Sunday, July 30, 2017

UPS Expects Retailers to Pay Up for Christmas Deliveries

Shipping company cites surge in online orders for peak-season surcharge

By
Paul Ziobro

Updated July 27, 2017 11:35 a.m. ET

United Parcel Service Inc. expects most retailers to agree to higher shipping prices during the weeks leading up to Christmas, which it says are necessary because of the glut of online orders.
UPS last month revealed the extra peak-season fee, which will affect packages shipped in the two weeks around Thanksgiving and in the week before Christmas. Discussions with retailers about the charges and their holiday-season forecasts are continuing, but UPS said it expects most shippers will have to pay them.
UPS is encouraging retailers to avoid shipping during those peak-season weeks by holding promotions earlier in November, offering incentives to shoppers to accept later deliveries or other tactics.
“If you can work with us to smooth out the flow, then it reduces your costs as well,” Chief Executive David Abney said in an interview Thursday. In the week leading up to Christmas, where the surcharge is between 27 cents and 97 cents per package based on the service used, shippers may be able to delay orders that aren’t gifts. “Not everything is a Christmas present,” he said.
Shipping consultants say retailers may have some wiggle room to negotiate other elements of their contracts. UPS still needs prices to rise to cover the costs of delivering packages during a period when daily volumes surge by nearly 60% to 30 million.
UPS is already getting paid more for the extra packages it delivers. In the second quarter, its revenue per unit shipped rose 1.7%, including 3% in the U.S. package business. That pushed U.S. package revenue up 8.1% to $9.75 billion. Gross margins rose to 14.3%, the highest level in nearly two years for the division.
Investors have been looking for evidence that UPS and rival FedEx Corp. can offset the higher costs of e-commerce deliveries by raising prices and operating more efficiently. The shift to online shopping and the closing of thousands of brick-and-mortar stores has put stress on delivery networks, as deliveries to homes are more costly than bulk deliveries to stores. In the second quarter, UPS total operating expenses rose 7.5%.
UPS posted higher sales in its international division and its domestic freight business. Overseas, UPS says it is picking up some business from FedEx, whose European arm TNT was hit by a cyberattack this summer. FedEx has warned that the attack will have a material effect on its results this year.
“We obviously don’t wish cyberattacks on any company,” Mr. Abney said, adding that UPS is regularly updating its defenses to, in part, prevent service disruptions.
Overall for the period, UPS revenue rose 7.6% from the year-earlier quarter to $15.75 billion. Profit rose 9% to $1.38 billion.
On a per-share basis, the company said it earned $1.58, up from $1.43. The latest quarter included about 10 cents of benefits from new fuel surcharge formula and other items. Analysts polled by Thomson Reuters had expected $1.47 a share.
UPS said that it expects currency headwinds and costs linked to strategic initiatives to weigh on its results in the second half. Third-quarter earnings are expected to be “relatively flat” compared with last year’s, and UPS reaffirmed its annual guidance for adjusted earnings of between $5.80 and $6.10 per share.
In morning trading, shares fell 2.9% to $109.08.

—Ezequiel Minaya contributed to this article

Write to Paul Ziobro at Paul.Ziobro@wsj.com

CONSTANT PUSH FOR LOW LOGISTICS RATES

Do shippers beat the low logistics rates issue to the point it impedes providers' abilities to invest in technology and other needs?

Wednesday, July 26, 2017

AMAZON ENTERING SOUTHEAST ASIA VIA SINGAPORE

What does it mean to SingPost?

Amazon prepares to enter Southeast Asia via Singapore launch

Posted yesterday by Jon Russell (@jonrussell)

Amazon is continuing its international expansion push with the launch of its services in Singapore coming imminently. The arrival could happen as soon as this week, according to a source with knowledge of the plans, and it will mark Amazon’s entry into Southeast Asia.

