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Supply Chain Matters Coverage of Oracle’s Modern Supply Chain Experience Conference- Part One

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This afternoon marked the opening keynotes of the Oracle Modern Supply Chain Experience conference that is expected to draw over 2800 attendees.

Rick Jewell, Oracle Senior Vice President for Supply Chain Applications Development kicked-off the event with his presentation titled: The Adaptive Intelligent Supply Chain Cloud. In this presentation, Jewell re-iterated a number of supply chain predictions relative to digital supply chain transformation and on Oracle’s current efforts in development of the Oracle SCM Cloud suite of applications. Release 13 of the SCM Cloud Suite is expected this summer.

Jewell then moderated a customer panel consisting of:

Jeff Abbott, Vice-President, Supply Chain and Logistics, Sears Canada Inc.

Debi Hanes, CIO Supply Chain, General Electric Global Operations

Emre Kusce, Supply Chain Engineer, Transit Wireless

Chris Nerf, Senior Director, Supply Chain, NCR

Each panelist described their business motivations for adopting elements of Oracle SCM Cloud, along with important lessons learned that would be of interest to the conference audience. The session, from this analyst’s lens, provided rather important learnings which Supply Chain Matters will dwell further upon in a subsequent posting

Jewell further took this opportunity to announce Oracle’s upcoming new applications supporting Internet of Things (IoT) Cloud capabilities. This announcement includes expanding its Internet of Things (IoT) portfolio with four new cloud applications to help businesses fully utilize the benefits of digital supply chains. The applications are being designed to enable businesses to detect, analyze, and respond to IoT signals and incorporate these insights into existing and rapidly evolving market capabilities.

Applications will include:

IoT Asset Monitoring Cloud: being designed to monitor assets, utilization, availability, and data from connected sensors and creates incidents in the backend SCM, ERP, or Service Clouds to automate workflows’

IoT Connected Worker Cloud: designed to tracks employees to support safety, service, and regulatory compliance initiatives.

IoT Fleet Monitoring Cloud: Monitors position and progress of passenger, service, and transportation delivery vehicles and driver-behavior.

IoT Production Monitoring Cloud: designed to monitor production equipment to assess and predict manufacturing issues.

This supply chain industry analyst had the opportunity to attend a conference pre-session held by three Oracle development executives that briefed a standing-room only audience on these upcoming applications.

According to the executives, the overall strategy for Oracle is to support five dimensions of supply chain visibility that include market, partner, enterprise asset and social visibility needs. They described Oracle’s unique approach to IoT, namely to bring together structured, semi-structured and unstructured information to support the convergence of operational technology (OT) systems and IT business applications. The approach leverages Oracle’s prior acquisitions of select data analytics tech providers as Oracle’s newly announced Data-as-a-Service (DaaS) platform along with its existing Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) platforms. A design principle emphasized was how to get access to OT data while managing this data in a cost-effective storage and hardware approach.  The design approach makes use of supporting a streaming data lake strategy that leverages open source Hardoop running in the background.

Release of this new compliment of Oracle’s IoT cloud applications is expected later this year.

This afternoon’s keynotes included a fairly interesting presentation delivered by K.S. Khurana, Vice President, Sourcing and Engineering Operations at Facebook. He opened his talk with the obvious question, why would a senior Facebook infrastructure development executive be presenting at a supply chain management conference. The answer became fairly obvious 10-15 minutes later after Khurana outlined Facebook’s strategies in the planning, forecasting and acquiring the social media’s giant’s own uniquely designed data center hardware and networking needs while supporting the explosive growth to support data management needs with a fixed staff of 600 operations personnel.

Bob Ferrari

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

 


GE Digital Provides a Report of Progress on Digital Industrial Efforts

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This week, General Electric, specifically the company’s GE Digital group, hosted a group of Wall Street equity analysts at its campus in Silicon Valley to present a report of progress. Division CEO Bill Ruh predicted that GE is delivering the winning formula in efforts to leverage industrial networks and the Internet of Things (IoT) in assisting businesses to enable new industrial outcomes concerning asset management.

As Supply Chain Matters has pointed out in previous commentaries, GE has invested significant dollars and resources into the growth of its new digital business since its founding in 2011. Upon listening to the webcast of this briefing, it was clear to this author that GE intends to leverage its perceived first mover market advantage in enable the notions of industrial networks.

