The business-to-business (B2B) network has become the new opportunity for fostering stronger supply chain and product business relationships with suppliers. More often today, this includes integrating new product management and introduction (NPI) with product design, collaborative manufacturing design and supply chain fulfillment.
Recently, Supply Chain Matters has highlighted a number of current day examples of the critical importance of these relationships. We highlighted recent accident investigation findings from previous Boeing 787 Dreamliner lithium ion battery fires along with findings from a joint FAA and Boeing study published in March which reviewed the broader 787 build program. Among report findings was added credence to the reality that globally extended aerospace and complex equipment supply chains need to consider more timely two-way integration of product lifecycle management (PLM) and manufacturing process test information across B2B supply chain networks.
In the high tech and consumer electronics sector, product lifecycles are far shorter and NPI cycles occur more frequently. The recent unexpected bankruptcy of a prototype Apple supplier of sapphire glass provided yet another example. Apple’s peak and valley tendencies for extraordinary new product ramp-up and corresponding large-scale production volume surges that correlate with condensed product release cycles place enormous pressures on suppliers and any last-minute product design changes can be a disaster without timely two-way information integration and change assessment. Within automotive supply chains, recent unprecedented levels of product recalls are a reflection of the exposure of common product platform strategies, where common component design is leveraged across multiple models or brands. Many if not all of these multi-industry examples point to the product and production information alignment disconnect.
Under sponsorship of E2open Inc., our research parent The Ferrari Consulting and Research Group recently published an E-Book, The Case for Tightly Integrating New Product Introduction and Supply Chain Management. This document identifies the new opportunity for leveraging the end-to-end supply chain business networks not only for synchronizing planning and fulfillment execution but the new opportunities for incorporating two-way NPI process information as well. Certain B2B networks provide the ability to support a hub-and-spoke, federated data model that spans these broader process areas and bridge the gap in existing PLM and ERP systems for integrating broader forms of process information across extended supply and demand networks.
The E-book is available for complimentary downloading with registration at the following E2open web link. Later this month, we will also feature this E-book in the complimentary section of the Research Center associated with this site.
Disclosure: E2open, Inc. is both a Named Sponsor of Supply Chain Matters and a client of the Ferrari Consulting and Research Group.
The World Health Organization (WHO) has declared the ongoing outbreak of the deadly Ebola virus in West Africa to be a Public Health Emergency of International Concern (PHEIC) and humanitarian organizations such as Doctors Without Borders continue to work on the front lines to control the outbreak. The consequences of further international spread of the virus coupled with fears of wider-scale contagion have created a call for coordinated global public health actions to stop and reverse the outbreak.
Other concerns should be the short or longer impacts to industry and global supply chains if the current outbreak cannot be adequately controlled. Within close proximity to the current effected region within West Africa is the country of Cote d’Ivoire, which is a major supply source for cocoa. Countries within the West Africa coastal and interior regions also produce supplies of palm oil, iron ore and other commodity materials.
Beyond local sourcing are the broader implications to global transportation and logistics networks if the current outbreak spreads to other countries and spawns additional travel and cross-border restrictions. In short, industry supply chain and sales and operations planning teams definitely need to monitor the current Ebola outbreak and have some form of scenario and backup plans identified.
This posting serves to alert our Supply Chain Matters readers who subscribe to Accenture Academy training and webinars that this author will overview the current Ebola crisis from an industry and infrastructure supply chain perspective and provide expert perspective on the areas to watch along with considerations for building risk contingency scenarios. Accenture Academy is launching a new series termed Trend Talks, which are more compact and two-way interactive webinars that address and provide collective discussion on important, rapidly developing trends among industry supply chains.
I am pleased and looking forward to delivering this inaugural Trend Talk webinar addressing this timely and rather concerning global topic. The session is scheduled for Wednesday, December 10th at 10am Eastern time with participation available only to Accenture Academy members. Readers can utilize this Accenture Academy web link for login and registration.
