We continue with ongoing Supply Chain Matters commentaries regarding the supply chain impacts of Hurricane Sandy as it continues to impact the Northeast portions of the U.S. Prior commentaries can be viewed here and here.
Today, news and social media has provided stark visual images of the initial destruction across states such as New Jersey, New York, Connecticut and other Northeast states. The death toll has surpassed 80, tragic on its own, but could have been far worse given the sheer scale of this storm. Buildings with back-up generators have come to discover the weak link, placement on ground level when flooding compromises reliable operation. Newark Airport began very limited service today while LaGuardia Airport is expected to open tomorrow for limited activity. Rail, air and surface transportation has also begun to recover but there is much backlog and highly congested roads and many infrastructure issues to overcome. Initial reports from oil refineries in the path of the storm thus far indicate no major damage, but operations have not resumed.
As the supply chain impacts of the Hurricane Sandy continue to unfold, some thoughts are worth reflecting upon.
Supply chain risk mitigation includes both anticipating a major disruption event, along with the actual response to the event. Already, there are stories being shared as to how food and medical supply distributors, home improvement retailers and transportation providers had pre-positioned resources and teams prior to the actual impact of the hurricane, and how those positioned resources are being dispatched.
The busy holiday buying season is just upon us and supply chains were already in a high level of inventory positioning and sales channel deployment. Transportation carriers were starting their ramp-up, and in the case of ocean, inbound containers are already inbound.
Over the coming hours, days and weeks, supply chain teams will again be called upon to redirect resources, respond to urgent customer or supplier requests, react to an unforeseen glitch brought about by overtaxed networks, or seek alternative supply on an urgent basis. The challenge differentiation, speed and effectiveness of the responses will ultimately be determined by those organizations that made a concerted investment in supply chain risk mitigation and response processes and tools.
Supply Chain Matters will continue to focus our coverage of this incident with sharing the learning and key takeaways for business management and supply chain teams.
Yesterday, a report published in Reuters indicates that supply chain technology and planning vendor JDA Software is exploring a sale. This report has been picked-up by a number of other web sources.
The report which originated from Reuters in Bangalore notes that according to sources familiar with the matter, JPMorgan Chase & Company has been engaged to advise on the process and that this process is already at an advanced stage. The report indicates that JDA has received interest from multiple parties, including private equity firms and strategic buyers.
This morning, Supply Chain Matters directly reached out to sources directly within JDA and has received a “no comment” response. A lack of full denial usually indicates that there may be some substance to the report.
We have also been contacted by IDC media for additional background comment that is now featured on Computerworld. Our first reaction to this report was surprise, given a number of ongoing developments concerning JDA. In August, in response to an inquiry from the SEC division of Enforcement and Corporation Finance, JDA had to restate its financial statements for the year ending December 2011. Yesterday, JDA was scheduled to formally announce its fiscal third quarter quarterly earnings but that was postponed until November 5, because of the severe storm impacting the Northeast and the subsequent closing of equity markets.
When we attended the annual Focus customer conference in May, JDA announced a strategic shift in product strategy with the introduction of the JDA Cloud platform. That was communicated as a multi-year journey. JDA was just beginning to provide customers a unified offering after finally assimilating its 2010 acquisition of i2 Technologies.
JDA would be an attractive catch for a couple of reasons. Over 75 percent of the company’s existing customers stem from manufacturing-centric supply chains. Of late, JDA has made a more concentrated focus on retail and online fulfillment supply chain support, augmenting replenishment, merchandise planning and integration of supply chain with online multi-channel commerce needs. During Focus 2012, analysts and influencers were provided a demonstration of JDA 3D, a virtualization of a store shelf that integrates directly with back-end supply chain support capabilities.
JDA customers will have to digest this latest news with patience and await further news. Our gut feel is that further news is imminent.
Hopefully, JDA will not repeat a prior tendency to pre-announce a strategic intent, as it did with the i2 Technologies situation, only after having to go back to the drawing board.
