It is my sincere pleasure to announce that BIQ has elected to become a sponsor of this blog, and we welcome Eric Strovink and his able team to the Supply Chain Matters thought leadership community.

BIQ technology can best be described as self-enabling business intelligence and insight.  Founded in 2003, BIQ’s business premise is that business analysts need a powerful transactional data analysis tool that they can operate on their own, without the burden of long-term licensing commitment.  The tool needs to be flexible, yet powerful enough to analyze difficult or complex problems. BIQ’s marketing message notes that the company is entirely focused on making users of BIQ technology the smartest people in the room by providing the most advanced analysis system, which is a fairly clear and simple statement of this vendor’s capabilities.

BIQ offers a rather flexible deployment model which allows customers the ability to utilize a ‘pay-as-you-go’ arrangement, which greatly helps in the justification and benefits derived from use of this technology.  This is quite a refreshing change from having to lock-in a long-term commitment. We have often noted that with the increasing complexity involved in supporting global-wide supply chain activities, knowledge management becomes a rather critical competency, and BIQ supports this capability.The application of BIQ’s technology lies in many different areas of supply chain and procurement business processes, the most obvious of which is procurement spend analysis or discovering cost savings opportunities. In my recent discussion with Eric, he mentioned a broader array of use cases including the analysis of customer demand, aftermarket service and inventory needs, and other areas.  One of the most obvious testimonials to the power of the BIQ analysis engine is that many consultants and systems integrators utilize the tool in their ongoing consulting engagements, and their clients will often adopt the tool for ongoing use.

Please join me in welcoming BIQ to the Supply Chain Matters sponsor community. Take a moment to explore BIQ’s capabilities.

Bob Ferrari, Executive Editor

I was very pleased to have the opportunity to be a guest blogger and contribute commentary to the Value Unchained community of followers hosted by Supply Chain Matters sponsor ModusLink Global Solutions.

In my guest commentary, I contrast the challenge related to sustainability strategy deployment across the supply chain, and important considerations in alignment of so-termed green or sustainability supply chain strategies with contributing benefit to overall business strategies.

You can view this posting at the following Value Unchained link.

Bob Ferrari

Today’s Financial Times features a rather timely article, Glut warning for China’s auto industry, (free sign-up account may be required) which notes that there is currently fierce debate occurring whether China’s auto industry is marching to a serious problem of overcapacity.  A top Chinese government official has warned recently that current industry investment targeted to collectively reach 31 million vehicles by 2015 may not only lead to significant overcapacity, but also a glut in the global markets which may lead to negative market competitiveness.  This challenge is not a new one when it comes to China’s industrial policy, and again uncovers a fundamental flaw in China’s overall global supply chain strategy.

The issue of build-up of overcapacity is not new to China.  In 2006, and again in 2007, as a global supply chain industry analyst for IDC, I warned of impending overcapacity that was being set in motion across China’s iron and steel and high tech industry sectors. This ultimately led to products being dumped in other global markets including the U.S..

China’s manufacturers aggressively compete with one another for industry and capacity presence with a notion that capacity is king, and it is better to have capacity than potentially losing an order because of lack of readily available capacity. This strategy raises considerable fears in the broader global supply chain community as to whether Chinese industry is really planning for increased dominance in world markets.  As the FT article also notes, the Chinese government is influencing the formation of ‘four large state-owned national champions’ producing 2 million vehicles per year, and four more companies producing 1 million each, for a total capacity of 12 million vehicles.  Consider, too, that at its height, the North America auto market peaked at 16 million, and of late is struggling to achieve a momentum of 11 million in vehicle sales.  North America auto sales are also heavily facilitated by consumer credit arrangements, whereas buying an anything with credit is often an anathema for many Chinese consumers.

