Multi-Channel Madness: We’ve been talking about multi-channel commerce and fulfillment for years, but in 2012 it started to get really serious, with companies, especially retailers, spending a lot of money to bolster capabilities and optimize the “customer experience.” Macy’s says it is partially converting almost 200 existing stores to support ecommerce fulfillment. Walmart, Amazon, the USPS, eBay and others testing same day delivery services. Almost everyone giving away shipping and trying to figure out how to make money at it. There is some serious stuff going on right now in multi-channel.

Amazon Rising: Relatedly, Amazon.com’s continued rise starts to put real fear into retailers, wholesalers and more as it grows its network and revenues at an unbelievable clip, and may just run away with this ecommerce thing. Best Buy, with almost an electronics monopoly in brick and mortar, struggles mightily in 2012, likely to be taken private, as “showrooming” hammers sales. Amazon growing at 30% or more quarter after quarter, likely ending the year with more than $60 billion in revenue, and will become the second largest US retailer in a few years. On track to have opened a staggering 18 more DCs in 2012. Consultants pushing services to help companies avoid being “Amazoned.” The one company Walmart fears.

Continued Hope for US Manufacturing: Optimism about a US manufacturing “renaissance” continued strong in 2012, especially in the first half of the year, with mixed actual evidence. GE CEO Jeff Immelt writes article in Harvard Business Review saying company is done chasing low labor rates around the globe. Research from MIT, Boston Consulting Group and others suggests a real corporate interest in keeping manufacturing in US or bringing some back from offshore, as rising Chinese labor rates and flat US ones make US more competitive, and companies focus on “regional” manufacturing strategies.

But is it real? There were certainly some examples (e.g. Caterpillar chooses Georgia for new factory over offshore options, Apple says it will again started building PCs in the US), but as a JC Penney supply chain exec noted at the CSCMP conference in October, the reshoring seems to be coming in drips and drabs, while the offshoring happened very fast. We’ll see.

Labor Takes a Beating: Again not unrelated to the trend above, union labor had a very rough 2012, even with its friends in the administration and the National Labor Relations Board. Union-heavy Michigan voters strongly shot down a referendum that would have guaranteed union rights in November, and in December legislators there made Michigan the 24th “right to work” state over fierce opposition, joining Indiana, which made the same move in 2011. Unions come out on the short end in high profile strikes at Caterpillar (which some called “labor’s last stand”), Cooper Tire and others.

A judge (for now at least) threw out in June the “microwave election” rules the NLRB had earlier passed to speed up union voting, though it will likely be back in play soon. So, not a good year for labor, but you can guarantee it will reload soon.

White House Stays with Democrats: Obama wins second term, which in practical terms means a number of regulatory measures that in general could be construed to be against pure supply chain interests likely to go forward. Hours of Service changes will become law in July of this year, increasingly stringent moves on greenhouses gas by regulations rather than law likely to continue (though EPA head Lisa Jackson, who was leading that charge, just resigned), the NLRB as noted above likely to regroup in favor of unions, and move to consider contract truck drivers as full-time employees of a company (and thus subject to unionization) are among the key potential issues.

Merger Mania Continues: The consolidation of nearly every sector in supply chain technology continued in 2012, most prominently the planned merger of JDA Software and RedPrairie, two of the industry’s largest software providers, in a move that will have major ramifications. 

Just as surprising was May’s announcement that SAP would acquire procurement technology leader Ariba. Industrial giant Honeywell in December announced it would acquire data collection provider Intermec, after acquiring Intermec rival LXE the year before, the same year Intermec acquired voice technology provider Vocollect, leaving the sector highly consolidated – basically, Honeywell and Motorola Solutions are the two giants left standing, with Psion and a few others smaller players still around.

Most surprising of all though was Amazon.com’s acquisition of robotic picking system provider Kiva Systems in March for an amazing $775 million – and what it will do with this capability is still unclear (though we are pretty sure Kiva sales reps are no longer calling on Walmart.com).

Intermodal Rocks On: The consistent shift by many US shippers to intermodal continues apace, with carloads up 3.1% over 2012 and just under the record set in 2006 (while truckload tonnage is up slightly less). But that masks a bit the more aggressive growth of intermodal freight outside of coal, shipments of which fell dramatically in 2012. But looking at individual carrier results tells that stronger tale: JB Hunt’s intermodal revenue was up about 16% through Q3; Swift’s intermodal business was up 41% in Q3.

