This Week in Logistics News (January 7-11, 2013)

By Adrian Gonzalez

No time to waste this morning, as I have a lunch date planned with my soon to be five year old daughter. Here’s the news that caught my attention this week:

The first significant merger of 2013 was announced this week, with GT Nexus and TradeCard announcing that they have signed a definitive merger agreement. According to the press release, the combined company will have “a global network of over 20,000 businesses spanning every major industry—from retail and apparel to high tech, automotive, heavy industry, consumer products, pharmaceutical, chemicals, commodities, finance and logistics. Together, the companies will manage over $100 billion in direct supply chain trade.”

I believe the two companies complement each other well. They are both network-based solution providers, where connectivity to trading partners is at the core of their respective solutions. The merger brings together the financial supply chain (TradeCard, PO to Financial Settlement) with the physical supply chain (GT Nexus, global trade movements and visibility). And the timing seems right too. While I’ve been a big proponent of network-based solutions for a long time, particularly for cross-enterprise business processes (see “Revisiting Supply Chain Operating Networks”), I believe more and more companies are starting to “get it” — they’re starting to understand the unique benefits a network-based solution can provide versus a traditional, standalone, behind-the-firewall one.

Steve Banker at ARC adds, “GT Nexus has not so secretly been positioning itself for an IPO. This merger may slow that down a bit, but it will make the new company much more interesting to the financial community. This is because neither company was in financial distress and both companies were roughly the same size. The new company will have about 1000 employees, and this larger heft should make them more interesting.”

The bottom line is that for supply chain and logistics processes, which involve the exchange of data and information with many external trading partners, software is not enough; you also need network connectivity. My bet is that solution providers will continue to march in the direction of realizing the Supply Chain Operating Network model depicted below.

Represenation of Supply Chain Operating Network (Source: 2010 presentation by Adrian Gonzalez) — Representation of Supply Chain Operating Network (Source: 2010 presentation by Adrian Gonzalez)

In other technology news, Oracle announced this week significant enhancements to its transportation management and global trade management solutions. According to the press release, new capabilities include “enhanced fleet management, transportation sourcing, transportation business intelligence, transportation planning, rail transportation, workflow and event management, freight payment, billing and claims, document management and customs management.” The press release provides more details, but here are a couple of new capabilities that caught my attention:

Mobility enhancements [for Oracle TMS] that improve efficiencies and decision-making by enabling customers to conduct key business processes and common transportation management tasks, such as shipment tendering and shipment visibility, on mobile devices using a configurable mobile web-app.

The introduction of Oracle Customs Management, a new module within Oracle Global Trade Management that helps customers manage customs clearance screening and custom filings by directly supporting US export AES filings and enabling data to be easily transferred to any other third-party filing broker solution.

Historically, TMS and GTM have been separate solutions. But over the years, as supply chains have become more global, demand for integrating these capabilities has increased. Oracle was relatively late to GTM, but its decision to build its own global trade management solution on the same platform as its TMS was a smart one. The missing piece, per my comments above, is having a network. Oracle continues to partner in this area, but I wonder if the company will change course this year and acquire a network-based solution provider in the near future.

On the 3PL front, Menlo Worldwide Logistics announced that it has expanded its operations in Singapore. Normally, the opening of a new distribution center is not very interesting, but this one caught my attention because of its “green” design and construction. Here are some details from the press release:

The new distribution centre features advanced building design and construction materials emphasizing environmental sustainability and high levels of energy and water-use efficiency—from the use of recycled concrete aggregates, to sustainably sourced office carpet and ceiling board, to high-efficiency air-conditioning and Philips T5 florescent lighting.

These efforts will be part of the criteria to be certified by the Singapore Building and Construction Authority (BCA), designating the Sunview facility as achieving BCA’s Green Mark Gold Plus status. The facility will be among the first to be so designated under the program, which encourages the use of recognized best practices in environmental design and construction and advanced “green” building performance.

Finally, one of my predictions for 2013 is that retailers and service providers will continue to focus on innovating the final mile. There’s been a lot of buzz lately about same-day delivery, with Amazon, Walmart, Google, eBay, and USPS all launching or ramping up their efforts in this area (see “On Amazon’ Quest for Same Day Delivery” and “Google, Same-Day Delivery, and Container Tracking”). The Financial Times published an article this week on the topic, which raised an interesting question: Do consumers even want same-day delivery? Here’s an excerpt from the article:

Profit margins are already under pressure in a sector where aggressive Christmas discounting produced only lacklustre sales growth and same-day delivery could erode retailers’ profitability further.

But rather than speed, there are signs that what matters more to some people is a reliable estimate of when their packages will arrive.

UPS adds: “Quite honestly, what consumers are telling us is as long as they know what the committed delivery date and time is, they are fine.”

This reminded me of a posting I wrote back in June 2009 titled “Speed vs. Consistency in Logistics,” where I highlighted a project Ace Hardware undertook to reduce lead time variability. I believe many of the points I raised back then apply here too.

And that’s a wrap. Have a great weekend!

Song of the Week: “Hurry Hurry” by Air Traffic Controller