Archive for Mergers-Acquistions

When two companies merge, the supply chain organizations also must merge.  That means downsizing that department, making personnel choices, converging IT systems, and meeting the supply chain synergies promised to Wall Street.  Mergers can go badly wrong, or they can be a new source of competitive advantage.

Larry Hartley, the Senior Vice President of Supply Chain at Office Depot, has lived through both types of mergers.  More recently, he was the man in charge of converging the supply chain operations of OfficeMax and Office Depot when those two companies merged.  Larry spoke about that experience at the 14th Annual North American 3PL Summit & Chief Supply Chain Officer Forum in Chicago this June.

The merger was driven by competitive necessity.  Increased competition in the office supply business has resulted from the entry of online retailers like, as well as growing incursions into this product segment from brick and mortar retailers such as Walmart, Costco, and Target. This had led to led to declining revenues, shrinking same store sales, and not surprisingly, declining market shares.

The government approved the merger at the end of 2013, but the planning process had begun 9 months previous to the approval.  At that point, they had two distinct organizations with similar products, service promises and customer profiles, but different approaches to supply chain management.  And until the merger was finalized, both organizations were competing while dealing with open headcount, dual leaders across the organization, and assortment changes.  Further, once the merger was complete, the combined company would have revenues of about $16-17 billion, which was still smaller than the market leader Staples.

Once the companies were combined, they had “two of everything.”  Employees were asking, will I keep my job?  And if I do, where will I live?  Who will my boss be?

two of everything

Two of Everything

There was also operational uncertainty.  According to Jeff, there was the understanding that what worked in the past probably would not continue to work.  “What should we anchor on?  How should we react to new situations?”

And there were new challenges.  Wall Street had been promised 70 to 100 million dollars in supply chain synergies from the merger by the end of 2016.  It was understood that there would need to be a stock keeping unit (SKU) rationalization across their three channels.  And, they needed to design a flexible Distribution Center (DC) network that would lower costs while providing flexibility to ramp up deliveries to meet a surge in demand if new ideas for revenue growth worked.

So how did the new company to be approach this?

They used an outside consultant, the Boston Consulting Group, to provide integration and merger process support.

There was a dedicated supply chain consolidation planning team staffed by good people who were pulled off their day to day duties and worked full time on the merger.

They attempted to make data driven decisions.  This was easier to say than to do.  They had to dig into the data and understand what the true costs were.  If they were comparing safety metrics or service levels, they had to look at how OfficeMax and Office Depot had defined those metrics.  Then even when they agreed on the data, the decision that should be made on the basis of that data was not always clear.  In these cases, the team moved on to the next issue; the new supply chain leader would make that decision when appointed.

In November of 2013, Roland C. Smith, who came from outside Office Depot and OfficeMax, was appointed the new CEO.  He was experienced in mergers, and brought in his own merger playbook.  He moved quickly.  The first thing he decided was that the new headquarters would be in Boca Raton.  He interviewed the leaders from both companies, and one week later he chose his leadership team.  Part of his decision on the new leaders was based on selecting the best team possible.  But the “best” team needed to reflect the culture he was trying to introduce.  Mr. Smith wanted to establish a culture of integrity, accountability, and innovation.  He wanted the new executive team to be committed to these principles.

The leadership team, which included Larry Hartley as the Supply Chain leader, was announced two weeks before Christmas.  The team was given their holiday homework.  They were told that when they came back from the break, they needed to tell Mr. Smith who would be reporting to them.  No reserve capacity for potential moves down the road could be retained; no shadow organizations were allowed.

The new CEO told the leadership team, 60,000 people are counting on you.  “Make your (personnel) decisions for the good of the company as a whole.”  The need for speed continued all the way through the merger process.  Larry said that “not making a decision is itself a decision.  It was important to get to an 80 percent solution, and rely on your people” to fix the last 20 percent.

Throughout these weeks, Larry strove to be open and honest about the process.  People knew where the new headquarters was located.  Executives that wanted to stay on knew if they would have to relocate.  He told people when they would be told about the new decisions.

If a person was offered the job, there was a need for speedy resolutions.  They were given two days to decide.  “They could handle it.”  Because of the drawn out merger approval process, “they has already had a year to think about this.”

Further, honesty was also important in the decision making process.  It was important to be able to admit that “you don’t yet have a solution to a problem.”  The answer will probably be one of these options, but “we just don’t know yet.”  And it was also alright to say, this is just “not a top priority right now.”  Finally, the reason a decision was made needed to be explained.  “People can understand change if they understand why” the change was made.

