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Supply Chain Matters Highlights of Connected Things 2017 Conference

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This supply chain management industry analyst recently had the opportunity to attend the Connected Things 2017- Accelerating the Adoption & impact of IoT for People, Places & Things conference, sponsored by the MIT Enterprise Forum of Cambridge.  This Supply Chain Matters posting shares key highlights, observations, and insights this author gained from the various sessions.

This was a one-day conference designed to exchange the latest thought leadership and information exchange regarding the current state of Internet of Things (IoT) technology strategy and deployment. The conference, as noted in the dedicated conference web page, included a format of keynote presentations from senior technology executives and market influencers along with seven different panel discussions directed at key IoT challenges and topics. MIT Connect Things 2017_2

From this author’s lens, the content was outstanding and very timely, and brought forward consistent themes related to this growing area of technology interest. Judging from the overflow crowd of conference attendees traveling from different regions and just before a forecasted major snowstorm across the New England region, IoT is obviously a top-of-mind topic within many an industry setting, including industry supply chains.

The opening keynote delivered by Harel Kodesh, Vice President, Predix and CTO, GE Digital provided a very timely context for how a manufacturing company such as General Electric is aggressively moving toward a journey to be an Industrial Internet and digital transformation company. This blog has provided several prior commentaries related to GE Digital and its development and rollout of the Predix operating system, and Kadesh’s keynote brought this all together. As an example, GE declares that it will have upwards of 68,000 of its jet engines and 10,000 turbines connected by Predix in three years. Another GE Digital initiative looks to railway locomotives serving as a “data center on wheels” in areas of data sharing not only on equipment and train operation but on the sensing and reporting of rail right of way data, such as the condition of agricultural farms and fields. An important key message reinforced by GE is that upwards of up to 40 percent of operational performance data generated by equipment is spurious, subject to cleansing or deletion. That reinforces the need for the Edge level, or as GE refers to the Digital Twin system, to serve as an actual data rationalization compute mode. We view this as a very important consideration for any form of supply chain or service management focused IoT digital transformation initiative.

The keynote from David Friend, CEO of BlueArchive, and former founder of Cloud storage provider Carbonite, provided clear reinforcement that Cloud based data storage will indeed transform to a utility model in the not too distance future. The current impediment is a generally accepted standard data exchange API for IoT driven processes to integrate with.  Friend’s remarks further reinforced the need for operational data cleansing at the Edge layer, along with today’s overriding concerns for increased data security standards as well as increased data speeds across all the levels involved in an IoT deployment. As an example, Carbonite today manages 500 million storage requests daily.

SAP executive Alan Southall, Vice President and Head of SAP IoT Predictive Maintenance, reinforced that engineers currently do not trust raw data emanating from an asset, and that SAP recently launched SAP Leonardo to be an IoT platform data management system to manage and mitigate semantic data flows from the physical asset to actual business applications. (This analyst recently received an SAP briefing regarding SAP Leonardo design and capabilities) SAP is further working with pilot customers on areas such as machine learning, as well as automated analytics. Southhall also reinforced the message that Edge systems require military grade data security.

We managed to sit-in on three separate panel discussions including one focused on IoT Analytics, Industry 4.0 impacts on legacy industries and the all-important, physical, and cyber security viewpoints.

Regarding an IoT analytics framework, we sensed a consensus viewpoint outlining a tiered analytics strategy, with smart assets and connected devices managing local processing and Cloud-based platforms serving as additional data aggregators and insights engine at high levels of more predictive event context. Regarding the long-term impact of analytics, panelists concurred that industry transitions are already underway but additional challenges need to be addressed in how to better automate data consolidation and aggregation, and yes, the need for more comprehensive network-wide data security practices and standards. Noted was that a lot of industry development right now is focused on Edge systems, namely decisions needing to be made at the machine or manufacturing layer, an initial step in helping organizations to be prepared for later enterprise-wide, IoT digital transformation efforts. A reality remains that most machine-level data resides in industrial environments primarily protected behind-the-firewall.

We were very pleased to hear one panelist declare: “Don’t give me more data- give me smarter data.”

