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ThinFilm Electronics and Diageo- A Noteworthy and Cool Joint Prototyping of Smart Label Technology

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Today marks yet another milestone announcement concerning the development and application of next generation smart item-level labeling technology that can be applicable for either supply chain business process or product branding and marketing needs.

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Thinfilm Electronics ASA and global alcohol beverages producer Diageo jointly announced the intent to unveil a prototype smart label that has the potential to completely change both the role of a bottle along with the consumer experience.

Supply Chain Matters readers may recall our previous commentaries related to Thinfilm’s ongoing development efforts in the next generation of smart item-level labeling.  Specifically we call reader attention to our May 2014 commentary that noted demonstration of a printed NFC-enabled smart label that demonstrated a label that combines printed electronics technology with real-time sensing and near-field communications (NFC) technology.  We were informed by Thinfilm that this new joint announcement involves a modified passive-tag application of this technology.Johnnie Walker Blue Label Smart Tag Enabled

This concept of “the connected smart bottle” will be prototyped in conjunction with Diageo’s Johnnie Walker Blue Label® brand.  The Thinfilm developed smart label will be printed with an object identifier during the bottling and labeling process. The label itself has a rather unique physical appearance that includes a narrow tail (note the photo). This tail provides the ability for the label to sense whether the individual bottle is in a sealed or opened state after the label is affixed. The breaking of the tail does not impair the label’s capability to be read or transmit information. Once encoded at the point of manufacturing, the label cannot be copied or electronically modified.

In its sealed state, the label can transmit via NFC its object identifier for supply chain physical tracking or tracing purposes. Once more, the label can provide added protection to combat counterfeiting or rouge product. When the label is triggered to an unsealed state, it provides the opportunity for the consumer to gather via individual smartphone, added information regarding the product experience.  Such information could include recommendations for further enjoyment of the product, added offers or promotions or other brand loyalty efforts.

Thus, this singular smart label opens-up the possibilities of multiple supply chain related business process and/or brand marketing loyalty use cases. Once more, the reading or sensing of the label can be accomplished with NFC enabled devices, such as smartphones or other mobile devices, which opens up further opportunities to be able to leverage such capabilities without the addition of more expensive infrastructure or proprietary networking or reading technologies as was the case with the initial phases of RFID labels.

In conjunction with joint announcement with Diageo, ThinFilm further announced the launching of its line of Open Sense ® sensor tag technology that has applicability not only within food and beverage but pharmaceutical, cosmetics, health and beauty and automotive industry areas.  As noted in the release, the interest levels and the potential use cases of such advanced smart item-level labeling technologies is rapidly increasing.

As noted in our prior Supply Chain Matters commentaries, the current evolution of smart labeling is indeed the dawning of a new era for item-level tracking, one that will harness the potential of the Internet of Things as well as the abilities to bring together the physical and digital aspects of supply chain management, and now, the added ability to enhance the brand experience.

Consider the possibilities. While some of these developments are prototype in nature they have the strong potential to be game changers in specific industry settings.

In the meantime, consumers and loyalists of Johnnie Walker Blue Label® can anticipate a really cool experience in the not too distant future.

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.


Report of Alternative Supplier of Automotive Airbag Inflators

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There has been a new development regarding the ongoing large number of product recall activities involving suspected automobile defective airbag inflators produced by supplier Takata Corporation.

The Associated Press is reporting that rival Japan based airbag inflator supplier Daicel Corporation announced last week that it will accelerate the building of a second U.S. factory in Arizona to meet the growing demand for alternative capacity for these components.  This supplier, responding to specific requests from Honda Motor for an alternative supplier, and expects to start operating the Arizona facility by March of 2016.  According to this report, Daicel has further plans to increase production of inflators at its existing factory in Western Japan to supply additional replacement parts later this year.

This is an obvious sign that alternative component supply arrangements are being initiated as Takata continues to struggle in resolution of current component needs.


A Sudden CEO Leadership Change at Honda and Another Reinforcement of the New Product and Operations Grounded CEO

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In the wake of continued challenges involving quality glitches and mass product recalls, Honda Motor Company announced today that is current CEO will step-down in June to make way for a new breed of leadership.

Takahiro Hachigo, a trained engineer and currently a managing officer within China, will replace Takanobu Ito as president and CEO in late June. Mr. Ito has led Honda since 2009, at the height of the global recession.

According to reporting from The Wall Street Journal, this executive leadership change comes at a critical juncture for Honda, which is being challenged by Nissan Motor for the number three brand leadership for the U.S. market, and amid continued product recall actions involving airbag inflators produced by supplier Takata Corporation. Honda has been one of the brands most affected by the defective airbag inflator quality crisis, and in October, top executives took on salary cuts to demonstrate responsibility for quality problems.