Supply Chain Matters continues with its featured market education series of commentaries directed at the goal of providing broader education to the concepts, business benefits and capabilities being articulated by industry supply chains in their evaluating and deploying of Supply Chain Control Tower initiatives.
The goal of this series is to provide broader education for our readers by featuring interviews with those closest to this emerging area of interest. Our interviews include technology and service providers along with supply chain functional teams evaluating the deployment of control tower capabilities.
In light of this week’s unprecedented storm impacting the entire U.S. Northeast, this topic and the capability remains very timely.
In this posting, we provide highlights from an interview with Rich Becks, General Manager, High Technology Business Unit at E2open, Inc.
Question: How would you describe the current market and/or customer interest level regarding Supply Chain Control Tower capabilities? Are current interest levels coming from specific industries or specific supply chains?
First, I think it’s important to define what we mean by “Supply Chain Control Tower.” The ongoing conversations I’ve had with supply chain practitioners have made it clear to me that today’s top manufacturers and brand owners aren’t in the market for a single, “cure all” product. Rather, they are interested in developing a core competency in end-to-end collaboration and process management that will enable them to make the best decisions based on the best available information. Within this framework, Supply Chain Control Towers should provide real-time transparency and exception management, tools for operational and financial evaluation of potential course corrections, and an integrated system for decision execution.
Interest in Supply Chain Control Tower functionalities is building quickly across a spectrum of industries. The utility and telecommunications industries have been using Control Tower capabilities for years to monitor the ongoing “health” of their networks. Chemical companies and process industries have relied on similar capabilities to manage equipment and formulation steps—either centrally or across complex manufacturing operations.
The current wave of Supply Chain Control Tower implementations is largely concentrated (although not exclusively) among high tech and telecommunications equipment providers that are trying to solve multi-tier visibility problems. We are also seeing a great deal of interest coming from more traditional industrial and consumer packaged goods (CPG) companies as they struggle to expand their supply chain footprints globally.
Question: Are current interest levels stemming primarily from supply chain functional teams, their associated IT teams, or both?
Interest is definitely coming from the supply chain functional teams, and they’re looking for support from IT. But because IT organizations aren’t traditionally close to supply chain issues and systems, it can be difficult for the functional teams to gain traction with their IT counterparts.
That being said, one effective way to create better alignment is to frame the conversation in the context of IT network management. After all, these IT organizations manage complex, multi-national networks of ERP and best-of-breed functional applications—and they certainly don’t do it via spreadsheet, phone, and fax! The best supply chain-IT partnerships are developed around a shared understanding of the complexities and interdependencies of modern network management, whether the network is within or outside the four walls of the enterprise.
Question: What advice can E2open share regarding how firms can best be prepared for a Supply Chain Control Tower roadmap initiative? Are there important organizational, change management and IT implications that firms need to be cognizant of?
Ensuring cross-functional alignment and partner adoption is critical to the long-term success of any Supply Chain Control Tower program. While most supply chain practitioners will tell you that SCM is an inherently multi-functional discipline, few organizations take advantage of cross-functional teams when it comes to resolving critical supply chain problems. For Control Tower programs to be successful over the long term, full-time representation from the planning, order management, order fulfillment, and logistics functions—as well as members from key trading partners—is imperative. Furthermore, this dedicated team needs the authority and proper escalation procedures necessary to make final decisions and ensure expediency.
When laying the foundation of a Control Tower program, it is also useful to anticipate the development of multiple “segments” of customers with different levers for course corrections. Some customer segments may value responsiveness over cost and efficiency, while other segments will always consider efficiency to be most critical. Control Tower programs can provide the level of granularity and configurability needed to more effectively meet the needs of a diverse customer base.
Finally, I would emphasize the importance of developing an exception management framework, which should outline the metrics to be tracked based on business needs, the tolerances that trigger alerts, and the workflows that implement corrective actions. A continuous improvement mindset is also critical to ensure that the exception management framework is assessed and improved on a regular basis.