The launch will see Amazon Prime, Amazon Prime Now fast delivery and Amazon’s regular e-commerce services become available to Singapore’s population of over five million people, the source said. Pricing is unclear at this point.
Amazon had not replied to our request for comment at the time of writing.
TechCrunch first reported that Amazon was working on entering Southeast Asia last November, but the original window of Q1 2017 was pushed back following complications.
In a further hint, Amazon has already begun marketing its services through online influencers. A number of high-profile Instagram users in Singapore have posted sponsored teasers of Amazon’s Prime Now service in recent days. While not labeled Amazon, the distinctive tick on the packaging is a giveaway.
The e-commerce giant has spent 2017 pushing into new geographies and verticals. It expanded into the Middle East — via the acquisition of Souq.com — initiated a move into Australia, and it is in the process of buying Whole Foods in the U.S. for just shy of $14 billion. Now it is jumping into Southeast Asia, a region of 600 million consumers where rival Alibaba and fellow Chinese firm Tencent are already actively investing.

Alibaba entered the region last year when it bought a majority stake in Lazada, the e-commerce service originally founded by Rocket Internet. Alibaba has since increased its stake to 83 percent via another investment. Alibaba-Lazada preempted Amazon’s arrival with the acquisition of Singapore-based e-grocery company Redmart, and the introduction of a Prime-like membership service in partnership with Uber and Netflix. Amazon will also be keeping tabs on Indonesia’s Tokopedia, which a source told TechCrunch is in discussions with Tencent ally JD.com and Alibaba over an investment that could reach $500 million.
At stake is a market that, alongside India, is seen as fertile ground for internet companies seeking growth.
Online is estimated to account for less than five percent of all commerce today in Southeast Asia, but the region is tipped to grow significantly over the next decade, according to a report from Google and Singapore-based fund Temasek published last year. E-commerce in the region is tipped to grow from $5.5 billion in 2015 to $87.8 billion by 2025, according to the report. That’s fueled by an emerging middle class and increased internet access — currently 3.8 million new users are coming online per month.
Indonesia, Southeast Asia’s largest economy and the world’s fourth highest-populated country, is tipped to account for over 50 percent of that e-commerce spending by 2025. Amazon has picked Singapore for its initial entry point to Southeast Asia, primary because of Westernized consumer consumption and its position as a regional hub, but we understand that Indonesia is on its radar for the future.

Monday, July 24, 2017

STATE OF U.S. LOGISTICS REPORT

Forward Thinking

Annual "State of Logistics Report" shows industry looking in cloudy rear-view mirror

By Mark Solomon | June 20, 2017

0 Comments

Expenditures dropped in 2016 for the first time in six years; logistics-spending-to-GDP ratio is at its lowest level since 2009.

