Above the Fold: Supply Chain Logistics News (April 29, 2022)

By Adrian Gonzalez

If Elon Musk would like to make a “best and final offer” for Talking Logistics, I’m sure that our board members (Me, Myself, and I) would seriously consider it. No poison pill or anything like that. Just saying.

With everything else going on in the world today (war, refugees, hunger, inflation, Covid, and so on), the amount of sound and fury created by Elon Musk buying Twitter is simply ridiculous (and a sad commentary about our society). I can hear my father and grandfather saying, both of blessed memory, “You’re getting outraged by that?! A billionaire buying a website? You wouldn’t last a day if you had to deal with the crap we had to go through in Cuba.”

I admit it: I just don’t get it.

In more important news, here are the supply chain and logistics headlines that caught my attention this week:

Amazon, Apple, GDP: Sign of the Times

The big headline yesterday was that U.S. GDP fell at a 1.4% pace to start the year. Various factors contributed to the decline, some of them likely temporary, but the bottom line is that we’re sailing in choppy waters at the moment.

“Amazon.com delivered a disappointing quarter and outlook on Thursday as the e-commerce giant was swamped by higher costs to run its warehouses and deliver packages to customers,” is how Reuters summarized Amazon’s Q1 2022 results. “Amazon is aiming to optimize transfers between warehouses to rein in expenses. It also is in the unusual position of having excess warehouse and transportation capacity – costing it about $2 billion in the first quarter.”

As a result, Amazon CEO Andy Jassy said, “Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network.”

Focusing on improving logistics productivity and cost efficiencies? Sounds like it’s back to basics for Amazon.

Meanwhile, Apple posted one of its best quarters ever, but the company warned that “the resurgence of Covid-19 in China threatens to hinder sales by as much as $8 billion in the current quarter,” as reported by the Wall Street Journal. “I want to acknowledge the challenges we are seeing from supply chain disruptions driven by both Covid and silicon shortages to the devastation from the war in Ukraine,” Apple’s CEO Tim Cook told investors, as quoted in the article. “We are not immune to these challenges.”

What will happen in the weeks and months ahead? What should you do? The honest answer is that nobody knows for sure. So, put on your life vest and take some Dramamine because these choppy waters might last for a while.

C.H. Robinson, Manhattan Associates, E2open: Sign of the Times Too

It’s a bit of a different story for logistics service providers and supply chain technology companies.

Compared to Q1 2021, C.H. Robinson reported that total revenues, adjusted gross profits, and income from operations increased 28.1%, 20.2%, and 33.3%, respectively, this quarter.

“In our first quarter, we delivered record quarterly profits,” said Bob Biesterfeld, President and Chief Executive Officer of C.H. Robinson. “Sequential improvement was driven by significant operating margin expansion in our North American Surface Transportation business, as we improved the health of our contractual truckload business, continued to grow our truckload volume, and improved the profitability of our LTL business. Our Global Forwarding team continued delivering excellent service to our customers and collaborating with our carriers, driving more business to our platform. And finally, our Robinson Fresh, Managed Services and Europe Surface Transportation businesses all improved their top line growth and operating income on a year-over-year basis.”

In terms of outlook, Biesterfeld commented, “As questions linger about the impact on global economic growth from the Russian invasion of Ukraine, higher energy prices and inflationary pressures, among other impacts, we believe that our global suite of multimodal services, our growing digital platform, and our resilient and flexible non-asset-based business model will continue to deliver strong financial results through the cycle.”

Meanwhile, Manhattan Associates (a Talking Logistics sponsor) reported “revenue of $179.0 million for the first quarter ended March 31, 2022. GAAP diluted earnings per share was $0.48 for Q1 2022 compared to $0.35 for Q1 2021. Non-GAAP adjusted diluted earnings per share for Q1 2022 was $0.60 compared to $0.43 in Q1 2021.”

Here’s what Manhattan Associates president and CEO Eddie Capel said:

“We are off to a great start to 2022, as robust demand for our cloud-native suite of Manhattan Active® solutions continues to drive solid pipeline and revenue momentum. Cloud and services revenue growth exceeded our expectations and drove exceptional operating results. We are committed to helping our customers digitally transform their supply chains and are confident in our business trajectory. While we remain appropriately cautious regarding the macro volatility, our business fundamentals are strong, and we are raising our 2022 guidance.”

E2open (a Talking Logistics sponsor) also reported quarterly and annual results this week. Here’s an excerpt from the press release:

“We are pleased to report strong fourth quarter and fiscal 2022 results, exceeding our annual revenue guidance. We added significant talent and capabilities in transportation and logistics with the acquisition and integration of BluJay Solutions,” continued Farlekas. “In fiscal 2023, our non-GAAP subscription revenue growth rate is expected to increase from 9.8% to 11.4% from a base of $354 million in fiscal 2022 as compared to a base of $493 million in fiscal 2023, continuing our pattern of organic growth rate acceleration as we scale…E2open achieved our long-term organic revenue growth target of over 10% earlier than expected, and as a result, we are increasing the long-term organic growth target to over 12%. We are leaning into the very strong demand environment and making incremental go-to-market investments to further increase our growth trajectory and build on the success of our existing growth initiatives and the very long-term nature of our client relationships.”

In general, business tends to be net positive for supply chain technology companies (a label that also applies to many 3PLs today too) regardless of economic conditions. When the economy is slowing, the sales pitch is about cost reduction and productivity improvement. When the economy is heating up, the sales pitch is about enabling scalable growth of sales, profits, and market share. They still need to have a life vest and Dramamine available just in case, but with the bright outlook ahead, many are reaching for their sunglasses first.

And with that, have a happy weekend!

Song of the Week: “The Future’s So Bright” by Timbuk 3