Prior to this week’s IBM Smarter Commerce Summit, Supply Chain Matters posed the question as to whether IBM has upped its game in B2B and supply chain technology solutions.  After two days of sessions, we found evidence that many of the end-to-end pieces of supply chain and Omni-commerce vision are beginning to fall into place but the roadmap to customer availability needs further acceleration. For that matter, clearer roadmaps would greatly assist.

To refresh our reader’s awareness, IBM has invested upwards of $3 billion in strategic external acquisitions to build out the various components of the Buy-Sell-Service and Market capabilities that make-up the IBM Smarter Commerce portfolio. The effort began three years ago, while the first public market presence for customers was two years ago in the first of the series of summits.  Major acquisitions for the supply chain and Omni-Commerce aspect were Emptoris for the Buy segment, Sterling Commerce for the Sell and network messaging segment, ILOG for enhancing Buy, Sell and Service needs, DemandTec for pricing optimization and a whole host of specialized vendors for predictive analytics to name a few. This year’s summit introduced a major new element, the unleashing of IBM’s corporate research and development efforts in coming up with potentially breakthrough approaches for the online Sell and Service aspects.

Two years ago in the first summit, the overall messaging was clearly slanted towards a CIO and IT audience.  This year’s summit left no doubt in our mind that the IBM marketing machine can right itself to today’s changed market needs. The messaging and audience was targeted for line-of-business and solutions selling addressing business problems. IBM executives and product marketing now speak in the language of end-to-end supply chain. More subdued however was overt messaging related to public and private clouds buying options.

In our attendance at both general and executive briefings, coupled with some general sessions, IBM is on the way towards embracing the integration of the front-end selling to the back-end value-chain response.  The most premiere enterprise technology provider has also become more pragmatic regarding the reality that not all customers will be total IBM shops, and that there are the clear realities of prior investments in legacy ERP or best-of-breed software that needs to be enhanced. Keynotes during day one were broad and visionary while day two included more of the required end-to-end accounting of how each of the Smarter Commerce components can interact.

Our one on one sessions uncovered the internal IBM discovery of the key linchpin that enables tomorrow’s more responsive and adaptable supply chain, that being the information network the spans the entire supply chain.  In the specific case of Smarter Commerce, that discovery was that the many roads surround the capabilities of the Sterling Commerce messaging and information integration network.  What we assessed as Sterling Commerce capabilities three years ago have clearly changed, bearing the mark of additional IBM development resources. The voices of existing high profile and influential Sterling customers have added to these efforts.  We extend a shout out to that community for your openness and perseverance.

In the all-important area of supporting both direct and indirect sourcing and indirect procurement process and predictive analytics capabilities, our perception is that Emptoris is leading the charge up the value-chain to all important integration to Fulfill, Sell and Service. Our current perception is that Emptoris is further into this journey than perhaps SAP and Ariba. Emptoris is also reaching out to the broader elements of ILOG business rules, predictive analytics and other areas.  We secured a commitment from IBM executives to keep us updated on this roadmap journey and we look forward to a subsequent update in the fall.

The other area we would like to mention is IBM’s introduction of cognitive based computing, namely Watson and other components, into the Smarter Commerce portfolio. We witnessed some extraordinary demonstrations of a Watson learning system supporting customer service processes.  An application which IBM has named Augmented Shopping Advisor, developed by its research labs in Haifa Israel monitors consumer movements within a retail store via the presence of a mobile device, and actually assists consumers (with their permission) in making a smarter product selection.  IBM executives disclosed that the application was actually running in the vendor showcase area and monitored the various movements of attendees as to which patterns and which kiosks were visited.  The possibilities to integrate this capability for supply chain sensing of product demand and replenishment are exciting.  In perhaps the same context, if you believe that sales and marketing teams drive you crazy in product forecasting and integrating to a single product demand plan, wait to they get their hands on augmented shopping and online experience capabilities.

We have many more detailed notes to absorb and thus we close out this initial impressions commentary with our key takeaway.  You, the supply chain and Omni-commerce professional will have many more enhanced technology tools in your arsenal in the not too distant future.  The all important question, however, are which partners will you decide to invest in.

There are a slew of product announcements and studies that were spawned by this year’s summit and most can be viewed on the IBM Smarter Commerce Blog site.

Stay tuned for further Supply Chain Matters impressions from this year’s Smarter Commerce Summit.

In the meantime, if you have specific questions, send us an email or call.  Contact information can be found on our main web site.