Reportedly, company insiders were taken by surprise by the timing of this announcement, and the choice of a younger executive promoted over those executives expected to be considered as the next Honda CEO.  The global auto company further indicated that several directors who ranked higher than Mr. Hachingo would retire. In a released statement, Mr. Ito stated: “Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team.”

Mr. Hachigo’s experience includes stints in product design, production operations, and procurement, which provides yet another example of a trend for new senior management appointments involving executives with product and supply chain management prowess. According to Honda’s announcement,  Mr. Hachigo’s previous experience includes roles as a vice-president of Honda Motor Technology- China, representative of development, purchasing and production- China, president and director of R&D in Europe, general manager of the Suzuka manufacturing facility production operations , general manager of purchasing and vice-president of R&D in the Americas.

This resume adds further evidence of the new importance of global-based experience, including operational experience within China.

In December of 2014, BMW appointed new replacement CEO Harold Kruger, with a background in operations, engineering and manufacturing.  A year earlier, General Motors rocked the global automotive industry by appointing the first ever female CEO, Mary Barra, who had risen through the GM ranks in roles in manufacturing, engineering, product design and other leadership positions. Mrs. Barra has since experienced a baptism of fire involved in GM’s massive product recall incidents.

This trend extends beyond the automotive industry, with product management and supply chain experience in the current CEO’s of Apple, Home Depot, McCormack Foods and other firms large and small.

There is an adage that one data point is interesting, two consistent data points are more interesting and three or more consistent data points is obviously a sign of a trend.  For the global automotive industry, the new trend for senior management is showing a common denominator for sensitivity and grounding in product design, operations and global supply chain management leadership.

The year 2015 may well be a watershed year as this new generation of product design and operations background CEO’s continue to take the leadership helm. For global supply chain ecosystems across the automotive industry, these are, by our Supply Chain Matters lens, encouraging signs.

Bob Ferrari

© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.


More Information Comes to Light Regarding Speculation that Apple is Developing an Electric Car

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Supply Chain Matters provides a brief update to our previous commentary regarding Apple’s reported potential development of an electric powered car. More information has come to public light, information pointing to development of advanced battery component capabilities for larger applications.

Today’s edition of The Wall Street Journal echoes a published report from Reuters that A123 Systems, a lithium-ion battery developer and producer is in the process of filing suite with Apple for what that company alleges as “an aggressive campaign to poach employees.” The compliant names five employees that have defected to Apple or appear to be in the process of recruiting other existing A123 employees to join Apple.

According to the Reuters report: “Apple has been poaching engineers with deep expertise in car systems, including from Tesla, Inc., and talking with industry experts and automakers with the ultimate aim of learning how to make its own electric car, an auto industry source said last week.” In its reported lawsuit, A123 believes Apple aims to build a competing battery business partially relying on the expertise from its former employees.  The employees in question, who initially joined Apple in June of last year, were reported to be working of A123’s most critical projects, and by joining Apple, they violated their employment agreements.

Neither Apple nor A123 have responded to both media outlets in requests for confirmation.

A123 was initially funded in-part by a research grant in 2009 from the U.S. government as part of a broad economic stimulus program as a result of the severe recession at the time.  A123 Systems, who was awarded a $249 million matching, grant to construct world class lithium-ion battery manufacturing facilities in the U.S., and Johnson Controls was awarded a similar amount to deploy advanced battery supply capabilities. A123 had been previously designated by Chrysler as its prime battery supplier, while Johnson Controls, in a joint venture with France’s SaftGroupe, was previously chosen to be a primary battery supplier to Ford Motor Company. Later however, A123 ran into a number of business challenges and had to file for bankruptcy in 2012.

These notion reinforces the speculation that we raised in our previous commentary, namely that if Apple has serious intent to produce electric cars, it needs to invest in product design and manufacturing sourcing of batteries.

Bob Ferrari


Added Evidence to Structural Business Changes Impacting Consumer Goods Producers

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Supply Chain Matters provides added rather important data point concerning the ongoing significant business challenges associated with many large consumer packaged goods providers and their associated supply chain teams. Multiple U.S. based food producers continue to serve up grim financial and operating news from their latest quarter. Most all of these ongoing challenges are attributed to the industry’s abilities to adapt to fundamental shifts in consumer tastes, changes in previous market growth assumptions and now, the added significant financial implications related to foreign currency effects.

This week, the largest globally focused food manufacturer by revenues, Nestle SA, reported its slowest annual sales growth since 2009 and 2015 will likely provide added challenges. Nestle’s organic sales growth for all of fiscal 2014 was reported as 4.5 percent, a number that perhaps most other large CPG producers would relish at this point.  But, that number fell below Nestle’s declared growth target of five to six percent organic growth. Real internal sales growth was noted as 2.3 percent while operating profit was up 30 basis points in constant currencies but 10 basis points in net.  In terms of quantification, Overall sales in 2014 were down 0.6 percent and Nestle executives indicated that negative foreign exchange shaved that number by 5.5 percentage points, which is a very significant amount.