Office Depot established a communication steering committee to make sure their messages were being understood by the rank and file.  They would ask employees from all levels of the organization, “did this message come through?  How can we make our next town meeting better?”

This was billed as a merger of equals.  This gave Larry more freedom to pick the best people. Larry said he ended up with a good mix of people from both companies. This was a very good thing in terms of creating the “To Be” process. It was important to have people that could explain both organization’s “As Is” processes and technology before a better “To Be” process could be selected.

Once people were onboard, spans of control were established such that there would be a single point of accountability.  It was important to settle who was responsible for which process and function publicly.  Once decisions were committed to, timelines for implementation were established, and the promised date had to be met.

There were still many decisions to be made and many issues the supply chain team needed to debate.  The principle that was followed was that everybody plays, no silent dissent was allowed.  Further, the term “this is the way we did it” was not allowed.  “We” is a term that should refer only to the new merged company.  Every time a team member said “we” and meant the company they use to work for, they had to pay 1 dollar to a donation kitty.  In one short statement, “a person could end up paying three dollars.”  They ended up with a nice contribution to their foundation.

Establishing core metrics as a rudder that could be used to steer the new supply chain organization was also important.  They took a Balanced Scorecard approach with top metrics that measured safety, the customer experience, and cost.  Then as they looked at their DC network and decided which DCs to keep and which to close, each of those DCs was rank ordered from top to bottom in each of those areas.  In some cases, they did have to close a DC with better ratings because of the need to have a balanced regional network.

From a systems perspective, the Office Depot ordering and delivery systems were kept.  They also selected JDA as their key Supply Chain Management platform.  Having a few core platforms kept integration simpler.

In closing, Larry said that he “learned more in the last year, than in the previous ten years;” his learnings related to leadership style were singled out as being particularly important.

Larry did not mention it, but mergers and Office Depot are back in the news.  In February of this year, Staples and Office Depot announced that the companies have entered into a definitive agreement under which Staples will acquire all of the outstanding shares of Office Depot.  The Federal Trade Commission has not yet approved this merger.

Categories : Mergers-Acquistions, Retail
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2014-2015-calendar-heroIt’s hard to believe another year is coming to an end. There have been many highs and many lows this year, and an awful lot of newsworthy items to keep you abreast of. We wrote about numerous mergers and acquisitions, new technologies and innovations, customer success stories, drones, overnight delivery, port congestion, drones, 3PL’s, robots, shale oil, drones, omni-channel, warehouse management, transportation management, and, of course, drones (did I mention drones?). As much fun as I’ve had writing some of these stories, I’ve also enjoyed reading the articles of my colleagues and customers. I truly feel that this has been a year of learning. And for that, I am thankful.

With the holiday season upon us, there are vacations to be had, family and friends to be enjoyed, and hopefully, some well deserved rest. For these reasons, this will be the final Logistics Viewpoints column of the year. We are going to spend the next two weeks re-energizing ourselves to make sure we continue to bring you the most insightful supply chain and logistics news and stories. Happy holidays from all of us here at Logistics Viewpoints.

And with that, on to this week’s news.

FedEx GencoFedEx has agreed to buy third party logistics provider Genco for an undisclosed sale price. According to FedEx, the impetus behind the deal is to expand their retail and e-commerce markets. The biggest (and most obvious) opportunity area for FedEx in the deal is the robust reverse logistics capabilities of Genco; the company processes more than 600 million returns annually from the world’s leading retailers and consumers good companies. A secondary opportunity is the addition of millions of square feet of managed warehouse space, which is not dedicated to reverse logistics. This aspect helps to broaden FedEx’s reach, and will certainly be an advantage during the 2015 holiday season.

What started out as discussions about a prisoner swap has escalated between the United States and Cuba. Thankfully, it has escalated in a positive way. On Wednesday, President Obama announced plans to normalize the relationship between the two countries, re-establishing diplomatic relations for the first time in over 50 years. Cuban president Raúl Castro tempered expectations, saying, “This in no way means that the heart of the matter has been solved.” The “heart of the matter” being the trade embargo. But a historic shift in overall relations between the two countries can be a step in the right direction toward an eventual larger commercial relationship.

ikeaIkea is opening a string of stores across Canada. However, unlike its normal store set-up, with dozens of showrooms and seemingly miles of warehouse space to walk through, the new stores will be approximately 1/10th the size of a normal store. The Swedish company plans to open these stores as e-commerce pick-up location. Unlike the normal stores, Ikea workers would retrieve items for customers who ordered online. This is quite the difference for those Ikea fans who are used to walking the warehouse looking for the tag to retrieve their merchandise. And with the influx of customers who have grown tired of a standard store experience, Ikea is making what looks like the right move at the right time.

