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Describing an Exponential Organizational and Supply Chain Capability

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In February, this supply chain industry analyst attended the Oracle Modern Supply Chain Experience Conference held in San Jose California.  Through Supply Chain Matters, I have shared several prior observations and takeaways from this conference. We noted the extraordinary attendance, upwards of 2800 attendees at a supply chain management information technology focused conference. We further highlighted the momentum of Cloud-based technology deployments in the many different business process areas that today come under the umbrella of supply chain management along with the building interest levels surrounding Internet of Things (IoT) technology being applied to future supply chain management processes.

There was one keynote that I initially did not share in prior conference highlights, principally because I needed time to absorb the many compelling messages that were delivered. The title was Exponential Organizations and the presenter was Yuri van Geest, Co-Founder of Singularity University. Yuri Exponential Organizations sized 207x300 Describing an Exponential Organizational and Supply Chain Capabilityhas a background in organizational design and is noted as a keen observer of exponential technologies and trends.  He is a co-author of the book- Exponential Organizations- Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it).

The keynote opened with van Geest recounting the dizzying exponential developments that have occurred in artificial intelligence, alternative energy, biotechnology and medicine, robotics, additive manufacturing, sensors, and drones. His primary message was that most of these exponential technology developments will eventually impact supply chains and the organizations and people that makeup this community. His takeaway message was that the best vision of the future is happening at the peripherals of such technology development.

My initial presumption was that many of the conference attendees would have a difficult time absorbing the stark nature of the messages or would dismiss this talk as that of a technology genius speaking far above an ability to absorb the real implications.  Frankly, the conference organizers should have allowed additional time to accommodate all the content as well as to allow for further audience interaction.

Since the conference, I have had the opportunity to read the book and revisit my notes from the keynote. My goal in this blog is help distill what I perceive to be some other key takeaway messages related to future supply chain management organizational purpose, design, and work activities, at least from my perspective after having time to really absorb the content.

Geest did a suberb job of translating today’s far more exponential technology trends to what he viewed as direct impacts on industry supply chains. As an example, he stated that over the next ten years, the exponential developments in 3D printing capabilities will foster the ability to print nearly everything in materials including molecular assembly. The implication is the ability for products to be produced within primary areas of consumption, with the model of contract manufacturing being one of virtual capabilities to receive electronic design information and print on-demand products. A further implication is a more localized supply chain or regional network.

The notions of machine learning or cognitive acquired deep learning technology capabilities will at some point in the future lead to autonomous supply chain planning and customer fulfillment, where algorithms and physical sensing manage supply chain needs. While on the subject of planning, the book declares traditional five-year planning as obsolete, and that in exponential organizations, there should never be more than a one-year planning cycle supplemented by continuous just-in-time learning and events.

Regarding the physical, Geest further spoke to the compelling impacts that IoT focused developments would have on supply chains.  In the book, there is a passage that is worth sharing:

In the same way that today we can no longer handle the complexities of air traffic control or supply chain management without algorithms, almost all the business insights and decisions of tomorrow will be data-driven.”

Obviously, the messages are profound and perhaps threatening to many. None the less, van Geest’s message is that we cannot ignore compelling events and individually, people need to be trained and prepared with new individual and team-based skills.

To better understand the implications, I turned back to book to ascertain what were described as the key competencies of the future Chief Operating Officer, Chief Human Resources Officer and either Chief Data or Chief Innovation Officers.

Here are just a few excerpts to ponder:

  • Digital based production and the unbundling of production steps will free the company to focus on its core competencies (customer relationships, R&D, design, and marketing)
  • The notion of a recycled materials supply chain where production materials recycled and reused multiple times.
  • Internet of Things sensors used to monitor the entire supply chain.
  • The need for long-distance transport to drop over time due to the rise of localized production and a closed-loop material supply chain.
  • Universal Cloud access to social technologies, data, and services, independent of physical location.
  • Data management systems that use methodologies, processes, architectures, and technologies to transform raw data into meaningful and useful business information, available to all teams.
  • The need for Big Data security practices.
  • The hiring of employees based on overall potential, not just past record of accomplishment, and on the premise of who can ask the right questions.
  • New notions of peer-based and continuous learning.
  • Reputation measured by contributions in communities and work teams.

 

The book addresses the obvious question regarding the impact on future jobs. The premise is that the democratization of technology will allow individuals and teams to follow their passions and create new economic opportunities and businesses, far different than work being performed today.

These are heady messages, and will cause some pause or skeptics. We applaud Oracle’s supply chain management  conference organizers for hosting such a thought-provoking presentation.

