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Analysis: Supply chain squeeze
OP companies battle to overcome supply chain and inflationary pressures
The quarterly earnings season at the end of October/early November has been an interesting one this year, given the well-documented distribution and cost input challenges impacting the global economy.
As Acme United CEO Walter Johnsen summed up: “We have had supply chain shortages, increased labour costs, extraordinarily high shipping costs, heightened energy costs and inflation nearly across the board. In addition, we have had many positions unfilled at most of our locations despite increasing wages. It was, and is, a very challenging time.”
He referred to the situation as “a mess” and “chaos”, saying the supply chain was being run “cluelessly” and that not enough was being done on a macro level to alleviate the problems of containers stuck in ports and a lack of truck drivers. He warned it was much more serious than consumers simply facing a shortage of toys over the holiday period and that the US economy could “grind to a halt” if essential parts and components do not get through.
INFLATION CONTINUES
According to Johnsen, inflationary trends aren’t going to dampen in the short term and he feared that higher consumer prices could be a drag on the US economy. In addition to increased shipping costs, he noted that production costs in China had also risen by around 10% this year, fuelled by more expensive raw materials, energy and transportation, plus labour shortages.
The vendor began stepping up inventory levels in the middle of 2020. This 30% build-up was in anticipation of disruptions caused by the Chinese New Year in February 2021, not the pent-up, post-COVID demand which has strangled supply chains. It has provided a cushion for Acme in 2021, but now the manufacturer is working on extended lead times for 2022. For example, products are being made currently that might not be delivered until next summer – something Johnsen described as “completely ridiculous”.
INVENTORY CHALLENGES
ACCO Brands is another company holding more inventory than it normally would. It has also benefited from shorter supply routes, with around 40% of its products made in the regions where they are sold. Indeed, this is something Acme has been looking at, too. Today, approximately half of its SKUs are sourced from the US and all of its acquisitions over the past six years have been North American companies.
One strategy at Newell Brands over the past few years has been to rationalise the number of products it sells. It has gone from more than 100,000 at the end of 2018 to 42,000 today, with a target of 30,000. While this process started before the pandemic, one result has been the simplification of Newell’s US supply chain.
Furthermore, the vendor recently announced Project Ovid. To be implemented in phases over the next 18 months, Ovid will consolidate 23 business unit-specific distribution networks into an integrated group platform. This will not only create efficiencies for customers (one order and one invoice, versus 23 currently), but enable more full truckload shipments and reduce the number of vehicles on the road.
LAST MILE SOLUTIONS
Meanwhile, in The ODP Corporation’s (ODP) Q3 earnings call, CEO Gerry Smith said the reseller was better placed than many others to deal with the current supply chain and sourcing challenges. For instance, contracted shipping prices have reduced the need to pay extortionate spot rates for containers.
Another focus for ODP has been maintaining service levels in terms of last mile deliveries, where capacity has been severely constrained. This is something its private fleet and relationships with more than 25 parcel carriers have helped achieve.
US wholesaler S.P. Richards is also addressing this last mile issue as third-party carriers struggle to meet next-day deadlines and increase their prices. It launched an initiative called the Reseller Delivery Network, a matchmaking programme that will enable dealers with their own fleets to deliver on behalf of fellow independent resellers.
As suppliers, distributors and resellers look to alleviate supply chain disruptions on many different levels, consensus is that the problems aren’t going away anytime soon and will be a factor in doing business well into 2022.
There are just a few weeks remaining to submit your entries and nominations for the next European Office Products Awards (EOPA). EOPA 2022 will take place at the Hotel Okura in Amsterdam, the Netherlands, on 22 March, coinciding with the OPI Partnership event that is being held at the same location.
The awards – the 21st EOPA – will recognise and celebrate the companies and people that have excelled during another extraordinary year. Don’t forget, as well as your own company, you are free to nominate other businesses and individuals that have gone the extra mile.