Development efforts surrounding the core GE Predix operating system began in 2012 as an internal effort to connect the vast amount of sensor data generated by equipment products. By 2013, GE began to analyze data among fleets of machines and equipment to discover important analytics related to operational performance and maintenance needs. Operating units began to correlate certain operating environments with performance outliers and needs for unplanned maintenance. It was then that GE executives began to view Predix as a data and analytics platform tailored for the unique and demanding requirements of many forms of equipment networks made up of aircraft engines, turbines, wind mills or sophisticated medical equipment. That includes collecting very significant volumes of real-time data and harnessing that data into more predictive analytical insights into asset up-time and reliable performance.

In this week’s update, Ruh indicated to analysts GE’s forecast of over $6 billion in revenues for this unit this year, with a goal of over $15 billion in revenues by 2020. That 2020 revenue forecast is now lower than previous estimates indicated earlier this year. As we have noted in our other IoT focused commentary, there is still a lot of market education and maturation required.

He outlined four pillars to support this level of growth:

  • A keen focus on customer outcomes particularly in business services growth.
  • Support of incremental productivity needs of customer.
  • The launching of “killer’ applications
  • The leveraging of GE’s Predix operating system in the enabling of the Industrial Internet ecosystem. Ruh indicated that by the end of this year, there will be 20,000 developers working on Predix enabled applications.

What makes GE’s approach to IoT enablement unique is its current ability to leverage both advanced digital technologies as well as the deep vertical industrial equipment domain knowledge that exists across GE’s industry verticals. With a strong presence in transportation, commercial and military aircraft, alternative energy, and medical equipment sectors, there are a lot of potential opportunities to leverage. From an organizational perspective, GE currently leverages both a business horizontal and business unit vertical leadership structure surrounding GE Digital.

From a broader go-to-market strategy perspective, executives placed emphasis on ongoing efforts to open the Predix platform environment to more developers and partners and building out a richer ecosystem surrounding the platform. Other efforts are directed at building solid customer references in both traditional and outcome based pricing deals, building digital commercial scale among different key industry verticals.

GE Digital executives went to great lengths to point out their belief that industrial based IoT applications and network opportunities will be a far larger market segments that consumer focused IoT applications, pegging the latter segment as greater than $225 billion by 2020. That stated, during open Q&A, executives indicated a belief the 2017-18 timeframe will be the point of industry inflection in IoT enabled efforts. From this author’s lens, that is fairly consistent with comments and observations we’ve heard from other IoT focused technology and services providers.

One other area we wanted to highlight for our readers was that of GE’s stated approach, namely this this is an ongoing race, and that came across quite clearly in executive level presentations and open Q&A. This is an industrial company that is fostering a software industry type culture of fast innovation and maintaining market dominance.  As a further point of reference, GE itself elected to begin efforts to move its corporate headquarters from pastoral central Connecticut to Boston’s seaport tech district principally to foster an overall culture of fast innovation. In March, Jeff Immelt took to the stage to tell Boston’s business leaders just how important their city is in his grand plan to redefine the industrial conglomerate- I want people that are down in the Seaport, I want them to walk out of our office every day and be terrified. I want to be in the sea of ideas so paranoia reigns supreme.”

That is indeed a different corporate culture for a diversified industrial manufacturer.

GE is in a race among other enterprise technology providers, systems integrators and industry platform providers a race that presents differing roles of partner, co-developer and perhaps key competitor.

Like previous market inflection points such as Client-Server, ERP, RFID, Cloud and now IoT, the race is on, and rather than a sprint, it is a marathon that features many hills and valleys and environmental changes along the route. Only this time, the make-up now includes some very interesting new players, one’s that live, breathe and practice industrial networks, equipment, services and understanding of asset management.

Let the race continue.

Bob Ferrari

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


Another Warning Sign Concerning U.S. Manufacturing’s Continued Momentum

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Yesterday, Supply Chain Matters posted a commentary relative to ISM’s August PMI report noting continued positive momentum for U.S. manufacturing.  Beyond just parroting of business and traditional media regarding the news, we raised caution on important warning signs relative to sustaining such momentum.Today’s published edition of the Wall Street Journal adds more evidence of caution, observing that many U.S. manufacturers have neglected to invest in replacing aging capital equipment.

The WSJ cites a recent Morgan Stanley report indicating that the average age of industrial equipment in the U.S. has risen above 10 years. Growth of all types of capital spending by U.S. firms increased 3 percent in 2013, and is forecasted to be 3.8 percent this year. These levels are far below the Morgan Stanley historic average of 8 percent.

