Managing Supply Chain risks may be as simple as a video conference away

Managing supply chain risks may be as simple as a video conference. As many folks know, I am always on the lookout for start-up companies that offer new solutions to the supply chain market. Though its services are for all industries, one interesting company is Zoom. Based in Santa Clara, California, Zoom is one of a growing number of start-ups that provide cloud-base solutions.

According to an Enterprise Networking Planet article, Zoom is “a true cloud-based solution,” with no dedicated on-premises hardware required. This is an important differentiator, according to Nick Chong, the company’s head of product marketing who also noted the company’s approach to mobility as another differentiator. Mr. Chong further states that Zoom is the first in the market to offer mobile screen sharing within video conferences. Mobile users can also start or join meetings; send invitations via email, SMS, and instant message; and utilize a full suite of collaboration features, such as typing on and annotating documents and presentations and recording meetings directly from their mobile devices.

So, what are the advantages of Zoom’s offerings for the supply chain market? One example can be found in freight forwarding. By nature, freight forwarding companies interact on a global basis and as such need to be able to keep up with changing trade regulations as well as to be able to react to any change within the environment quickly or else run the risk of delays and/or possible damages to goods. Communication and collaboration are important to keep the flow of goods moving between trade lanes.

JAS Forwarding is one such freight forwarder that utilizes Zoom for its internal communications. JAS consists of a global network of 47 subsidiaries, 35 exclusive agents and more than 3,700 employees across 80 countries. As a cost savings measure as well as one to provide a high standard of customer satisfaction, Zoom is being used for training purposes and for global counterparts to discuss business trends, new solutions, and strategies to improve service to customers.

Supply chains continue to globalize and with this expansion comes the need to communicate with teams regardless of where in the world they may be – collaborating, training and sharing knowledge and being able to react quickly to any potential risk that may occur is a requirement especially in freight forwarding. The rise of mobile devices such as smart phones and tablets and cloud-based solutions such as Zoom are allowing companies such as JAS to communicate with employees around the world in an easier and cost-effective manner.

Cost management and e-commerce result in good fourth quarter for FedEx

The latest earnings from FedEx depicts rising revenue, improving operating income and increasing volumes. For fiscal year 2014 (June 1, 2013 – May 30, 2014) overall revenue increased 2.9% to $45.6bn and operating margin was 7.6%. For the fourth quarter (March – May), overall revenue increased 3.5% with operating margin of 10.0%. It appears that there are improving economic signs, particularly as weather improvements in the US domestic market from January and February brought forth the need to clear shipper backlogs. But perhaps even more so, the company is benefiting mostly from rate increases and its reorganization and cost management programs.

The company’s largest division, Express noted a slight 0.2% increase in revenue for the quarter but thanks to higher package volumes and improved yields, operating income increased 3.0% to $475m from an adjusted $460 from previous year. Average daily international volumes increased 2.0% while those for US domestic increased 3.0%.

The Freight division also noted good numbers with revenue increasing 12.0% to $1.5bn for the quarter and operating income up 51.0% to $122m from an adjusted $81m same period last year.

As with previous quarters, e-commerce was credited with increased volumes and revenue for the Ground division. Revenue increased 8.0% to $3.0bn from $2.78bn the previous year. Average daily volumes increased 8.0%. Its SmartPost service reported an 8.0% decline in volume but management noted that this was due to one customer opting to go directly to USPS instead.

FedEx’s outlook for the new fiscal year includes aircraft deliveries to support its fleet modernization and to continue expansion of the FedEx Ground network which management attributed to market share gains. For all its divisions, the company will continue to focus on revenue quality and improve yields.

Meanwhile, FedEx noted on its earnings call that it implemented two pricing changes during the fourth quarter. The Freight division increased its published fuel surcharge indices by three percentage points effective June 2 and perhaps what could be prove contentious is its plan to expand its dimensional weight pricing to all Ground package shipments effective January 2015. While it currently applies such pricing to packages over three cubic feet in size, management noted by expanding such pricing to all Ground package shipments will align its pricing with its cost to deliver. As such, FedEx management commented that the move to dimensional pricing will give FedEx the opportunity to work with customers to make better packaging decisions. Additional thoughts and analysis on FedEx and UPS announcements to implement dimensional pricing will be provided in a separate blog post this weekend.