One other theme expressed on this blog in multiple prior commentaries, is the belief that, like other data-focused technology automation transformations of the past such as RFID adoption, ultimate ownership of data remains a big challenge yet to be sorted out. For instance, original equipment manufacturers or digital services providers are positioning strategies based on aggregation and ownership of equipment data for business process management or digital transformation business model needs, while data generators of the equipment declare that actual customers already own such data.  One example mentioned by a panelist is within agriculture settings, where seed providers have been collecting vast amounts of data to provide managed services related to crop yields, while not making such data available to the same specific farms without a bundled service.  In our blog commentaries, we have portended similar conflicts yet to play out in industries such as commercial aircraft, where airlines will claim ownership of their own operational performance data.  Obviously, a period of transition and sorting out must evolve.

Again, this was a beneficial and informative conference addressing a transformative but still young technology with more iterations to come.  Conferences such as these helps in cutting through some of the hype, focusing on key challenges and needs, while providing learning from those in multiple roles of moving such transformation forward.

Bob Ferrari

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


Hospital Supply Chain Survey Points to Needs for Broader Education and Alignment Across Healthcare Delivery Support Supply Chains

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Global integrated healthcare services and products distribution company Cardinal Health has released findings of a recent Hospital Supply Chain Survey and the results once again reinforce the need for far more supply chain management focused efficiencies among hospitals, along with broader stakeholder alignment across healthcare delivery supply chains.  _DSC0083

The survey, conducted in late October 2016 included responses from slightly over 400 doctors, nurses, service line leaders or supply chain administrators. What especially caught our Supply Chain Matters interest were the findings indicating that 57 percent of physicians did not have the right products needed during a planned procedure. The study highlighted that one in four hospital staff have observed or heard of an expired product being used on a patient and 18 percent have observed or heard of a patient being harmed due to a lack of necessary supplies at the right time. The responses further indicate that nearly 20 percent of front-line caregiver time is consumed by supply chain management expediting or follow-up which then amplifies further to service line and other administrators.

A fundamental tenet of our community is that the supply chain exists to serve the needs of the end-customer, and in the case of healthcare, patients and frontline caregivers. Ladies and gentlemen of the healthcare focused supply chain community- these findings point to continuing systemic issues in your supply chain processes and they well should be garnering added calls-to-action.

Then again, from our lens, it is yet another indicator of the current stakeholder misalignments across healthcare supply chains. While most care givers, those on the front lines for delivering quality patient care and managing healthcare delivery costs, believe that the seamless operation of the supply chain is critically important, the other supply chain participants seemed aligned to other conflicting interests.

For the first time, we included pharmaceutical and drug supply chains in our industry-specific predictions for 2017. The principal reasons were twofold and somewhat inter-related. The increasingly global reach of the industry’s various supply chains is adding continued possibilities for risk and disruption. According to the U.S. Department of Commerce, the United States is now the biggest importer of pharmaceuticals from other countries. Pharmaceutical and drug production is now global in scope. Incidents of counterfeit drugs and medicines have been a constant challenge and lately, conformance to generally accepted production practices have become troublesome. Second, within the U.S. especially, there remains an enormous groundswell of political and social backlash directed at what is perceived as artificially high and inflated pricing stemming from conflicting buyer self-interests across the industry’s extended supply chain. Pharmacy Benefit Managers (PBM’s) negotiate pharmaceutical and drug prices on behalf of heath insurance plans and de-facto now include a far higher share of control over the supply network. The latter challenge alone is beyond explanation in a single blog commentary.

Latest Survey Responses

Survey responses from this latest Cardinal sponsored survey indicate a fair to poor rating among 52 percent of respondents for having the right product when needed, 53 percent indicate a fair to poor rating for the ability to keep track of recalled products or tracking product expirations, and 56 percent a fair to poor rating for the ability to manage inventory volumes. The full details of this hospital supply chain survey report can be downloaded at this Cardinal Health web link.

