service their customers.
“In turn, this creates an opportunity for all kinds of cross-border shipment-processing requirements for a forwarder to provide as value-adds to grow ecommerce business.”

SUPPLY CHAIN FINANCE---OVER $2 TRILLION FOR CHINESE INTERNET FIRMS

Supply chain finance to be over $2trillion market for Chinese internet firms!


Supply chain finance tipped to become US$2.27tn market for Chinese internet firms by 2020

Sector is filling the yawning funding gap, as larger commercial lenders remain belligerently reluctant to grant small loans to businesses and individuals, who present anything like a risk
PUBLISHED : Friday, 20 October, 2017, 11:55am
UPDATED : Friday, 20 October, 2017, 10:35pm

China’s supply chain finance sector is now being tipped to be worth a whopping 15 trillion yuan (US$2.27 trillion) by 2020, and the mainland’s booming internet-based businesses are lining up to grab their own share of it.
The term refers to credit given to small- and medium-sized enterprises (SMEs) that act as suppliers to large blue-chip buyers.
And despite the reverberations from the recent peer-to-peer (P2P) lending crisis, a marriage between information technology and financial services is continuing to play a vital role in transforming Chinese business.
Supply chain finance sector is now being tipping to be worth a whopping 15 trillion yuan (US$2.27 trillion) by 2020. Reuters

“As lots of internet companies, particularly small ones find it difficult to make a profit, they are turning to financial services to help improve their bottom lines,” said Hao Zhiwei, chief executive of consultancy Haowenhaokan, which advises a portfolio of Web-based firms on how best to win more finance-related business.
“Supply chain financing is increasingly viewed as a money spinner to help shore up profits.”
On the mainland, supply chain finance not only serves suppliers but is extending its tentacles into thousands of SMEs which run their businesses via huge e-commerce or logistics platforms.
That 15 trillion yuan figure was calculated by Forward Business, a Shenzhen-based consultancy focusing on studies of IT and other emerging industries. The total value of new loans granted by mainland banks in 2016 was 12.65 trillion yuan.
The Chinese leadership remains determined to reform the country’s financial system, with the principal aim of getting banks and other institutions to extend more credit to cash-hungry small companies.
But the grim reality remains, that the larger commercial lenders remain belligerently reluctant to grant small loans to businesses and individuals, who present anything like a risk.
Glass products at a factory in Hejian, north China's Hebei Province. On the mainland, supply chain finance not only serves suppliers but is extending its tentacles into thousands of SMEs which run their businesses via huge e-commerce or logistics platforms. Photo: Xinhua

P2P first emerged as a new lending model to help redraw the country’s banking industry in 2011, before a raft of scandalous incidents of poor and reckless lending erupted in 2015, prompting the regulators to wade in and clean-up the new class of business, essentially to maintain social order.
Supply chain financing among internet businesses, especially, started growing in leaps and bounds last year, with analyst estimates suggesting a doubling in total volume from 2015.
Most online platform operators have now either launched or have plans to diversify into supply finance chain businesses, as a way of improving profitability.
Xu Shuibo, the founder and chief executive of Tiandihui Supply Chain Management, the mainland’s largest online commercial transport provider, said being able to offer financial services has helped put his business firmly on the road to profit.
“Offering loans to trusted companies using our platforms is a fast track to making quick profit,” he said.
Established in 2013, Tiandihui is an online platform where cargo and trucks are matched.
It s network stretches across 50 mainland cities and it handled some 64 billion yuan worth of transactions last year. The company, which charges fees for its matchmaking, has yet to break even.
Online businesses are diversifying into finance by raising their own fresh funds, which are then lent on to other smaller customers.
In a typical case, the online platform would set up its own small-loans company, but only after receiving a licence from the banking regulator.
The small-loan firm then takes advantage of its parent’s database and connections to do business.
Others form more formal partnerships with banks to offer credit to suppliers and clients, charging service fees on each transaction.
Supply chain finance falls into the business-to-business (B2B) category, which analysts describe as better tools than P2P in supporting the mainland’s overall reform of the finance sector.
As banks continue to shun small business lending, supply chain financing is now viewed as a vital source of working capital, but they charge higher interest than normal bank loans.
People visit a software product and information service trade fair in Nanjing, east China's Jiangsu Province this week. Photo: Xinhua