I believe that this continuing trend uncovers a significant flaw in China’s overall supply chain philosophy, always having a China centric capacity strategy.  While other global providers try to balance a combination of low-cost sourcing and near-shoring production strategies, China insists on a ‘made only in China’ type of strategy across many of China’s growth markets which worked fine for Japan many years ago when energy and transportation costs were more stable.

Will China’s emerging middle class become affluent enough in the next five years to buy 31 million vehicles annually, many of which are high-end brands?  Would it not make sense to balance domestic and potential export market needs by practicing a smarter strategy of balancing domestic and outsourcing capacity considerations?

The Chinese government is right to be concerned with Chinese owned auto makers marching to this over optimistic scenario of domestic and  global manufacturing capacity.

What’s your view?  Are Chinese auto manufacturers properly positioning to support China’s future auto buyers, or are there grander visions?

Bob Ferrari

The following posting can be viewed and commented upon on the Kinaxis Supply Chain Expert Community web site.

At the recent Emptoris Empower conference, I had the opportunity to view an interesting presentation delivered by Kevin Keegan, Director at PRTM Management Consultants. The presentation really caught my interest because it included a recent PRTM survey of what’s on the mind of the Chief Operating Officer (COO) in positioning global supply chain process capabilities for the next two years.

The survey itself, titled Global Supply Chain Trends, Are Our Supply Chains Able to Support the Recovery, was rather timely and involved the views of 300 COO’s across multiple industry settings.  It took place in late spring and early summer of 2010, which would have placed the context of the COO agenda more toward moving beyond the effects of the global economic recession of 2008-2009.  The full report can be downloaded at this link.

The survey’s principal focus was to ascertain what supply chain capabilities will be capitalized upon in the coming months.  The summary conclusions were not at all surprising and fairly consistent to what I’ve been feeling and sensing:

• Volatility and uncertainty have permanently increased in many industry settings, and the COO seeks a more market dynamic, demand sensing, cost-optimized supply chain configuration
• Top-line revenue growth requires a global customer and supplier presence
• The existing supply chain organization is not truly integrated or empowered
• Managing supply chain risk involves the complete end-to-end supply chain

The most important conclusions drawn from the survey results point to three key enabling strategies that COO’s want by 2012:

Today              2012

Joint planning with key customers                   35%                  53%

Improved sensing of demand                         22%                  47%

VMI services provided by suppliers               25%                    44%

VMI services provided to customers                13%                    29%

Yet, in the category of exhibiting real-time planning and execution capabilities, the responses were flat at 44%, and data capture at point-of-sale showed some slight improvement, 25% today vs. 33% by 2012. The PRTM conclusion was that the emphasis in the slash and burn cost strategy seems to have subsided, and that is certainly the good news. Another key PRTM conclusion is that the supply chain process perspective now shifts toward improving customer access, increasing upstream and downstream flexibility and improving the overall accuracy of supply chain planning.

My reaction to this latest PRTM study is that we, as a community, are not educating the COO as to the most important capabilities needed to enable this agenda, namely more business intelligence and what-if analysis capabilities.  It just does not seem to show-up in this and other survey data I’ve been seeing.

There are also some other messages here about the continued importance of management education, and positioning an integrated sales and operations planning (S&OP) process as a key mechanism for facilitating improved access to both customer and supplier needs.  Managing senior management education includes an agenda of why previous investments in transaction centered supply chain planning automation fall short in added capabilities for supplier and customer engagement, synchronization and business intelligence.  It is not a question of why didn’t we get this from our ERP vendor, but rather how we get the process enabled with different, forward-looking analysis capabilities.  I’ll cite one powerful analogy I often heard from Jake Barr of Procter and Gamble.  If you are driving down the road, and storm clouds are threatening, do you drive by looking in the rear-view window to ascertain what landmarks just passed, or look through the windshield to ascertain what direction you are headed.  Today we can add yet another addition to that analogy.  With the advent of GPS in our cars, we let the system suggest the best routes for reaching our destination, given certain weather and traffic conditions.