Natural Gas Reaches a Tipping Point: Though a measure to provide cheap loans for natural gas truck purchases died in the Congress, momentum continued, with interest and adoption rising throughout most of the year. Clean Energy Fuels and Shell both announce and began executing aggressive plans to develop natural gas filling stations in partnership with major truck stop chains. The ATA holds major and successful conference on natural gas trucks. Beyond trucking, low cost of US natural gas literally fueling major manufacturing investments in the “rust belt” and beyond in sectors such as chemicals, fertilizers and metals. First new US fertilizer plant being built in more than 20 years.

Momentum also building to change law to allow exporting of US natural gas overseas, which could lead to US being the Saudi Arabia of natural gas. All this together will simply transform the US economy.

There’s more, but those are the top trends and themes from my view. I would have added a still greater and deeper focus on supply chain risk management and the green supply chain going sideways (ups and downs) if I had more space.

2013 will mark the 10th year anniversary of Supply Chain Digest (I can’t believe it has been a decade), and look for special stuff from us this year.

By Dan Gilmore – Editor In Chief, Supply Chain Digest – Jan. 4, 2013

Six of the 17 countries that use the euro currency are in recession. The U.S. economy is struggling again. And the economic superstars of the developing world — China, India and Brazil — are in no position to come to the rescue. They’re slowing, too.

The lengthening shadow over the world’s economy illustrates one of the consequences of globalization: There’s nowhere to hide.

Economies around the world have never been so tightly linked — which means that as one region weakens, others do, too. That’s why Europe’s slowdown is hurting factories in China. And why those Chinese factories are buying less iron ore from Brazil.

As a result of this global economic slowdown, the International Monetary Fund has reduced its forecast for world growth this year to 3.5 percent, the slowest since a 0.6 percent drop in 2009. Some economists predict the global economy will grow a full percentage point less.

For now, few foresee another global recession. Central banks in China, Britain, Brazil, South Korea and Europe have cut interest rates in the past month to try to jolt growth. European leaders have begun to focus more on promoting growth, not just shrinking debt and cutting budgets.

The Chinese government, in particular, is expected to do what it takes to protect its economy from deteriorating too quickly. And despite their slowdowns, China and India are still growing at rates America and Europe can only imagine.

But many economists say European policymakers aren’t moving fast enough to strengthen European banks and ease borrowing costs for Italy and Spain. They fear the global impact if Europe’s economy deteriorates further.

Stock prices in the United States and elsewhere are fluctuating almost daily depending on the outlook for a resolution of Europe’s debt crisis.

Around the world, sales at companies ranging from automakers to technology companies are falling. Advanced Micro Devices, a California-based maker of computer chips used in everything from slot machines to smart cameras, says revenue likely dropped 11 percent in the second quarter because of weaker-than-expected sales in China and Europe.

At Jagemann Stamping Co. in Manitowoc, Wis., sales to Europe have dropped more than 10 percent from a year ago. The company makes metal parts for auto companies and other customers. It’s still enjoying strong sales in the United States, so it hasn’t had to cut workers because of falling business in Germany and the Czech Republic.

“What it does is slow our new hiring,” says company president Ralph Hardt.

One growing concern about the global economy is there’s little margin for error: Unemployment is already at recession levels in Europe and the United States.

The United States, by far the world’s biggest economy, has long pulled the global economy out of slumps. Now it needs help. Three years after the Great Recession officially ended, the American economy can’t maintain momentum. For the third straight year, growth has stalled at mid-year after getting off to a promising start.

Unemployment stood at 8.2 percent in June — the 41st straight month it’s been above 8 percent.

Americans spent less at retail businesses for a third straight month in June, the longest losing streak since the recession. Economists are downgrading their estimates of economic growth in the April-June quarter. When the government releases its first estimate on Friday, many think it won’t even match the first quarter’s sluggish 1.9 percent annual pace.

The global slowdown is squeezing U.S. exports, which have accounted for an unusually large 43 percent share of U.S. growth since the recession officially ended in June 2009.

