Constant reminders of how difficult the planning and forecasting of product demand can be are ever present in today’s challenging economy.  While readers can often read and view webcasts, white papers and blogs focusing specifically on challenges presented in the consumer products industry, there are many unique challenges in other industries as well. I provided some summarized take-aways outlined in a good article on this subject in a recent post.

Within the high tech and consumer electronics industry, recent quantitative market updates bring forth the true picture of these challenges.  According to press release from market researcher IDC, global shipments of personal computers demonstrated their first decline since 2002, declining 0.4 percent in the October-December quarter, and sinking 3.5 percent in the U.S. IDC indicated an overall 10.5 percent increase in global unit demand for PC’s in 2008. “Despite market optimism early in the fourth quarter, the pace at which the economic environment unraveled and the extent to which PC purchases were affected was faster than anticipated.” stated IDC in its opening statement, a clear indicator of how sudden changes continue to occur in our current worldwide economy.

In contrast, market researcher Gartner Inc., obviously utilizing different market sizing assumptions, indicated there was a 1.1 percent increase in global quarterly shipments and a 10.1 percent decline in U.S. shipments.  Beyond the obvious differences in the implications of these market performance numbers, planners will also need to dive into the details in order to get a true picture of what’s going on in the market, and more importantly, how to effectively plan for product demand in the coming months.  In fact, reported global shipments for each of the PC providers indicate highly contrasting market performance, ranging from a 25.3 percent increase in shipments for Acer, vs. a 6.3 percent decline for Dell.  Thus, while overall market demand may be starting to decline, existing or future demand is more related to specific products that are being positively accepted by consumers or rapidly changing demand patterns that are specific to certain geographies.

Meanwhile, the video game business continued to be a bright spot.  Even though growth slowed somewhat in December, U.S. retail sales of video game consoles, games and accessories amounted to nearly $18 billion in sales, with monthly sales surpassing the $5 billion mark for the first time.  Here again, specific brands and certain game titles demonstrated far different pictures of product demand.

These updates provide more reminders of the existence of high demand volatility in multiple industry settings, as well as the need for companies to be more demand vs. forecast-driven in overall planning. Regardless in what industry you reside, and especially in high-tech, planning and forecasting of demand in this unprecedented economy requires both the ability to dive much deeper into the numbers to ascertain demand patterns for specific products and/or features, as well as the ability to quickly sense at the most detailed level, any changes in demand, as they occur.  The numbers can also uncover potential new market opportunities for your company.

There is no doubt that sensing specific demand patterns within this economy can no longer be accurately accomplished utilizing general or mere spreadsheet forecasting techniques. 

What’s your view?  Is your company experiencing this high rate of volatility in product demand?

Bob Ferrari

It seems one of the most repeated business stories these days has involved the health of Apple’s CEO, Steve Jobs.  Apple and Silicon Valley fanatics have been consumed for weeks with wanting to know the status of Steve’s health.  How can one individual have such a profound impact on one company? Yesterday’s announcement that Mr. Jobs has elected to take a six month leave of absence sent Apple stock into a tailspin, and has fueled even more buzz. Included in this latest announcement is a statement that Tim Cook, Apple’s current COO will assume the role of CEO while Steve recuperates. Over on the CNET Apple blog, Tom Krazit pens that media and bloggers have crossed the line regarding speculation of any individual’s health.  I totally agree.  Rather than add one other Steve Jobs commentary to this litany, let’s a supply chain perspective of this situation.

It’s no secret that Apple has risen to the top of most every industry analyst’s rating of most innovative supply chain.  I myself began to cite Apple’s excellence in 2005, before AMR Research’s recent anointment of Apple as number one rating in its latest Top 25 Supply Chains Rating.  In 2008, I’ve penned six different posts citing Apple’s supply chain competencies. From my perspective, the fact that Tim Cook, an experienced supply chain executive, will be the interim leader should be no concern whatsoever.

An article penned by Brandon Bailey in SiliconValley.com summarizes a consensus view that Mr. Cook has the right qualities to lead Apple for the next five months. Mr. Cook was recruited in 1998 to overhaul the company’s manufacturing and distribution processes, which had many challenges at the time.  He has been widely credited with successfully transitioning production to contract manufacturers, streamlining production systems, and driving today’s efficiencies that we observe in Apple’s highly outsourced supply chain.  Tim Cook’s management competencies lie in operational and supply chain excellence, and what’s wrong with that?  The path of Apple’s product innovation is already set, and I would argue that in this unprecedented turbulent economy, a focus on execution and cost effectiveness may be just what Apple needs over the coming months.

It will be great to observe a solidly grounded supply chain executive lead Apple.  The secret of Apple’s ongoing success is not only in the marvelous creativity of its products, but also the capabilities of its supply chain.  If you believe as I do that cutting your teeth in supply chain is a great proving ground for “C-level” success, than rest easy.  All will be fine.