Question: When supporting an overall Supply Chain Control Tower business process and technology enablement roadmap, what are the top three areas that customer implementation teams should focus on to ensure a successful rollout?
(1) Define a strategy and set expectations. Before tackling specific operational and technology issues, define the scope and objectives of the Control Tower project. Involve cross-functional stakeholders early on and set realistic expectations. For each stakeholder, try to answer the questions, “What’s in it for me?” “Why should I be invested in the long-term success of this program?” Outline a plan to onboard partners to the program in manageable “waves” based on similar geographies, maturities, interest, or willingness.
(2) Lay a solid foundation. Successful Supply Chain Control Tower initiatives are built on, and sustained by, good information. In the context of global manufacturing, that means having reliable access to real-time, cross-network data. This class of information begins with a solid, scalable integration platform that connects all trading partners in the extended network. From E2open’s perspective, the cloud serves as the perfect environment for this type of connectivity, offering fast, cost-effective integration regardless of the geographic location or technical sophistication of individual participants.
(3) Leverage the collective brainpower of the network to make decisions—and then execute! Once timely, end-to-end visibility is established, the focus shifts to problem identification (and ultimately, resolution). Control Towers should provide a collaborative platform—plus automated processes and workflows—to enable cross-functional team members to work proactively with external partners to resolve the most pressing issues. The most sophisticated Control Towers will provide real-time dashboard visibility for multiple partners—as well as cutting-edge analytics to assess the operational and financial impact of changes, and “what if” decision support to preempt issues or resolve problems rapidly.
We want to thank Rich for taking time from his busy schedule to participate in this Supply Chain Matters market education series. Readers can view an additional video perspective on overall capabilities delivered by supply chain control towers by visiting the E2open web site.
If readers have specific thoughts and/or needs in the area of control tower initiatives, or if your organization wants to contribute to this market education series, please send us an email: info <at> supply-chain-matters <dot> com.
Past interviews in this this education series can be accessed by double clicking on the below web links.
Bob Ferrari, Executive Editor
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters Blog.
This commentary is an initial preliminary update after our initial alert regarding the supply chain impacts of Hurricane Sandy as it continues to impact the Northeast portions of the U.S.
The storm itself was massive and met initial reports of being unprecedented in terms of scope and impact. Sandy made landfall off the coast of New Jersey at about 8pm eastern with storm related effects extending up to 1000 miles from the center of the storm. As expected, after traveling parallel to the U.S. east coast, it suddenly turn westward and accelerated speed, packing sustained winds of 90 miles-per-hour with higher gusts. The coastal regions of New Jersey and New York suffered the greatest impacts, with reports of up to 12 inches of rain impacting the immediate coastal areas when the storm came ashore.
At midnight, a storm surge estimated to be 9-12 feet inundated lower Manhattan, flooding streets, businesses, and the underground subway system. Six tunnels that provide access to the city have been flooded and need to be pumped out, while suspension bridges need to be inspected. Government officials indicate that it will take at least a week, if not more, for the city to fully recover. The New York Stock Exchange remains closed for a second day, something that has not happened since the late 1800’s.
The governor of New Jersey described his state as in “total devastation”, with rescue and recovery efforts underway. As of this morning, millions of customers across the Northeast remain without power including 2.4 million customers in the state of New Jersey alone. According to this morning’s Wall Street Journal, some 20 percent of the U.S. population is expected to be affected in some way from the storm, with economic damages ranging from $10 to $20 billion. The storm itself continues on its inland path, bringing continued heavy rains and some blizzard conditions in high elevation areas of Pennsylvania and West Virginia.
As is usually the case, specific supply chain related implications will not be known until after various teams assess the full extent of their facilities and operations. As we noted in our initial alert, there are 5 east coast oil refineries directly in the forecasted strike zone along with petrochemical and pharmaceutical production facilities. The Mid-Atlantic and Northeast regions are also the epicenter for the seafood, poultry and other food related production supply chains, and also have a high concentration of product distribution facilities.