From a geographic perspective Nestle’s organic growth was described as broad-based and included 5.4 percent for the Americas, 1.9 percent in Europe and 5.7 percent in Asia, Africa and Oceania.  Business media noted that growth in developed and emerging markets is moderating.  The CPG producer indicated the need to adapt with the fast-changing expectations of the Chinese consumer.  In fact, throughout its earnings release, there is a constant theme of continuous product innovation, re-formulation and re-launching, which all impact the underlying supply chain.

Other noteworthy financial numbers were that Nestle’s cost of goods sold (COGS) fell by 30 basis points driven by product mix and pricing actions along with savings generated by Nestle’s Continuous Excellence program which more than offset increases in raw material costs. Distribution costs were up 10 basis points. The global CPG producer has further established a Nestle Business Excellence initiative at the executive board level in an effort to aggregate line-of-business support services. Thus, the pressure on costs, added efficiencies and productivity continue along with needs for continuous innovation and resiliency to global market changes

Campbell Soup also reported financial results this week, along with added plans for a multi-year zero-based cost focused initiative to slash costs and restructure certain operations. CEO Denise Morrison provided another profound quote: “We are well aware of the mounting distrust of so-called Big Food, the large food companies and legacy brands on which millions of consumers have relied on for so long” and further noting that changing consumer tastes remain a key challenge for the industry. Campbell’s has plans to re-organize its businesses by product category as opposed to geographic regions. According to reporting from The Wall Street Journal, Campbell’s has hired Accenture, the same consultancy that assisted 3G Capital with its efforts to consolidate the operations of HJ Heinz, ant those of Mondelez International, to assist in the Campbell initiative.

Supply Chain Matters reiterates that rapidly shifting industry markets and consumer preferences imply a critical need for increased product innovation and quicker introduction of new products. These capabilities need to be obviously enhanced, in spite of continued pressures to reduce costs. Volatile and rapidly changing global markets require that Sales and Operations Planning (S&OP) teams be more responsive and anticipate such changes.  The focus clearly turns toward an outside-in perspective, allowing the supply chain to quickly sense changes in product or regional demand and respond as quickly as possible to market opportunities or threats. Finally, supply chain segmentation strategies, those that orient supply chain resources to the most influential customers, most profitable market segments or highest customer growth opportunities are now ever more essential.

Bob Ferrari

© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.


Reports of Apple Designing and Producing a Concept Electric Car

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Business media including the Financial Times and the Wall Street Journal reported last week that Apple was working on a secret research lab (not so secret anymore) possibly directed at developing a concept electric car.  According to these reports, under the code name “Project Titan” Apple has several hundred employees working at this research lab designing a concept vehicle that resembles a minivan.

Apple, of course, has declined comment to any of these publications.

According to the published WSJ report, the size of the project team and the senior executive hires are indications of seriousness, with Apple CEO Tim Cook approving the development project almost a year ago.  Once more, the report indicates that Apple executives have flown to Austria to meet with contract manufacturers.  The publication names the Magna Steyr unit of Canadian auto parts supplier Magna International as one potential party involved.

The report accurately notes that manufacturing an automobile is enormously expensive with a single plant costing upwards of well over $1 billion. Thus, it should be of little surprise that Apple might be investigating existing contract manufacturing options.

Auto supply chain teams know all too well that sourcing production in any particular country and transporting autos among global regions can be an expensive proposition without volume and market scale. It’s clearly not the same as shipping iPhones and iPads or for that fact, ramping-up new product and supply chain labor resources to coincide with a product development lifecycle. Once more, intellectual property (IP) protection becomes a larger consideration because of the nature of the multiple components and new technologies that may be involved. For electric powered vehicles, the design and production cost of the batteries is the single most important material and product margin component.

Another parallel that these reports bring forward is that if Apple becomes serious in pursuing this foray into electric cars, it will likely be a competitor to Tesla Motors, who has been pursuing a vertical integration strategy including the design and production of its own electric storage batteries for automotive and solar energy storage use. Tesla elected to invest in a former Toyota auto factory located in Fremont California.

Certainly, there will be continued speculation as to what Apple ultimately decides to do.  However, in the light of our previous Supply Chain Matters challenge to Apple to invest more in U.S. or North America based production, Project Titan could provide the opportunity to consider such an investment commitment, either contract manufacturing or owned manufacturing investment.  North America automotive production plants and their associated supply chains have proven world class competitiveness and indeed are exporting vehicles to global markets.

However, in light of our previous commentary noting excess auto production capacity across China, Apple may elect its familiar new product introduction and contract manufacturing model.

Bob Ferrari


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