Consumer confidence has fallen four straight months in the face of scant hiring and weak economic growth. U.S. companies are nervous about the threat of tax increases and spending cuts that are scheduled to kick in at year’s end unless Congress breaks a deadlock. The IMF has warned of a spillover to the rest of the world if the U.S. economy falls off the so-called fiscal cliff.

Europe’s obstacles are even more severe. It’s faced with crushing government debts, struggling banks and scant economic growth. Unemployment in the 17 countries that use the euro is 11 percent, the highest since the euro was adopted in 1999.

Greece, Portugal, Italy and Spain are in recessions. Germany and France are faring better, but both are likely to grow more slowly this year than America.

French retail giant Carrefour SA — the Wal-Mart of Europe — says its sales fell in the second quarter amid a slowdown in its core markets in Europe.

Italy’s Fiat lost nearly $260 million in Europe the first three months of the year. French carmaker PSA Peugeot-Citroen plans to slash 8,000 jobs in France and close a major factory. Europe’s banks are stuck with bad real estate loans and shaky European government bonds.

The European Central Bank has made massive amounts of money available to Europe’s banks at cheap rates to try to revive lending. But borrowing by many businesses and consumers remains weak because they are uncertain about future income.

Many fear that Greece and perhaps other countries will default on their debts and have to abandon the euro currency, which could ignite financial chaos across Europe.

A summit of European leaders last month produced some agreements that helped calm markets for a few days. But optimism faded as investors recognized that governments are still saddled with big debts and banks with bad loans. And that Europe itself still faces the threat that growth will stall and the euro currency alliance will collapse.

The European Commission predicts the 17-country eurozone economy will shrink 0.3 percent this year. Many economists fear it could be worse. Capital Economics says a recent drop in eurozone business confidence is consistent with a 1 percent decline in economic output.

In the latest wallop to the global economy, China said last week that its economic growth fell to a three-year low. The world’s second-largest economy grew 7.6 percent in the April-June quarter compared with the same quarter last year. That was the slowest growth since early 2009.

Countries like China need fast growth to serve growing populations and millions of people leaving farms to seek work in cities.

Chinese growth has decelerated for eight straight quarters. That’s the longest slowdown in records dating to 1992, according to Yu Bin, a government researcher.

The slowdown is partly deliberate. In 2010 and 2011, Chinese officials raised interest rates and took other steps to tame inflation and cool an overheated real estate market.

“Mission accomplished,” says Cameron Peacock, a market analyst at Australia’s IG Markets. “China now has the room to re-stimulate its economy.”

But China is also feeling Europe’s economic squeeze. Chinese exports to Italy dropped 24 percent in June from a year earlier. Exports to France fell 5 percent, those to Germany nearly 4 percent. Europe buys about 17 percent of China’s exports.

The impact of weak European demand for Chinese-made furniture, shoes, toys and other goods has fallen hardest on export-oriented manufacturers along China’s southeastern coast. Some companies have closed. Others are cutting staff.

China is the biggest trading partner of Brazil, which has the world’s eighth-biggest economy. Brazil is likely to grow only 1.8 percent in 2012, according to Sao Paulo Federation of Industries. China’s slowdown has reduced demand for Brazilian soy and iron ore. Brazilian manufacturers, such as aircraft maker Embraer, are hurting as Europe reduces its demand for manufactured goods.

A relatively strong currency isn’t helping. It makes Brazilian products more expensive to foreign buyers.

Brazil also has a U.S.-style problem with consumer debt: Since 2003, about 40 million Brazilians have entered the middle class and brought a strong appetite for consumption. Brazilian leaders credited those consumers with invigorating the economy in recent years and helping protect it from external shocks.

But most of the buying has been on credit. And those bills are adding up. In a report last week, London-based Capital Economics estimated that debt payments now eat up 20 percent of household income in Brazil.

“The current pace of credit growth in Brazil remains unsustainable — and the longer it continues, the bigger the risk of a messy ending further down the line,” Capital Economics warned.

Similarly, the outlook has dimmed for India, the world’s fourth-biggest economy. Its growth slowed to a 5.3 percent annual rate in the first three months of 2012, the slowest rate in nine years.

Over the past two decades, India has emerged as a powerhouse in services — writing software, running call centers, making movies, drafting engineering plans.

In a report last month, Andrew Kenningham, senior global economist at Capital Economics, said India’s troubles are mostly self-inflicted.