The 28th annual "State of Logistics Report" painted a somber picture of logistics activity during 2016, with expenditures declining for the first time since 2010 and logistics spending as a percentage of U.S. gross domestic product (GDP) dropping to its lowest level since the depths of the Great Recession.
The annual report, prepared by consultancy A.T. Kearney Inc. for the Council of Supply Chain Management Professionals (CSCMP), and presented by third-party logistics (3PL) provider Penske Logistics, found that spending last year was constrained by uneven economic growth, overcapacity across virtually all modes, and corresponding rate weakness. Total logistics expenditures—framed in the report as "costs"—fell 1.5 percent year-over-year, to $1.392 trillion. The decline contrasted with a 4.6 percent increase in spending, compounded annually, from 2010 to 2015, as the U.S. economy and the logistics businesses supporting it fitfully emerged from their worst downturn in more than 70 years.
Logistics costs as a percentage of GDP, traditionally viewed as the report's headline number, came in at 7.5 percent in 2016, the lowest point since 2009, when the ratio stood at 7.37 percent. The ratio moved in a very tight range between 2011 and 2015, and ended 2015 at 7.84 percent.
In years past, a ratio as low as last year's would have been viewed as positive because it underscored the supply chain's strides towards greater efficiencies. For example, the ratio was well into double-digit levels during the report's early years as transportation and logistics providers threw off the yoke of regulation in the late 1970s and early 1980s and slowly adjusted their models to manage more efficiently in a free-market environment. Indeed, the first-ever drop in the ratio below 10 percent, which occurred in the early 1990s, was a cause for celebration at the time.
Modal spending: some up, some down
Truckload expenditures, the largest line item among the cost categories, fell 1.6 percent year-over-year to $269.4 billion. That may not be the case by the time next year's report comes out. It is "not sustainable" for so many carriers to accept noncompensatory margins; shippers should therefore expect to see higher trucking prices in the fourth quarter of 2017 and first quarter of 2018, said Marc Althen, president of Penske Logistics, at a June 20 press conference in Washington where the report was released.
Rail carload expenditures, buffeted by continued weakness in coal volumes and declines in spending on energy exploration and development caused by lower oil prices, fell by 13.8 percent, according to the report. Intermodal spending declined 2.5 percent. Rail demand was "anomalously low" last year, and volumes and associated spending should rise this year, said Beth Whited, executive vice president and chief marketing officer for western railroad Union Pacific Corp., at the press conference.
Whited said she expects single-digit volume increases in 2017, with coal and grain exports leading the way, and "a significant jump" in 2018 as new chemical production facilities begin to pump out product.
Spending on water transportation, which covers both domestic and U.S. import and export traffic, dropped 10 percent, reflecting persistent liner overcapacity and rate pressures on international trade lanes, according to the report. Airfreight spending, which includes domestic and U.S. export and import cargo, rose 1.5 percent.
Not surprisingly, parcel spending, supported by increases in demand for e-commerce fulfillment and delivery, jumped 10 percent, the report said. For the first time in the report's history, parcel moved ahead of rail in modal spending.
Whited cautioned shippers that rates could rise across the modal board sooner than they think. "Shippers have enjoyed unrealistically low supply chain costs" for years, Whited said. While railroads have shown "good discipline" in pricing, other modes have not; as a result, there will likely be "more consolidation and rationalization" in those modes, which could raise prices, she said.
Warehouse space fell 10 percent from the first quarter of 2016 to the same period in 2017, the report said. However, spending on warehouse services rose just 1.8 percent over 2015 levels, about half the pace of its five-year compounded annual growth rate. A sizable decline in the weighted average cost of capital drove down the financial costs of carrying inventory by 7.7 percent. A third category of inventory carrying costs, which include obsolescence, shrinkage, insurance, and handling, fell 3.2 percent.
These muted levels may not last, however. Decisions by 21 states to raise their minimum wage and the need for e-commerce warehouse operators to invest in expensive automated material handling systems will have "a significant effect" on warehouse costs, Sean Monahan, an A.T. Kearney partner and the report's lead author, said at the press conference.
Different directions
The decline in transportation spending came amid a rise in energy prices off of multiyear lows. This marks the second straight year that the two trends moved in opposite directions, reinforcing the notion that energy is no longer the primary factor driving logistics spending. Rather, consumers have become the main influence, the report said.
The report's authors said the logistics industry "appears destined for a prolonged bout of cognitive dissonance" as it reconciles subpar GDP growth—first-quarter output rose a scant 1.2 percent— with rising stock market values, better consumer confidence data, and ongoing investments in information technology.
Yet the inherent uncertainty has not slowed the pace of change as newcomers challenge established players for market share and incumbents refresh their business models, the report said. In one of the report's most provocative forecasts, the authors said they expect more large shippers to follow the lead of Amazon.com Inc. and either establish or expand their in-house logistics operations. Seattle-based Amazon, the nation's largest e-tailer, has added aircraft and truck trailers. It is also constructing an air cargo hub in Cincinnati to support its two-day delivery service, Amazon Prime.
For now, caution rules the day, reflected in declines in the closely watched inventory-to-sales ratio, which measures on-hand inventories in comparison to sales levels, the report said. The authors acknowledged that the declines could be attributed to more accurate forecasting tools that minimize the risk of overordering. However, a more plausible case can be made that companies unsure about future demand are holding inventory levels closer to actual retail sales figures instead of stocking up in anticipation of future growth, the authors said.
Editor's note: This article has been updated with quotes from the June 20, 2017 press conference.
CSCMP's Supply Chain Quarterly Editor Toby Gooley contributed to this report.

Mark Solomon is executive editor—news at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

ALIBABA LOOKS TO ADD BRICKS TO ITS CLICKS

Alibaba rewrites its e-commerce playbook

Robyn Mak

5 Min Read

Jack Ma, Founder and Executive Chairman, Alibaba Groups, talks with American television host Charlie Rose during the inaugural Gateway 17 event at Cobo Center in Detroit, Michigan, U.S., June 20, 2017.Rebecca Cook

HONG KONG (Reuters) - China's e-commerce giant is abandoning its unique selling point. Alibaba is trumpeting a push into bricks-and-mortar shopping. It’s not alone but the stakes are particularly high for the $392 billion giant led by Jack Ma as it marks a reversal of the asset-light model which fuelled its extraordinary profitability.