Bob Ferrari

We all know that globally extended supply chains business processes add more complexity and added challenges to management processes.  More demanding customers and constant changes across business areas cause Sales and Operations (S&OP) teams to get involved in much deeper business scenario and project planning needs.  There are more frequent new product introduction cycles, constant fluctuations in customer product demand that is now focused for specific geographic markets and business processes need to be focused on supporting more supply chain responsiveness. At the same time, global operations imply a multitude of information sources spanning multiple software applications and systems spread across the value-chain. Supply chain and S&OP professionals are also much more mobile, finding themselves to be loyal members of airline frequent flyer programs as they visit multitudes of suppliers and trading partners.

Often, when senior executives poll their S&OP teams for options and timetables related to many of these challenges, there are often lag times as teams query multiple information sources and analyze all various options to make the most appropriate recommendation.  While the goals of the S&OP process and indeed the overall end-to-end supply chain are often focused on enabling more predictive capabilities to stay in-front of constantly changing business needs, challenges in finding and analyzing insightful information become bogged down in elongated information analysis and search for insights. If there was ever a business process capability that can best benefit from advanced analytical capabilities, it is managing the end-to-end supply chain.

The good news for manufacturers, service providers and retailers is that leading-edge software vendors who understand these supply chain decision support needs now “get-it”.  Newer, more analytically driven decision support and business intelligence tools are making their way to you, business end users.

Here are some examples of capabilities now coming to market just within the last few days.

S&OP process support provider Steelwedge announced this week the enhancement of process support capabilities adding a Steelwedge S&OP Insight module, powered by a separate analytics engine, that combines online analytics and planning to deliver contextual planning to analyze decisions related analysis of product demand segmentation, inventory segmentation or service level planning for key customers. We found, after witnessing a demo, a neat provision for customers to be able to add other analytical “apps” to these capabilities, and then incorporating them into the S&OP process. This is indeed a new opportunity area for S&OP teams to add more responsive analysis and decision support tools to their process framework.

Collaborative B2B execution provider E2open has this week announced the addition of E2 Rapid Resolutions, extending the E2open Business Network with cross-network prescriptive analytics for decision support.  This added capability leverages next-generation integrated data, process, and analysis across the end-to-end network for continuous monitoring, earlier detection, and faster resolution of supply chain disruptions. Supply Chain Matters will feature an additional commentary regarding this capability in a separate forthcoming commentary.

Response management and adaptive planning provider Kinaxis has added deeper analytical planning capabilities including the ability to present analytical planning and decision support information on mobile devices.

Here at the IBM Smarter Commerce Summit, Emptoris, an IBM Company has outlined its roadmap to build the one-stop information repository for procurement, adding broader analytical and decision support capabilities leveraging Cognos analytics capabilities.  IBM also announced that its Watson based analysis capabilities made famous in the Jeopardy game challenge, is now going to be directly provided in areas of customer service and support for manufacturers, services providers and retailers. IMB further announced support to leverage SAP HANA capabilities, particularly related to SAP APO, for those organizations utilizing IBM DB2 database technology.

The takeaway for our readers is that the community of technology providers focused on supporting supply chain and B2B support needs are now quickly responding with deeper business intelligence and predictive analytics support options.  Deployment options include cloud-based, hosted and behind-the-firewall.  Now is the time for your supply chain organization to have a strategy on how to best leverage the benefits of these tools. Your options are getting far broader.

Bob Ferrari

Disclosure: Both Kinaxis and E2open are named sponsors of Supply Chain Matters and clients of the Ferrari Consulting and Research Group.

An important news item coming from our attendance at this week’s 2013 Smarter Commerce Summit, was the release of IBM”s first Chief Procurement Officer (CPO) study. Readers familiar with IBM will note that the IBM Institute of Business Value has conducted ongoing high-profile surveys of various C-Suite executives which include the CEO, CFO and CMO. Readers can download this study at this web link.

This new CPO study surveyed over 1100 executives in 22 countries, thus it has important global scope. The primary headline from the survey findings is that companies defined as top-performing procurement organizations reported 13 percent higher profit and 22 percent higher product margins than lower performing organizations.

That conclusion should not be a surprise to other functional supply chain or product management teams.  CPO’s are well noted for their relentless focus and organizational zeal on corporate spend savings.

What Supply Chain Matters found of interest are the findings related to internal collaboration and leveraged use of analytics.  According to the IBM CPO study findings, the majority, over 80 percent of high-performing companies report that collaboration among internal departments such as IT, marketing, sales, and presumably product management and supply chain, is a reported key strength and an investment priority. Again, not a complete surprise since other studies related to top-performing supply chains continually point to high rates of internal and external focused collaboration.