From our lens, there is no denying that the exponential changes occurring in technology and business will eventually impact how supply chains are manifested and managed. The question is in what time frames.

The other obvious question, will teams and individuals be prepared?

We encourage readers to share further thoughts and comments.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Technology Addressing the Convergence of Internet of Things and Smart Manufacturing Deployments

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As a follow-up to Supply Chain Matters recent attendance and coverage of this year’s Oracle Modern Supply Chain Experience Conference, we wanted to specifically follow-up on some sessions that addressed Internet of Things (IoT) enablement of future smart manufacturing, supply chain and service management business processes.  Oracle MSCE banner Technology Addressing the Convergence of Internet of Things and Smart Manufacturing Deployments

Noted in many of our prior blog commentaries related to IoT deployment strategies, many businesses are starting to connect the dots relative to the existing wave of new advanced technologies that can literally allow connecting physical things with digitally focused applications, processes, and new business services. Included are the notions of what is commonly described as Industry 4.0, or the fourth industrial revolution, enabled by more sophisticated sensors, additive manufacturing, new iterations of analytics and data management. The common objective is convergence- a convergence of operational technologies along with data management, business applications software and decision-support technologies working together in an integrated real-time manner.

When this author presents or speaks with supply chain management focused audiences, I often describe the objective as what I once termed as the “holy grail” of supply chain management, our ability to connect the physical and the digital, now coming much closer to reality.

In Oracle’s approach to supporting customer IoT transformation, multiple speakers emphasized the importance of the overall IT architecture strategies required in addressing the different needs at the physical layer (the machines), and the digital applications layer of applications and information needs. We cannot stress how important these strategies and approaches have been addressed in multiple conferences and discussions we have been involved in. The obvious most important consideration is the management of data at each level.

At the physical layer, data is purely operational in nature. We are talking about sensor readings, alarms, state conditions, fault detection and all sorts of other operational data. As emphasized in prior highlights of a recent MIT IoT focused conference, engineers are fully aware that much of this data can be spurious, perhaps upwards of 60 percent. On the other hand, the remaining data can point to important and insightful information when placed in context with other data. The Oracle presentations cited sample classes of questions related to the era of “Smart Manufacturing”:

Are there patterns of events that tend to cause or lead to actual equipment failures?

Is there a correlation between product failures in the field and the manufacturing process originally used to manufacture that product?

Can we predict the likelihood of a product defect and avoid costly downtime?

Many developers on the front lines of current IoT initiatives will readily tell you that the challenges related to filtering and capturing the correct physical data, whether structured, unstructured or time-series in-nature are hard, but not insurmountable. A current reality is that most physical or operational assets currently reside behind a data-protected firewall, for valid reasons. As we have noted in prior commentaries, developers cite consistent and secure data management standards as well as combinations of encryption technologies as the means to unlock data discovery across various layers. Oracle emphasizes the need for a robust and scalable technology foundation supported by an open standard, in-memory, Hadoop data lake approach that supports three distinct data types in a secure manner.

A further critical aspect often includes distinct data aggregation at both the physical and digital application layers, each aggregation providing added contextualization to overall intelligence and required decision-making. Managing all this data needs to further include a more cost effective approach, and that is where the advantages of Cloud-based deployment and storage strategies play an important consideration.

Some of our functional or IT readers who experienced prior IT data warehouse approaches can well relate to the frustrations for the ability of various functional users to mine or discover data on their own without the direct assistance of IT. We were pleased to observe that Oracle’s approach is anchored to presenting of data to differing personas or business roles, ranging from that of occasional or frequent business user or domain expert, to an actual data scientist.

The Oracle presenters cited a jam or jelly manufacturing process as an example of the goal of actionable manufacturing intelligence that was developed for a pilot customer:

What most everyone has today is an operational report of what has occurred, namely descriptive analytics. For example, 68 percent of batches of strawberry jam made in July, incurred a production yield of between 78-82 percent.

The goal is actionable intelligence supported by more prescriptive or predictive data and analytics. In the same example, the 68 percent of batches of 78-82 percent production yield:

  • Occurred during the second shift and involved a common operator
  • The sugar utilized came from specific identified lots from a specific supplier(s)
  • The mixer speed variation was in a certain range and ambient humidity reading but did encounter some discernable variations.

This added context of the data provides the intelligence as well as determinants to manage higher manufacturing yields or identify potential production issues in a timelier manner.  These are the notions of mining the data, that can be applied to many other supply chain related business processes or business model support needs, many of which can save substantial amounts and open many new opportunities for equipment services.