Let us be blunt and to the point. Processes for supporting timely supply of right product with the ability to manage updated and timely product information have proven business process solutions that have been acquired both in healthcare process pilots and from many other industries. Likewise, the technology needed to support accurate and timely product data is available today in either new product labeling, active item-level chip or other Internet of Things (IoT) enabling technology.  The missing element seems to always come back to the alignment of stakeholders across the extended supply chain and to leveraging process and technology investments consistently across the healthcare supply chain. Buying influence is a big determinant as well, especially when state and federal government are factored as buyer influences.

Frontline care givers should not be having to constantly manage supply and inventory tasks and similarly, hospital supply chain administrators should be allocating time to occasional supply and demand alignment exceptions. As the survey responses and the Cardinal report findings reinforce, such time is better freed-up for patient time.  Once more, today’s integrated supply chain planning and customer fulfillment systems are up to the task for planning healthcare supply needs.

We agree completely with the conclusion that improvements are long overdue and they are centered on the current conflicting stake holding interests. However, supply chain inventory management is basic and has proven solutions.

Again, by our lens, hospital teams should be viewing these challenges as both local supply chain management education and in external supply chain network-wide process alignment perspectives. Seek out supply chain management business process and technology experts for education. Work with your major supply distributors and PBM’s on the most efficient and cost affordable means to align with existing automated supply response management processes that link both manufacturers, distributors, and your local facilities in extended supply chain inventory supply visibility.  As we have noted in a prior Supply Chain Matters commentary, Cardinal Health supports its own supply chain innovation laboratory. Likewise, other distributors and manufacturers are willing to collaborate on overall supply chain visibility and addressing more automated local supply chain processes and decision-making needs.

This blog and this Editor is willing to do our part in broadening industry education and in visibility to new, more cost affordable technology or business practices. However, we as healthcare consumers, along with frontline healthcare providers need to be far more vocal in influencing the broader industry that local supply chain management supply and decision-making needs need to be far more intelligent and far more simplified for hospitals and services providers.

Bob Ferrari

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

 


Rolls Royce- Another Potential Weak Link for Commercial Aerospace Supply Chains

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Supply Chain Matters has highlighted some percolating supplier weak links among commercial aerospace supply chains from either financial, operational or product quality perspectives.  Certain key suppliers such as Pratt and Whitney have provided signs of such industry concern. Now, broader industry visibility to engine producer Rolls Royce is likely added.

Rolls-Royce Trent 1000 aircraft engine

Source: Rolls-Royce Image Gallery

This week, Rolls Royce reported financial and operational performance for the December-ending quarter and the headline was a $5 billion annual loss driven by a corruption scandal and negative currency factors, along with signs of premature engine component failures.

Recall that this manufacturer is a prime supplier of aircraft engines for the newest models of wide body, longer distance aircraft such as the Airbus A350 XWB and A330 aircraft and Boeing’s 787 Dreamliner.

The reported annualized loss in the latest year reflects a large, noncash accounting charge from the revaluation of U.S. currency hedges after the British pound slumped. It further includes a £671 million one-time charge for bribery settlements with U.S., British and Brazilian authorities after the company admitted to illegal business practices spanning decades.  Operating pre-tax profitability fell for a third year to £813 million from £1.43 billion a year earlier. Total revenues declined 2 percent to £13.4 billion. Chief Executive Warren East indicated to shareholders and analysts that 2017 will provide another challenging year. Shareholders responded with a reported 5 percent decline in the company’s stock value.

The UK based company has now undertaken a corporate-wide restructuring that unfortunately includes the shedding of positions. A reported 600 manager positions are being eliminated along with upwards of 2,600 job losses in the aerospace division. About 1,800 jobs are further reported as being eliminated in the ship-engine group. The company is forecasting annual savings starting at the end of this year of around £200 million as a result of such efforts.

Further, according to business media reporting, the company is preparing for the introduction of new accounting standards that will impact the reporting of near-term profitability. Rolls-Royce typically sells aircraft engines at a loss and makes up revenues during the operating phase through various pay by the hour servicing contracts with airline operators. The company buffers the early losses by booking some of the assured services revenue early. Under new accounting rules, such losses reportedly will need to be reflected immediately, while services revenue should be accounted for as-delivered.