To conclude, FedEx reported a good fourth quarter thanks mostly to cost management, restructuring and rate increases. The company is optimistic in regards to improving global economic conditions and highlighted on its call its investments it has made to its Japanese and Mexican infrastructure as well as its acquisition in Africa. According to CEO Fred Smith, the company’s strategy in the Express business is “to operate an unduplicated backbone priority network that allows people to move door-to-door express shipments of parcels and light freight between almost any two points on the planet within one to two business days”. Indeed, it appears the company is heading in the right direction.

Same-day delivery? The real race is in both fulfillment and delivery

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Several articles are reporting of the potential shut-down of Ebay Now, Ebay’s one-hour courier service. While Ebay denies such a possibility, one wonders how viable a $5.00/one hour service really is.

Amazon, Google, Wal-Mart plus a host of others are all trying their hands at same-day delivery with each achieving some form of success and expansion.

However, don’t rule out Ebay yet. Ebay Now is based on the company’s acquisition of Milo, a local shopping start-up that lists real-time in-store product inventory for over 50,000 stores across the country; featuring over 3m products from Target, Macy’s, Best Buy, Crate & Barrel and more. Since that 2010 acquisition, Ebay has gone on to acquire UK-based Shutl, which provides a network of couriers to deliver local goods within a couple of hours of an online purchase. Together, the two companies have partnered with UK-retailer Argos to offer a Click & Collect and fulfillment solution.

Expect Ebay to tweak Ebay Now here in the US as it expands its fulfillment solutions.

While local delivery in US metropolitan locations such as New York, San Francisco and Chicago will probably remain a niche solution, delivery combined with fulfillment options will prove the winner in the same-day race as evident by Amazon’s fulfillment facility building frenzy. EBay is following suit with its seven facilities located in Kentucky; Virginia; Nevada; Ontario, Canada and Manchester, UK. Along with traditional fulfillment solutions, it offers “modular, cloud-based SAAS solutions” such as ship-from-store, in-store pickup and ship-to-store. In other words, its omnichannel solution offers quick, nimble and agile solutions for retailers in the fast changing retail industry.

For example, this past week, eBay Enterprise, an eBay company, announced it will provide regional fulfillment services for Walgreens and Paula’s Choice. Walgreens first signed with eBay Enterprise in 2011 for distributing its West Coast Drugstore.com business and then in the fall of 2012 for Walgreens.com. This renewal agreement will provide ship-to-store and direct-to-consumer West Coast order fulfillment from the eBay Enterprise fulfillment center in Reno, Nevada.

Fast growing west coast-based Paula’s Choice needed to expand its capacity and provide a location that could deliver product quickly to the east coast. As a result, it has contracted with the eBay Enterprise Shepherdsville, Kentucky facility.

“Today’s consumer expects their order quickly, hassle-free and with nominal shipping fees if any,” said Tobias Hartmann, interim president of eBay Enterprise. “Our goal is to provide retailers with warehouse and store-based fulfillment solutions that provide a competitive advantage and exceed their customers’ expectations to build long-lasting loyalty.”

Indeed, can such traditional providers of fulfillment and delivery as FedEx and UPS offer similar solutions? The use of cloud-based solutions is on the rise allowing for quicker implementation and lower costs – a benefit for retailers competing in such a competitive environment. Keeping costs down is a necessity so not only are retailers looking to keep fulfillment costs low, transportation costs are another concern. As FedEx gets set to launch its dimensional pricing in 2015 with UPS expected to follow, retailers may start to look for alternative solutions or end free and/or reduced shipping for customers. Regional delivery companies such as Eastern Connection and OnTrac are waiting in the wings.

The Middle East – A Rising Star in Global Logistics

Transport Intelligence (Ti) has focused a lot of attention on the Middle East this year – and rightfully so. It’s no surprise that global trade is changing thanks to manufacturing shifts, the loosening of trade barriers, nearshoring and foreign direct investments. As such, emerging markets are receiving heightened attention from the logistics community. The Middle East is one of these emerging markets and is evolving into a global logistics hub.