“Weak governance, although not new, is the most plausible explanation for the slowdown,” he wrote.

The government has reneged on promises to make it easier for foreigners to invest in India. It has taxed Indian firms that acquire companies overseas. Indian factories have cut production. And the pay of many Indians has been diminished by inflation, which has averaged more than 9 percent a year for the past two years.

The slowdown in the developing world could make it harder for the economies of Europe and the United States to climb out of their ruts. And the weaker the rich countries get, the harder it will be for developing economies to regain their old fast pace.

“In today’s interconnected world, we can no longer afford to look only at what goes on within our national borders,” IMF Managing Director Christine Lagarde said earlier this month. “This crisis does not recognize borders. This crisis is knocking at all our doors.”

___
07/23/2012 Manufacturing Business Technology
Associated Press Staff Writers Bradley Brooks in Rio de Janeiro, David McHugh in Frankfurt and Joe McDonald in Beijing contributed to this report.

Moving forward, sustainability will be a defining characteristic of these supply chains. Consumers are demanding it, shareholders are beginning to take notice and resources are becoming fewer by the day. According to the authors of one Oracle white paper:

“Today, sustainability has replaced cost, value and speed as the dominant topic of discussion among purchasing and supply professionals.”

So what are the types of discussions that need to be had at the leadership-level to ensure that sustainability coincides with cost reduction, risk mitigation, corporate social responsibility and other initiatives?

Michael Koploy, ERP Analyst at Software Advice, interviewed four sustainability experts to find out how leaders can make gains to ensure the right investments are being made within the supply chain. After speaking with these four experts, Koploy synthesized five questions that corporations have to ask about their supply chains:

1. How can we better measure sustainability?
2. How can we instill sustainability into our suppliers?
3. How can our products be designed to be more sustainable?
4. How can we avoid suppliers that are socially-negligent?
5. Who can we trust to lead sustainability initiatives?

You can read more of the discussion over on Michael Koploy’s website at: 5 Questions to Start the Sustainable Supply Chain Conversation.

To find out more about the state of Cloud-based solutions within the public sector, Michael Koploy, ERP Analayst at Software Advice, caught up with government IT expert Alan Webber of Altimeter Group. Webber believes that security, data ownership and perceived control are all deterrents to public-sector groups deploying Cloud-based solutions, but that the public sector will likely follow the private sector in deploying these systems–it will just take time.

Koploy asserts that procurement is one area of the public sector where the Cloud can be embraced. He feels that vendors can do the following to improve their eprocurement solutions for the government:

(1) Deployment via “Private Clouds”: The ownership infrastructure ownership is shifted to the user–perfect for public-sector groups worried about their data security.

(2) Specialization for the Public Sector: While some vendors already do this well, many others can focus on the adjusting the functionality of their procurement systems to match the needs and peculiarities of public-sector procurement.

Koploy also spoke with Mary Scott Nabers, a public-sector procurement expert on trends that could lead government groups to the Cloud. Nabers feels that there are two trends that will lead to more public-sector groups to the Cloud:

(1) Increasing Number of P3s: Nabers believes that the importance of public-private partnerships is going to reach a crescendo soon. These new groups will need software solutions, and because of budget-constraints, subscription-based programs hosted in the Cloud may be the only options.

(2) Popularity of Software Buying Groups: Because these solutions are often accessible through any computer’s web-browser, local groups can band together to purchase them. One example of this that is becoming popular is with school districts.

For more on Koploy’s discussions with Webber and Nabers, check out the original post: State of the Union: Public Sector and the Cloud.

Jobs are up, but which jobs are in the highest demand? Michael Koploy, an ERP Analyst that specializes in WMS systems for Software Advice, interviewed other industry experts to find the fastest growing jobs in logistics and the supply chain. Here are his top 5 along with some of the skills and certifications that these professionals need to find success:

1. Demand Planner: Many of these professionals have experience with various ERP systems, such as Oracle and SAP, are Six Sigma Black Belts and have obtained advanced certifications such as the CSCP through APICS.

2. Procurement Manager: A background in marketing, sales and supply chain operations are all important in this role, as the person must be both an analytical-thinker and a negotiator. Many professionals have obtained certifications through groups such as the ISM (CPSM) or Next Level Purchasing (SPSM).

