Supply chains are constantly changing as new rules, technologies, resources and market trends transform operations. Here's a skim of the week's indexes, technology announcements, expansions and M&As from around the web.
In Case You Missed It
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- McCormick expects its relationship with Amazon will help it sell more to Whole Foods.
- Maersk's lengthy recovery from last week's cyberattack highlights the need for security.
Market Snapshot
Supply prices are in the spotlight, as globally expanding consumer confidence and market demand, coupled with recent logistics issues, threatens to drive up prices and tighten margins.
The Institute for Supply Management's June 2017 Manufacturing ISM Report on Business reveals a higher price volatility among commodities, as markets and suppliers adjust to growth. The June report reveals 11 commodities rose in price, while seven commodity prices decreased. As a comparison: 13 commodity prices rose in May, while only five decreased; and 20 commodities surged in price in April, but no commodity decreased in price that month.
The basic month-by-month correlation suggests markets are adequately adjusting their production forecasts for a growing economy, at times causing prices to decrease due to overproduction. Such shifts are natural or cyclical, at best. In fact, recent examples show supply chain managers should be careful not to rely too much on decreasing prices at the expense of healthy margins.
Earlier this week, Supply Chain Dive reported a temporary spike in prices for butter in Ireland was leading to a "panic" among brand buyers, especially as 70% of the spike happened over the past eight weeks. Reports indicate the crisis was in part due to a previous inventory glut that drove low prices, which ingredients buyers learned to rely on.
The butter crisis is a market-wide issue, so other factors are likely at play, but it presents a cautionary tale: supply prices, and particularly commodities, are fickle and depend on a variety of factors. Forecasts, meanwhile, are almost always wrong. Ensuring resilience to sudden price changes is as important of taking advantage of market trends.
Technically Speaking
The Port of Antwerp just announced a joint venture with T-Mining to convert its logistics operations to a blockchain system, according to CoinDesk. The Port of Antwerp — which is the second largest in Europe — isn’t the first entity to use blockchain technology to streamline operations: in March, Maersk successfully conducted a trial using blockchain to track its shipments. This indicates a trend in the freight industry toward blockchain adoption as the technology becomes more readily available and reliable for a variety of business uses.
The Financial Times reported that big companies including Maersk, WPP, Reckitt Benckiser and FedEx are still struggling with fallout from the Petya ransomware attack last week. According to the Times, customers are losing packages and struggling to place and track orders, and Maersk’s shipping routes are scrambled because of its crippled IT systems. The news further shows the need for stronger cybersecurity in many global companies as cyber criminals become more adept at launching cyberattacks that can down a company’s computer systems for days and even prevent the company from safely recovering its data.
In other news, Volvo announced that all Volvo models from 2019 onward will be fully electric or hybrid, according to the Wall Street Journal. Volvo plans to release five new electric and hybrid models between 2019 and 2021, setting a trajectory for fast-paced growth to compete with other electric car makers, includingTesla. Volvo is the first car marker to completely switch over to electric vehicles, as other car makers have only dabbled in green energy solutions. Volvo’s move may ignite a larger shift within the auto industry, and as Tesla still struggles to keep up profits while selling expensive electric cars for a niche consumer market, competition from Volvo may help drive down the costs of electric vehicles for the average consumer in the long-run.
Breaking Ground
Amazon will open its largest warehouse at 850,000 square feet near the Opa-Locka airport in Florida next year. The project will be subsidized by the Carrie Meek Foundation, and when finished, the warehouse will employ robots and more than 1,000 human workers, according to the Miami Herald.
The Rockefeller Group will also build a 2.2 million square foot logistics center in Piscataway, New Jersey, according to the Wall Street Journal. Rockefeller will break ground on two of the center’s buildings later this summer. Whirlpool Canada also just broke ground on a new distribution center in Alberta, closer to Canada’s rail network to streamline Whirlpool’s supply chain and delivery services.
Every week, more companies are building distribution centers to keep up with the demands of e-commerce and consumers who expect rapid product delivery. More distribution centers streamline a company’s supply chain, and as companies continue to grow, expect more distribution centers will pop up near urban and residential areas to match supply levels to demand.
Mergers & Analysis
'Tis the season to be merging, as companies look back at positive first-half results and let themselves dream of a more expansive future. But mergers are never as easy as the press releases make them seem, at least according to various recent reports.
HR Dive's Kathryn Moody recently explored one of the toughest challenges: bringing together a workforce despite disparate company cultures. At the moment of a merger, employees often wonder what's next for their jobs, and silence on the status and long-term significance may cause undesired employee turnover. Similarly, employees on either side may be disheartened when they begin feeling a shift in certain habits they enjoyed: like office drinking, which Walmart banned after acquiring Jet.com.
Yet, changes to office culture can be the least concern when faced with a global mega-merger, like the one Hapag-Lloyd and United Arab Shipping Company (UASC) are currently facing. In an exposé on the challenges ahead for the two shipping companies, American Shipper explores how the two must now harmonize IT systems and operational structures, in addition to company cultures.
Mergers and acquisitions often come with the promise of million-dollar synergies, but how much of it is lost in the inefficiencies of transition? A careful eye on recent deals, like Amazon/Whole Foods and Hapag-Lloyd/UASC, may shed more light on this issue.
In other news: Rumors of OOCL's purchase abound, and CMA CGM is back in the spotlight as a potential buyer, according to The Loadstar; and Celadon and Staples both found new deals to help them weather tough financial waters.