According to reporting by The Wall Street Journal, costs associated with the Trent 1000 engines used to power Boeing Dreamliner’s have also risen as a result of turbine components degrading prematurely. Other problems include weakness in its business in equipping engines for the regional and business jet sectors where Rolls-Royce is losing ground to rivals.

Thus, as the commercial aerospace industry now enters its next industry inflection point, with overall airline order demand for larger, wide-body  aircraft is now showing signs of contraction, a potential supplier weak link is likely added.  An added irony is that Rolls can likely benefit from added automation of manufacturing and supply chain business processes along with the more leveraged use of advanced technology in areas such as improved sensing of key component operating performance parameters in its engines. Such investments can be difficult when shareholder eyes are focused on near-term profitability.

Bob Ferrari

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


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.

 


Deep Dive on 2017 Prediction Nine: Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Initiatives

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The following Supply Chain Matters blog is part of our ongoing series of deep dives into each of our previously unveiled ten 2017 Predictions for Industry and Global Supply Chains.

At the start of the New Year, our parent, the Ferrari Consulting and Research Group along with our Supply Chain Matters blog as a broadcast medium, provide a series of predictions for the coming year. These predictions are shared in the spirit of assisting industry specific and global supply chain cross-functional teams in helping to set management objectives for the year ahead. Our further goal is helping our readers and clients to prepare supply chain management and line-of-business teams in establishing impactful programs, initiatives, and educational agendas.

The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and customer service management.

In an earlier Supply Chain Matters blog postings, we provided deep dives related to:

 Prediction One- Subdued World Economic Outlook and Heighted Uncertainty to Test Industry Supply Chain Agility.

Prediction Two- A Challenging Year in Procurement

Prediction Three- A Supply Chain Talent Perfect Storm

Prediction Four- Increased Anti-Trade Geo-Political Forces Provide Added Global Sourcing Challenges

Prediction Five- Continued Global Transportation Industry-wide Turbulence

Prediction Six- A Renaissance in Supply Chain Focused Business Services and Technology Investments

Prediction Seven: Enhanced Supply Chain Intelligence Capabilities Among B2B Network Platform and Managed Services Providers Will Pay Dividends for Industry Supply Chains

Prediction Eight-Amazon and Alibaba Continue to Position for Global Online Platform Dominance

 In this deep-dive series posting, we drill down on our next prediction.    Paris_COP21

2017 Prediction Nine: Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Focused Initiatives

Despite the declarations by U.S. President Trump that climate change has not been proven to be an issue, we predict that individual business and supply chain self-interest needs, along with the track record of benefits to-date, will continue multi-industry green and supply chain sustainability initiatives and momentum.  There is literally too much positive momentum on a global basis to motivate senior executives to derail such efforts in 2017.  The need remains compelling.

Where Emissions Emanate

Scientists point to three sectors that are most critical toward reduction of GHG emissions:

Energy– the engine and most influential cost aspect of global business and of industry supply chains represents upwards of 30 percent of global CO2 emissions. Throughout modern history, the cost of energy and fuel has been the principal driver of a majority of industry, manufacturing, distribution, and global supply chain strategies. Reduction opportunities reside in the consumption of alternative and low carbon renewable energy sources, smarter and far more efficient energy, and logistics utilization practices.

Agricultural, Land Use and Forestry Practices account for an additional 30 percent of global-wide emissions. With world population growth expected to reach 9 billion people by 2050, our planet cannot tolerate an unsustainable food production system. Farming practices, fertilizer, water use, animal husbandry all add to considerable emissions.

City Infrastructure, Buildings and Transportation can be responsible for upwards of 40 percent of global emissions. More of the world’s population is expected to be concentrated in larger cities, (mega-cities) and thus will be the hubs for economic growth, commerce, delivery, and fulfillment logistics. The potential of smarter, more connected cities coupled with advances in more sustainable, renewable energy sources provides the opportunity for a complete re-thinking of urban logistics and transportation. Global trade must now stem from advances and efficiencies in global, regional, and local transportation networks.