“Online platforms often have a solid grasp of the detailed operations and financial status of their suppliers and clients, and technically can easily assess the risks of potential defaults,” said Wang Feng, chairman of Shanghai-based financial services company Ye Lang Capital.
“It is a strong prospective sector, but risk management remains the name of the game.”
When P2P first started to flourish it was touted strongly as a potential saviour in helping support millions of under-banked businesses and individuals.
A rash of cases involving unscrupulous operators such as Ezubao, however, which allegedly defrauded about 900,000 investors out of nearly 60 billion yuan, undermined the growth of P2P in China.
Once China’s biggest P2P lending platform, Ezubao folded last year after it turned out to be little more than a Ponzi scheme that collected 59.8 billion yuan
Beijing First Intermediate People’s Court sentenced Ding Ning – the chairman of Anhui Yucheng Holdings Group that launched Ezubao in 2014 – to life in prison, and fined him 100 million yuan for crimes including illegal fundraising, illegal gun possession and smuggling precious metals.
The crux of the matter is whether the companies can eventually eke out profits from their core businesses
Entrepreneur Joe Zhou, who owns an online start-up dealing in agricultural businesses, which translates as Chongfa
Ding Dian, the chairman’s brother, was also sentenced to life, while Zhang Min, Yucheng’s president, and 24 others were sentenced to between three and 15 years.
Joe Zhou, an entrepreneur who owns an online start-up dealing in agricultural businesses, roughly translated as Chongfa in pinyin, is among those who still has strong reservations about chasing what he calls “easy money” by lending to clients.
“If everyone rushes to do that, the economy will be vulnerable to collapse,” he said.
“The crux of the matter is whether the companies can eventually eke out profits from their core businesses.”
Consider too, that despite the massive surge in the number of smaller members of this fledgling finance sector, listed banks still remain the biggest contributors to overall profits on the mainland stock market.
In the first half of this year, the country’s 25 A-share banks reported total net income of 774.6 billion yuan – or 46.4 per cent of all profits among China’s total population of 3,300 mainland-listed firms.



SUPPLY CHAIN COSTS

If you measure supply chain costs and performance by its logistics components, then you don’t know supply chain management.  SCM





CATALOG RETAILERS

Do catalog retailers have the supply chains and supply chain management performance to meet customer expectations and not be Amazoned?




IS AMAZON THE REAL STORY?

Is the real story what Amazon is doing with e-commerce, supply chain management, and logistics?  Or is it what too many retailers and manufacturers are not doing?




Thursday, October 19, 2017

SUPPLY CHAIN MANAGEMENT AND LOGISTICS--NEXT FIVE YEARS


Supply chain management and logistics transformations will be exciting over the next five years.




BLOCKCHAIN AND RFID

LTD sees an integrated supply chain future with blockchain and RFID.  Missing link between finance and product supply chain and integration.





E-COMMERCE AND THE UPSTREAM SUPPLY CHAIN

E-commerce supply chain success depends on the upstream supply chain. Everything else is a derivative of that success or lack of success.




CONTAINER LINES--DEMAND AND RATES

How much do demand and supply factor in with container line pricing?  Every year it seems, second verse same as the first.