However, in our travels, procurement teams do not on the whole tend to gain high marks concerning internal collaboration. Too often, leaning on executive mandates for cost savings tends to rule the conversation and indeed the opportunity for team synergies. This study points to the fact that greater gains are garnered by two-way collaboration.  Readers are invited to weigh-in on your own observations, but there is an obvious sign posts for CPO’s.

Another important finding in this survey noted that 73 percent of top performing procurement organizations are effective in gathering insights from the supplier base, compared with 16 percent for lower performing counterparts. Effective mining of information and supply insights are the obvious tools being unleashed by these top performing teams.

Other separate studies that we have reviewed and discussed with clients reinforce that procurement leaders remained concerned about gaining broader leadership skills, and at the same time, perceive skill gaps within their organizations regarding the comprehension and leveraged use of todays more sophisticated analytical and decision support skills.

Thus, survey data is reinforcing similar insights.  Procurement teams benefit more from enhanced internal communication, collaboration and cross-functional leadership.  They must also address the need to further skill their team members in awareness of the power of analytics and the mining of supplier and product insights.

Bob Ferrari

Today’s edition of the Financial Times features a headline article on the growing threat of organized cyber threats on corporate systems.  (paid subscription required or free metered view) It outlines how criminal networks have increasingly been stealing information and extorting money not to release that information.

One of the examples cited was a 2008 hacking attack directed at today’s global leader in contract manufacturing, Foxconn, who happens to be Apple’s predominant manufacturing services provider. The same contract manufacturer performs manufacturing for some of the world’s premiere high tech companies including Dell, HP, IBM and others. FT cites sources with direct knowledge as indicating that hackers breached the contract manufacturer’s email system to exploit Foxconn’s then head-to-head rivalry with battery maker BYD. Both companies at the time were intensely competing in the design and manufacturing of alternative energy components. The plan was apparently to blackmail both parties with the threat of releasing the hacked information, but was aborted. Both companies declined FT’s requests to confirm this attack.

The article also cites reports late last year that heavy machinery producer Sany hired hackers to spy on its industry rival Zoomilion.  Three Sany executives were arrested as a result of this case.

A supply chain risk mitigation plan needs to umbrella, among other areas, the increased threat of cyber information attacks.  As is often the case, the weakest links in global supply chains, namely supplier networks, can sometimes be the target of such attacks. Insure that your supplier audits involving strategic suppliers include some basis of insuring that adequate information security measures are in-place.

This week, SAP conducted its combined 2013 ASUG and Sapphire customer conference in Orlando and Supply Chain Matters was able to view some of the executive keynotes and theatre presentations.  This author has attended many prior Sapphire events, and thus has a context of where SAP has come in this event and how overall customer messaging has evolved. In the near past, these events tended to be large on vision but lacking in details for customers to get excited about.

When we shared our Supply Chain Matters perception of Sapphire last year, our headline was one of bold vision but confusing messaging. That changed this year, and we were pleasantly surprised with the improvement in customer messaging and the crispness of product direction and strategy.  Customers should be much more of ease that SAP is now getting its full act together and has obviously completed its homework.

Co-CEO Bill McDermott’s opening keynote that featured an entire sports business theme candidly did not hit the mark for us, but subsequent executive keynotes from Co-CEO Jim Hagemann Snabe and Board member and CTO, Vishal Sikka were crisp and focused.  Snabe outlined SAP’s strategic advancements in three significant areas:

1. The ability to bring data and information, both transactional and analytical, of large global and other companies into one area.  In essence, a declaration that SAP will support all applications and information intelligence from main memory, vesting improving response times.
2. Introduce innovative new applications that can leverage the power of SAP HANA, as well as the power of cloud and mobile computing. This was the opportunity to introduce the Sapphire audience to SAP HANA Enterprise Cloud, which we previously commented on.
3. Much more increased attention by SAP on the end-user experience and how users desire to interact with SAP applications, which was described as completely new thinking on the user experience. SAP now views its benchmark for usability to not be contrasted with other enterprise systems but to consumer software such as Amazon.com and others.

In the context of B2B and supply chain messaging, there was a real effort to have Ariba, SAP’s most visible B2B acquisition, and gain maximum visibility in conference presentations. Similar to what occurred after SAP’s same-year acquisition of BusinessObjects, there was all gloss, with no real substance in articulating for SAP customers the all-important progress being made in integration of all of SAP’s current sourcing, procurement, electronic invoicing and catalog support functionality, not to mention the overall direct material B2B networking support strategy timeline. The emphasis was more to have SAP sales teams selling the potential of Ariba vs. the all important questions of what does Ariba bring to my existing product supply chain landscape vs. general procurement process support needs.

