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Supply Chain Matters Blog On Summer Pause

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This posting is to alert readers that the Supply Chain Matters team will be taking a summer vacation pause to partake of some needed rest and rejuvenation.Supply Chain Matters Blog 350 100 J Supply Chain Matters Blog On Summer Pause

While we may post an occasional important or critical update, our normal cadence of blog posting activity will resume the week of 23 July.

During this pause, readers are welcomed to explore our vast amount of content related to multi-industry supply chain management business processes, information technology and other related topics. We know there is significant content because we recently had to add additional data storage to the blog.

To assist readers, below is a select listing of some of our most-read blogs so-far this year, as-well as in 2016. Perhaps these can be part of your summer reading.

 

What are Specific Skill Needs and Gaps in Supply Chain Management? (February 26, 2016)

Supply Chain Matters highlights results and an infographic from a supply chain skills survey conducted by Canadian based Argentus Supply Chain Recruiting outlining what specific hard and soft skills are organizations looking for in their hiring and recruiting efforts. Supply chain skills and talent development content has consistently drawn reader interest.

 

The Future of Supply Chain Planning (May 2, 2017)

The first in a market education series that explores changing needs in supply chain planning, what is termed concurrent supply chain planning, and why it is becoming a more important capability to support today’s multi-industry supply chain business environments.

 

A Path Towards Internet of Things Enabled Service Management- Service Parts Planning Realities (June 13, 2017)

A content education series on building the foundations for robust, more efficient, less costly service and aftermarket parts planning capability while building the foundation for IoT enabled service management business models.

 

Articulating Supply Chain Needs in the Language of the C-Suite (May 11, 2017)

The latest economic and business data reinforces that supply chain leaders must more than ever, be able to translate investment needs in the language of the C-suite and in the notions of delivering desired business outcomes.

 

Airbus and Boeing Continue to Experience Supply Chain Scale-Up Challenges (May 2, 2016)

After announcing Q1 financial and operational performance results, both Airbus and Boeing addressed ongoing challenges related to their supply chains and expected performance for 2016 total aircraft delivery commitments. We shared candid comments from Airbus’s CEO as to the global producer’s most critical new product introductions and clear signs of concerns related to various supply chain challenges.

 

The Value Proposition for Cloud Computing is Broader in Scope and in Business Implications (January 22, 2016)

Our commentary explored the implications of a full Cloud-based technology suite in supporting broad supply chain business process needs after industry analyst Bob Ferrari completed nearly two days of briefings and conference presentations related to Oracle’s Cloud based technology offerings. One takeaway provided was to view Cloud from the perspective of a broader focus on an engineered suite of pre-integrated software applications that are continually updated to reflect changing business needs.

 

Technology Addressing the Convergence of Internet of Things and Smart Manufacturing Deployments (March 23, 2017)

As a follow-up to Supply Chain Matters attendance and coverage of Oracle’s Modern Supply Chain Experience Conference, we highlighted some sessions that addressed Internet of Things (IoT) enablement of future smart manufacturing, supply chain and service management business processes.

 

Sports Authority- A Disturbing Twist to Consignment Inventory Management Practices (March 17, 2016)

Characterized as one of the largest sporting-goods retailers, Sports Authority was weighted down with debt from a prior leveraged buyout a decade ago. We called attention to a disturbing development in the ongoing bankruptcy process, as the retail chain filed lawsuits with more than 160 suppliers challenging supplier claims to consigned inventories. We opined that this development had significant ramifications for supplier collaboration practices within retail as well as other consumer goods focused supply chains.

 

Chipotle’s Consumer Trust Crisis Enters a New Critical Phase (February 9, 2016)

One of our early blogs in a series of ongoing commentaries we outlined from a supply chain lens regarding the business, brand and supply chain crisis that impacted Chipotle Mexican Grill after hundreds of consumers were sickened by a series of varying incidents ranging from E-coli outbreaks to norovirus that date back to the summer of 2015. We opined that too much attention was being applied to corporate marketing vs. supply chain and restaurant risk mitigation efforts.

 

Look to the Cloud to Support the Modern B2B Network (September 1, 2016)

This blog commentary addressed an organization’s journey toward mature B2B information integration and how this is made possible by today’s advanced cloud-based platforms, applications and infrastructure. We opined that there is no question that analytics and broader, more predictive business insight capabilities are opportunities to transform B2B business and supply chain business networks. The opportunity — and indeed the necessity — is to leverage an end-to-end business network to synchronize planning, execution, customer fulfillment and more predictive decision-making needs.

 

Thanks again to all our globally located Supply Chain Matters readers for their continued readership and frequent visits. Thanks as well to our sponsors, clients, and network contacts for their continued support.

Bob Ferrari, Founder, and Executive Editor

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


This Week’s Paris Air Show- More About Product Development and Supplier Tensions

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The Paris Air Show is being held this week representing an important sales and marketing event for aerospace and commercial aircraft manufacturers and supply chain participants. Thus far, two dominant themes appear; one being efforts by Boeing to premiere or hint of new aircraft as well as added services, the other by aircraft engine producers and key suppliers, exercising influence as the critical link in commercial aircraft supply chains.

