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
- Kellogg is firing over 4,000 people as it shifts distribution models. Some are fighting back.
- Amazon's purchase of Whole Foods is just the start of supply chain disruptions to come.
- Truck drivers in California are protesting business priorities that ignore abuse and forced debt.
Supply chain managers don't need a reminder of the long-term inventory effects of the 10-day West Coast port shutdown in 2014 that cost the nation roughly $1.9 billion per day. Or, for retailers, the global impact of the Rana Plaza factory collapse in 2013. Each news item of jobs lost due to automation, or a brand breaching promises of sustainability is a reminder the industry's struggles with labor are far from over.
In fact, the recent release of the ITUC Global Rights Index shows anxiety over jobs and wages is increasing worldwide. Over the past year, the report claims, threats against workers have risen 10%. In an article on the report, Sourcing Journal used the index's map to portray the world in terms of labor risk within supply chains.
Supply chain managers may not often consider labor risks when thinking about market trends, but economic theories place capital and labor side-by-side for productivity.
Various reports show how, when thinking of automating a warehouse, terminal, or process, executives must simultaneously consider workers: Do they have the skills needed to operate new technology? Will it displace key workers? If so, how many, and to what impact for the company's brand?
The supply chain talent crisis is as much due to a soon retiring workforce as it is to the emergence of data-driven processes requiring additional training. In many, recent cases, this training and consideration is what protesters — such as the ones who threatened to shut down East Coast ports in February — demand.
Labor risk, then, is not limited to visibly threatening conditions like those seen in Bangladesh before the Rana Factory collapse. It also has to do with union activity, protests and effective labor compliance. If anything, the ITUC report shows labor risk is highly prominent in the U.S., Mexico and China despite high GDP figures.
A 10% rise in risk is nothing to scoff at, and if recent events imply anything, this may translate into further economic disruptions in ports, plants and even roads throughout the year.
Automation is continuing to make its way into the supply chain: not only is the International Maritime Organization (IMO) planning to research whether to amend regulations regarding automated vessels, but General Motors-owned Cruise Automation recently announced it is recruiting for the head of a mapping unit as the company accelerates in the self-driving cars race. Tesla, on the other hand, just lost the head of its autopilot software, Chris Lattner, after less than six months on the job, Reuters reported.
In other news, Chinese manufacturers are buying up robots left and right to work jobs that human workers no longer want. To sweeten the spree, the Chinese government is providing subsidies to businesses buying robots to replace dangerous factory jobs, Nikkei Asian Review reported.
While some manufacturers are actively pursuing automation and exploring new ways to incorporate technology into their production process and finished products, others — like Tesla — are struggling to implement the technology with consumer and regulatory expectations. Automation is no longer a new concept, but how automation will fit into the supply chain remains a challenge for veterans and newcomers to the technology alike.
Amazon is opening two fulfillment centers — one on Staten Island to be ready by the end of the summer, and one in Utah. Amazon's expansion comes on the heels of its Whole Foods deal — as the e-commerce giant aims to meet the demands of New York consumers who want same-day shipping, the company is also dipping into the grocery business, further indicating that the e-commerce trend won't die soon.
If Amazon does implement same-day shipping for New Yorkers, it could easily start delivering fresh produce right to a consumer's door. This is a threat to traditional brick-and-mortar grocery stores like Kroger and Wal-Mart — if they want to keep up, they will need to develop similar strategies to provide the most convenient shopping experience to consumers.
In other news, UPS recently announced plans to open a new $260 million, 893,000 square-foot shipping hub in Plainfield, IN, which the logistics company expects will streamline its supply chain and increase profit margins. According to Bakersfield, MRC Global also just opened a new hub in Shafter, CA, as the company faces sharp competition from Amazon and UPS.
Mergers & Analysis
Mid-way through the calendar year, companies beating expectations or in need of major shifts are beginning to look outside their four walls for assets and ideas.
Perhaps as a result, this week brought a wave of rumors surrounding major deals, or the fate of previous ones. In addition to all the talk of Amazon's purchase of Whole Foods — and the potential impact this may have on Sprouts, Instacart and the numerous grocery retailers in the market — half a dozen major companies in the freight transportation space were involved in speculation of their own.
Orient Overseas Container Line (OOCL) again found itself denying a potential takeover from its Chinese rival, and alliance partner, COSCO Shipping. Sources told The Loadstar and The Wall Street Journal the line would be sold for upward of $4 billion as early as next month.
But a whale emerged later this week, potentially threatening any future mega-merger. South Africa rejected the proposed merger between K Line, NYK and MOL, otherwise known as the Ocean Network Express, over antitrust concerns and a history of collusion.
The three lines are all in the top 15 global carriers by capacity, according to Alphaliner data, and their merger would create the sixth largest line. Meanwhile, a combined COSCO and OOCL would create the third largest carrier worldwide. If the Japanese lines' example shows anything, it's that the world may not be ready to accept another large shipping industry merger.
However, other modes of transportation are a different story. XPO Logistics, which rose to prominence through a series of major acquisitions that included Con-Way, is reportedly eyeing new targets. Similarly, rumors of a CEVA Logistics acquisition are gaining prominence, and the global 3PL Geodis may be the main contender, The Loadstar reports.
If just a few of these rumors are true and talks are starting, Amazon and Whole Foods may have been but a drop in a bucket for major acquisitions to happen in 2017.