Strong consumer demand strains retail supply chain
Not surprisingly, the Japan Disaster and Thailand Flooding that impacted global trading have had an effect on how supply chain managers manage their space. These changes have been of paramount importance on the retail chain, which has felt the pressure of strong consumer demand from Black Friday and Cyber Monday this year.
“You saw a lot of demand in manufacturing shift from Japan to Thailand, and most electronic manufacturers have been scrambling throughout the year,” BravoSolution’s VP of Supply Strategy Paul Martyn said. “Companies like Apple are reconfiguring their supply chain in ways that I haven’t seen in my professional career.”
One of the dirty secrets of the electronics supply chain has been the lack of new products in the marketplace, which has put a different type of strain on the retail sector this year, according to Martyn.
“One of the things coming out of the retail sector in general, has been an absence of innovation during the holiday season,” Martyn explained. “I can’t remember holiday seasons like the last couple where there’s been an absence of that new thing that people have to have.”
SEE OTHER TOP STORIES IN THE SUPPLY CHAIN DIGITAL CONTENT NETWORK
That lack of innovation, particularly in Apple’s case, could be at least partially attributed to the lack of competitors in the market. Apple doesn’t have legitimate threats to its iPad tablet computers, given the flameouts of BlackBerry’s PlayBook and other Apple competitors.
Martyn took a different approach to describing Apple’s supply chain behavior, however.
“You could look at Apple’s behavior in cutting orders on new parts as not being able to cover all the parts for their products, but they’ve also got a lot of excess inventory, and they may be wanting to whittle down their inventory,” Martyn said.
While Apple’s behavior has been strange, the good news for the retail supply chain has been a buoyed demand within the United States. While there’s still considerable doubt as to what will happen with Europe’s growing financial crisis, the global manufacturing and retail sector has had a bounce-back year this holiday season.
“Lead times and inventories are showing bullish qualities in the U.S.,” Martyn said.
UPS Posts Record Second Quarter with Revenues of $23.4bn
Growth across each of its core segments resulted in record results for UPS in the second quarter, with group revenues climbing 14.5% year on year to $23.4bn.
The global logistics outfit achieved consolidated operating profit of $3.3bn, up 47.3% compared to the same period in 2020. It is the second consecutive quarter of record profit, and a significant rise on Q1’s $2.9bn.
UPS Q2 Revenues in Brief
- Consolidated revenues: $23.4bn (+14.5% yoy)
- Domestic: $14.4bn (+10.2%)
- International: $4.82bn (+30%)
- Supply Chain Solutions: $4.2bn (+14.3%)
The US company’s domestic segment performed steadily with 10.2% revenue growth to $14.4bn. But it was its international and supply chain solutions segments where UPS saw the biggest gains. Strong demand in Europe led an increase in international revenues of 30% to $4.82bn. UPS’ supply chain solutions division saw revenue growth of 14.3% to $4.2bn, driven, the company said, “by strong demand in nearly all businesses”.
UPS’ steady growth throughout the pandemic has been led by the overarching vision of its chief executive Carol Tomé to do “better not bigger”, focussing on efficiency and high margin deliveries through its network over pure scale and volume.
“I want to thank all UPSers for executing our strategy and delivering high service levels, which fuelled record financial results in the second quarter,” she said. “Through our better not bigger framework, we are moving our world forward by delivering what matters.”
UPS Completes Sales of UPS Freight
The second quarter also saw UPS complete the divestiture of UPS Freight in a deal worth $800m - with a surprise result for the division, now called TForce Freight, under new owner TFI International.
“The second quarter was historically significant for TFI International, with the closing of our UPS Freight acquisition and record performance across the board,” said Alain Bédard, chairman, President and Chief Executive Officer, TFI International. “Particularly gratifying is the performance of TForce Freight, which has exceeded our operating ratio targets far ahead of schedule, and we have only just begun our work.”
In it first two months of ownership TFI reported that adjusted operating ratio (OR) was 90.1% for TForce Freight, far outperforming its forecasted OR of 96-97%.
“I wish to thank our entire team for their hard work and remarkable efforts, and officially welcome aboard our new TForce Freight colleagues who have seamlessly come under the TFI umbrella and are already making stronger than expected contributions,” Bédard added.