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Tesla’s Revised Master Plan Provides More Product Engineering and Supply Chain Implications

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Last week, Tesla founder and CEO Elon Musk penned a blog posting that essentially updated the master plan for the company that called for a broader product development thrust into hybrid trucks and buses. This places a far broader emphasis on the firm’s supply chain ramp-up challenges, one with the implication that Tesla will, by our view, have to seriously consider adding to existing final assembly production capacity beyond its current Fremont California facility.Tesla ModelX_Live

The commentary itself not only provides an argument for why the electric car company must merge with SolarCity, but a further expansion of the master plan that includes:

  • Create stunning solar roofs with seamlessly integrated battery storage
  • Expand the electric vehicle product line to address all major segments
  • Develop a self-driving capability that is 10X safer than manual via massive fleet learning
  • Enable your car to make money for you when you aren’t using it

New product offerings were described as a new form of pick-up truck, and beyond the consumer vehicles market, an innovative heavy-duty trucks and high passenger density urban transport vehicle. Regarding the latter, Musk envisions a smaller footprint of urban busses with a transition from the role of individual bus driver to one of fleet manager. Both are noted as in the early stages of development at Tesla and should be available for unveiling next year, and will follow the availability of the more affordable Model 3 currently due in 2017.

Supply Chain Matters previously highlighted efforts of truck maker Nicola Motor Company in developing a Class 8, 2000 horsepower electric powered semi-tractor truck that will be named the Nicola One. This manufacturer has to-date booked 7000 reservations, each accompanied by a $1500 deposit, totaling more than $2.3 billion in cash to secure a reservation for this new vehicle, hence the sense of urgency for Tesla to enter such a market.

To state that the latest master plan is audacious or ambitious is an understatement. It places a far more concentrated focus on whether product development and the supply chain can rise to the challenge in such a short timeframe.

As noted, our last Supply Chain Matters commentary on Tesla concluded that the company remains challenged by supply chain ramp-up issues as it strives to meet aggressive short and long-term production and supply chain needs of existing announced vehicles. Musk has literally accelerated by two years, his goal to have the California final assembly facility output 500,000 vehicles per year. In his latest blog post, Musk once again re-iterated that this will be addressed as a function of engineering:

What really matters to accelerate a sustainable future is being able to scale up production volume as quickly as possible. That is why Tesla engineering has transitioned to focus heavily on designing the machine that makes the machine — turning the factory itself into a product.

The adding of commercial vehicles with more innovative hardware and software designs implies no choice but to accelerate capacity, strategic commodity and supply chain wide resources. Just today, The Wall Street Journal reports (Paid subscription required) that Tesla’s new $5 billion “gigafactory” near Sparks Nevada to produce the combined company’s battery component needs is currently one-sixth of its planned future footprint. Currently, 1000 construction workers are working two shifts per day, seven days per week to prepare for 2017 needs in the output of lithium-ion cells. Primary battery supplier Panasonic admits to the current challenges of finding qualified production workers, and with the addition of even more models of transport vehicles, the scale of the battery plant’s capability become crucial.  But so does final assembly and distribution as well, in an area that is noted for rather expensive real estate and distribution space.

Thus, any experienced or even entry level supply chain and manufacturing professionals that enjoy an environment of fast-paced innovation and creativity in business process and physical supply chain processes best route your resumes to Tesla. We anticipate a razor-like focus that harnesses the fusion of engineering, product development and supply chain management into a kaleidoscope of expansion that will test current norms and thinking.

Bob Ferrari


A Significant Announcement Related to Internet of Things Technology

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There has been quite a significant announcement related to Internet of Things (IoT) and Industrial Internet technologies, one that line of business, product management and manufacturing focused teams should pay close attention to.

General Electric announced that it will partner with Microsoft in uniting their Cloud computing and analytics technologies in a partnership that will bring GE’s Predix platform for the Industrial Internet to businesses running on Microsoft Azure. The parties indicate in the joint announcement that the combination of Predix with Azure will bridge GE’s industrial equipment and digital expertise in industry and manufacturing, and Microsoft’s forte in information technology. From the lens of this analyst, there are far more implications related to the all-important selection of a technology platform to power IoT initiatives.