Three years ago, when the Hangzhou-based company went public in New York, investors were drawn to the company's low cost model of matching sellers and buyers online. Ma rejected the direct sales model of Amazon and local rival JD, which relies on holding inventory. Instead, Alibaba charged for advertising, took commissions, and turned to outside partners to take care of warehousing and delivery. That kept the e-commerce group's balance sheet trim.

Now Alibaba’s growth online may be reaching its limits. Revenue for the Chinese e-commerce business, which accounts for over 70 percent of the total, soared 43 percent to 114 billion yuan ($16.9 billion) in the twelve months to end March. But for Alibaba to meet its revenue targets for the current fiscal year, it will have to outgrow China’s entire online shopping market.

Graphic: Most of Chinese retail spending still happens in physical stores: reut.rs/2ts7J1x

That’s because e-commerce shopping transactions will increase just 19 percent this year, down from 37 percent in 2015, according to iResearch. And while the $700 billion market is sizable, 85 percent of Chinese retail spending still happens in physical shops. So going offline presents a tempting way for Alibaba to maintain its growth trajectory.

Clicks to Bricks

Ma's so-called "New Retail" strategy envisions marrying two worlds. The basic idea is that Alibaba will now build some of its own test stores from scratch and upgrade existing brick-and-mortar shops in partnership with established retailers to make them more efficient in both online and offline sales.

Alibaba's $2.6 billion plan announced in January to take private InTime, a leading department store operator, fits the bill. As does Alibaba's own supermarket chain, an experimental concept called Hema, which allows shoppers to buy groceries online and have them delivered as quickly as within 30 minutes. Customers can also go to the store to select fresh produce, have it cooked and eat there. A similar experience could be applied to shopping for clothes.

The attraction for existing retailers is a chance to boost their notoriously low margins by tapping into Alibaba's technology and platforms to manage inventory, supply chain, and logistics. Stores can also benefit from using the tech giant's algorithms to analyse shopping habits and by moving to cashless checkouts, powered by Alibaba's payments affiliate.

The e-commerce group boasts that sales per unit area at Hema are up to five times higher than a traditional supermarket. The same ambition and logic has driven its U.S. rival Amazon, which has opened its own-branded stores and last month spent $13.7 billion to acquire the local Whole Foods Market chain.

Adaptation

The overall shift suggests Alibaba is asset agnostic rather than asset light. Investments in traditional retail and logistics together with Ma's other bets in entertainment, media and other things amounted to $11.5 billion in cash in the twelve months to end March, a 42 percent rise from the previous year.

Alibaba is also starting to rely more on Cainiao, a logistics company 47 percent-owned by the e-commerce group. Fees paid to the unit, mainly for supermarket deliveries, increased 88 percent to $658 million in the year to end March. That is only 3 percent of Alibaba’s total revenue, but the portion may creep up with any rise in online grocery sales.

Meanwhile, losses at Cainiao more than tripled to $332 million in 2016. Alibaba only books its share but, last year U.S. regulators initiated an investigation relating to how it accounts for the unit. The probe is still underway, and if Alibaba is forced to consolidate the logistics business, that will be painful for profitability.

Alibaba’s adjusted EBITA margin for its core commerce business was 62 percent in the last fiscal year. That is already lower than 65 percent two years ago, and analysts at China Renaissance Securities forecast this will shrink further to 55 percent by 2020. By comparison, the adjusted operating margin at JD’s shopping platforms last year was less than 1 percent.

Online shopping is still lucrative for Alibaba, but the company is evolving into something entirely different.

AMAZON BUYING SOME PRODUCTS AT FULL PRICE TO BUILD GLOBAL INVENTORY

Amazon is buying products from some US retailers at full price to build global inventory

Amazon sent an email to thousands of U.S. merchants, offering to buy their inventory at full offer price.
A similar program was previously rolled out in Europe.
Birkenstock says that its sellers aren't allowed to participate.