If our readers have had the occasion to travel to Boston, you might have experienced the public transit subway system which is referred to as the “T”. Typical to the historic nature of the city, its subway system dates back to the late 1800’s. Today, its subway lines are denoted by colors, namely the Red, Green, Orange and Silver lines.
Last week, another very important milestone took place.
The Massachusetts Department of Transportation awarded a contract to China’s state-owned CNR Corp. for the replacement and delivery of 284 modern subway cars. The important headline for this development was the awarded contract cost, namely $567 million, is a rather compelling sum for this amount of modern equipment.
It its reporting, Bloomberg News echoed that this was the first deal of this kind for a Chinese company in the U.S.: “The deal breaks new ground for Chinese train makers whose overseas push, backed by Premier Li Keqiang, has been mostly limited to developing markets.” According to CNR officials, this deal eventually places CNR equipment in all of the world’s six continents.
The contract calls for CNR to replace 152 Orange Line subway cars, that line’s entire fleet, which has an average of 1.5 million miles of service per car. Additionally, 132 Red Line subway cars which date back 27 years and have racked up to 2.3 million average miles will also be replaced. CNR will construct a new $60 million final assembly manufacturing facility at a former closed Westinghouse factory site located in Springfield, a central city in Massachusetts. The new production facility is expected to employ upwards of 150 factory workers.
Since the contract stipulates that 60 percent of the work to take place in the U.S., Supply Chain Matters speculates that the subway car components will be imported directly from China, most likely by ship via and expanded Panama Canal routing to an east coast port.
The timetable calls for a three to four year design phase, with initial pilot cars delivered in 2018, and production car output spanning the years 2019-2021. The deal has an additional option for the delivery of 58 additional Red Line cars.
The specifications for these new subway calls call for adding an additional 15 additional passengers per car, wider accessibility doors, LED lighting, regenerative braking systems, environmentally friendly HVAC and advanced customer information systems.
The Massachusetts Bay Transit Authority (MBTA), operator of Boston’s transit system has struggled with its finances for many years, falling behind in any efforts to invest in new operating equipment. Thus, the opportunity to replace this amount of equipment at the stated cost had to be a very attractive proposition for taxpayers. However, it has to a rather concerning development and omen for existing train equipment manufacturers.
A reported six companies bid on this replacement contract. Bidders were reported to have been evaluated on criteria ranging from technical and manufacturing experience, quality assurance, reliability as well as price. In its reporting, Bloomberg noted that the CNR price was a little more than half that of Bombardier and other bidders included Hyundai Rotem Co. of South Korea and Kawasaki Rail Car of Japan. An MBTA spokesperson later added that that agency found no human rights violations with CNR.
Rival state-owned CSR Corp. is reportedly keen to supply high-speed trains to the State of California. A published Reuters report indicates U.S.-based SunGroup USA indicated to Reuters earlier last week that it had teamed up with CNR and its unit Tangshan Railway in a pitch to supply California’s $68 billion project with up to 95 trains that can travel as fast as 354 kilometers per hour (221 miles per hour). That news is significant in that CSR could possibly team up with rival CNR, the recipient of the recent Massachusetts subway car contract, for the California contract. About a dozen firms are expected to compete for the California project.
And then there is one more development. An additional Bloomberg report published yesterday indicates that both CNR and CSR will make “a major announcement” in about a week. The report cites speculation that China’s State-Owned Assets Supervision and Administration Commission (SASAC) is seeking the merger of the two companies to boost exports of high-speed railway technologies.
Obviously, China has indeed set aggressive targets for exporting train equipment and supply chains to global markets and developments are moving rather quickly.
This week, Gartner unveiled its annual regional listing of what the analyst firm considers to be fifteen of the best supply chains in the European region. Gartner conducts this ranking as a supplement to its Top 25 Global Supply Chain rankings that are traditionally announced in the fall. According to Gartner, the top three European supply chains, Unilever,Inditex and H&M, remain unchanged and continue to lead in supply chain excellence while Seagate Technology made its debut in the number four ranking. Three new company supply chains also made a presence in the Gartner Europe ranking.