We did have the opportunity to view a presentation anchored by Hans Thalbauer, Senior Vice President, Line of Business Solutions for Supply Chain.  That presentation provided a bit more clarity as to long-term direction setting, including some integration among and between Ariba and other existing SAP supply chain applications.  However, for us, the important news from Thalbauer was that finally, SAP will begin to deploy SAP APO (Advanced Planning and Optimization) on a HANA architectural platform.

Last year, what seemed little noticed was a passing reference by SAP Supervisory Board Chairperson Hasso Plattner on the ability to significantly accelerate the performance of SAP APO by leveraging HANA capabilities.  In April of this year, SAP quietly announced in a News Byte the planned availability of SAP liveCache technology powered by the SAP HANA platform.  SAP APO users know all too well that liveCache was SAP’s original manifestation of in-memory computing and that it serves as the foundation of all data brought into the application.  Users, however, had to often deploy instances of SAP Business Warehouse (BW) in their landscapes as a supplemental repository of the APO information that could not be supported by liveCache.  In its earliest days of introduction, it was often referred to as “live crash” because of its limitations.  That has since greatly improved but make no mistake, this move to HANA will be the most significant announcement in the history of SAP APO.

It now opens the door for the application to support both planning and predictive analytical capabilities along with a more compressed footprint of data and information. It should also enhance the overall scalability and response times of not only APO, but other supply chain support applications in the SAP Business Suite.

We heard encouraging words from some customer presentations regarding the building interest with the SAP Sales and Operations Planning Powered by HANA application. We were previously disappointed with the released functionality at the time of announcement but it appears that gaps are now being addressed by SAP development teams and key implementation partners.

One other noteworthy mention was a clarification we heard regarding the near-term availability of both the SAP Business Suite on HANA and HANA Enterprise Cloud offerings.  Apparently the initial released versions will contain limited supply chain management support applications and no initial Ariba support.  That will hopefully change in the coming months.

Supply Chain Matters will follow-up with a more detailed commentary regarding SAP in B2B and supply chain management support in the coming weeks.

Bob Ferrari

We call reader attention to a recently released research study from AlixPartners, that firm’s Manufacturing-Sourcing Outlook. This is the third consecutive year of publication of this report.

It warrants a read from supply chain, product management and sourcing leaders.

The report concludes that the United States has reached parity with Mexico as a preferred nearshoring location and that the U.S. is on-track to achieve cost-parity with China by 2015. There are, of course, important caveats to surround the assumptions of these conclusions.  The latter conclusion is consistent with the well cited 2011 research report by the Boston Consulting Group.  After reviewing all of them, Supply Chain Matters believes that they are reasonable and pragmatic including considerations for China’s wage inflation rates and sourcing switching costs. One of the other more important criteria are assumptions related to the cost of transportation, which AlixPartners viewed as currently favorable to outsourcing.  As we have noted in previous commentaries, international ocean container and air freight carriers are awash in excess capacity and need to recover eroding revenue streams by cutting capacity or service.

Some of the other important takeaways from this report are:

• Decisions related to nearshoring are now very top-of-mind; the report states that 84 percent of respondents indicate that these decisions are important, up from 53 percent last year.
• The majority of executive respondents surveyed expect to reduce total landed costs in the range of 5 to 20 percent.  An editorial sidelight, when this author led research 8 years ago related to decisions to source production in China, this same bandwidth of cost savings was cited.  Thus, thresholds of cost savings opportunities remain consistent.
• The cost gap concerning China and the U.S. has been closed, on average by 70 percent in specific product categories that AlixPartners analyzed, which included fabricated parts, assemblies and consumer products.
• A caution that China still maintains an advantage of scale, and will aggressively protect its existing manufacturing capabilities.  We would add the caveat that protection should be assumed in defined strategic industries within the current five year plan for China.  That includes growth industries such as high tech and consumer electronics, alternative energy, medical and healthcare products and other strategic industries.

As we have also pointed out in our recurring commentaries, supply chain teams should expect more leveraged use of robotics and factory automation across China as it responds to these current global economic shifts.

We all know that product sourcing decisions are strategic and often involve longer time horizons.  Therefore it is very appropriate for sourcing and product management teams to be broadening their horizons out to 2014 and beyond. That would include, by our view, some discussion in the Executive S&OP process.

If you are asked to support these efforts, keep in mind that sound analysis and insightful information will go a long way to insure that decisions on continued outsourcing or nearshoring are made with all the facts and with consensus assumptions. We remind sourcing and product management professionals to absolutely include the voice and insights of transportation, logistics and supply chain operations in these ongoing analysis and decisions.

The good news is that newer analytical and business intelligence technology tools making their way into mainstream use will greatly help in these efforts.

Bob Ferrari