Amazon primeWhile my Christmas shopping is done, there are scores of people who are waiting until the absolute last minute to order gifts. And this year, the last minute is even later. Amazon has extended its free shipping deadline for Christmas Eve delivery. Customers who order online by 11:59 pm EST today, will have their items delivered by Christmas Eve. For those customers who are Prime members, the deadline for free two day shipping is December 22. While many procrastinators will rejoice at this news, let’s not forget about last year’s late-delivery debacle. A huge influx of online orders could backlog Amazon and delivery partners, leading to another disastrous season. Hopefully Amazon has learned its lesson and will be ready for the shopping onslaught.

portsTo make things more difficult for retailers, holiday shipments are said to be at risk due to the West Coast port labor disagreement. Protracted labor talks at the busiest U.S. container ports are leading to delayed deliveries to some retailers. The backlog has already caused FedEx to shift resources and limit shipments from some customers to avoid a last-minute pre-Christmas surge, the company said. The National Retail Federation (NRF) estimates that a strike or lock-out could cost the US economy more than $2 billion a day. The current dispute affects 29 ports including Los Angeles and Long Beach. Many retailers are reporting up to a week’s lag time getting merchandise on the shelves. With so many companies at the make or break part of their year, the port slowdown could be disastrous. It also means there could be a lot of gift cards under the tree.

That’s all for this week and for the year. We hope everyone has a happy and prosperous new year and we look forward to bringing you more logistics news in January. Enjoy the weekend and the song of the week Pharrell’s Happy.

Black-Friday-ShoppersAccording to the National Retail Federation (NRF), Black Friday fizzled compared to last year, as sales tumbled 11%. An estimated 6 million+ shoppers that were expected to hit the stores on Black Friday never showed up. There are a few reasons why sales tumbled. First, more consumers appear to not be in a rush to hit stores and deal with massive crowds. With Cyber Monday right around the corner, many consumers are more comfortable with waiting a few days and shopping from the comforts of their homes (I certainly received an amazing number of promotional emails throughout the day on Monday). Secondly, retailer were targeted by protesters who called on consumers to boycott Black Friday. The plan was to make a statement about recent police violence. The third reason is that consumers simply were not moved enough by the discounts retailers were offering. The big draw for Black Friday is the massive discounts. Consumers apparently did not find the discounts enticing enough to venture out to the malls. Whatever the reason, NRF is still confident that this will be a busy holiday season. According to NRF Chief Executive Officer Matthew Shay (via a conference call), “the holiday season and the weekend are a marathon, not a sprint. This is going to continue to be a very competitive season.”

And with that, on to this week’s news.

C.H Robinson, a logistics service provider, announced that it has reached a deal to acquire for $365 million in cash. Freightquote is a privately-held freight broker providing services throughout North America. The acquisition plays well for C.H. Robinson’s freight services. C.H. Robinson is focused on mid-size and large customers, where Freightquote has a focus on the SMB. This will allow C.H. Robinson to expand its target market. The acquisition also aids the company’s advances in the e-commerce market. According to John Wiehoff, C.H. Robinson chairman and chief executive officer:

“E-commerce is going to be a bigger part of future supply chain services and Freightquote brings us a leading solution in our industry. Along with their track record of success, Freightquote has an established brand, a talented management team, excellent people, and a performance-based company culture.”

Speaking of acquisitions, Trucking Unlimited has acquired for $800,000. This acquisition is partly aimed at helping to relieve the ongoing shortage of truck driver in the United States. Trucking Unlimited was established in 2012 as a specialty job site for recruiting truck drivers to available vacancies in every state. By acquiring a niche site focused on more specialized and higher paying opportunities, the new Trucking Unlimited can reach a larger pool of applicants, as it is significantly more targeted than general job boards. It also helps to reach the newer demographic of truck drivers which are more tech and web savvy.

death ringCyber criminals have been attacking retailers and banking establishments, stealing credit card numbers, account information, and pin numbers. Now there is a new area of attack: the smartphone supply chain. A new mobile Trojan dubbed “DeathRing” is being pre-loaded on to smartphones somewhere in the supply chain, warn researchers at mobile security firm Lookout. DeathRing is a Trojan believed to be of Chinese origin that masquerades as a ringtone app, but can download SMS and browser content from its command and control server to the victim’s phone. DeathRing could use SMS content to phish a victim’s personal information, for example, using fake text messages requesting the data. Lookout researchers say the malicious app is impossible to remove because it is pre-installed in the system directory. Researchers said this signals a potential shift in cyber-criminal strategy towards distributing mobile malware through the supply chain.

