Above the Fold: Supply Chain Logistics News (February 7, 2020)

I threw up on my first day in kindergarten.

I don’t remember the specifics, just the brief conversation I had with my mom when she picked me up from school. “Why didn’t you tell the teacher that your tummy hurt?” my mom asked me. “I didn’t know how to tell her in English,” I replied.

Spanish was my first language, but by the end of kindergarten, I was fluent in English too.

I still speak Spanish, but mostly with my mom. One of my goals for this year is to practice my Spanish more and to learn a new dialect: Supply Chain Spanish.

How do you say supply chain in Spanish? Cadena de suministro

It doesn’t roll off my tongue as easily as me duele el estómago (my tummy hurts), but with practice, and a little Spanglish here and there, I’m sure I’ll become fluent in time.

To begin the journey, I kicked off Café con Logística (“Coffee with Logistics”) a couple of weeks ago. Our second episode has received over 1,200 views on LinkedIn so far, with some great comments from the community.

La conversación has begun.

Moving on, here’s the supply chain and logistics news that caught my attention this week:

Coronavirus: The Ripple Effects in Supply Chain Continue

Earlier this week, I wrote about how coronavirus is putting supply chain risk management back in the spotlight. As the virus continues to spread and companies scale back or shut down operations, the ripple effects across global supply chains continues.

“Key Apple suppliers are bracing for severe labor shortages due to the coronavirus outbreak as travel restrictions are expected to keep tens of thousands of workers stranded in their hometowns even after the extended Lunar New Year holiday ends on Feb. 10,” multiple sources told the Nikkei Asian Review. “Apple suppliers bracing for trouble include Foxconn and Pegatron — the two biggest iPhone assemblers — as well as many components makers.” 

Aerospace and automotive companies are also feeling the impact. Airbus has shut down a factory in China and Hyundai has stopped operations at seven plants in South Korea due to lack of parts from suppliers in China.

Logistics operations are slowing down too. “Ship calls at or through major Chinese ports have fallen 20% since Jan. 20, maritime data provider Alphaliner said, as measures to control the coronavirus outbreak cut into international supply chains,” writes Costas Paris in the Wall Street Journal. Air shipments are also affected, as Jennifer Smith reports in the WSJ: “A steep reduction in airline services to China in response to the coronavirus outbreak is slashing trans-Pacific capacity for high-value, expedited goods that move as airfreight, and setting the stage for potential outbound cargo bottlenecks once Chinese factories resume production.”

And as reported by CNBC, “the union that represents United Parcel Service pilots said Wednesday it has reached an agreement with the delivery giant to make flying to mainland China ‘voluntary’ as the coronavirus spreads.”

It’s situations like these that separate true supply chain leaders from the rest. As I wrote several years ago in Do You Have A “Top 25” Supply Chain?, there are many ways to determine if you have a best-in-class supply chain, but here is my quick 1-Question Assessment Test, which I borrowed from a presentation Bindiya Vakil, founder of Resilinc and a supply chain risk management expert, gave a few years ago at a CSCMP New England Roundtable event:

Can you complete the following email within four hours of a supply chain disruption?

At 9:05am today, an earthquake of magnitude 7.0 struck Vietnam. N suppliers have manufacturing sites in a X mile radius of the epicenter. Within X hours of the event, we contacted all of these suppliers and determined that X supplier has shop floor damage. This will take N weeks to repair and clean up, and an additional N weeks to ramp and clear backlog. N single sourced parts with revenue impact $X-$YM each are manufactured at this facility. They are used in critical product lines Alpha and Gamma.

We have N weeks of component supply on hand and have secured additional N weeks of inventory from the broker market. The supplier has an alternate facility in X which can build this part. A 4 person team will deploy tomorrow to the alternate facility to support the supplier with an initial build. The alternate site should be up within N weeks. Communications with the supplier are streamlined and updates are posted every N hours.

At this time, we have no reason to believe that our manufacturing lines will be shut down due to this event.

The ability to compose that email implies that you have mapped your supply chain, that you have timely, accurate, and complete visibility of what’s happening in your supply chain, and that you communicate and collaborate effectively with your suppliers and trading partners  — which, in my book, are all fundamental attributes of supply chain excellence. From this, everything else follows: financial performance, market share, and customer satisfaction and loyalty.

Supply Chain Software Vendors in the News

Lots of news this week coming from supply chain software vendors, starting with Manhattan Associates (a Talking Logistics sponsor) which reported record fourth quarter and full year 2019 revenue ($152.9 million and $617.9 million, respectively). 

“For the first time ever in a quarter, cloud revenue surpassed license revenue,” said Manhattan CEO Eddie Capel during the earnings call. “And we expect this to be a permanent trend as our cloud pipeline is growing more rapidly than license reflecting that market demand I mentioned.”

Capel also highlighted the company’s transportation management system (TMS) and its growing contribution to the business:

“Q4 is another positive quarter for our TMS business. Many of the market factors that I’ve noted in prior calls continue to help us close additional TMS business [this] past quarter. And while we closed some very nice deals here in the Americas, of particular note was the addition of a large European grocer to our TMS community. And I’ve shared with you on prior calls that expansion of our TMS business into Western Europe is one of [our] strategic objectives. So it’s particularly heartening to be selected by a TMS customer who has no pre-existing relationship with Manhattan Associates.”

Meanwhile, Infor announced that an affiliate of Koch Equity Development LLC, the investment and acquisition subsidiary of Koch Industries, Inc., has entered into a definitive agreement to acquire the remaining equity stake in the company held by Golden Gate Capital. According to the press release: “In addition to being a key enterprise customer, Koch has been an investor in Infor since 2017. With the strength of its balance sheet and a AA corporate credit rating, Koch intends to quickly position Infor as one of the most well-capitalized companies in technology.”

Also this week, ClearMetal announced that “it has received an additional $15 million in funding in a round led by Palo Alto-based Eclipse Ventures, making the total capital invested in the company to date more than $31 million. The funding enables the further development of ClearMetal’s CDX Platform, which continually learns, adjusts and gets smarter to drive constant improvement in delivery and experience for customers. Additional investors include Prelude Ventures, Innovation Endeavors, NEA, SAP.io, Prologis Ventures, PSA Unboxed, DCLI, and the founders of GT Nexus, Navis, and Uber Freight.”

ClearMetal has certainly evolved a lot since I first started following them in 2017. Check out my September 2017 Talking Logistics interview with Adam Compain, ClearMetal’s CEO, on “AI, Machine Learning, and the Power of Predictive Logistics” — one of our most popular episodes that year with over 1,400 views.

The bottom line, as these three news items indicate, there is plenty of positive momentum (and money at play) in the supply chain software space.

And with that, have a happy weekend!

Song of the Week: “Manhattan Skyline” by a-ha