3. Distribution Center Supervisor: These individuals are essential in running an efficient logistics operation. They must possess the ability to not only communicate with both in-bound and out-bound transportation units but also a crew of warehouse workers. While advanced degrees in supply chain management or certifications are not absolutely necessary for career success, a grounding in the supply chain is beneficial.

4. 3PL Business Development Manager: More and more companies are outsourcing their logistics operations, leading to an increasing importance within 3PLs to efficiently manage communication between clients. A background in account management, sales and finance are all very helpful–and an understanding of the supply chain is great for relating to clients, as well.

5. Supply Chain Analyst:Many consulting firms, from those that specialize in supply chain management to the Big Four accounting firms are always looking for more supply chain talent. This is a hot destination for many supply chain undergraduates, as well as newly-minted MBAs. These professionals are exceptionally hard workers and often earlier in their career–ready to to do their time to become the next leaders within the supply chain.

For more on these positions, check out Michael Koploy’s report: Top 5 Fastest-Growing Jobs in Logistics.

Internal Red Flags

• Evaluating in siloes. Even if they are not part of phase one, secondary department or group’s input can be vital and help avoid a plethora of similar applications in each department. Many times it helps to include these peripheral groups early and give them the option take a more proactive role in the project.
• Inaccurate budget. Make sure to include things in your project budget like time estimates, travel, trials, contractors, and other costs that are required for a successful evaluation.
• Previous failed deployments. Find out who rolled it out, what were the challenges, estimated benefits, lessons learned, and actual results of deployment. Communicate why your new project is different even though it may be supported by similar technology.
• Check box requirements. Make sure requirements have a priority and understanding of level of effort associated with each requirement. Although Pareto analysis of how many times you heard a requirement helps, make sure to poll users also on importance.
• Product driven requirements. Many times the check boxes are all product focused, and services are a single “has services” box. Look at the major categories of services needed (implementation, technical, adoption, training) and create requirements for each similar to your functional requirements.
• Soft ROI. When the business case reaches purchasing and finance committee, make sure it includes real hard savings along with assumptions for the estimated return so it passes the CFO “sniff test”.
• Company Politics. People internally may feel threatened, excluded, or burdened by a project. The key to winning them over in most situations is to include them, communicate, and not avoid confrontation.
• Meetings without meaning. New initiatives can be exciting, and there’s typically a high level of urgency on both sides. However before scheduling a meeting, ask yourself:
  • What is the purpose? (education, political alignment, etc.)
  • What is the agenda (and roles)
  • Who are the necessary attendees? (internal and external)
  • What is the desired outcome? (completed tasks, next steps)
  • What amount of time is required? (Overestimating is better than under)

External Red Flags

• Vendor Politics. An employee’s previous relationship with a vendor can be deep rooted. The question is how do you spot and react to this to ensure an unbiased evaluation, which is different in every company.
• Desperate Sellers. This can be a clear sign of financial insecurity within the vendor, or could be an opportunity for savings. Find out which this is and begin questioning the “what if scenarios”, however never skip steps to move faster.
• The Yes Sales Rep. Make sure to follow up with how their company did it, how long did it take, how much did it cost, with whom did you provide this for, and can you speak to them?
• “Next Release, you’ll be live by then.” Even with the advent of Agile development and cloud solutions, features slip all the time or are narrowed in focus to meet a release. Take them into consideration, but don’t make them part of your deployment plan or consider their requirements fully checked.
• Coached References. There are occasions where the reference call is biased and sellers always suggest their best references. Ask for a reference with a similar business problem, in the same industry, or of the same scope. Try to contact a new reference on your own, and speak to previous customers.
• Only Meeting Sales Teams. Sellers are always trying to navigate through your organization, however as evaluators we should be doing the same. Make sure to meet the leaders of their product, services, and support teams to understand the DNA of their organization.
• Pretty Pictures. Sales / pre-sales teams mitigate risk by demoing their application in screenshots or offline versions of the software, with small and simple data sets. Make sure to have them demonstrate their application live the most complex data, content, and processes to mimic your environment.
• Not logging in. Vendor demonstrations look so easy as their experts have been living and breathing their application for years, and know what to avoid. Make sure to get your hands on the software and test the things they haven’t shown, going through user scenarios, and testing around the world.