This latest announcement bears significance because of selection of Microsoft itself. It is no secret that Microsoft technology has over the years become a dominant integrating technology within and across factory floors. Therefore, from my lens, the potential is the ability to link not only physical objects to business and supply chain business processes but further to connect the shop floor and manufacturing applications with operating assets as well. GE engineers and executives do due diligence very well and they are increasingly acted like an information technology provider with deep domain expertise in industrial equipment and expensive physical assets.

SAP focused readers may recall that at the recent SAP Sapphire conference, Microsoft and SAP also announced a strategic alliance to leverage Azure in the future development of more desktop and mobile applications as well as to provide extensibility of SAP applications to desktop, mobile, Cloud and analytics needs.

We believe that readers should view both of these alliance announcements as a strategy by Microsoft via its Azure platform to become a far more pertinent player as an IoT information and analytics platform. It further opens IoT efforts for the scope of mid-market equipment manufacturers where Microsoft technology is dominant.

In prior Supply Chain Matters commentaries we have called attention to GE as a manufacturer that is both a dominant player and first mover in IoT, but also a significant influencer as to which technology players will ultimately be key IoT participants. By recently opening up its Predix platform in its Digital Alliance program, GE is striving for Predix to become the Industrial Internet platform of choice. In our most recent blog related to GE Predix, I have stated:

Make no mistake, the expanded (GE) Digital Alliance program is a wide swath initiative to build extensive influence and critical technology and development mass in the IoT marketspace.”

This week’s GE-Microsoft announcement adds far more credence to this intent. It is sure to invoke other responses from competing enterprise information, business applications and infrastructure technology providers. The announcement is indeed a big deal and this partnership merits lots of visibility and scrutiny over the coming months.

We will do our part to keep readers informed and in helping to connect events and implications. While the IoT focused industry remains in the early stages of more widespread IoT deployments, current actions center on how major enterprise, supply chain, industrial equipment and platform vendors converge on approach, since the current strategy is one of fostering platform and technology dominance.

This is great theatre one that will keep technology analysts busy and engaged in advisory modes. Insure that you acquire multiple opinions and viewpoints to determine how to position your organization or line of business perspectives related to planned  IoT initiatives. Give us a call or send us an email if you require further assistance.

Bob Ferrari

© Copyright 2016. 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.


The Rush to Internet of Things Platform Dominance- General Electric Opens its Predix Technology Platform

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Supply Chain Matters has featured prior commentary regarding General Electric and its ongoing efforts to transform itself from a diversified industrial equipment manufacturer to that of both an equipment and software services provider.  GE is an ongoing case study in the leveraging of Internet of Things (IoT) technology into new business models for its customers and for GE itself. The core of GE’s Industrial Internet strategy is the Predix IoT platform tailored for operating equipment environments.

In conjunction with the Mobile World Congress trade show being held in Barcelona, GE announced today the GE Digital Alliance Program, an effort dedicated to growing its digital industrial ecosystem. This expanded alliance program is billed as connecting systems integrator’s telecommunications service providers, independent software vendors, technology providers and resellers with the technology and digital industrial expertise of GE. For the first time, GE alliance members will be able to train and certify their developers and begin building a variety of additional industrial applications with Predix.

In a prior commentary reflecting on GE’s 2015 financial performance, we noted that the new GE Digital business unit delivered a reported $5 billion in revenues in 2015. The company’s goal is to triple Digital Business revenues by 2020.

Development efforts surrounding the core 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. The CTO of GE Digital is of the belief that Industrial Internet platforms will break the zettabyte barrier (1000 exabytes) in the next five years.

GE has invested upwards of $1 billion in its Industrial Internet efforts thus far, in-essence making a significant strategic bet on the Predix platform. The industrial giant holds a strategic card as well, namely current existing customer relationships with global industrial companies eager to leverage new and more recurring revenue streams. Make no mistake, the expanded Digital Alliance program is a wide swath initiative to build extensive influence and critical technology and development mass in the IoT marketspace.