Ari Levy | @levynews

Thursday, 20 Jul 2017 | 5:05 PM ETCNBC.com

Amazon is buying products from some US retailers at full price to build global inventory Friday, 21 Jul 2017 | 8:36 AM ET | 00:44

Amazon is trying to boost its catalog by telling tens of thousands of marketplace sellers in the U.S. that it will buy their inventory at full retail price.
In an email sent to sellers and obtained by CNBC, the Fulfillment by Amazon (FBA) team said that a new program is being rolled out where Amazon will buy products at full price from third-party merchants, then sell them to consumers across the globe.
"For a limited time, there will be no additional fees, and we will purchase inventory from you at your local marketplace offer price," the email said.

The new program, which follows a similar rollout in Europe, is the latest move by Jeff Bezos to build up a complete catalog, even if Amazon can't make much money on the products in question. In some cases, Amazon is approaching these third-party merchants after the manufacturer has declined to distribute the products through Amazon.

FBA is big and growing

With FBA, merchants pay a fee to have their inventory stored in Amazon's fulfillment centers and to make use of the company's supply chain and shipping operations. It's a huge piece of Amazon's e-commerce business: In 2016, the number of FBA sellers worldwide grew more than 70 percent, and they delivered more than 2 billion items.
For items that are in high demand, Amazon wants to be able to deliver right away, anywhere in the world.
An Amazon spokesperson confirmed the authenticity of the email and said that merchants can opt out of the new program at any time.
"When items are unavailable in a particular geography, we provide customers with selection from another marketplace," the spokesperson said. "This offers customers a wider selection of great brands and helps sellers increase sales."
But the program presents potential problems for sellers of particular brands.

Birkenstock leaves Amazon Wednesday, 20 Jul 2016 | 4:50 PM ET | 01:09

Birkenstock, for example, doesn't allow its authorized retailers to sell the company's sandals to other resellers — including Amazon.
Last year, Birkenstock announced that it would stop selling directly to Amazon because of frequent counterfeits and inability to weed out unauthorized distributors. Birkenstock does allow certain partners to sell on the Amazon marketplace.
Some merchants that sell only Birkenstock products were sent the email and forwarded it to CNBC. Birkenstock USA CEO David Kahan said in a statement that any Birkenstock sellers that participate in the program would be breaking their agreement with the company.
"If Amazon is in fact soliciting our accounts in order to acquire our products so that they may resell those goods, that causes a serious breach in our agreement with our existing retail partners," Kahan wrote. "If indeed this is the case, we will take immediate action with any account that violates our agreement."
Last year, Amazon introduced Pan-European FBA, enabling merchants to sell their products across Europe and have inventory stored in any of the region's fulfillment centers at no extra cost.

AMAZON EFFECT AND LOGISTICS PROVIDERS

Amazon is moving faster than logistics providers can react. It may be an opportunity for new providers to lead.

LEAN AND INTERNATIONAL

Much of lean, with its four walls emphasis, misses the biggest opportunity-the international supply chain.

Friday, July 21, 2017

CAN YANG MING HOLD OFF INSOLVENCY?

Analysis: can Yang Ming's new bid to raise cash keep insolvency at bay?

By Alessandro Pasetti

20/07/2017

I’m afraid that Yang Ming remains in a limbo – and its latest announcement is proof of this.
The embattled Taiwanese container shipping company said last Friday that, “as the subsequent round of private offering continues with amounts pledged exceeding the first round, the board of directors of Yang Ming on July 14, 2017 has approved a resolution allowing for the public offering of an additional 500m shares of company stock”.
It continued: “Under this plan, the existing Yang Ming shareholders, Yang Ming employees and the general public will have an opportunity to purchase company stock at a price to be determined. This public offering is made largely in response to the interests shown by current shareholders to invest in Yang Ming.” (Emphasis in bold is mine)
An opportunity?
Its partners, clients as well as financial markets have been waiting to hear from the company about the level of appetite, if any, from new investors in a recap, but its promises have done little to satisfy third parties, despite a decisive marketing push aimed at reassuring the entire industry.
What it called in its latest announcement “a steady path of recovery” in the wake of decent growth rate figures in June, is actually the least it needs to secure a bit of time, in my view – but that alone is not sufficient to keep the risk of insolvency at bay.

Yang Ming growth rate, company filing with the Taiwan Stock Exchange

In fact, given its stretched capital structure and bloated cost base, Yang Ming needs a normalised sales growth rates of 40-60% year-on-year to the end of 2017, which would help it generate some positive free cash flow once capital expenditures are taken into account – although it would not be enough to address a structurally weak balance sheet.