The US West Coast port congestion has caused lots of headaches for shippers and retailers alike. And we have certainly followed the coverage here quite a bit. With fears of a complete shutdown looming, and accusations of a work slowdowns, the congestion has continued to get worse. Just how much worse? Recently it drove Asian shippers to abandon ocean shipping and resort to air freight. This ensured that shippers would have their goods on store shelves for the holiday season. The only problem: it was the worst possible time to ship via air freight. Air freight rates rose 17% during the month of October. Just another reason the shipping world as a whole would like to see a deal reached in the West Coast ports.

Pizza-DeliveryAmazon has quietly entered the food delivery game. While this may not sound like something new, we’re not talking about Amazon Fresh and grocery delivery. Instead, Amazon has launched a takeout and delivery feature to rival GrubHub. The still-unnamed service rolled out in Seattle with around 20 restaurants for delivery and around 110 for takeout orders that you pick up yourself. As with other Amazon services, the takeout and delivery service lets you charge everything to your existing Amazon account.

That’s all for this week. Enjoy the weekend and the song of the week (in honor of my son’s newfound obsession with the song), Get Lucky by Daft Punk.

EARNS EXXON MOBILEFor many years, “fall back” was a good thing. I could go to the bed at my normal time on Saturday night and enjoy an extra hour of sleep. Sure, it meant that the cold of winter was coming and that it would be dark by 4:30, but for one glorious day, I got to indulge in an extra hour of sleep. Unfortunately, that all changes once you have kids. For some reason, they do not understand the concept of extra sleep. Instead, they are hard wired to get up at the same time they usually do – only it’s now an hour earlier. But they don’t adjust after one day. I’m going on nearly a week of 5 am wake-ups now. At least the time change makes it feel like the winter and holiday seasons are coming, making the influx of Christmas-themed commercials at least a little more palatable.

And now, on to the news.

transplace-logoTransplace, which is owned by Greenbriar Equity Group, has bought Logistics Management Solutions (LMS), which is a third party logistics (3PL) provider. LMS has strong ties to the chemical and industrial manufacturing industries, which will help boost these areas for Transplace. While no financial terms were disclosed, LMS earned a spot on Inc. magazine’s ranking of the 500 fastest-growing private companies in the country.

“Acquiring LMS further supports our commitment and strategic plan to grow Transplace and build a competitive advantage for our company and our customers,” said Transplace CEO Tom Sanderson. “We are pleased to add LMS’s knowledgeable, experienced employees to our workforce. Bringing the LMS team on board allows Transplace to offer more services to its existing customers and to serve an entirely new set of customers, as well as continue to expand our presence in key verticals, such as the chemical industry.”

Since their contract expired back in June, Pacific Coast dockworkers negotiating a new labor agreement have begun a work slowdown in Seattle and Tacoma. The slowdown by members of the International Longshore & Warehouse Union reduced container movement to 10 to 18 per hour from 25 to 35, the Pacific Maritime Association said yesterday. Most ports in Seattle and Tacoma are now experiencing delays, which does not bode well for the upcoming holiday season. While there has been an influx of imports over fears of a looming strike, if a deal is not settled soon, the holiday season, and the fate of many retailers, could be disastrous.

First there was Amazon Prime, with its free two day delivery. Then Amazon rolled out is private fleet of trucks for same day local delivery. Now, Amazon is testing deliveries via taxis in San Francisco and Los Angeles. Amazon is using the taxi-hailing mobile app, Flywheel, to ship parcels via licensed cabs. In its latest test, Amazon summoned cabs through Flywheel to distribution centers, from where they picked up as many as 10 packages bound for the same location at about $5 a package. With drones still facing a lot of scrutiny, maybe switching to taxis will pay off, especially as the holidays approach.

Washington State saw a record-breaking number of cargo thefts in the third quarter of the year along with a new tactics on the part of thieves, according to new report from the logistics security services provider FreightWatch International. There were a total of six incidents in the last 12 months, with four of these happening July through September. In addition, half of the thefts in Washington State during the quarter were multiple trailer thefts — one taking three trailers, and one getting away with four. This made the full truckload theft total nine in the quarter, 29% higher than the total number from 2010 through the second quarter of this year.

teamstersAnd finally, the Teamsters have scored another victory at FedEx, which is their second victory in the last month. Drivers at FedEx Freight’s New Brunswick, N.J., terminal voted last week to join the Teamsters Local 701 with a 66-42 vote, following drivers from the Croydon, Pa., terminal, who voted to join the union Oct. 14. The drivers are seeking job security and improved benefits, according to the Teamsters. After organizing started, FedEx increased wages by 80 cents an hour and scrapped a driver scorecard, the union added. FedEx is “offering pay raises and other improvements at the same time we are organizing, but the workers know that these things can be taken away just as quickly without a legally binding contract,” said Tyson Johnson, director of the Teamsters’ freight division.