Entries and nominations will be accepted in the following categories:
• Sustainability Excellence • Marketing Campaign of the Year • Initiative of the Year • Business Product of the Year • Reseller of the Year • Vendor of the Year • Wholesaler of the Year • Young Executive of the Year • Professional of the Year • Industry Achievement
22
The deadline for receiving entries and nominations is 10 December 2021. For more details, visit www.opi.net/EOPA2022 or email awards@opi.net
Hamelin acquires in school segment
French stationery group Hamelin has acquired a majority stake in Italy-based book cover specialist CoLibri System.
Founded in Milan 20 years ago, CoLibri System is the maker of a patented solution for covering schoolbooks. Its devices are now used in more than 10,000 sales outlets across Italy, while the company has also developed an international presence in over 40 countries.
Hamelin CEO Eric Joan commented: “This acquisition and partnership with the management of CoLibri will enrich the portfolio of products and services we offer to our customers worldwide. It will [also] allow the acceleration of the development of CoLibri System in Europe and Australia.”
ODP and Sycamore: still talking
In early November, The ODP Corporation (ODP) confirmed that it was still involved in “ongoing conversations” with Sycamore Partners, the owner of Staples in North America. During its Q3 2021 earnings call, ODP said its board continues to review Sycamore’s June 2021 offer to acquire ODP’s US retail operations and the officedepot.com e-commerce site for $1 billion.
For its part, on 5 November, Sycamore reaffirmed its $1 billion offer, saying the terms remain unchanged. Nevertheless, there were signs of a positive relationship between the parties when the PE firm confirmed it had abandoned plans to launch a tender offer for all of ODP.
While a tie-up of the Office Depot and Staples store networks in the US is still very much on the cards, the exact nature of a potential transaction remains unclear. ODP is pressing ahead with its plans to separate the company into two publicly traded entities – a B2B-focused ODP and the other (to be called Office Depot Inc) involving the same assets Sycamore is seeking to acquire.
The ODP split is expected to take place in the first half of 2022, and it now looks as if Sycamore and the ODP board are waiting for this process to be finalised before they take things further. It is a complicated process, but one which will achieve much of the legwork required for an Office Depot and Staples retail merger. It’s also expensive: ODP estimates total costs to be in excess of $120 million.
While the focus so far has been on Sycamore acquiring ODP’s consumer-facing businesses, it is not the only possible transaction. When Office Depot Inc becomes independent and, presumably, well-funded, its shareholders may see more value in being the acquirer. That would also provide Sycamore with a convenient exit from its Staples US Retail investment.
RAJA closes Viking deal
On 1 November, RAJA Group completed its acquisition of Viking and other assets of Office Depot Europe. The transaction – announced in August – involves operations in seven countries that generate annual sales of almost €500 million ($590 million), and employ around 1,500 staff (see Analysis, OPI September/October 2021, page 6).
The closing of the deal represents the exit from Office Depot Europe of private equity firm Aurelius, which acquired the reseller from its US parent company in 2017. It also completes the break-up of the former Staples and Office Depot operations in Europe.
For the most part, these have been successfully divested to existing players operating in local and pan-European markets, with the biggest deals involving RAJA and Lyreco.
In October, Amazon opened its first non-food 4-Star store outside of the US as it continues to bridge the gap between digital and bricks-and-mortar retailing. The location chosen for the new store is a shopping centre in the UK town of Dartford, near London.
The name of the shop (4-Star) comes from the range of products on sale – all rated at four stars or above on Amazon.co.uk. Categories include consumer electronics, toys, games, books, kitchen and home. As you would expect, Amazon is pushing its own products, such as Kindle e-readers, Fire tablets and Echo Dots, but it is also promoting goods from small business marketplace sellers. Items will change on a regular basis.
The new store does not feature Amazon’s Just Walk Out payment technology and is open to anyone, not just those who have an Amazon account. In fact, it looks similar to any other modern consumer electronics retail outlet.
Amazon opened its first 4-Star location in New York City in September 2018; there are now more than 30 of them in cities across the US. The company did not say if it plans to open more 4-Star stores in the UK or other markets.
ON THE MOVE
Andrew Morgan
Alex Kalvin
Seth Raley
Morgan joins ESG
Red Cheetah Software co-founder Andrew Morgan has joined US consultancy firm Execution Specialists Group (ESG). Morgan – President of ECI’s Distribution division after it acquired Red Cheetah – has been appointed as a Principal Consultant with ESG and will lead the practice in the areas of sales effectiveness, operations and go-to-market strategy.
