AI, machine learning centerpieces of Blue Yonder’s end-to-end solutions
(Photo: FWTV)
On this week’s The Stockout show, I interviewed Manish Ghosh, VP of strategy and consumer industries at Blue Yonder, one of the largest supply chain software companies. Blue Yonder’s specialties include assisting retail and CPG companies with omnichannel fulfillment, robotics and automated warehousing, and supply chain visibility. Over the years, Blue Yonder has completed numerous acquisitions that expanded its capabilities to provide end-to-end supply chain visibility.
According to Ghosh, CPG companies had faced very few supply chain disruptions before the past few years, which caused supply chains to become elevated in importance in the eyes of many CPG management teams. Machine learning and AI are central to customer discussions, but computer-generated predictive analytics are more reliable in predicting demand rather than forecasting potential disruptions in the supply of ingredients — which are often linked to some black swan (often geopolitical) event. As a result, it is critical for CPGs to have visibility on a real-time or high-frequency basis into all aspects of their supply chain so they can make immediate adjustments. Predictive modeling can also help CPGs quantify the cost of potential disruptions and help inform decisions around adding redundancy/resilience to supply chains, which is typically at odds with the desire to simplify/streamline supply chains for efficiency.
Yellow shutdown leaves void to fill for grocery deliveries
On last week’s The Stockout show, I interviewed Dave Giblin, VP of transportation at ODW Logistics. One of ODW’s specialities is managing midsize food and beverage companies’ supply chains and warehousing. To that end, the logistics company sources LTL capacity and also consolidates LTL shipments into truckloads to enhance efficiency.
Along with Old Dominion, Yellow had been one of the largest LTL carriers involved in grocery delivery (Giblin estimates that they were 20%-30% of grocery deliveries), and its freight was more weighted toward retail than the industrial orientation that is more commonly associated with LTL. While the Yellow bankruptcy is potentially the biggest disruptive event of the year, Giblin has not yet seen any significant disruptions to logistics networks that ODW is managing — he believes that is because the current oversupply of LTL capacity is sufficient to handle the freight that was in Yellow’s network.
In addition, Giblin believes that there may have been a pull forward of freight demand in July, which explains why tender volume rose toward the end of the month, as shippers worked to mitigate the impacts of Yellow shutting down and a possible strike against UPS.
More vertical farming companies file for bankruptcy protection
Vertical farming is in its infancy but is one of many technologies with the potential to transform global food supply chains — cell-based and plant-based meat alternatives are other examples. But as with many new technologies, profitability remains elusive for most players in the space, which has become more apparent as venture capital firms have transitioned from growth-at-all-cost objectives to demanding positive returns.
AppHarvest is the latest company in the space to file for Chapter 11 bankruptcy, joining Aerofarms, which filed last month, and Kalera, which filed in April, among others. Vertical farming is currently struggling with the more energy-intensive nature of the operations, relative to traditional farming, which makes the cost structure of vertical farming more variable.
However, the industry should not be counted out because, at scale, the economics could be very different and some companies in the space have the backing of, and partnerships with, some of the largest retailers and food companies.
Tyson announces more chicken plant closings as margins remain under pressure
TSN share price (black) graphed against the S&P 500 (blue). (Chart: Barchart.com Inc.)
Tyson shares on Monday were down more than 5%, the second-steepest drop in the S&P 500. A year and a half ago, the Biden administration was holding out Tyson’s strong results as evidence that the industry was too concentrated and thus, uncompetitive. Less favorable results this year suggest that the company’s strong results in the early days of the pandemic were instead driven by market forces.
In fiscal Q3 (ended July 1), the company’s sales declined 3% year over year (y/y) while operating margin declined from 7.7% in the year-ago quarter to minus 2.7% in the most recent quarter. The pressure has been driven by a combination of rising costs for animal feed, cattle and other input costs as well as cutout prices not rising as fast as livestock costs. In response to the challenging market conditions, the company has been closing chicken facilities (six in total including four announced Tuesday — typically smaller facilities that are in need of capital), cutting managerial positions, reducing finished food inventory and automating processes.
On its analyst call, management offered a positive spin by highlighting sequential improvement from fiscal Q2 as well as the strong results in the prepared foods segment (a favorable read-through for other players in the CPG industry).
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