The published ranking for Europe Top 15 supply chains were noted as:
- Unilever (ranked 4th in 2014 Top 25 global ranking)
- Inditex (ranked 11th in 2014 Top 25 global ranking)
- H&M (ranked 13th in 2014 Top 25 global ranking)
- Seagate Technology (ranked 20th in 2014 Top 25 ranking)
- Nestle (ranked 25th in 2014 Top 25 ranking)
- Delphi Automotive
- Reckitt Benckiser
Similar to our view of this week’s Gartner’s Asia-Pacific rankings, Supply Chain Matters believes that this ranking reflects how we would have voted if we were part of the external or peer voting panel. Unilever is indeed a great supply chain competing in a very challenging CPG industry group. As we noted in our commentary associated with Gartner’s Top 25 ranking, Unilever has made steady progress over the past three years and deserves special recognition. Inditex has long been an icon when describing a top retail focused supply chain that is extraordinary in sensing and responding to fashion and customer demand. Seagate Technology as well, has bounced back from the near disaster of disruption and supply shortages caused by the 2011 floods in Thailand. L’Oreal has made great strides in integrating supply chain planning and execution across its supply chain business network. Nestle deserves its recognition especially in leading with industry-leading supply chain sustainability initiatives.
Three of the Gartner European Top 15 reside in the automotive industry sector which has been an industry segment not previously noted for consistent supply chain excellence. Both BMW and Volkswagen have been deploying a global based product platform strategy and have weathered the European economic crisis through a focus on international markets.
Also noteworthy is the appearance of two pharmaceutical supply chains, Glaxo and Reckitt in Gartner’s Europe ranking.
We believe that a ranking of the top Europe supply chains has even more significance given the ongoing challenges related to the severe economic conditions that have impacted Europe. These are supply chains that had to demonstrate various aspects of resiliency to insure required business and product outcomes.
Supply Chain Matters again extends its congratulations and recognition to each of the named supply chain organizations for achieving such recognition. There is obviously hard work that goes into achieving such recognition and citation and it should be acknowledged.
Today, Gartner published its annual regional listing of what the analyst firm considers to be ten of the best supply chains in the Asia-Pacific region. Gartner conducts this ranking as a supplement to its Top 25 Global Supply Chain Rankings that are traditionally announced in the fall. According to Gartner, while most of these regionally-based supply chains still need to elevate their supply chain capabilities to compete on a global level, many have dramatically improved their position.
The published ranking for Asia-Pacific Top Ten supply chains were noted as:
- Samsung Electronics (ranked 6th in 2014 Top 25 global ranking)
- Lenovo Group (ranked 16th in 2014 Top 25 global ranking)
- Toyota (reported to have moved up three places in the top ten Asia-Pacific and up 22 places in global ranking but not in current 2014 Top 25 global ranking)
- LG Electronics
Overall, Supply Chain Matters believes that this ranking reflects how we would have voted if we were part of the external or peer voting panel. Samsung is especially noteworthy since by many accounts its supply chain is supporting more product and perhaps process innovation than that of its arch competitor, Apple. It is quite interesting to note the appearance of three automotive OEM’s in the Asia Pacific ranking while there are no automotive OEM’s ranked in the global Top 25 rankings. We have been especially impressed with Honda’s global manufacturing sourcing strategies that have helped the company overcome currency challenges and better service global product demand.
At least three of the Gartner Asia-Pacific top ten, namely Samsung, Lenovo and Hyundai practice some form of supply chain vertical integration strategies.
However we were somewhat quite taken-back by the appearance of Sony’s in this top ten ranking, given its profitability challenges in the past few years. Sony has also been aggressively outsourcing parts of its television and certain parts of its consumer electronics supply chain to contract manufacturers in order to aggressively reduce costs. Gartner’s own admission is that Sony is lagging behind some of major competitors.