A final observation relates to current IoT approaches and pilot efforts perhaps being investigated. In the many technology and industry perspectives we have reviewed or encountered, it is important to stress that teams evaluate prospective IoT technology vendors not only on the specific technology approaches and capabilities they provide, but also on the partner ecosystem they recruit and support, along with actions to adapt and support an open standards approach for data security as well as data maintenance.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


Even Newer Innovations in 3D Printing and Additive Manufacturing Emerge

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In his latest book, Thank You for Being Late, An Optimist’s Guide to Thriving in the Age of Accelerations, New York Times columnist and three-time Pulitzer Prize author Thomas Friedman brings forward the exponential wave of business innovation and computing technology that surrounds all of us today, what he terms as the “supernova” of forces.

The book has provided new revelations for this Editor, and I recommend that our readers read this book.

The book has also motivated us to renew our efforts to seek out additional evidence and reinforcement for our readers.

In prior Supply Chain Matters postings, we brought attention to the first 3D part certified for commercial aerospace use in 2015, a multi-color, multi-material series of 3D printing technology developed by Stratasys in 2016, and pilot efforts by contract manufacturer Jabil to prototype volume printing of component parts utilizing new HP 3D volume printers.

Thus, we bring Supply Chain Matters reader attention to a sampling of some new recent developments concerning acceleration in 3D printing and additive layer manufacturing capabilities.

A published Reuters report, South Africa in talks with Boeing and Airbus to print 3D prints, indicates that South African’s scientists and researchers are developing what is described as the world’s largest machine capable for producing titanium powder-based 3D printing of aircraft parts using lasers to melt the powdered titanium.

The termed Aeroswift research project has produced three demonstrator parts in its pilot phases and reportedly, talks are underway with Airbus as to how to best commercialize this process. Noted is that South Africa ranks fourth in world titanium reserves, implying local supply of raw metal material. The report notes: “During proof-of-concept trials, the machine achieved production speeds up to 10 times faster than currently available commercial laser melting machines.

CNET reported that Ford Motor Company and Stratasys are piloting what is termed as the Infinite Build 3D Printer. Unlike today’s conventional printers, that build layer by layer, in an upward fashion, the prototype Stratasys machine prints sideways, implying that it can build much larger objects. This new 3D printer employs a proprietary thermoplastic micro-pellet powder that appears like sand. The pelletized material is fed along a screw-drive, and heated to liquification before being shot out of a print head. A robotic arm refills the powdered material canisters as-needed, which implies the machine can produce various parts for many hours or days. While this new 3D printer is characterized as alpha stage, product design engineers are already working on ideas to print parts not only for prototyping needs, but volume production as-well. Stratasys has further explored applications with Boeing and members of the medical community to find other printing applications.

In his book, Freidman cites Antoine van Agtmael, the investor who coined the term “emerging markets,” who now argues that we are at the start of a paradigm shift in manufacturing. “The last twenty-five years was all about who can make things the cheapest, and the next twenty-five years will be about who can make them smartest.

Flexible manufacturing technologies will drive this era, and above are two additional examples of how quickly the wave is building.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


2017 Industry Specific Predictions- Commercial Aerospace Manufacturing Supply Chains

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Thus far, we have posted deep-dives on the first nine of our 2017 Predictions for Industry and Global Supply Chains.  The one prediction remaining is our final Prediction Ten, which for each year, dives into what we foresee as unique industry-specific supply chain challenges or environments for the coming year.

This year’s industry-specific challenges were especially challenging in that we contemplated adding a lot of industries, more so than prior years. In the end, we will hone in on those industries that merit additional monitoring and updates in the coming months. As Editor, I have also decided for the purposes of brevity and reader interest, to present each industry in a separate Supply Chain Matters blog posting. We will be also posting these industry-specific predictions in a faster cadence.

Our prior Prediction Ten posting, we dived into Automotive Supply Chain Residing Across North America

Next-up:

Commercial Aerospace Manufacturing Supply Chains  Boeing 787 SC 300x199 2017 Industry Specific Predictions  Commercial Aerospace Manufacturing Supply Chains

Once again, for many former and now new challenges, we have once again included commercial aircraft supply chains in our industry-specific predictions for 2017.

Commercial aerospace focused supply chains will have an especially challenging year in 2017 from several dimensions. While Airbus and Boeing both declared that they each exceeded operational performance targets in 2016, the numbers indicate that an industry inflection point is at-hand, one that has implications for the collective industry supply chain ecosystems. The overall demand for larger, wide aisle aircraft is now showing signs of contraction. Added challenges remain in the number of planned new product introductions in the coming quarters, and the industry has now discovered some weak links in supply, namely new more technologically sophisticated aircraft engines and certain other troublesome components.