Bob Ferrari

Just about a week ago, I alerted Supply Chain Matters readers to the ongoing investigation by the U.S. Center for Disease Control of a human outbreak of infection due to Salmonella serotype Typhimurium. At the time, 388 persons were identified as sickened, with ongoing investigations from multiple agencies to determine the cause. As of today, the number of reported sick has risen to 430, and five deaths have been reported across three states (Idaho, Minnesota, and Virginia).

It has not taken long to now identify the potential cause of this outbreak linked to peanut butter.  Virginia based Peanut Corporation of America (PCA), which distributes its peanut butter in bulk to institutions, private label food companies, and other food producers, issued a nationwide recall on January 13^th for 21 lots of peanut butter made since July 1 at its plant located in Blakely Georgia.  PCA utilizes the brand Parnell’s Pride in its institutional products, and is also sold by the King Nut Company under the name of King Nut, An open container of King Nut peanut butter in a Minnesota long-term care facility was found to contain the strain of salmonella.

While FDA and media reports continue to stress that none of the recalled peanut butter is sold to end consumers in retail stores, the implications of the potential contamination will echo through various food production supply chains, and indirectly impact consumers.  The first indicator is that The Kellogg Company announced a precautionary hold of the sale of a variety of its Austin and Keebler branded peanut butter cracker  sandwiches.  Consumers and retail stores are being asked to hold onto the Kellogg products, but not eat them, until the investigation is complete.

We need to applaud PCA and King Nut for their prompt and proactive actions in voluntarily recalling their institutional products.  I especially applaud Kellogg for taking bold action to not only protect consumers, but proactively respond to a supply chain risk situation.  Crisis what-if, and business continuity planning are important tenets of an effective supply chain risk management plan.  This ongoing situation is yet another opportunity to observe these plans in action.  Other consumer product companies utilizing peanut butter or paste should focus upstream and proactively act.  Consumers and customers should be your first priority.

Bob Ferrari

It is my sincere pleasure to introduce my readers to our first 2009 sponsor of Supply Chain Matters, Kinaxis. I’ve had the opportunity to follow this company since its inception as a software vendor named Webplan in the late nineties.  At the time, the company founders recognized a glaring need in supply chain planning, namely that as more and more high tech manufacturers were outsourcing production to globally-based contract manufacturers, traditional MRP planning cycles could not quickly and adequately plan external planning requirements.  The fact that its original customer base resided in the high tech industry brought a set of application design principles reflecting supply chain performance predicated on how fast and how effective these companies could respond to a rapidly changing set of demand or supply events. A remarkable set of success stories and a prestigious customer base have occurred since that time.

A testament to its technology is that Kinaxis has now grown its customer base beyond  just its high tech vertical roots.  Named customers such as Avaya, Cisco, Jabil, Research In Motion (RIM), and Teradyne, are now joined by other industry players including Casio, Cannodale Bicycle, General Electric Aviation, MTD, Nikon, and Raytheon, among others.

The Kinaxis RapidResponse technology  that is available today is the result of many years of functional improvements, but still relies on a core principle of rapid planning and ease-of-use among the many functional groups that need to collaboratively perform supply chain planning and response activities.  The application is available either in a traditional on-premise or on-demand hosting alternative. Its strengths lie in concurrently planning supply chain wide production operations among globally sourced operations.  RapidResponse elegantly integrates data from existing ERP or supply chain systems, monitors real-time customer demand, and enables key individuals with the ability to run various scenarios of appropriate response.  Users are alerted to unexpected events much sooner, and can respond to exceptions in a much more timely manner. Earlier this year, Kinaxis augmented its capabilities with the release of new demand management functionality to support the challenges faced in near-term operational  changes that typically occur in a sales and operations planning (S&OP) planning process.

I am very pleased to have Kinaxis included as a sponsor of Supply Chain Matters and look forward to a continued joint collaboration of thought leadership and commentary. If your organization is in need of extended supply chain visibility and response capability that can be implemented in a very timely manner, I would recommend that you place Kinaxis on your short list.

 Bob Ferrari

This post is a reminder to my readers that Alexander Hamilton Financial Technologies has asked me to conduct a two day training workshop on the critical topic of Global Supply Chain Risk Management. This workshop will be conducted on two different dates, January 26-27, 2009 in Saddle Brook New Jersey, and February 18-19 in Schaumberg Illinois. I designed this workshop to appeal to a broader audience, especially functional managers who may reside in Finance, Product Management, Marketing, or others who are concerned about their company’s exposure to supply chain risk management.  There will also be appropriate content for supply chain professionals including Procurement, Planning, and Operations professionals.  You can view all of the course details and registration information at the following link.

Once again I realize that in these very challenging times, attendance at workshops may be very difficult to justify, but this is such an important topic that we decided to move forward in scheduling.  A supply chain disruption has the potential to have severe consequences to the bottom line, or even the brand.  We purposely selected cities with high concentration of interested companies and where attendees can more cost efficiently travel to the workshop by automobile.  If there is added interest, we can also extend the scheduling to other dates in 2009. Please join me on either of these dates for a lively and valuable session that will benefit you and your company.

 Bob Ferrari