Yang Ming cost base at the end of Q1, company filing with the TSE

Admittedly, it has stopped the bleeding, thanks to relatively more stable cash balance changes in recent months, but its enormous debt pile means its latest fundraising attempt hardly qualifies as an opportunity, and unfortunately testifies to a company that remains desperate for a sizeable cash injection, which is likely to occur at a steep discount against the market value of its stock.
Cash is king
Following recent news of the $6.3bn purchase of OOCL by Cosco, chief executive of SeaIntelligence Consulting Lars Jensen told The Loadstar: “Evergreen, Yang Ming and HMM and their owners need to contemplate exactly what their options are, longer-term, in the face of the size advantages held by the six super carriers.” And that is absolutely right – it is my view that of those three container shipping lines, Yang Ming is the one under the most pressure to provide reassurances to the markets short-term, at least financially.

Yang Ming cash flows at the end of Q1, company filing with the TSE

In my latest Yang Ming coverage, in early April, I said the risk was that the group would run out of money by early 2018. Cash balances trends have been a bit more satisfying over the past few months than previously, reading: TWD10.6bn (US$350m) in May; TWD7.6bn in April; TWD11.1bn in March; and TWD12.4bn in February.
(The average gross cash figure currently represents approximately 50% of its market cap.)
But it means this money pit is only on a slightly more solid financial footing since the turn of the year, when its cash and equivalent stood at TWD11.9bn, down from almost TWD24bn ($792m) one year earlier.
So, it is now looking to issue 500m of new stock, boosting its share count by 35% from about 1.4bn of shares outstanding, only a few months after it decided to shrink it. That decision, very possibly, was made to reduce opportunistic trades by speculators willing to bet on likely weakness in its stock price, going forward, and its market value has been virtually unchanged since.
Interestingly, while cash and equivalents have been relatively stable since 31 December, up to now, cash on hand still doesn’t cover for short-term funding needs – typically liabilities that mature within a year – that comprise short-term debt, short-term payables and long-term liabilities maturing within 12 months.
Moreover, the company is only barely at break-even in terms of core operating cash flows, based on its first-quarter figures ended 31 March, before capex is considered, and cash outflows from financing are significant.
The picture looks nicer than in the first quarter of 2016, as the table below shows, but Yang Ming is by no means safe.

Yang Ming cash flows break-down and comparision, company filing with the TSE

Placement
If it gets away with a private placement priced at TWD10 a share (which would equate to raising TWD5bn, or $165m), it will raise just about half of the total represented by the difference – about TWD10bn – between cash on the balance sheet and all the aforementioned short-term debt obligations.
If the deal is fully priced in line with the market price of the stock, it would raise almost TWD7bn ($226m). However, some TWD5bn is more likely, assuming – and this is not a given – it manages to wrap up the fundraising successfully. Such a sizeable deal would represent a discount of about 25% on its current market value of TWD13.7bn – a discount that was also implied in its offering earlier this year, but on a much smaller size of TWD1.6bn.
Either way, it might need either another round of funding or state intervention, or a mix of both, by the end of the first quarter 2018, assuming its lenders do not pull the plug beforehand.

Yang Ming cash balances and trading update, company filing with the TSE

At the end of June, the carrier informed us that “the business relationship between Yang Ming and lending banks is going well. The loan facility will be renewed. The improvement of operating performance is the primary objective of Yang Ming”.
Aside from the fact that it needs a proper PR and marketing agency, vague and inaccurate statements such as “working capital could also be enhanced” will provide little comfort to new investors. Meanwhile, double or quits could be a painful game for existing equity holders.

THE 4 SUPPLY CHAIN METRICS

http://www.ltdmgmt.com/the-4-supply-chain-metrics.php

THE 4 SUPPLY CHAIN METRICS

First, the metrics discussed here are for manufacturers, retailers, and distributors. This is important and why they are THE supply chain metrics.
Metrics are a way to measure performance; and, in turn, communicate that information to key executives in the company. Their value is how supply chain management is supporting the direction and strategy of the business. It is important that they present a strategic and tactical understanding of what is happening and how well it is happening.
Supply chain management is a process that flows across the organization and from suppliers through to customers or stores. The challenge of a supply chain is the length; scope; geographic reach; number of internal and external stakeholders and participants; and overall complexity. No other activity has all this—suppliers and factories around the world and global customers.
Supply chains are non-linear, not linear as some project them. There are supply chains within supply chains. Viewing non-linear supply chains as linear contributes to performance issues and to measuring operations.
All these make it difficult to select the proper metrics. There are numerous metrics. Good metrics should measure the performance of the total supply chain, more exactly the process.
KPIs (key performance indicators) must be measurable. As a result, numerous metrics are about the logistics components. Some of these are good. However, they do not present a view of the total supply chain. Plus, many have little or no usefulness for the C-suite. Assessing logistics parts is a node-link approach and does not recognize the supply chain process.