Our stream of research and observations related to commercial aircraft supply chains have painted a picture of an industry that has created extraordinary levels of product demand streams by designing and manufacturing new generations of more technology laden, far more fuel efficient new aircraft. This has led to the enviable position of having order backlogs of upwards of $1.5 trillion that extend outwards of ten years. At the same time, an industry with a track record of prior challenges in its ability to more rapidly scale-up overall aircraft production levels are clashing with the industry dynamics of both Airbus and Boeing in their desire to deliver higher margins, profitability, and more timely shareholder returns.

Smack in the middle of these dynamics are relationships among suppliers, a need to continue to invest in expanded production capacity and innovation capability and now meet shareholder return needs. Suppliers have been buffeted by various OEM demands for larger cost and productivity savings. In the specific case of Boeing, suppliers to the wide body 787 program are now being asked to step-down pricing related to prior volume ramp-up needs as Boeing seeks to better balance new order flows with annual production.

A Declared Industry Inflection Point

Aviation Week, a well-respected and highly followed industry publication made a declaration in an early January 2017 commentary: The End of the Airbus-Boeing Supercycle. (Free complimentary sign-up account required)

This declaration declares:

After a remarkable 12-year boom, world aircraft industry output growth sputtered to a halt in 2016. The market fell 1.2% (in constant dollars) relative to 2015, the first aggregate decline since 2003. While military demand remains robust, most civil segments are feeling the impact of negative macroeconomic and geopolitical developments.”

This commentary further observes:

The jetliner market is just finishing a 12-year supercycle. Airbus and Boeing guidance, until recently, indicated that they expect a 17-year supercycle. That now looks unlikely to happen. For some time now, there has been a disconnect between airliner market prosperity and the rest of the world economy, which is seeing higher instability and slower growth. The jetliner industry, unfortunately, is falling in line with that macro environment.”

While Aviation Week anticipates some modest growth in commercial aircraft deliveries this year, it will be half-that experienced over the past 12 years. Most order growth going forward is anticipated in the single-aisle segment with the twin-aisle market being declared as flat at best. Meanwhile, jet fuel prices are again rising adding more financial pressures on airlines to operate more efficiently.

Implications

For the industry’s respective multi-tier supply chain, the implications of this inflection point are sobering for planning windows through the year 2020. After 2020, the industry may well be in a decline from the current 12-year cycle. The decline of new order flows for higher margin wide aisle aircraft place the major emphasis on narrower margin single-aisle aircraft that must produce higher volumes to meet financial business objectives.

The notions of euphoria in multi-year order backlogs will likely be replaced with more conservative, but far more detailed planning pitting OEM’s and suppliers at-odds with mutual win-win financial performance objectives.  The challenge for Airbus and Boeing will be in implementing increased production automation, higher levels of end-to-end, multi-tier supply chain visibility with far more informed supply chain wide insights and business intelligence.

Other Supply Chain Challenges

New Product Introduction

As was the case in the prior three years, the industry again has important NPI milestones this year.

For U.S., based Boeing, the first 737 MAX 8 is scheduled to delivered to Southwest Airlines in the first-half of this year, followed by 737 MAX 9 model later in the year. This aircraft has been five years in development and will feature a far more automated production process that must now be ramped to expected volumes. An expanded 787-10 Dreamliner, designed to carry more passengers and utilizing more carbon fiber content is scheduled for first flight this spring. For the first time, Boeing North Charlestown facility will have sole manufacturing responsibility for this model.

European based Airbus likewise has important NPI milestones this year. The second iteration of Airbus’s revamped single-aisle family, the A321 neo (new engine option), will enter service in 2017. It will represent the largest member of the updated A320 neo family and has significant dependencies on newly designed, more fuel-efficient engines being supplied by CFM International along with Pratt & Whitney. The 366-seat long-range A350-1000 representing the biggest twin-engine jet Airbus has ever designed, with eventually compete with the Boeing 777-300ER. First customer ship to flagship customer Qatar Airways is scheduled for late 2017 and this airline has had a pointed relationship with Airbus regarding meeting expectations.

Weak or Critical Links

Commercial aircraft supply chains are often described as constantly dealing with exceptions or surprises. Whether it is an unexpected notice of late-delivery from a key supplier, components that unexpectedly slip from meeting highly engineered conformance standards, or having full visibility to events or risks occurring across the extended supply chain.  With the current wave of new, more technologically laden aircraft models, engineering specifications are more demanding and new process technologies such as 3D printing and other additive or automated manufacturing techniques are now present. Yet, amid such an environment, the industry is now hard at work meeting and sustaining higher volume production and supply chain cadence needs.