Along with publishing the Middle East and North Africa Logistics report, several white papers were published including a Middle East Logistics white paper series written by Ti’s CEO, John Manners-Bell and one on the Middle East e-Commerce Logistics Market written by Cathy Roberson. These publications along with special briefings culminated in Ti’s Emerging Markets Conference which was held June 4 and 5 in Dubai.

With over 200 registered delegates, the opening session was led by Ti’s CEO, John Manners-Bell and Agility Global Integrated Logistics President and CEO, Essa Al-Saleh. The two companies collaborate and produce an annual emerging markets logistics index. The latest results note the growing attractiveness of the Middle East region. For example, Mr. Al-Saleh pointed out that Saudi Arabia has been a “star performer among emerging markets globally, taking third spot in the 2014 index”. In addition, Mr. Al-Saleh observed that there has to be investments in “soft infrastructure” to support the “hard infrastructure” investments. Indeed, Ti’s CEO cautioned later at a press conference that “capacity planning in the Middle East is dysfunctional. It’s uncoordinated and it’s also unmanaged, and this will lead to capacity growing in entirely the wrong locations and a lot of white elephants. They just won’t have enough volumes to fill these ports or these airports.”

Along with the opening session, there were panel discussions on trade, moderated by Ti’s Head of Consulting, Joel Ray and further discussions, led by John Manners-Bell on infrastructure including an update from Etihad Rail. The last session of the day focused on IT which was moderated by Ti Advisory Board member and Managing Director for Virtual Partners, Ken Lyon.

The second day began with a discussion on supply chain risks, led by John Manners-Bell an expert in the field and author of the book, “Supply Chain Risk: Understanding Emerging Threats to Global Supply Chains”. To prove there is indeed more to the Middle East than just oil and gas, the rest of the sessions focused on the growth of e-commerce, moderated by Ken Lyon; Healthcare, moderated by Logistics Consultant, John Gould and of course a conversation on the oil and gas industry by Joel Ray and UPS’ Fred Lucha.

A special thank you to Ti’s Head of Marketing and Events, Sarah Smith, for bringing the conference together and to our conference partner – Agility – Thank you! Our sponsors, we thank you: Aramex, Kewill and Kogan Page. Also thank you to Logistics Executive and to the Chartered Institute of Logistics and Transport for your support.

For the Twitter followers, thank you for the retweets and tweets. This was the first time Ti utilized a special Twitter hashtag. It was a great success and I personally had a blast tweeting and making new Twitter friends!

Look for a new Twitter hashtag for our next conference in Singapore later this year. If you are interested in being a sponsor or getting involved, be sure to contact Sarah at ssmith@transportintelligence.com. To keep up with what’s going on with Ti be sure to sign up for our newsletters and follow us on Twitter @Transportintell.

Thank you again!

A challenging freight forwarding market results in rate quote solution from Freightos

Freight forwarding, hard hit by economic, modal and lane shifts, seems to be making a recovery. That is, at least for some providers. For first quarter 2014, Kuehne and Nagle and Panalpina each posted positive gains in volumes for airfreight, 1.4% and 6.0% respectively and for ocean freight, 6.9% and 6.0%.

Financially, it was different story – While Panalpina noted positive gains in gross profit for airfreight and ocean freight 5.0% and 5.0% – Kuehne and Nagel struggled a bit as ocean freight gross profit declined 2.4% and airfreight gross profit slipped 0.9%.

Across the pond, US-based Expeditors International of Washington noted good gains for the quarter with volumes up for air, +6.0%, and ocean, +12%. Financially, subtracting out services, air revenue increased 5.7% while ocean revenue increased 1.3%.

In its SEC 8-K filing, Expeditors noted that airfreight is still experiencing modal substitution favoring ocean but at a reduced rate. Meanwhile shippers are trying to shift as much risk as possible to 3PLs and forwarders as this shift continues, thus, possibly driving ocean costs up according to an analyst note from Stifel.

The changes within the freight forwarding market have been disruptive and true, the market may be experiencing a recovery, but there will likely be additional disruptions as supply chains are redefined by many companies worldwide.