Metrics should measure the supply chain, not its logistics components.

Supply chain management is a process that is often measured on its logistics costs. That a
pproach is a root cause of issues. Such computations do not measure the supply chain or its performance and can include factors outside of the supply chain. In addition, the way accounting treats supply chain costs is dated. They go back a hundred years, before supply chain management and global activity were recognized.
Supply chains are being transformed. The Amazon Effect has stimulated the beginning of a global supply chain revolution. It is moving beyond e-commerce/B2C and is crossing industries and markets.

Traditional supply chains for retailers and manufacturers face issues with omnichannel, its different markets, and new ways to reach customers, including end-user ones. The underlying expectations are pushing supply chain transformation. In turn, this means improved performance and new metrics.
Supply chain complexity raises the question of whether measuring the overall supply chain is sufficient. Segmenting can reflect similar supply chain characteristics, business unit, or other ways. Supplementing the macro performance with segmented KPIs provides understanding and insight to what is happening on both centralize and "decentralized" views. It enables seeing underlying factors to the "corporate" measure.
Another topic is how many metrics to have. Too few supports the view of a monolithic, linear supply chain. Too many metrics can become measures for measures sake.
The best four metrics that define supply chain performance are—

Inventory Velocity. Inventory has been a hot button with dual challenge of capital tied up and while being able to service sales orders. With omnichannel and meeting customer expectations, it has become hotter. Aligning inventory and the supply chain network is an additional challenge. Moving inventory more quickly through the supply chain has become a requirement. This is also important with inventory planning and with being able to respond to positioning products.

This is also a good metric for tactical issues, such as the working capital mandate. It is important for lean and the waste of excess inventory. In many of these cases, inventory is stationary, not moving dynamically across the supply chain. Speed increases the value of inventory, while reducing working capital. It is critical with aligning networks, positioning inventory, and satisfying customer requirements.
Inventory control is outdated in a business world defined by speed—from decision making to customer expectations. Supply chain management is pivotal in achieving the many forms of velocity. Also, inventory management, as traditionally understood, has been replaced by alignment and by velocity.
Velocity can be measure as turns or days of inventory. It can be applied to finished goods; WIP (work in process), especially that is transferred to another location; and raw materials. Segmenting as to division, product category, or other relevant ways for the company is important.

Time Compression. This KPI ties to inventory velocity and is an integral part of the providing the immediacy customers want. Time is a hidden waste both inside and outside the company and is an enemy of supply chains. Reducing it is important with the new business reality.

Measuring time and compressing it must be done across the total supply chain—from suppliers through to customers (and/or stores). This means breaking it down by inbound, outbound, and stationery—sitting in distribution centers and factories. Remember, time is important with building inventory velocity and minimizing inventory waste.
There are two points here. One is that the largest time sector is with the inbound supply chain, especially if there is international sourcing. The other, and often overlooked, is the non-movement part. That is a fixed block of time that is not compressed, unless it is recognized.

Perfect Order—Customer. This is an outstanding metric. The KPI comes from the SCOR (Supply Chain Operations Reference) model. This metric is about the customer. It validates the customer mantra. This is what customer service is—delivery of orders, complete, accurate, and on time. It is implicit in a customer's doing business with a company. But, as simple as that sounds, firms struggle with it.

The new reality of selling for manufacturers and retailers is the customer experience and meeting customer requirements. Service expectations have been elevated. It is not limited to B2C and is spreading across industries, markets, and B2B. Omnichannel is everywhere. Speed is expected. That makes this metric vital.

Perfect Order—Supplier. The supplier is at the opposite end of the supply chain from the customer and the perfect customer order. This metric then creates a yin and yang. Supplier performance—purchase orders delivered complete, accurate, and on time—is very important to supply chain success.