With today’s announcement, GE unveiled new Digital Alliance collaborations with Intel, Capgemini, TCS, Deloitte Digital, Infosys, Genpact, Softtek and Wipro Limited. They join existing Digital Alliance partners Accenture, AT&T, Verizon and Vodafone, Softbank Corporation and Cisco. We recently brought reader attention to Cisco’s announced acquisition of Jasper Technologies to broaden that firm’s IoT platform.

Other enterprise technology providers recognize the vast potential of IoT enabled business models that link equipment performance with add-on services. Thus, as Supply Chain Matters has observed, the battle of which platform is to be most utilized in now underway, and there is a lot at-stake. Firms such as Cisco, PTC, Microsoft and Oracle are now engaged in this effort of influence among IoT development communities.

As Supply Chain Matters has previously advised, the early adopters of IoT enabled business models related to industrial and supply chain needs should exercise some caution in their early prototype development efforts. Understand that vendors are indeed positioning for dominance and to do your homework on the long-term resilience and scalability aspects of the network platform. Just like previous item level tech waves such as RFID, the perspective is far broader than any existing single technology or services provider.

Vendors with influence and large pockets will continue to positioning for platform and indeed partner and industry dominance, but that should not be deterrence to early adoption business initiatives for new business models that can leverage IoT information. . Early adopters also have a buyer’s advantage in that customer references and early success stories are critical for technology vendors and services providers vying for dominance.

A large building or business initiative requires a solid foundation built for endurance, solid architecture and partner support resources. That should remain a guiding principle.

Bob Ferrari

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

 


General Electric Declares a Pivotal Year and a Look into its Future

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General Electric recently announced its fourth quarter and full 2015 financial results and made it a point to call attention to its new GE Digital business unit. It did so because GE’s bold goal is to be a top 10 software company by 2020. In its press and media outreach, GE declared that GE Digital accomplished $5 billion in 2015 revenues with anticipation of far more growth in the coming years.

This relatively new GE Digital business segment was formally launched in November after a series of internal re-alignments. The unit brings together all of GE’s digitally focused and Industrial Internet capabilities under a single business focus. This includes GE’s Software Center, the company’s global IT and commercial software teams along with cyber security teams.

The underlying mission of this business is to make intelligent machines and connected industrial equipment as an emerging reality. GE is of the belief that the Industrial Internet could add $10 to $15 trillion to the global economy over the next 20 years. This includes aircraft engines that can self-diagnose operating performance, alert to pending operating maintenance needs and automatically order required repair components.  Railroad locomotives that can communicate onboard diagnostics, train operating conditions and train rail car composition. Data can be analyzed across fleets of similar equipment providing design engineers timely performance information while fleet owners have the ability to optimize operating assets.

GE executives are quick to differentiate Smart Machines and Industrial Internet from Internet of Things (IoT). The latter GE views as more consumer market focused. The Head of GE Digital, Bill Ruh, states in a recent blog post: “There’s a difference between running a smart thermostat in your house and controlling a power plant. We work in mission critical environments.”

Some in today’s broader tech world of IoT may take issue with GE’s succinct differentiation of consumer vs. industrial facing connected devices. Suffice to point out that the opportunities are indeed enormous for both dimensions. However, by our lens, it is rather important to differentiate the different scale, scope and function of needs for both, especially in the data security and scalability dimensions of industrial applications.

GE has indeed been a pathfinder in the notion of connected machines and is now beginning to harvest the financial and market benefits for being an early innovator.  From its longstanding industrial roots, the company can surely grasp the notions of what is required for mission critical operating environments.

Other industrial manufacturing and enterprise software providers will surely escalate their commitment to intelligent machines and by 2020, there may well be a different software provider landscape with competitive dynamics. What we term IoT today become more differentiated and more succinct in application. As with all prior tech revolution, there will be winners, laggards and market casualties.

The good news, however, is that bringing the physical and digital aspects of supply chain information and decision-making together are no longer a distant vision, but within the realm of a five-year goal.


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