Key US hire for ES Tech Group
E-commerce software provider ES Tech Group has appointed Alex Kalvin as VP of Sales to grow its presence in the North American market. Kalvin has joined the company from Sage’s Intacct ERP software business, where he was an SMB Account Executive, and he has more than 13 years of sales experience.
Highlands names B2B President
Sales and marketing agency Highlands has appointed Seth Raley, the former General Manager of Zep’s North American Distribution business, to head its US B2B division. Prior to Zep – where he spent seven years in a number of roles – Raley worked for Ecolab, which provided an opportunity for him to develop relationships within the foodservice, hospitality and jan/san distribution channels.
Harrop joints Nectere
Well-known UK business products exec Steve Harrop has been appointed as Head of Commercial at dealer services organisation Nectere. The former Office Friendly Managing Director and Advantia CEO started in his new role at the beginning of November.
Sara Armbruster
Allan Smith
Executive changes at Steelcase
Workplace furniture manufacturer Steelcase has a new CEO and Chief Revenue Officer. As previously announced, Sara Armbruster took on the CEO role in October. She succeeds company veteran Jim Keane, who will retire early next year.
Another important change has been the promotion of Allan Smith to Chief Revenue Officer. Smith is a long-serving Steelcase exec, having joined the firm in 1991. Over the years, he has held a variety of key roles, and was most recently VP of Global Marketing.
Expanded role for Voll
Michael Voll, Managing Director of Depsec Nordic’s operations in Denmark, Norway and Sweden, has also taken on responsibility for Sweden and Finland at the distributor. It follows the retirement of Staffan Söderberg, who 28 years ago co-founded the company that became Despec Sweden.
Lyreco confirms Germany MD
Lyreco has appointed Frank Exslager to lead its operations in Germany, succeeding Marc Gebauer who left earlier this year.
Exslager joined Lyreco in April 2021 and officially took over the reseller’s German subsidiary in August. In this role, he is also responsible for the former Staples Solutions business in Germany following the departure of Christian Grosse. This entity now trades as Lyreco Advantage.
Michael Voll
Frank Exslager
Independent Suppliers Group (ISG) and the Education Market Association (EDmarket) have created an education industry purchasing consortium called EDmarketplace powered by IS Contract.
Officially launched at Charles Forman
the EDspaces event in early November, the initiative encompasses educational furniture and fixtures sales, marketing, and technology purchasing capabilities. It is designed to provide a platform that, on the front end, facilitates product and inventory searches, and cataloguing for dealers and manufacturers, while managing administration, billing and receivables on the back end.
“The combination [of ISG and EDmarket] will give dealers the flexibility they need to continue to compete more effectively in the education furniture category,” noted Charles Forman, EVP of Sales and Marketing at US dealer organisation ISG. Office Products Women in Leadership (OPWIL) has announced it is taking a new direction by becoming a ‘social organisation’.
OPWIL was co-founded in 2008 by Kathy Hoyle of Hoyle Office Solutions and K Coaching’s Krista Moore. Their vision was to address the need for women in the office products industry to more easily network, collaborate and grow as leaders in a traditionally male-dominated industry.
Since then, it has operated as a non-profit entity, benefitting its executive members through mastermind groups, educational events, workshops and retreats, for instance. It has also supported the City of Hope cancer research programme through fundraising and donations.
Going forward, OPWIL is opening itself up to more people by becoming a social organisation, a less formal set-up that will require no membership fees. The goal is to involve more women in the industry and encourage growth and leadership.
More details about activities and OPWIL’s collaborative leadership structure will be available in due course.
IN BRIEF Emerald Brand in US supply agreement
Sustainable breakroom products manufacturer Emerald Brand has signed an exclusive supply agreement with US producer Tissue Plus (TP). TP will now act as a production unit for clients of Next Generation Solutions, Emerald’s sales and marketing arm.
The multi-year deal is for all production out of TP’s two facilities in Maryland and Maine, adding 5,000 tons of additional capacity in finished goods.