 Focus, Inc. San Francisco, CA

This week, we are going to take a look at those areas with a fairly broad brush, followed by a more detailed month by month review of key events in 2011. So let’s go.

For the fourth straight year, I would have to say the economy was once again the main supply chain theme of the year. The lack of relative clarity on the economy’s direction – let alone signs of a strong economic recovery – continued to weigh on supply chain strategy and investment. The US economy was modestly strong at best, and there were several periods, notably around mid-year, when threats of a “double dip” recession seemed to loom large. GDP growth was .4% in Q1, 1.3% in Q2, and 2% in Q3, though there are signs the economy is now picking up, and many expects Q4 GDP to be stronger than these weak numbers in what is supposed to be a recovery.

US manufacturing certainly held its own, with the ISM Purchasing Managers Index above a score of 50 – the level that separates expansion from contraction – every month of 2011, though it fell perilously close to the 50 mark several times. It ended the year with a December reading of 53.9, the highest number since June, but well off where we started the year, when we had four straight months of scores over 60.

China’s economy, while still relatively strong, was also a bit wobbly, with its PMI recently below 50, and exports – especially to Europe but to a lesser extent the US – dropping significantly.
But the primary economic news of the year was Europe and its dreaded sovereign debt crisis, as Greece, Portugal, Spain and Italy and their bonds dominating the news frankly to the point you were sick of hearing about it. But the issues are still there, it could still blow up and tank the world economy, and demand from Europe is likely to be bad – and maybe horrible – for some time.

With that out of the way, the other top themes/trends were (as they occurred to me):

Government Intersection with the Supply Chain: In no year in my supply chain lifetime was there more news and concern relative to government actions than in 2011. It seemed we were constantly reporting on one development or another: The NLRB blocking a nearly complete Boeing facility over perceived union issues; the EPA issuing lots of new regs over greenhouse gas emissions, taking over when Congress failed to approve Cap and Trade; new Hours of Service Rules; court battles over the Port of LA’s clean truck program for drayage drivers; the NLRB pushing almost through (soon will be) rules to encourage faster unionization campaigns, and more. Too much so, in my view.

War on Trucking: Directly related to the above, many, especially my new friend Mike Regan of TranzAct Technologies, saw an assault on the trucking industry ensuing. Cited were the new HOS changes, rising tolls, strong bias in some government circles for rail transport, likely increases in diesel taxes, the CSA 2010 rules that are eliminating large pools of current drivers, and more. I am not sure that “war” is quite the right word yet, but truckers and especially shippers need to pay close attention.

Predictions for a Manufacturing Rebound: 2011 was filled with predictions from many observers that the US was headed for something like a “manufacturing renaissance,” as a combination of factors such as rising labor costs in China, the rising value of the Yuan, and the growing unimportance of labor costs in the overall sourcing equation were likely to cause a reversal in US offshoring trends. Boston Consulting Group, Accenture, Booz Allen and others all weighed in with relatively similar analyses, with BCG, for example, predicting the lowest cost US regions would be cost competitive with eastern China by 2015. We agree to an extent, but is the move back to the US – or to Vietnam and Mexico?

RFID Makes a Comeback: Item-level tracking in apparel retail just might really be the catalyst that gets RFID going again in the consumer goods-to-retail sector, after its collapse following the debacle that was WalMart’s first go at it. WalMart is expanding its program – notably now to include some non-apparel categories – and Macy’s and JC Penney are also aggressively rolling out capabilities, with more retailers on the way. It appears this will stick, and I predicted that ultimately it will drive back up to the case level, just as UPC item bar coding did.

Green Supply Chain Goes Sideways: All told, a tough year for the anti-global warming forces, with a very weak accord coming out of the UN Climate Summit in Durban last month (an agreement for an agreement, and a goal of 2020 for a final binding accord – sure), more damaging “climate gate emails,” global temperatures which stubbornly refuse to rise, and several surveys finding consumers are losing interest. Still, many individual companies are doing great things, in their own interest to reduce costs, and the issuance in October of the final rules for California’s own aggressive Cap and Trade program could be a trend setter – or cause still more economic woes for the Golden state.