IT has also played a big role in disrupting industries of late, particularly cloud-based solutions. An interesting start-up, Freightos provides such a solution that can be integrated into shippers’ and carriers’ existing IT systems or used as a standalone to provide rate quotes in minutes versus waiting for a couple of days. In a recent interview, CEO and founder, Zvi Schreiber describes the company as “the equivalent of Expedia/Orbitz/Kayak for the shipment of goods rather than people. We help the sellers to automate their quotes online and we help the buyers to compare prices and quality and find the best deal.”

That is probably one of the best descriptions I have come across. Recently, Zvi Schreiber was kind enough to chat about the company and to provide a demo of the system to me. Its simplicity was refreshing and one I could fully relate to. In a previous job, I was involved in arranging airfreight quotes and sometimes it would take days to put a quote fully together. With this system, users can upload carrier contracts and create a private network or use the system as is for air, ocean and road modal pricing and scheduling. In real-time versus days. The system spans around the world and is available in multiple languages and multiple currencies.

As with cloud-based systems, it can be customized based on customer’s needs and reporting/data analysis is included as well. Freightos’ customers include Apex Logistics, belsped, Cargo Group of Companies, Fercam Logistics & Transport and CEVA.

As such, even though the freight forwarding market continues to face challenges due to economies, modal and lane shifts as well as changing customer needs, the market is undergoing additional changes to simplify processes and improve customer satisfaction.

Out Now! Global Express and Small Parcels 2014

Originally posted on the Ti blog:

Ti’s annual Global Express and Small Parcels report is here, ready and available for you to browse and buy!

Each year Ti’s team of analysts delve into this dynamic market exploring the shifts that have occurred and the impact of shifts which may yet occur. In the 2014 report areas of focus include the impact of technological advances such as 3D printing and the global boom in e-commerce, as well as the changing demands of the consumers.

Within the report Ti has also analysed global and regional market size trends; the global express and small parcels market is forecast to grow at a CAGR 9.8% through 2017. In addition, the report includes provider profiles of integrators, 3PLs, post offices and regional players are included as well as a financial comparison of the integrators.

More information on the report can be found either in the brochure or on the infographic

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Procter & Gamble – Getting Closer to the Customer

Procter & Gamble (P&G) reported a 5% increase in profit for its fiscal third quarter (period ending March 2014). The increase was largely attributed to sales growth in its home goods segment as well as cost savings. According to its Chairman, President and CEO, “We’re operating in a slow-growth, highly competitive environment, which places even greater importance on strong innovation and productivity improvement. We’re making good progress on our productivity plans, with cost savings and enrollment reductions ahead of going-in targets for the year.”

Indeed, for a company that sells goods in more than 180 countries worldwide, it has been faced with slowing growth. Although, emerging markets have contributed to the company’s growth, currency fluctuations, competition and costs have led to a drag on profits so Procter & Gamble, like many other companies, have looked towards its supply chain to cut costs and improve efficiencies.

In an earlier blog post, Procter & Gamble consolidates Latin American supply chain planning in Costa Rica, it was noted the company had announced a $10bn restructuring plan. As part of this plan, it has collapsed its regional market organizations from eight to five with Europe combined into one business, India joining the Middle East and Africa and the rest of Asia combining with Australia. The other two regions are North America and Latin America.

Within its North America organization, P&G is continuing its supply chain transformation by reworking its distribution network. Similar to a trend in which retailers such as Amazon are undertaking, P&G is looking to locate these facilities near major US population centers and easily accessible road and rail networks. As such, it has recently announced it would build a multi-category distribution center near Dayton, Ohio. At a cost of $89m, the 1m sq. ft. facility, which Prologis is building, is expected to open in 2015. The distribution center will be outsourced to 3PL, Exel and packager, Quality Associates. A spokesperson for P&G noted the goal is to reduce corporate transportation costs and get products to customers faster. The program will reduce rail and truck miles logged to carry P&G products to stores by 7.0%.

In an interesting analysis from Boston Consulting Group and IRI, bigger does not necessary equate to better in the US consumer package goods (CPG) industry. In fact, smaller competitors are outperforming larger ones. Will P&G’s strategy succeed? Find out what else is going on in the consumer package goods industry at Innovation Enterprises’ CPG Forecasting & Planning Summit, May 21 in Chicago.