I’m on borrowed time this morning, so let’s go straight to the news that caught my attention this week:
- Amazon, in Threat to UPS, Tries Its Own Deliveries (WSJ – sub. req’d)
- Ryder Reports Record First Quarter 2014 Results
- Manhattan Associates Reports Record First Quarter 2014 Results
- Weather Impacts UPS 1Q Results
- JDA Software Launches New Business Unit Dedicated to Delivering Supply Chain Solutions to the Global 3PL Marketplace
- JDA Software Launches JDA Flowcasting – Game-Changing Retail/Manufacturer Collaboration Solution
- ATA Truck Tonnage Index Increased 0.6% in March
- Two of Five Modes Carried More U.S.-NAFTA Trade in February 2014 than in February 2013
- Freight Train Blues Hit Car Supplies (WSJ – sub. req’d)
- U.S., Japan Push Ahead on Trade Talks (WSJ – sub. req’d)
It seems like Amazon finds a way to capture the headlines every week. This morning’s Wall Street Journal reports that Amazon is testing its own last-mile delivery network in San Francisco, Los Angeles, and New York. Here are a couple of excerpts from the article:
Next up for Amazon is Treasure Island, a man-made spit of land in San Francisco Bay. Amazon is reviewing a lease for a site on the island to house trailers and delivery trucks, according to a person familiar with the matter. From there, Amazon would dispatch trucks into San Francisco, likely late at night and early in the morning when traffic is lighter and fewer island residents would be disturbed, this person said.
Amazon offered a peek at the delivery network in a recent job posting on its website. “Amazon is growing at a faster speed than UPS and FedEx, who are responsible for shipping the majority of our packages,” the posting reads. “At this rate Amazon cannot continue to rely solely on the solutions provided through traditional logistics providers. To do so will limit our growth, increase costs and impede innovation in delivery capabilities.” “Last Mile is the solution to this. It is a program which is going to revolutionize how shipments are delivered to millions of customers.”
I haven’t had a chance to fully digest the news, but as I wrote earlier this week in Webvan 2.0: If at First You Don’t Succeed, the race is on to crack the code on local delivery and leverage it as a competitive differentiator. The news also underscores another point I’ve been writing about recently: companies “in-sourcing” logistics to have greater visibility and control of their operations (at least from their perspective).
(In other Amazon news, the company also announced a new service called Amazon Pantry, where Prime customers “can order as much canned foods, cereal, snacks, beverages and everyday household items as can fit in a four-cubic-foot box that holds up to 45 pounds” and have it delivered for a $5.99 fee. More on this in a future posting.)
If Ryder and Manhattan Associates are bellwethers for supply chain and logistics software and services, then the outlook is very positive. Both companies reported record Q1 results this week. You can read the press releases for all the details, but here are some highlights:
Ryder: Q1 comparable EPS from continuing operations was up 14 percent to a record $0.92. Record Q1 operating revenue grew 4 percent, while record Q1 total revenue was up 3 percent. “In the SCS business segment, first quarter 2014 total revenue was $597.3 million, up 4 percent…SCS operating revenue comparisons benefited from new business and increased volumes in the industrial, consumer packaged goods/retail, and high-tech industry groups.”
Manhattan Associates: Adjusted diluted earnings per share, a non-GAAP measure, was $0.26 in Q1 2014, compared to $0.19 in Q1 2013. Consolidated total revenue was $113.6 million in Q1 2014, compared to $96.6 million in Q1 2013. License revenue was $17.1 million in Q1 2014, compared to $14.2 million in Q1 2013. Four contracts of $1.0 million or more in recognized license revenue during the first quarter of 2014 [all with existing customers].
Is the traditional license model dead for supply chain software? Apparently not — at least not yet, as Manhattan’s Q1 results indicate. But as the company’s CFO commented in the earnings call, “our license performance continues to depend heavily on the number and relative value of large deals we close in any quarter…and with license revenue essentially flat the past two years and estimating sales cycles for large deals remaining challenged [emphasis mine], our goal for 2014 was to achieve 6 percent to 7 percent license growth rate” — which the company is now predicting will be closer to 7 percent.
In other software news, JDA Software announced a new business unit focused on the third-party logistics (3PL) market. Here’s a quote from the press release:
“Shippers and 3PLs are reevaluating the nature of their strategic relationships in an effort to expand beyond warehousing and transportation services into all aspects of the end-to-end supply chain,” said Todd Johnson, global vice president, 3PL, JDA Software. “This newly formed business unit will enable 3PL organizations to expand their service portfolio to deliver growth, differentiation and profitability by leveraging JDA’s market-leading supply chain solutions and a robust cloud and services offering.”
Technology is certainly becoming an important differentiator for 3PLs, and it’s one of the four important factors shippers should consider when evaluating 3PL partners. Historically, the solutions offered by supply chain and logistics software vendors were either too expensive or failed to meet the unique requirements of the 3PL industry, which is why many logistics service providers built their own solutions — and some 3PLs continue to develop their own solutions today in order to control and manage the innovation cycle.
That said, I applaud JDA for focusing on the 3PL industry. The market opportunity is great, but so are the challenges. Simply put, compared to manufacturers and retailers, 3PLs are much more cost sensitive and don’t have as many IT resources, which means JDA and other software vendors catering to this market must adapt their pricing, deployment, and support models accordingly.
As a side note, the role technology plays in maximizing the value of 3PL-customer relationships will be a key research focus for 3PL Briefings, the new service my company launched earlier this month. Stay tuned for research results later this year.
Finally, the American Trucking Associations’ For-Hire Truck Tonnage Index increased 0.6 percent in March, after rising 1.9 percent the previous month. Here’s what ATA Chief Economist Bob Costello had to say about the results:
“Tonnage continued to claw its way out of the hole that was dug in December and January. However, with a cumulative gain of 2.5% during the last two months, we still have a way to go to offset the total loss of 5.2% in December and January.
“Despite the fact that tonnage hasn’t snapped back to the levels we saw late last year, the fundamentals for truck freight continue to look good. While it will take time to regain what was lost due to weather and other factors, like a potential inventory correction in the first quarter, I remain optimistic for 2014; however, don’t expect a 6.3% annual gain in truck tonnage like during 2013.”
And with that, have a happy weekend!
Song of the Week: “Stay with Me” by Sam Smith