Instead, firms are investing in acquisitions, stock buy-back programs and capital investments in other faster growing economies in Asia and Latin America. The WSJ cites a Dealogic statistic which indicates that in the first-half of this year, firms have shelled out $80.7 billion for acquisitions, compared to $69.5 billion in this same period of 2013. That equates to the potential of a lot of capital equipment investment.

Of more concern, geopolitical events are changing rather quickly.  China’s huge market potential has increasingly become more challenging for foreign based manufacturers. In a separate news report, The WSJ cited a recent survey conducted by The American Chamber of Commerce in China, whose members include manufacturers, which indicated that 60 percent feel less welcomed in China, compared with a 41 percent sentiment a year ago. Responding to a new added question as to whether respondents feel that foreign firms are being singled out for attack, 49 percent indicated yes. Europe’s manufacturing sector still remains in doldrums while Latin American countries, with continue to be challenged with global currency and inflation challenges. Mexico seems to be the new exception.

Thus, previous manufacturing capital investment bets within emerging economies may be sidelined at this point because of fast changing global events. That places even more dependence on U.S. manufacturing resources, hence the growing need to continue to invest for added productivity and newer U.S. based equipment.


The Effects of Asset Management Strategies- Who Really Owns Accountability for Overall Risk Management?

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Industry supply chains have constantly had to respond to business needs for overall cost reduction.  This author can recall numerous supply chain executive surveys dating back to the early part of this decade, all pointing to supply chain cost reduction as one of any top three organizational challenges. While the severity of such pressures tended to vary, the extreme being the global of recession that began in 2008-2009, they have since established numerous structural supply chain changes. These changes included transferring more cost risk into lower tiers of the supply or value-chain as well as the shedding of assets.  The consul of CFO’s was to avoid, as much as possible, the ownership of hard assets. A clear byproduct of the implications of shedding assets or outsourcing asset management was who owns overall accountability for risk management.

This relentless pressure to improve return-on-assets has, as this community well knows, led to far different industry supply chain structures.  Shedding of capital-intensive manufacturing related assets led to the resurgence of the contract manufacturing model.  Today’s dominant contract manufacturers hold production plants in multitudes of countries and regions. In semiconductor related manufacturing, the termed fabless model emerged where many semiconductor suppliers shed their super highly expensive capital intensive chip manufacturing plants into today’s smaller concentration of global fabricators such as TSMC. Fabless semiconductor firms’ in-turn, outsourced chip assembly and test to other lower-cost Asian locations.

Similar asset transfer trends occurred in logistics and transportation.  Manufacturers and retailers shed transportation assets to third-party logistics providers (3PL’s), and have since added technology and services augmentation which are the basis of termed fourth-party logistics providers (4PL).  Each of these providers themselves discovered enhanced opportunities for profitability growth by transferring transportation assets to mega-carriers or IT infrastructure to leasing or IT hosting firms. 

Like any game, the unwritten gaming rules seem to be, hold no assets.

In this specific commentary, we want to focus on a current development capturing the attention of general and business media that being the U.S. railroad industry. By its nature, this industry is completely capital-intensive and ROA driven and must further adhere to continual regulatory standards and practices. 

In April of 2011, a Supply Chain Matters commentary focused on how U.S. railroads were attempting to bounce back from years of industry setbacks as well as severe recession across the economy.  A previous decade or so of asset transfer and outsourced maintenance strategies had the bulk of railcars, especially those related to the transport of bulk cargo, under the ownership of leasing, financial services or bulk shippers themselves. In essence, the railroads served as service providers to ship customers’ bulk cargo, utilizing primarily non-owned bulk transport railcars.  In 2009, railroad shipments had declined by a whopping 64 percent, the worst year since 1988. An estimated 28 percent of rail fleets were parked and idle storage on unused track, some stretching as much as 30 miles in places. The crisis of asset management was acute and leasing companies and railroads jointly bore the brunt of that crisis. Another reality was that a large percentage of the bulk transport railcar fleet remained dated and proper maintenance did not appear to be financially viable in times of severe downturn.