Gloomy picture painted for container shipping is lightening, says Alphaliner

dreamstime_s_31136607
© Corepics Vof | Dreamstime.com - International Logistics
China today reported a 6.8% year-on-year increase in GDP for the third quarter – a slight decline on the 6.9% growth in the first half of the year, but nonetheless meeting government targets.
Retail sales grew by 10.3% in September, while factory output, a key metric for container lines, grew 6.6% in the same month.
Carriers should also be buoyed by recent analysis from Alphaliner which suggests the GDP-teu multiplyer – the relationship between economic growth and container volumes – is on on the rise for the first time since the financial crisis hit shipping in 2009.
With global container growth forecast to reach 6% by the end of this year, and Chinese port volumes up by 9.1% in the first three quarters, Alphaliner suggested there were grounds for renewed optimism for carriers.
“The strong container volume growth this year is expected to lift the multiplier to 1.7 times global GDP growth, reversing the recent downward trend that has seen the multiplier drop to below 1.0 in the previous two years.
“Predictions that the container trade had reached a mature phase of its development, with volume growth expected to grow only on par with GDP, proved to be overly pessimistic, even though container volume growth is unlikely to see a return to the 2-3 times GDP ratio it had enjoyed prior to 2008,” it wrote.
Anecdotal and statistical evidence has painted a strong first nine months to the year. Shipping data attributed to PIERS and Container Trade Statistics saw both Asia-Europe and the transpacific routes grow 5.3%, compared with 2016’s full-year growth of 2.8% and 4.3% respectively.
However, whether this will translate into a stronger rate environment will largely depend on how much more capacity carriers deploy, with the global fleet expected to expand by 5.8% in 2018, compared with forecast growth of 4.8%.
And the warning signs have been clear over the last three months, according to Alphaliner.
“The higher demand growth recorded this year has not been sufficient to stop a dramatic fall in spot freight rates in the third quarter, with the SCFI recording a 23% fall since the end of July with the downward pressure continuing into October.
“Carriers will need to keep an eye on 2018, as the influx of new containerships will continue to put pressure on freight rates next year.
“Total new capacity due in 2018 is expected to reach 1.72m teu, compared to 1.25m teu that will be delivered in 2017, after accounting for some deferrals from this year into next year,” it said.

KUEHNE & NAGEL HAS ISSUES

If K&N has issues, what does it say about other logistics service providers?


Analysis: Kuehne + Nagel on a slow path to value destruction?

kuehne-nagel
There could something fundamentally wrong in an industry where the market leader and other players experience huge swings in working capital management (WCM), leading to tighter short-term liquidity.
That is usually true when most of the players in a sector are financially weak, particularly with capital heavy businesses.
But that is not the case with the world leader in ocean freight, Kuehne + Nagel. However, its performance in the first nine months of the year should raise eyebrows, as far as WCM is concerned.
And some of its latest financial developments could herald the start of another difficult stint for the carriers.
Anomaly
WCM-related cash outlays might just be a hiccup at K+N, but I have decided to focus on its short-term liquidity affairs – a rather dry topic perhaps – before exploring, at a later date, the truly exciting prospects, for the bears at least, of two companies whose fortunes are intertwined with those of the Swiss forwarder: Taiwan’s Yang Ming and Hong Kong’s Seaspan.
Why? Because its receivables are trending up in a rather unusual fashion, based on historic data.
Higher volumes determine higher revenues and usually surging credits against clients, heightening counterparty risk; while it is easy to argue that the anomaly of significantly higher trade-related credits to be collected within one year – this is what trade receivables are – is related to seasonality. However, the financial constraints of some of the carriers with which K+N deals daily may have something to do with it.
Kuehne + Nagel
 (Source K+N 2015 results, pre-consolidation in the container shipping industry, and before the latest alliances emerged)
Down
The K+N story is of a business that is rock-solid financially, but also one that is not immune to the vagaries of the global economy, where volumes are ok, but profitable volumes are not.
Its earnings growth trajectory in recent months testifies to that, and its core cash flows and WCM performance have had me thinking increasingly that: a) its rich payout dividend ratio might become unsustainable through to 2018; and b) it needs a corporate strategy for which its managers are, quite simply, unprepared.
This has become more apparent following the release of its nine-month results this week, which were uninspiring, to say the least, and – unsurprisingly for our readers – pushed down the stock almost 6% in two trading sessions, with most of the losses coming on the day its trading update was released.


