This Week in Logistics News (September 29 – October 3, 2014)

By Adrian Gonzalez

We had friends over for dinner last Friday, and the kids ran off to play hide-and-seek after eating. A half hour later, my nine year old son opens the coat closet door and calls out, “Hey guys, are we still playing?” Apparently, he had been hiding in the closet the entire time while the other kids had moved on to other games upstairs.

There’s a business lesson here somewhere, I just can’t put my finger on it. It’ll come to me eventually, but in the meantime, here’s the news that caught my attention this week:

One of the early pioneers of software-as-a-service (SaaS) transportation management systems (TMS) was Nistevo, which was acquired by Sterling Commerce in May 2006 (Sterling Commerce had become an AT&T company in late 2005). Four years later, AT&T sold Sterling Commerce to IBM, which “lumped Sterling Commerce and its 2,500 employees in with its WebSphere middleware unit” — in other words, the TMS (rebranded IBM Sterling TMS) fell into a corporate black hole, virtually disappearing from view, with some customers disappointed in the rate of investment and innovation over the past few years.

Well, IBM Sterling TMS has come out of that black hole, with Kewill acquiring the solution this week. Here are some excerpts from the press release:

The IBM Sterling TMS will be rebranded as Kewill Transport and will become part of the Kewill MOVE® multimodal transportation management platform…“The acquisition of the IBM Sterling TMS enhances Kewill’s position in the multimodal transportation management space, and in particular in the North American marketplace, enabling us to extend the range of solutions we offer to shippers and retailers,” states Bob Farrell, President and CEO at Kewill….As part of the transaction, the IBM team transferring to Kewill will add valuable domain and industry knowledge and further strengthen Kewill’s global multimodal domain expertise. Moving forward, Kewill will continue to invest in this offering [emphasis mine] as part of the Kewill MOVE platform.

“Investing in the TMS” is certainly something current customers want to hear, and it’s something that Kewill must do, not only to integrate the solution with its Kewill MOVE platform, but also to establish itself as an innovation and thought-leader in the highly-competitive TMS market in North America. Over the past couple of years, since getting acquired by Francisco Partners, Kewill has made significant investments in expanding its solution footprint and modernizing its technology platform, bringing together transportation management, warehouse management, trade compliance, visibility, and B2B integration capabilities. Putting those pieces together remains a work in progress, but Kewill is arguably in a much stronger market position today than it was just a few years ago.

Moving on to omnichannel fulfillment, Manhattan Associates introduced Available to Commerce™, which gives retailers “the power to offer specific units of inventory available for sale in the most appropriate channel (online, store, same-day delivery, etc.) and then optimize how the order is fulfilled, all based on a variety of strategic planning and daily operational variables.” Here’s an example from the press release:

A fashion retailer can now set a rule to delay offering inventory available for sale online that is selling well at full price in certain stores. Alternatively, slower moving styles or distressed units in stores can be actively directed to other channels to prevent markdowns later in the season. Retailers could also redirect fulfillment for their eCommerce channel to store locations that are projected to have excess labor capacity.

This solves a major obstacle in the implementation of omni-channel strategies today: having the right inventory identified for sale with a system that can intelligently direct orders to fulfillment sites that have the optimal mix of available inventory, labor capacity and delivery capabilities.

Great stuff, but I believe the rate of innovation in omnichannel solutions is far outpacing what most retailers are able to implement and execute today. As I warned retailers and others earlier this year, forget innovation if you can’t execute the small stuff.

In a post earlier this year (Is Your Business Model Safe?), I asked the following question: Is there an opportunity for third-party logistics providers (3PLs) and supply chain software vendors to innovate their business models to deliver greater value to clients, differentiate themselves from the competition and gain market share, and achieve greater financial success? My response was, “Of course there is, and it’s already happening.” enVista’s announcement last week is the latest example. According to the press release:

enVista…has launched a joint venture with Fredman Design Group (Fredman), a nationally recognized interior design firm. Together, enVista and Fredman created and launched 350West, an ecommerce site to showcase and sell Fredman’s upscale line of home goods and furnishings. enVista Commerce, a division of enVista, will manage 350West’s ecommerce omni-channel platform and operations.

This 350West project marries enVista’s deep supply chain consulting expertise, Magento experience, and omni-channel technology platform to provide a seamless customer experience.

enVista calls itself “a leading supply chain, omni-channel retail consulting and IT services firm,” but I view them as Exhibit A in the convergence of business models I’ve been talking about. To me, they’re a 3PL, software company (with its own, internally-developed omnichannel software platform), and consulting firm all rolled into one. And you can view this ecommerce joint venture as a Vested agreement, where both parties are sharing the investments, risks, and benefits associated with the launch and success of 350West. It’s also an example of how technology and service providers can help entrepreneurs — who often lack the skills and expertise in logistics and supply chain management — launch and scale their businesses (for related commentary, see Choosing the Right 3PL and IT Partners: An Entrepreneur’s Perspective).

Finally, an interesting story in today’s Wall Street Journal highlighting how UPS and FedEx are trying to work with retailers to avoid the delivery issues experienced last Christmas. Here are some excerpts from the article:

UPS is trying to persuade e-commerce companies to hold their big sales in mid-December instead of in the countdown to Dec. 25. It also wants them to stagger special offers geographically—so a GoPro camera might be on sale one day in Texas and a different day in Florida.

Perhaps most of all, UPS is lobbying retailers to banish any and all free overnight-shipping offers on Dec. 23, as well as promotional emails going out that day.

If all else fails, UPS executives say they can’t guarantee they will ship anything that exceeds what retailers projected.

FedEx, for its part, isn’t trying to persuade retailers to change their ways. Rather, it is collaborating with them on forecasts and advising them on how much business it can handle in the weeks before Christmas—and warning what will happen if it is overwhelmed.

I’ll just repeat what I said back in January: Retailers have to accept responsibility for creating ever-more unrealistic expectations. The margin for error is almost zero when you let consumers order by 11 pm December 23rd and promise them next day delivery. And consumers aren’t without fault either. If you wait until the last few days before Christmas to buy a gift, you’re playing with fire if you have it shipped. Just go to a store and buy the gift — or buy it online and pick it up at a nearby store, which many brick-and-mortar retailers are enabling.

And with that, have a happy weekend!

Song of the Week: “Ana Ng” by They Might Be Giants