Logistically Minded: Walmart.com CEO opens up about acquisition strategy

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

Market Snapshot

The Federal Reserve Bank of Philadelphia's regional April 2017 Manufacturing Business Outlook reinforces the national economic trend: A strengthening economy is placing pressure on production, but manufacturing is catching up at a more tepid pace.

April's figured showed, once again, manufacturing production slowed in the region, although the overall sector continues to expand. New orders and shipments were slightly lower last month, but other indicators show companies are looking to expand their capacity to meet an expanding economy.

Figures above 0 signal an expanding industry.
Federal Reserve Bank of Philadelphia

Labor investments were up as 27% of firms reported increases in employment, while the index showed the 18.9 hour workweek remained unchanged. Equally importantly, 52% of respondents indicated they would increase their capital investments, with 43.1% stating they would invest more in non-computer equipment. About 63% of those who do plan to spend more capital this year plan to do so within the next six months.

In other words, while production may be slightly lower and unfulfilled orders and backlogs continue to rise, manufacturers — at least in the Philly Fed's region of study — appear to be making the appropriate investments to increase capacity. Production is but a function of capital and labor, after all.

However, another less rosy lesson should be drawn from recent figures: An unseasonably strong first quarter may have risen expectations beyond normal, potentially leading to an economy-wide oversupply in the next months. Already, prices for a few commodities like copper and oil are slipping on high inventory expectations, according to various reports.

In fact, the Organization for Economic Cooperation and Development (OECD) recently sought to temper expectations of rapid global economic growth with its recent leading economic indicators, The Wall Street Journal reports. 

Without a doubt, the economy continues to climb but recent figures suggest caution before betting too heavily in a demand surge for the rest of the year.  

Technically Speaking

Next-generation technology is attracting the purse strings of Silicon Valley, as self-driving vehicle innovations, 3-D printing and drones promise to disrupt a number of industries.

In fact, there's now at least 263 companies vying for a piece of the promised self-driving car pie, according to venture capital firm Comet Labs. The firm developed a graphic of the top companies in each market exploring self-driving vehicles, which includes services, safety and security, in-car intelligence, autonomy, infrastructure, intelligent manufacturing, onboard sensors and specialty vehicles.

Each market, in turn, has a number of subsectors, revealing that the technology may in fact become an industry within itself, with a complex slew of actors working on its supply chain. Leaders include a diverse set of companies, including Toyota, Rethink Robotics, Delphi Automotive, Waze and Flexport, among others.

It may be a bubble, or a race to the finish line, but the promise of technologies is encouraging other companies to follow suit.

Shipbuilders such as Mitsubishi Heavy Industries are looking to bring the idea to ocean vessels and develop self-navigation systems for fleets. The Japanese company is not alone, however, as two Norwegian firms recently announced they were also exploring the idea.

In other news, the U.S. Coast Guard and Airbus are among those investing in drone technology, and industrial giant General Electric is investing heavily on its 3-D printing capabilities. In fact, even smaller companies are vying for access to the technologies, and at least one University is providing it, provided it has a good business case. 

Bubble or not, next-generation technology may not be that far off anymore. 

Breaking Ground

The San Francisco Bay Area may see its largest warehouse lease deal in history come to fruition by one tech-inspired manufacturer: Tesla. The 1.3 million-square-foot project will include three warehouses in Livermore, CA, and should help the auto manufacturer produce its much-hyped Model 3 vehicle, Inbound Logistics reports.

The logistics investment is but the latest from Tesla, which has over the years encouraged suppliers to move production nearby in order to reduce transportation costs and fulfillment timelines. With a massive warehouse project in place, the manufacturer seems to be more fully centralizing its supply chain. 

Most new developments are built closer to the end consumer, however. In just a few recent examples, Dot Foods opened a 191,000 square-foot distribution center in the Chicago area; Bonded Logistics is opening a 372,000 square-foot facility in Charlotte, NC; and AutoZone is building a 440,000 square-foot building in Ocala, FL

Empowerment doesn’t mean you get to do whatever you want as long as you agree with your new parent company. It means giving true authority to others.

Marc Lore

CEO, Walmart.com

In fact, there is even now an AirBnB for warehouses, Flexe, which seeks to help warehouse operators with spare space rent it out to companies in need offering dozens of locations nationwide.

In other news, the Port Authority of New York and New Jersey recently issued a Request for Proposal to build a freight tunnel connecting Brooklyn and New Jersey, the Brooklyn Daily Eagle reports. 

Mergers & Analysis

Former Jet.com CEO and now Walmart.com CEO Marc Lore provided some LinkedIn advice on how to proceed following an acquisition this week, first asking: Why is it so many acquisitions fail?

It's partly about culture clashes and challenges post-acquisition, he writes. The first mistake is to acquire a company and allow them to continue as usual, even if the new parent company agrees. Under this scenario, the acquired company has its own vision of how it plans on "changing the world," but now that it has new ownership, quickly realizes their future is "a side road that can't access the thrill of the highway," Lore writes. 

He points to Wal-Mart's recent acquisitions of Moosejaw, Shoebuy, Modcloth and even his own, Jet.com, as examples. "Empowerment doesn’t mean you get to do whatever you want as long as you agree with your new parent company. It means giving true authority to others," according to Lore. As a result, Wal-Mart has sought to empower each company by challenging them to not only keep their own operations, but also integrate their products within Wal-Mart's websites and tailor solutions to the store's existing customers.

The question is not 'why sell a company?' but whether the sale is "moving toward or away from your vision," Lore concludes. In his case, "things got more exciting after the acquisition, not less." 

In other news, acquisitions continue beyond the e-commerce world, although at a mixed pace according to PwC's Global Transportation and Logistics M&A Deal Insights 2017 report. Logistics Management reports that in the sector's deals were down 38% in value, but the number of deals increased 26% on a year-over-year basis to 63 in the first quarter.

Follow on Twitter

Filed Under: Logistics Technology
Top image credit: Jet Facebook page