EDInomics with Steve Keifer

Nickel and Diming Strategies for the Airline Industry

It seems that not a week goes by without the US airlines announcing some new strategy to nickel and dime their customers with new fees for services that used to be complementary. 

The Software is a Service Market

In my last post, I discussed the recent trend of acquisitions of B2B technology vendors by large manufacturing conglomerates. The mergers of 3M and HighJump as well as Illinois Tool Works and Click Commerce resulted in subsequent divestitures just a few years later. Attempts to incubate and grow B2B technology divisions within major manufacturing companies have met with a similar outcome. GE spunoff its Global Exchange Services division. IBM spunoff its Business Exchange Services and EDI groups. In my opinion, insufficient synergies exist to justify mergers of discrete manufacturing companies with technology vendors.

China’s Export

There has been a surge in articles recently about the risks associated with sourcing from China.  With Beijing hosting the Olympic Games, China is the center of attention across the world.   As a result, every aspect of the economy, culture, history and political framework is being scrutinized by opinion leaders around the world.  With China’s massive export industry, it is not surprising that the manufacturing and distribution industry is being examined with a higher level of scrutiny as well.  Yesterday I did an interview with a reporter to discuss the supply chain impacts of the Olympics, which forced me to collect my thoughts on China’s growth and challenges.  So I thought I would take a few minutes to offer my perspective on the situation.

Should Manufacturers own B2B Vendors?

Earlier this month, Illinois Tool Works (ITW) announced the planned divestiture of supply chain software and services vendor Click Commerce. The marriage of ITW and Click was relatively short one with the divestiture coming less than two years after the acquisition in September 2006. I recall there were mixed reactions from industry thought leaders following the announcement of the deal.

Netflix Software Glitch and the Video Rental Supply Chain

Last week Netflix suffered a major disruption to its supply chain last week when its order fulfillment system went offline for several days.  In my opinion, the DVD industry and the broader home entertainment sector consisting of video games and music (CDS) have one of the most complex supply chains of any industry.  The primary challenge surrounds new product introductions.  On average, 80% of the lifetime sales for a new title are sold within the first 2-3 weeks of availability.  To maximize the revenue and profit opportunity entertainment product distributors and retailers must minimize the out-of-stocks for new titles in their retail locations.  They must maintain a high level of inventory precision across thousands of stores without any historical demand data upon which to base their forecasts.  The supply chain issues are further compounded by the proliferation of SKUs for each title.  For example, for each new DVD launch, a retailer must stock widescreen and standard format; the high definition Blu-Ray version and often gift packs or "Special Collector's Editions."  See my earlier post for more details on the retail DVD supply chain.

The Long Tail Phenomenon in B2B - For Better or Worse?

Someone recently asked me - Is the long tail phenomenon in B2B making e-commerce better or worse?  There is no question that the exponential rise in the number of standards over the past decade is making B2B more complicated than ever before.  Considerable effort is required to migrate from traditional EDI to newer XML paradigms.  Even greater challenges exist for companies in different industries (e.g. manufacturing and banking) to perform document exchange as different standards are used.  So for many, the long tail is making B2B e-commerce more challenging, expensive and complex - in order words - worse.  But for others, the long tail is unlocking the potential to collaborate with business partners electronically in ways never before possible. 

Food Supply Chains - Is Shorter Better?

There was a good article in today's New York Times called Supermarket Chains Narrow their Sites, which stated that Wegmans has experienced a 20% growth in local food sales in the past 12 months.  I found this not the least bit surprising given that I am hearing more and more discussion amongst my coworkers and friends about buying local.  In fact, earlier this week the GXS Marketing team had an offsite meeting at a local Virginia winery (See John Radko's post for details).  All across the US local wineries are emerging in states never before known for wine production.  Many of these new regional wineries are quite successful.  With airfares and gas prices skyrocketing these days who can afford to fly to the Napa Valley to go wine tasting.  But convenience is not the only driver for consumer interest in nearby wineries.  Consumers enjoy the reassurance that comes with being able to view the origin of the wines they are consuming.  Others enjoy the experience and variety that comes with tasting a local product not commonly available in stores.

 

Food Supply Chain Goes Local

Global trade talks sponsored by the World Trade Organization (WTO) came to a halt earlier this week as the key parties were not able to resolve disputes over agricultural subsidies and tariffs.  The primary differences of opinion were between emerging market countries such as China and India and the more developed markets of Europe and the United States.  Experts state that this is the first multilateral trade agreement that has failed since the 1930s.   The trade talks' failure has led many to question whether we will see a reversal in international trade patterns.  Some suggest that we are entering a new era of trade in which nationalist interests will prevail over open, globalized markets.  If true, it could mean that there are fewer food imports/exports and more in-country production. I think it is too early to predict the long term impacts of this week's events, but there is no question that more of the food we eat will be harvested and produced locally.   However, in my opinion this changing dynamic will not be the result of government trade regulation or the WTO.  It will be driven by the consumer population's growing interest in "ocally grown" products.