That’s it for the news this week. As a nod to all the news from the Pacific Northwest, enjoy the song of the week, which was probably my first mind-blowing music experience, Nirvana’s Smells like Teen Spirit.

ice-bucket-challenge-fb-user-profile-2I’m sure everyone’s Facebook feed has been jammed with friends and family members (and links to celebrities) taking the ice bucket challenge. For those of you who don’t know what the ice bucket challenge is, I’ll explain. If you are challenged, you have 24 hours to either dump a bucket of ice water on your head, film it, post it, and challenge some friends to do the same, or you are to donate $100 to the ALS Association. For those that complete the ice bucket challenge, a $10 – $25 donation to the ALS Association is recommended. To say that the challenge went viral is an understatement. It swept the social media landscape by storm. As of Thursday, August 21, The ALS Association has received $41.8 million in donations compared to $2.1 million during the same time period last year (July 29 to August 21). I applaud everyone who has accepted the challenge and donated for a great cause.

And now, on to the news.

TMW Systems announces a strategic partnership with 3Gtms.  This partnership includes a significant – but minority – equity investment by TMW Systems parent company, Trimble Navigation Limited.  They get a seat on the board based on this investment.  TMW, a market leader in the fleet management space, will sell the 3Gtms solution into their installed base of asset-based transportation providers.  3Gtms will continue to sell their planning and execution solution to shippers and non-asset based logistics providers.  This partnership was driven by increasing momentum of brokers and carriers seeking to move up the value chain and provide managed transportation services.  Integration between the products has begun and there is one customer with both solutions that will serve as a beta customer for the integration.

At last week’s Oracle Transportation Management Special Interest Group meeting, Oracle announced that beginning in September, customers can purchase a cloud-based offering of their TMS and GTM solutions. This move is in line with Oracle’s investment in cloud-based solutions, and will likely bolster their position in the market. The solutions are all pre-configured, including work flows, user roles, and reports. Oracle is claiming that they can achieve rapid, cost-effective implementations of core OTM / GTM functionality in 8 – 10 weeks with a private cloud solution. While Oracle will still offer its OTM and GTM as on premise, licensed solution, the cloud offering can open a new market of smaller companies for Oracle.

free tradeLast year’s development of a Free Trade Zone in Shanghai has opened the doors for Amazon to try to seize some market share away from local giants Alibaba and Amazon will open a new logistics warehouse in the 11 square mile zone. It is a market worth going after; according to data from, Amazon has barely 2% of a B2C market that was worth some $75 billion in the first quarter of the year alone. According to Amazon’s senior vice president for International Consumer Business Diego Piacenti, “Amazon must seize this strategic development opportunity. We’re going to have lower shipping charges, faster delivery coming into the free-trade zone, so there are going to be many benefits.”

In other Amazon news, drones are back. After a lot of news coverage and debate, the use of drones for home delivery had slipped into the background for many people. But according to anonymous sources, drone deliveries are close to becoming a reality. However, India, not the United States, will be the launch pad for drones. Sources indicate that Amazon will debut its drone delivery service with trials in Mumbai and Bangalore, cities where it has warehouses. While Amazon itself would not comment, sources say that the drones could be deployed as early as Diwali, which is October 23.

According to latest CIPS Risk Index, global supply chain risk fell to an 18 month low. The Index, which tracks the effect of economic, political and social factors on the security of global supply chains, has fallen from an all-time high of 82.4 in Q3 2013 to 78.1 in Q2 2014.

“Nevertheless, global supply chains still face significant risks. The Ebola outbreak in West Africa, combined with, political unrest in the Ukraine, Iraq and Libya, have the potential to create significant risks to global supply chains. These risks must be monitored and managed and where necessary contingency plans must be developed.” – John Glen, CIPS economist and senior economics lecturer at the Cranfield School of Management.

corner storeTaxi and car service company Uber has launched a test of same-day grocery delivery in Washington, D.C. The service, named Corner Store, allows users to choose from more than 100 products, excluding fresh food, through the Uber app. The exclusion of fresh food is a departure from the norm for tech companies investing in last mile technology, such as Amazon Fresh and Google Express. The key question is how can Uber make this model profitable and sustainable.

That’s all for this week. Enjoy the weekend and the song of the week, The Smashing Pumpkin’s 1979.