The question however remains- are you educating your COO on what is really required to insure improved customer and supplier access as well as improved supply chain accuracy. Educating on the differences between transactional oriented vs. business intelligence, S&OP enabling and what-if analysis capabilities is the proper context to enable the 2012 agenda.

Bob Ferrari

I had the opportunity to attend the annual Emptoris Empower 2010 customer conference held in Boston this week. Overall it was an interesting and well attended event that provided some significant announcements and certain considerations for the installed Emptoris customer community.  I was pleased that I attended.

This strategic sourcing, procurement and contract management technology provider has been on a roll of late, taking maximum advantage of the need to control material costs across many industry settings, and that was certainly reflected in the communication from CEO and President Patrick Quirk.  He noted a 91% improvement in sales bookings growth during the first half of 2010 with more than 100 customers going live with Emptoris applications. The two biggest competitor’s for Emptoris are of course  Ariba and to some extent, SAP. Since Emptoris is a private company, actual revenue numbers are not shared, which is somewhat of a shame, given this type of momentum in a slowdown economy.  Quirk described the past year as one investing in the company, its relationships, and the customer community. He also described the company as embarking upon a global presence with new and planned presence in many new countries and geographic regions, including Latin America.  Emptoris already has a significant presence in China and India.

Among the multiple announcements made in conjunction with the conference, the most significant  in my view, was that Emptoris has signed a global agreement with SAP regarding the use of SAP Business Objects technology for business intelligence reporting and analysis needs across the Emptoris suite of applications.  I suspect a good majority of Emptoris customers also have SAP installed, and that most likely drove the decision to go with the Business Objects decision.  No doubt, the IT communities among these customers will be pleased with this decision, from an overall integration perspective.  The announcement, in my view, is also reinforcement that Emptoris is responding to customer feedback, namely that data mining and business intelligence needed to be enhanced across the entire suite. There was however no mention of any SAP attendance at this year’s conference, which perhaps is understandable, given that SAP has its own offering of sourcing and procurement technology.

The keynote and customer presentations were all rather informative, but by far, the most interesting and thought provoking was delivered by Geoffrey Moore, author of ‘Crossing the Chasm’ and ‘Inside the Tornado’.  Every time I get the opportunity to hear Moore, I come away with a much better understanding of the big-picture as it relates to business and consumer information technology trends, and my sense is that I was not alone.  Moore spoke to the profound changes occurring in “Systems of Record’ or traditional ERP applications and “Systems of Engagement”, which are evolving person related applications. I will be posting a separate commentary related to this presentation.

Other very informative presentations from my perspective were delivered by Cardinal Heath Inc., Novartis, and United Health Group,  Both Accenture and PRTM shared rather interesting and updated research data on the state of procurement and supply chain risk management across industries, which we will also provide commentary in a separate posting.

Regarding Emptoris itself, a new and transformed management team has been clearly focused on getting closer to customer needs, while making implementation of its technology easier for customer to navigate and manage.  A five step transformation framework was adopted and I was not able to discern specific customer feedback on the benefits thus far.  I suspect that is because this methodology is rather new.  The current Emptoris product release is Emptoris8, but from the presentations I attended, there have been some scalability issues which Emptoris product development teams are addressing. Last year, the company acquired the former Click Commerce contract and service management business which is now re-branded as Emptoris Services Procurement, and after sitting in on the product development session, my sense is that more important functionality will come in future releases.

Some final thoughts relate to other observations.  There has been some debate regarding current customer preferences in deployment options for Emptoris software, specifically whether traditional license of Software-as-a-Service has been garnering the most attractiveness for current deployments. Some of this debate naturally relates on the fact that competitor Ariba tends to favor the SaaS approach.  The feeling I got was that behind-the-firewall or private cloud continues as the preferred option for Emptoris customers.  In the area of sourcing and contract management, it seems that companies are much more sensitive toward keeping confidential and legal content data behind the firewall.

Bob Ferrari