This Week in Logistics News (March 18-22, 2013)

By Adrian Gonzalez

#MostSupplyChainExecsStillDontGetIt

In other news…

FedEx and Oracle surprised investors this week with disappointing fiscal Q3 financial results. Net income at FedEx declined 31 percent in Q3 compared to a year ago. The main culprit: customers shifting more international shipments from air to ocean, plus over-capacity in Asia which is eroding margins. Here are some quotes from the press release:

“The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.

“Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer.

Meanwhile, Oracle’s total revenue declined 1 percent in Q3 compared to the previous year, including a 2 percent drop in revenue from new software licenses and cloud subscriptions. Oracle blamed its sales team for the poor execution, rather than weakness in customer demand. “Since we’ve been adding literally thousands of new sales reps around the world, the problem was largely sales execution,” said Safra Catz, Oracle’s CFO. “Especially with the new reps, as they ran out of runway in Q3.” She expects revenue from software licenses and cloud subscriptions to rebound in Q4, as sales people will be more motivated to hit their annual targets that impact their commissions.

The FedEx results signal that companies are starting to trade speed for cost reductions in their supply chains (in contrast to all the buzz and activity surrounding same-day delivery), and Oracle’s results could be a red flag that cloud and software-as-a-service deals are starting to erode the company’s traditional license sales (we’ll have to see a few more quarters of results to know for sure).

On the mergers and acquisitions front, Echo Global Logistics announced that it acquired Open Mile, Inc., a truckload brokerage headquartered in Boston, MA. Here’s a quote from the press release:

“Open Mile has developed leading edge, cloud-based technology that successfully automates many of the manual tasks of transportation management,” said Douglas R. Waggoner, Chief Executive Officer of Echo Global Logistics. “The acquisition of Open Mile enhances the technology solutions we offer clients and carriers while also expanding our client base, sales force and carrier network in the Northeastern United States.

I first wrote about Open Mile back in February 2011 when the company announced its Series B round of funding. I’ve known the CEO of Open Mile, Evan Schumacher, for more than a decade, and Evan’s vision for the company was to transform the freight brokerage business by better leveraging mobile and web technology. I’m not sure how far the company got in fulfilling its mission, but it went far enough to grab the attention of Echo Global Logistics, a bigger and fast-growing fish with a similar vision.

New software companies continue to enter the transportation management systems market. The latest entrant is Postmaster, “an intelligent, cloud-based platform with an easy-to-integrate API that allows SMBs to save time and money throughout the lifecycle of shipping, from integration to audit.” The platform currently supports FedEx, UPS and USPS, with regional and international carriers to be added soon (see the press release for more details).

I was briefed by Postmaster earlier this week and a couple of items caught my attention. First, the company is focusing on the SMB market, which is an underserved segment of the TMS market. Just a couple of weeks ago, 3Gtms and Transite joined forces to focus on SMBs too, and Cloud Logistics, which launched last summer, is also taking aim at this market segment. Simply put, the race is on to crack the code on how to profitably serve the shipping and transportation management needs of small and midsized businesses.

The other point that caught my attention is Postmaster’s “bottom up” strategy of pitching its platform to developers — that is, the IT folks at SMBs, as well as third party solution providers, who are tasked with integrating shipping functionality with their order management and other systems. In other words, Postmaster is taking the “techie” sales route in addition to the line-of-business one. It’s similar, in some ways, to what Oz Development is doing with its Integration Marketplace.

Finally, in customs-related news, Transplace announced that Transplace Mexico has received Custom-Trade Partnership Against Terrorism (C-TPAT) certification for supply chain security. This complements the C-TPAT certification earned by Transplace International in 2008. As stated in the press release:

Participation in the program provides companies with the assurance of a safe, secure and expeditious supply chain, benefiting their employees, internal operations, suppliers and customers. C-TPAT members benefit directly by reducing the number of physical inspections and documentation reviews when crossing borders, helping to dramatically decrease the time required when passing through customs. Obtaining C-TPAT certification offers businesses an opportunity to take an active role in improving national security.

And the United States and Canada are getting ready to launch a pilot to “test the concept of conducting primary inspection of U.S.-bound truck cargo in Canada in order to better manage our shared border and improve economic opportunities for Canadian manufacturers and their U.S.-based supply chain partners,” Canadian Public Safety Minister Vic Toews said in a statement. According to an article in The Globe and Mail, “The deal is part of the slowly unfolding effort called Beyond the Border. It’s intended to shift inspections and clearances away from actual border crossing so that shipments – once cleared and approved – can go directly to destinations.”

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

Song of the Week: “Houdini” by Foster the People