That brings us to today and in particular the current manufacturing and energy boom occurring across the United States.  The U.S. economy is rebounding and utilization of bulk transport railcars has now increased significantly to the point of periodic lack of availability. The massive new discoveries of shale oil deposits and the new technologies of fracking have led to today’s oil exploration boom, but with a certain bulk transportation challenge.  The existing north to south oil pipeline networks existing across the United States did not account for current booming sources of crude oil production such as the Bakken region in North Dakota. That region alone is producing what is estimated to be 1 million barrels of crude production per day. In December alone, rail transport accounted for nearly three-fourths of crude production stemming from the Bakken region. With the lack of pipeline infrastructure, and with new options for higher profitability depending upon which refinery or which port ultimately receives such crude, energy companies have now re-discovered rail as the preferred shipment mode.

The rest of this story has occupied general and business media headlines, namely a tragic series of tanker car explosions and fires endangering property and human life.  There have been revelations that Bakkan crude is far more volatile and unstable than allegedly believed. The railroads have been finger-pointing toward tank car owners for holding liability for such accidents. Two major railroads have filed lawsuits against asset maintenance contractors over who is liable for derailments caused by broken axles.  Of further contention is which entity is responsible for proper safety inspections and which is responsible for necessary safety modifications to strengthen railcar axles and to contain a potential tank car explosion from spreading to other cars.  Maintenance contractors claim the railroads are far exceeding weight limits and overlooking the hazardous nature of today’s crude oil shipments. Both are balking at who will pay the overall expense, with the implication being which party is accountable for risk?

This entire situation has resulted in an oil safety deal reached in mid-January when federal regulators were forced to step-in and demand railroads and energy companies agree to forms of voluntary changes to improve the safety of tanker rail cars.  Railroads must now take more proactive steps to avoid derailments, reduce speeds and reroute tanker laden trains around high risk areas such as major cities.  Both parties agreed to come up with recommendations for improved safety of tank car fleets.

One railroad is going a step further. The BNSF railroad is seeking bids for investing in 5000 next-generation tank cars that will meet higher safety and cargo load standards. However, for the current remainder of the rail industry, and perhaps many industry supply chains, is an open question of which party holds ultimate risk when the bulk of assets and asset management services are outsourced. We believe it is a timely and rather important question, one that will occupy the mindshare of CFO’s, insurance providers and industry supply chain leaders in the months to come.

What’s your view?  Does outsourcing of assets and asset management include the outsourcing of risk accountability? Is the current trend sustainable?

Bob Ferrari


PTC Acquires Internet of Things Platform Provider ThingWorx

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Prediction Nine of our Supply Chain Matters 2014 Predictions for Global Supply Chains declared that the Internet of Things would gain considerably more momentum in 2014 and beyond. We based that prediction on new investment initiatives from industrial giants such as General Electric to build-out the technology and service technologies to make more machines interact with one another.

Yet another reinforcement of this increased momentum was yesterday’s announcement from product and service lifecycle management software provider PTC indicating that it had acquired ThingWorx, a provider of platform that allows firms to build and run applications that leverage machine to machine information exchange.  The acquisition included a sum of $112 million in up-front cash along with a two year earnings agreement that could net ThingWorx an additional $18 million.  The transaction has already closed and PTC indicated in its briefing call with analysts that ThingWorx will continue to operate as a separately branded company with its existing senior management team providing both platform technology for customers while affording PTC the opportunity to leverage this technology within the provider’s existing PLM and SLM product suites. ThingWorx’s revenue model is subscription based predicated on the number of connected devices.

ThingWorx was founded in 2009 by three previous senior executives at manufacturing intelligence portal vendor Lighthammer, after that company was acquired by SAP AG. Their goal was build a manufacturing and services focused platform that would leverage concepts of connected intelligence to operational systems, involving people, systems and devices. While PTC executives admit that ThingWorx is not currently profitable, they were willing to pay a considerable premium by investing in a “momentum” company that could provide much broader internal and external opportunities. The company provides opportunities to leverage PTC’s current customer base of asset intensive design and manufacturing firms including its high profile within aerospace and defense focused firms.

PTC will begin selling ThingWorx this quarter and believes the company can add an additional $5m-$7m in incremental boost to PTC’s annual revenues. The company also outlined plans for internally leveraging the platform in development plans over the next three years.

Supply Chain Matters initial reaction is that PTC has made a bold move to lock-up a promising technology platform.  Of course, how PTC balances the needs to continue to fund ongoing development and selling efforts by ThingWorx and at the same time insure an open standards based development platform will be interesting to observe in the coming months. The move adds another arrow in PTC’s ongoing efforts to compete with far larger enterprise software vendors. In the longer-term horizon, successful internal integration efforts if timely, could present rather compelling service management options for asset-intensive or service intensive customers.

Bob Ferrari

 

 


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