Transportation remains severely curtailed with airlines, rail lines, ports and other carriers suspending services until after the storm. Carriers are expected to suffer losses in the millions. UPS is reported to be re-directing incoming international airfreight destined for Philadelphia and Newark to its Louisville Ky. Hub. Major airports in the New York and New Jersey area, along with other east coast airports are still struggling to restore any sense of normal operations. Seaports from Virginia to Boston had suspended operations and the timing was not ideal, coming at the height of the current peak period for unloading inbound shipments of goods destined to retailers for the upcoming 2012 holiday buying season. CSX, the east coast’s largest rail freight operator closed tracks from Richmond Va. North to Albany NY informing customers to expect a minimum three day delay.
At 9am this morning, Supply Chain Matters surveyed major retailer we sites for indicators of disruption. Wal-Mart’s web site provided the most prominent and helpful information with Storm Alert information prominently displayed on its main page. The retailer indicated that 800 facilities along the eastern seaboard were in the path of the storm. As of 10:30pm Eastern time, last night, 267 stores remain closed with the Wal-Mart Disaster Response Center was in full alert. The WSJ quoted a spokesperson as noting that 282 truckloads of merchandise were dispatched to the impacted area with replenishment shipments that included generators, cleaning supplies, blankets and ready-to-eat foods. Wal-Mart has consistently responded in this manner, including the tragedy of Hurricane Katrina in 2005. In our view, Wal-Mart remains a benchmark for responsive response to supply chain disruption.
Target provided very little web site information and we had to dig to ascertain by our count, a listing of 111 retail outlets that remained closed because of the storm.
The web-site of home improvement retailer Home Depot provided limited information as to status, which is unusual since the Depot has demonstrated previous excellent response capabilities. We had to dig deep into Lowes’s web site to ascertain that 143 stores remained closed but there was no information available regarding any response plan.
Supply Chain Matters will continue to monitor this ongoing situation in terms of supply chain implications. We strongly suspect the real effects will unfold in the coming days and weeks.
As we pen this posting, Hurricane Sandy has been churning up the U.S. east coast and is forecasted to combine with another winter storm and Jetstream forces in a significant storm with major destructive implications. The storm is expected to turn westward and make a direct strike on one of the heaviest populated areas of the U.S., namely the New Jersey and New York regions. The effects of this storm in terms of hurricane force winds and very heavy rains are extend to over 500 miles from the center of this storm. Weather forecasters have termed this storm to be one of “historic proportions” especially for certain portions of the U.S. northeast, with impacts throughout the Mid-Atlantic region including New England. Widespread and long-duration electrical power interruptions are further forecasted. Some forecasters are already speculating upwards of $15-$20 billion in expected economic damage.
No doubt, supply chains in the northeast and perhaps the rest of the U.S. will be considerably impacted. There are 5 east coast oil refineries directly in the forecasted strike zone along with petrochemical and pharmaceutical production facilities. The Mid-Atlantic and Northeast regions are also the epicenter for the seafood, poultry and other food related production supply chains. Already, transportation has been severely curtailed with airlines, rail lines, ports and other carriers suspending services until after the storm. New York City alone is expected to experience storm surges and flooding that it hasn’t seen in the past 100 years with dire warnings that the entire subway system could be flooded. Subway services were shut down last night. There is serious concern for the two airports located adjacent to New York City since they lie near the water where high storm surge is expected. Equity markets and the New York Stock Exchange will suspend operations out a sense of caution. The storm is forecasted to move inland and meander for additional days, adding more concern for prolonged flooding and economic impact.
Supply Chain Matters will continue to monitor this ongoing situation in terms of supply chain implications. Readers should also be aware that both our offices and ISP provider reside in the impacted region and that we may experience some interruption in posting activity during the coming days.