Supply Chain Technology Market Stays Strong:  Except for a few quarters in 2009, the supply chain technology market, meaning primarily software, has stayed robust, and that remained true in 2011. Like it or not, companies continue to spend money on software in part so that can do more with fewer workers. Among public companies, for example, JDA Software reported software and subscription revenues up 17% year to date over 2010, and Manhattan Associates recently projected full year 2011 revenue would be up 10-13%. While as always there is a mix, in general our discussions with private companies also indicate sentiments that things are pretty good. In the materials handling market, however, conditions are certainly well off the disastrous lows of 2009, but still a bit wobbly.

Commodity/Input Costs Take Wild Ride: Commodity prices and hence industrial input costs had a wild ride, soaring in late Spring to levels that caused great concern, but then falling from there, dropping sharply in the Fall over what looked like a weakening economy in China – which now really drives commodity moves – and a surprise strengthening of the US dollar as investors fled the Euro. All told, commodity prices were close to flat for the year across broad basket of agricultural, metals, energy and other commodities, through the range was wide. The Standard and Poor’s commodity index reach just over 763 in April from about 630 at the start of the year, then falling to about 575 by early October, a drop of 25% from the peak. It ended the year at about 650, up slightly.

London Brent oil surged as high as $127.02 per barrel in April and West Texas crude hit a two-and-a-half year peak at $114.83 in early May. Prices drifted downward from there, but Brent and WTI were up about 13% and 9% respectively on the year, and we seem to have simply adjusted to the once terrible idea of $100 oil.

Ocean Carriers and their Strange Ways: It was also a wild ride in ocean shipping, as volumes were very weak from Asia to the US and Europe, though overall traffic was up 6.5% given growth in Asia to Asia and Asia to South America volumes. Still, the growth in capacity keeps coming, capstoned by Maersk’s surprise February announcement it was contracting for at least 10 new Triple E megaships with capacity of an amazing 18,000 TEUs. Mind blowing. Then in June, Maersk Line CEO Eivind Kolding gives speech calling for radical changes in the ocean shipping arena that makes it easier for shippers and is more reliable and sustainable, among other recommendations. Drewry Shipping Consultants estimates ocean shippers lost $5.2 billion globally for the year.

Ok, that about does it. I am sure I left something important out, but think this is a pretty decent summary.

Dan Gilmore – Editor in Chief, Supply Chain Digest, January 2012

Warm regards,

Saul Cadoch

S. Cadoch Associates Inc.

The problem with these collection methods is that inventory data is more likely to be delayed, disconnected and error prone. This results in lost inventory information and inventory data that is inaccurate. To counteract this, supply chain managers should invest in a network of supply chain solutions that can communicate inventory information quickly and efficiently. Users can access the network via a “supply chain hub” – a centralized access point that allows other supply chain members to access vital inventory data.

Michael Koploy, manager of WMS Guide, discusses this topic in his blog post titled: “Today’s Supply Chain Secret Sauce: More Visibility, Fewer Silos.” The post describes how better visibility can result in more accurate spend analysis, improved policies on inventory storage and improved communicate during the logistics and transportation process.

1. Align business initiatives with scorecards

To figure out which KPIs and which suppliers to focus on, meet first with the executive team to determine what the main goals of the business are. Find out where improved performance will actually improve the business’ bottom line. Then, you can take a step back and develop scorecards that will benefit your business.

2. Establish how you will evaluate performance and communicate

The next step is to determine your thresholds for both excellent and poor performance. Before working with suppliers to improve their performance, you must internally set what your standards are going to be. When will suppliers be rewarded? When will you disengage with poor performers? Decide this before you begin working with suppliers.

3. Communicate with suppliers

From initial contact to the SLA to contract re-regotiations, performance mangers need to communicate the performance expectations of their suppliers. Communicate and open dialogue will help both sides – suppliers will know what to expect and where they need to improve to succeed, and performance managers will learn what’s working for suppliers and what’s not.

4. Communicate internally

Performance scorecard results are useful for other supply chain departments, but they need access to this information to be able to take advantage of this data. Internal visibility will allow for collaboration between performance managers, inventory managers and risk assessment managers as they attempt to decrease the supply base’s susceptibility to natural and financial disaster.

For more on this discussion, check out this blog post: Four Best Practices to Improve Supplier Performance Scorecarding.