share price source Yahoo Finance
WCM – what is that?
If you Google “working capital management” (WCM), something like this will come up: “The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.”
It is fairly straightforward: freight forwarders have no or little inventories on their books – unlike their customers – so WCM mainly refers to the way receivables and payables are managed, and their changes over a period of time. If receivables rise, core cash flows will be negatively impacted, and should be offset, fully or partly, by a drop in payables, and vice versa.
While K+N’s operating earnings are slowly growing, they are not growing fast enough.
We are also familiar with brokers’ expectations, which simply remain too high into the fourth quarter, not only for the market leader, but also for many of its competitors. Cash flows and WCM trends, rather than meaningless headline figures such as net revenues (given current trends for costs of goods sold) clearly show the extent of the problem.
The problem
When it reported third-quarter numbers one year ago, the group said the target was to maintain “working capital intensity at 3.5 to 4%”. Working capital intensity roughly equals (receivables minus payables)/annual gross turnover, but conveniently, I could not find a mention of guidance this year, and that ratio has deteriorated swiftly in recent months.
So far this year, cash outlays from WCM have been significant, as the table below shows.

K+N working capital development Sept 2017 (source K+N)
But what is truly remarkable is the latest level of receivables (Sfr3.495bn, including other minor “work in progress” items) as gauged against historic trends, at a time when cash balances have fallen significantly, again based on K+N’s comparable trailing figures.
At the end of December 2016, trade receivables stood at Sfr2.6bn – notably, that is some Sfr600m lower than at the end of the third quarter this year, as the table below shows.

K+N balance sheet 31 Dec ’16 vs 30 Sept 2017 (source K+N)
That amount was broadly in line with almost Sfr2.5bn of receivables in most years since 2010, as the following three tables show.

 K+N balance sheet 31 Dec ’15 vs 30 Sept 2016 (source K+N)

K+N balance sheet 31 Dec ’13 vs 30 Sept 2014 (source K+N)

K+N balance sheet 31 Dec ’11 vs 30 Sept 2012 (source K+N)
Meanwhile, the trough in receivables was indeed 2010, as the table below indicates.

K+N balance sheet 31 Dec ’10 vs 31 Dec 2011 (source K+N)
Net working capital, as shown above, was Sfr843m at the end of September this year. It is above historic trends, while working capital intensity is closer to the levels we witnessed between 2013 and 2014, as shown in the following tables, which clearly now point to heightened dividend risk, among other things.

K+N working capital and WCM intensity 2013-2014 (source K+N)

K+N working capital and WCM intensity, late 2014 (source K+N)

K+N working capital 2015 (source K+N)
Receivables are growing more rapidly than payables, which puts more pressure on cash balances, all other things – cash flow from financing and investing – being equal. We are actually in a market where the balance between the receivables and payables is skewed towards the former, but more attention must, in fact, be paid to the latter.
Although working capital intensity was similarly high three years ago, at the end of December 2014, K+N boasted Sfr1.17bn of cash and equivalents (Sfr841m on 31 Dec 2015 and on 31 Dec 2016; Sfr1.25bn at the end of 2013; Sfr1.08bn at the end of 2012) on the balance sheet, while at the end of the third quarter this year it had “only” Sfr600m of cash on the books.

K+N operating cash flows (source K+N)
K+N cash on the balance sheet (source K+N)
All of this makes me think that current market conditions could force K+N’s rather conservative management team to consider more creative alternatives – M&A anybody? Otherwise this could easily be a slow path to value destruction. And for these reasons, unless I am missing something obvious, for the time being I am happy to abide by an old saying in finance, according to which revenues are vanity and earnings are sanity, but core cash flow – and working capital management with it – is reality.

Wednesday, October 18, 2017

AIR FREIGHT, SEA FREIGHT, AND E-COMMERCE

Does air freight activity reflect e-commerce?  Does that also reflect the slow transit of sea freight?  E-commerce supply chains are velocity.




Monday, October 16, 2017

E-COMMERCE AND RFID

Does e-commerce, as compared to retail stores, change the role of RFID for inventory tracking in supply chains?




THREE SUPPLY CHAINS AND WASTE

Until the three Supply Chains of product, finance, and data/tech are completely integrated, there will be gaps and redundancies, aka, waste.




JERRY RIG SUPPLY CHAINS

Many manufacturers and retailers jerry rig their supply chains instead of transforming for e-commerce and meeting customer expectations.