This is a fundamental metric. Supply chain performance begins on the inbound side with suppliers. The impact of weak supplier accomplishment ripples throughout the supply chain and impacts the actuality and fundamentals, both operational and financial, of the company.
The four metrics triumph because they recognize and deal with the entire supply chain and its process. Success with them can mitigate company failures and problems with sales, growth, and profitability. The four metrics have value across markets, industries, and businesses. They are inter-related, connected, and bring cohesion to the supply chain, what it does, and how it does it. These define it and provide a way to see the intricacies and convolutions which can be lost in the daily happenings. They recognize what can be viewed as unrelated parts of the supply chain—when they are not.

The four metrics triumph because they recognize and deal with the entire supply chain and its process.

For example, the two perfect order measures highlight the supply chain. Add the time compression and inventory velocity that recognize the speed which has become a requirement of business. This is especially true for retailers and manufacturers dealing with duality of omnichannel and its selling to intermediaries, directly to end-use customers at their designated locations, and through ways that has customers coming to merchandise. The traditional ways no longer function as they once did.

The challenge to improving performance is ongoing. Success lies at the macro and granular levels. Some of the work ahead includes—

Focus and improve the process
Increase visibility across the supply chain
Integrate the financial supply chain with the product supply chain
Align the inventory network
Extend the supply chain upstream
Implement advanced integration of process and technology

Wednesday, July 19, 2017

WAL-MART, VIRTUAL REALITY, SUPPLY CHAIN MANAGEMENT

Wal-Mart wants to be active in Virtual Reality. Imagine what it will do to their supply chains for e-commerce large orders and more SKUs.

Walmart wants to be on the cutting edge of VR

Daniel Keyes

BI Intelligence

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Walmart’s technology incubator, Store No. 8, has announced a competition seeking virtual reality (VR) solutions from developers across the US, PYMNTS reports. The competition is looking for “ideas that have the potential to change the way we shop and live,” and offers winners funding for their initiatives, as well as the chance to partner with Walmart or Jet.com.
The company is positioning itself to be at the forefront of VR shopping applications. Consumers are already interested in the technology’s retail potential, with many hoping to use VR to avoid store visits and alter the sales assistant experience. But of those in a group of 500 top North American retailers who use VR, none believe it is working well. Walmart is likely hoping to buck that trend, and it may be well positioned to do so — the retailer already uses VR for training purposes, and this competition could help it form partnerships to keep pace with new improvements in the space. This would allow it to reap the benefits of consumer interest in VR as the technology develops.
Investing in VR could help Walmart in its ongoing battle with Amazon. The company has invested in a bevy of e-commerce pureplays, improved machine learning, and launched Store No. 8 this past March. All of these moves are part of Walmart’s plan to boost its e-commerce and technological capabilities as it competes with Amazon across a number of markets and industries. High-quality VR could help Walmart better take on the e-commerce giant by providing it with a critical edge in a yet-to-be-mastered space among retailers, particularly if it can use the tech to revolutionize the shopping experience both online and in-store.
Jessica Smith, research analyst for BI Intelligence, has compiled a detailed report on virtual reality that:

Identifies the major players in today's VR hardware and platform markets.
Estimates future growth of each of the major VR categories.
Explores barriers to mass market consumer adoption for each of the VR hardware categories.
Considers how developer sentiment is driving the growth of various platforms.
Assesses how the market will shake out over the next five years in terms of size and the success of various VR hardware categories.

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Sunday, July 30, 2017

UPS Expects Retailers to Pay Up for Christmas Deliveries

UPS Expects Retailers to Pay Up for Christmas Deliveries

Shipping company cites surge in online orders for peak-season surcharge

CONSTANT PUSH FOR LOW LOGISTICS RATES

Wednesday, July 26, 2017

AMAZON ENTERING SOUTHEAST ASIA VIA SINGAPORE

Amazon prepares to enter Southeast Asia via Singapore launch

In a first deal of its kind, Convoy lands $62 million led by YC’s Continuity Fund

Monday, July 24, 2017

STATE OF U.S. LOGISTICS REPORT

Annual "State of Logistics Report" shows industry looking in cloudy rear-view mirror

ALIBABA LOOKS TO ADD BRICKS TO ITS CLICKS