To address these three imperatives, more and more organizations have discovered that the firm’s supply chain can be responsible for up to four times GHG emissions beyond that firm’s direct in-house operations.  Industry supply chains are therefore one of the most critical areas of opportunity to enable GHG reductions and climate chain resilience.

Sustainability is further not limited to emissions and natural resource protections, it further umbrellas global-wide social responsibility as a business and corporate citizen, and in the treatment and respect of labor provided by individuals. Here, the latter is especially pertinent to industry and global supply chains who elect to source production, component supply or business services in low-wage, limited protection geographies.

Current Status

As we begin 2017, scientists indicate that the Earth reached its highest temperature on record during 2016, breaking an earlier record set in 2014. This development represents the first time in the modern era of global warming data that average temperatures have exceeded prior levels for three years in a row.

The 12th Edition of The Global Risks Report 2017, sponsored by the World Economic Forum, observes that extreme weather events, climate change and water related crisis have each consistently been noted as among the top ranked global risks for the past seven editions of this report. However, according to this latest report, the pace of change is not yet fast enough to curb current warming trends.

The Artic sea ice had a record melt in 2016 and the Great Barrier Reef suffered an unprecedented coral bleaching event last year. Estimates are that GHG emissions are growing by 52 billion tons of CO2 equivalent per year even as the share from industrial and energy sources may be peaking because of investments in green and sustainability initiatives among multiple industries and countries.

Much has been accomplished these past few years, but more difficult work remains.

The Paris COP21 Agreement on climate change entered force during November 2016. This agreement has now been formally ratified by 110 countries with another 196 countries including China, now indicating strong support. The Global Risks Report 2017 cites data indicating: “The reality remains that to keep global warming to within two degrees Celsius and limit the risk of dangerous climate change, the world will need to reduce emissions by 40% to 70% by 2050 and eliminate them altogether by 2100.

Moving Forward

This new era of the Paris COP21 Agreement provides both a profound call to action as well as a significant opportunity- an opportunity for bolder collaboration and joint goal-setting to not only address greenhouse gas reduction imperatives and to saving our planet, but the imperative of sustainable business itself. It literally should change our perspectives and goal-setting for sustainability strategies surrounding industry supply chains, moving such initiatives beyond supply chain functional to line-of-business level efforts.

Across many industry supply chains, a lot has already been accomplished in identifying opportunities related to reducing industry supply chain related GHG emissions, preserving natural resources including water, and insuring sustainable supply of Earth dependent commodities. Multi-year objectives have been established that include annual tracking of performance to each objective. The benefits of these initiatives are meaningful in relation to savings on supply chain related costs, reductions in responsible emissions, insuring adequate supply of key strategic supply needs and a more positive perception to one’s corporate and product branding.

Opportunities to Further Leverage Technology

With the era of COP21, industry supply chains are presented opportunities to seize upon the tenets outlined in Jeremy Rifkin’s book, the Third Industrial Revolution as well as other Industry 4.0 thought leaders that point to the compelling convergence of technologies that are before us. One that leverages the convergence of green and renewable technologies, new more renewable energy sources, IoT enabled predictive-focused analytics and the digitization of manufacturing and supply chains. All are converging over the not too distant future, and collectively can foster insured business continuity through strategies that are directed at long-term sustainability of commodity, raw material, and natural resource supply.

Our Takeaway

In 2017, despite any U.S. political notions that climate change may or may not be a significant factor for business risk, industry supply chains and the respective businesses and customers they support and serve, will be at a disadvantage in de-railing or slowing down sustainability efforts.

Benefits have already been recognized along with added opportunities. From our lens, the ongoing convergence of digital and physical business processes manifested by IoT, more predictive analytics, autonomous decision-making and additive manufacturing will provide added opportunities towards sustainability needs and objectives.

The challenge remains insuring a sustainable business within domestic and global dimensions, and that momentum is likely to continue in the coming year.

 

This concludes our Prediction Nine drill-down. In our final posting of this series, we will explore Prediction Ten which addresses certain industry-specific supply chain focused challenges in the current year.

Stay tuned.

Bob Ferrari

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


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