One of the most critical supply links in 2017 will be that of aircraft engine manufactures, which collectively must now transition revolutionary new designed engines into meeting high- volume manufacturing and customer delivery requirements of aircraft OEMS.

In the single-aisle aircraft category, two prime manufacturers, CFM International (joint venture of Safran Aircraft Engines of France and General Electric Aircraft Engines) and Pratt & Whitney, are prime power plant options based on airline selection. CFM had planned to deliver a total of 100 of its new LEAP engines in 2016, but could deliver but 77. For 2017, 500 LEAP engine deliveries are being planned. For Pratt, a series of highly visible supply chain related challenges related to the new geared turbo-fan (GTF) PurePower engines contributed to a delay in deliveries for the Airbus A320 neo and Bombardier C-Series programs. In 2016, Pratt delivered 138 GTF engines, 62 of which were in the final Q4 quarter. Pratt plans to produce between 350-400 engines in 2017, but some identified component reliability issues have some of these engines designated as spares to support airline uptime requirements. Any subsequent slippage or delivery disruptions from either of these two engine suppliers will likely impact planned OEM deliveries to customers.

In the wide-aisle, long distance aircraft segment, Rolls Royce and its family of Trent engines have served as the workhorses of these larger, more fuel-efficient aircraft. For the past three years, Rolls has been challenged with profitability performance as well as allegations of bribery practices related to sales of various products. Revenues from commercial aircraft engines currently make-up upwards of one-half of revenues, yet Rolls has not been able to control costs related to design and manufacturing.  A new restructuring plan calls for this aerospace engine provider to double production levels by 2020, which is being described as the fastest ramp-up in its history. The company is headquartered in the United Kingdom, and thus any effects of Brexit in terms of currency, trade, or tariff issues are a further open question.

While on the topic of Brexit, the United Kingdom hosts several aerospace providers who serve the technology and equipment component needs of various global commercial aircraft manufacturers. Depending on the outcome of the European Union and British exit terms related to currency, tariffs, taxes, trade and population movement, aircraft model producers may well have to assess any impacts to costs, pricing and added risks.

 

This concludes our 2017 prediction related specially to commercial aerospace supply chains.

In our next posting, related to Prediction Ten, we will dive into consumer packaged goods and beverage focused supply chains.

Readers are reminded to review all our prior 2017 predictions postings.  And a final reminder, all ten of our 2017 predictions will be available in a full research report which we expect to be available for downloading in our Research Center by February 10th.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


A Step Closer to Global Interoperability Standards for Internet of Things and Industrial Networks

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Last week, there was a noteworthy announcement concerning efforts directed at ensuring global wide interoperability standards related to Internet of Things (IoT) technology deployments.

The Industrial Internet Consortium (IIC), the global member supported organization that is promoting accelerated growth of IoT adoption, announced that it had signed a memorandum of understanding (MoU) with the China Academy of Information and Communications Technology (CAICT) to work together in helping to insure ensure interoperability for the Industrial Internet across China. IIC has released a framework to support development of best practices and standards related to IoT data security and has further developed a Business Strategy and Innovation Framework that defines at a high level, efforts of process, people, and technology that an enterprise will need to address to effectively capitalize on IoT enablement initiatives.

CAICT serves as a research arm under China’s Ministry of Industry and Information Technology. This academy serves a specialized think tank and development lab for China’s industry and government efforts. Joint CAICT and industry development efforts have involved areas such cloud computing, big data, intelligent manufacturing and 5G mobile networks.  The academy has been collaborating with ARM, Intel, and Huawei Technologies to establish the Edge Computing Consortium, an effort to ensure that information and operational technology elements of the Industrial Internet can integrate.

IIC is also collaborating with its European counterpart, Platform Industrie 4.0, in pooling interoperability expertise that can insure a compatible systems and security framework.

With an active Liaison Working Group, the IIC is helping to move the needle in global standards consistency, and now with collaboration in best practices and standardization efforts that umbrella China, Europe and the United States, there is potential to streamline and accelerate efforts toward consistency in standards and practices in a timelier manner.

Line-of-business and functional supply chain teams currently contemplating or directly contributing to internal IoT or Industrial Internet focused initiatives should monitor the ongoing efforts and planned deliverables of IIC and its global-wide strategic partners.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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