“This sales and consulting agreement will accelerate the production output that TP has on 12 lines of towels, tissues and napkins, […] securing capacity for all Emerald Brand Tree-Free paper products on the eastern seaboard of the US,” said Emerald Brand CEO Ralph Bianculli Sr.
Pilot reaches EMAS milestone
Writing instruments leader Pilot is celebrating ten years of achieving Eco Management and Audit Scheme (EMAS) certification. EMAS is a high-performance management tool established by the European Commission in 1993, and Pilot is one of just a handful of companies to be accredited for a ten-year period.
All activities of Pilot’s main European production site in Allonzier-la-Caille in France obtained EMAS registration in 2011. Since then, the manufacturer has increased the share of recycled materials in its products by 50%, reduced the amount of virgin plastic used by 80% and cut the energy consumed in making its iconic G-2 gel ink roller pen by 40%.
Essity to run hydrogen production pilot
Hygiene products manufacturer Essity is testing the use of green hydrogen at its site in Mainz-Kostheim, Germany, to run a paper machine CO2-free. The Tork brand owner is trialling to what extent green hydrogen can replace natural gas in the tissue manufacturing process without compromising product quality.
The €4 million ($4.6 million) investment will require rebuilding the facility’s largest paper machine. The plan is to run the drying hood on 100% green hydrogen by autumn 2022. Essity said the project would contribute to its goal of achieving net-zero emissions by 2050.
Special issue THINKING 86 New companies that joined Amazon’s Climate Pledge, JulySeptember 2021 56,7000 tonnes Reduction in use of virgin fossil-based plastics pledged by 3M, 2021-2025
Reckitt takes centre stage at COP26
Reckitt – maker of the Dettol and Lysol brands – was the official hygiene partner at the recent COP26 climate conference (see Hot Topic, page 24) in the Scottish city of Glasgow. Reckitt’s Pro Solutions team of virologists, microbiologists and medical scientists worked closely with the London School of Hygiene and Tropical Medicine over a nine-month period to support the United Kingdom Cabinet Office, the host of COP26.
Reckitt Pro deployed its largest-ever targeted hygiene programme to protect more than 25,000 delegates at the event. The project involved: • focusing on 12 key zones with 60 high-risk surfaces; • ensuring the disinfection of 123 office spaces, 99 large meeting rooms, 747 toilets and 694 washbasins; • carrying out 4,800 ATP swab tests on high-touch points; • providing each delegate with a hygiene pack.
PICTURE OF THE MONTH
Australia’s Officeworks is one of the country’s first retailers to support a new, UN-backed global climate change initiative – The Race to Zero Breakthroughs: Retail Campaign.
The goal is to halve greenhouse gas emissions by 2030 and achieve net-zero carbon emissions by 2050 at the latest.
Primo to exit single-use plastic business
Water delivery giant Primo has announced plans to exit its small-format, single-use plastic bottled water business for the North American retail channel. The product line includes 24 and 36-bottle packs, and one and 2.5-gallon (3.7 and 9.5 litres respectively) plastic jugs. Primo said the move will improve profitability and help it become more environmentally responsible.
Pentel launches plastic-free packaging
Pentel UK is replacing all its key blister cards with a range of plastic-free packaging made from 100% recyclable cardboard. One challenge in developing the new format was to make the products visible to retail customers. Pentel overcame this by creating an angled aperture that allows consumers to see how many items are in each pack and to identify the ink colour of the pens.
The new packaging is the same size as the previous blister cards, which means it will not affect retailers’ planograms. It also comes with strong branding and prominent messages about recycled product content, designed to attract attention and generate swift purchasing decisions.
$80 million Investment by HP Inc in expanded WWF partnership, October 2021
Epson converts to renewable energy
On 1 November 2021, Epson became the first company in the Japanese manufacturing industry to convert to 100% renewable electricity – amounting to 530 GWh a year – for all its domestic sites. As a result, Epson said it would reduce its annual CO2 emissions by 25,000 tonnes.
In the current financial year ending March 2022, around 40% of Epson’s power needs will come from renewable sources.