Again, we are shocked with the lack of recognition toward Foxconn Technology (Hon- Hai Precision), the world’s largest contract manufacturer by revenue and output volume. Foxconn is a major supplier and serves as the lead contract manufacturer for Gartner’s consistently ranked number one global supply chain of Apple. This CMS’s ability to respond to Apple’s intense product innovation requirements as well as rapidly scale volume production is highly noteworthy. We remain highly curious as to why Flextronics does not appear in this top ten regional ranking, let alone the global ranking, but then again, social responsibility strategies concerning workers may be a weighting factor. Another supply chain worthy of consideration is that of TSMC, the world’s largest semiconductor manufacturer.
Supply Chain Matters has featured commentaries on many of Gartner’s ranked top ten Asia Pacific supply chains. They can be accessed by utilizing our Search box: i.e. Samsung supply chain.
Factory Destruction Across Vietnam: Supply Chain Sourcing Flexibility and Resiliency Has Never Been as Important
In the quest to seek alternative global low-cost manufacturing sourcing across multi-industry supply chains, countries such as Thailand and Vietnam were high on the list. Both offered relatively attractive direct labor wage rates while offering a highly educated and motivated workforce. Up to this point, that has resulted in a steady flow of foreign investment in these countries including internal supply chain ecosystem capabilities.
All of this is now subject to current re-evaluation because of new political and social unrest that is occurring in these countries. The most visible has been Vietnam where this week, anti-China related violence has caused widespread rioting across the country, targeting factories and industrial parks that rioters believe are owned by Chinese interests. This rioting began earlier this week and according to various global media reports has resulted in arson and vandalism involving multitudes of factories and businesses owned by Japanese, Malaysian, South Korean and Taiwanese ownership since rioters have not been precise in targeting.
The protests were apparently prompted by Vietnamese citizen outrage over an oil rig that China placed in a disputed part of the South China Sea. We have read reports of some speculation that the core anger may be more broadly directed at accumulated anger against foreign-based exploitation within the country. The government of China is holding the Vietnamese government responsible for not taking more definitive actions to curb the rioting and damage. A report published by the Wall Street Journal today indicates that upwards of 3000 Taiwanese and 600 Chinese citizens were fleeing the country amid fear of further violence.
While foreign based business people flee Vietnam for fear of personal safety, a large number of factories have halted production because of either damage or lack of workers. Thus, the potential for significant industry supply chain disruption in the automotive, footwear, high tech, consumer goods and other areas is growing each day. It would appear that many brand owners and foreign interests are looking to the government of Vietnam to curb the current building wave of violence and factory destruction and avoid the current situation from quickly moving from the current bad to a far worse situation.
Meanwhile, continued political unrest across Thailand continues to provide an uneasy environment as violent protests continue sporadically across that country. Yesterday, there were reports that at least three anti-government protestors were killed and 22 were injured as government authorities fired guns and lobbed grenades at antigovernment protestors.
Supply Chain Matters has previously noted how significant incidents social unrest has led to a new wave of worker protests within China’s low-cost manufacturing sectors such as footwear. Political tensions involving China and Japan over disputed ownership of islands continue and have both supply and product demand impacts to certain Japan based firms.
From our lens, the notions of global sourcing are beginning to take on a new risk management perspective, that being social, national and political unrest along with the longer-term implications of that unrest. The notions that industry supply chains can continually follow a singular strategy that is solely directed at sourcing in low-cost countries is being challenged, and increasingly requires a re-evaluation. Global sourcing now includes far more considerations beyond the cost of direct labor, and as we have continually noted, are now taking on social, political and employer of choice perception aspects. The ramifications apply not only to product brand owners, but to industry supply ecosystems.
We believe that these incidents are not isolated and business and supply chain teams need to focus on much broader trends and their implications in access to foreign markets and supply chain ecosystems. The need for supply chain sourcing flexibility and resiliency has never been as important as it is now becoming. Insure that your firm and its supply chain strategies are prepared to manage among these new challenges and needs.
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