Boeing has focused this week’s event as the formal market launch of the newest version of the 737-aircraft family, that being the 737 Max 10. This latest model of the 737 can seat upwards of 230 passengers and has a reported list price of upwards of $125 million, but customers more than often acquire aircraft at discounted price levels. Industry watchers position the 737-10 as a market response to Airbus’s rather popular A320 neo series Boeing began the week by announcing 135 new orders for the aircraft, and thus far, visibility to individual airline or aircraft leasing companies have come forth, including a United Airlines order for 100 of the aircraft. The aircraft manufacturer expects to book orders of upwards of 240-250 aircraft. The 737-10 is expected to enter operational service in the 2020 timeframe.  Boeing 737Max Tail 300x200 This Weeks Paris Air Show  More About Product Development and Supplier Tensions

The president of Boeing Commercial Airplanes indicated to attending press that customers wanted the aircraft producer to build the single-aisle 737 bigger, and with more operating range.  From our lens, that is reflection of airlines being primarily-driven by financial metrics vs. customer comfort factors.  Anyone who has had to endure a 5-6-hour flight on a packed 737 with few amenities including lavatories likely know what we mean by customer comfort.  Welcome to the new world of airline travel, where efficiency trumps any sense of overall customer experience. But, we digress.

From a product development perspective, because of existing iterations of the 737, incremental product development and manufacturing costs for the larger model are relatively modest by comparison, boosting product margins for Boeing.  The supply chain is already in-place and ramping-up production of all models of the 737 family.

Industry media including Aviation Week report that airlines in general have a mixed view of the 737-10, mostly because of market timing and overall claimed capabilities. Boeing is therefore taking the opportunity to leverage this week’s event as a sounding board for the development of a new, smaller twin-aisle “middle-of-the-market’ aircraft with the designated name of the 797 series.

The conceptual 797 would by some accounts, be positioned between the 737, and the 787 Dreamliner, providing airlines more options in operating U.S. coast-to-coast or transatlantic flights airlines. Many in the industry view this model as a successor to the very popular 757 series.

For Boeing, the 797 series would be a test of quicker-time-to-market since by some accounts, airlines have expressed enthusiastic response to initial paper designs. A further critical design decision would be the selection of the aircraft’s available engines. Thus far, we have read indications that existing 737 MAX and A320 neo engine providers CFM International and Pratt & Whitney would be potential suppliers as well as Rolls Royce, which has up to this point, concentrated its product strategy on the larger twin-aisle segment. However, we read one show report indicating that executives from General Electric and CFM International have no interest in sharing a supplier arrangement with Boeing’s 797 series. Instead that are bidding to be the sole engine provider to assure a timely market introduction.

On the subject of aircraft engines, this week’s event has manufacturers in this segment touting their new engine orders. As an example, GE and CFM expect to book $15 billion in new business, both in hardware and services. GE Aviation indicated that its engine order backlog now exceeds $150 billion.

Beyond the marketing, as we have noted in our most recent Supply Chain Matters commentaries focused on commercial aircraft supply chains, engine manufacturers are currently the critical weak-link in the supply chains for both the A320 neo and the 787-MAX.  Pratt continues to deal with initial engine component design and manufacturing deficiencies related to its new geared turbo-fan (GTF) engines requiring the planning of whole engine spares to keep existing operational aircraft flying to schedule.  Engine supplier CFM International, the joint venture of GE Aerospace and Safran, producers of the new LEAP series engines experienced an initial quality problem in a turbine disc within operating engines of the first 737-MAX. At this week’s event, CFM International management indicated confidence in discovering root cause of the turbine disc flaw and expressed further confidence in meeting the targeted delivery of 500 LEAP engines by the end of this year.

Finally, industry and business press is highlighting the July start-up of Boeing’s newly announced Global Services Business Unit.  This week, Boeing management indicated expectations to garner much more of the estimated 8 percent of business services existing Boeing operational aircraft representing billions of dollars in potential added revenues and profits. The goal is to double annual services revenues to $50 billion in five years. Boeing management acknowledged the potential of a “healthy tension” with major suppliers, including engine producers, since many key suppliers rely on services revenues to boost their financial performance. Some engine producers are currently threatening to invest less in product innovation if Boeing insists on taking more market-share in services. That threat includes the currently contemplated 797 aircraft.  For Boeing to accomplish its business goals for services growth, it will need to convince major suppliers to give-up intellectual property as well as spare parts distribution rights. That is a tall order that is bound to lead to added supplier tensions. A further battleground will be the area of Internet-of-Things enabled service models where both aircraft manufacturers and suppliers are expected to clash on whom owns and controls customer-focused operational and services data. This is an area that bears quite a lot of observation in the months to come.

Bob Ferrari

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


MetTel Announces Single SIM Chip for Internet of Things Seamless Connectivity

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A sidebar to our previous blog posting reflecting regarding IDC’s latest global market forecast for IT related technology reflects on new technology entering the market each week. Supply Chain Matters is continually impressed with the current cycle of new technology that addresses specific challenges directed at IoT enabled business processes.

We highlight just one example that crossed our news desk this week.

One of the more troublesome challenges for connecting physical objects with digital information driven processes is overcoming challenges related to connectivity. While mobile network connectivity proliferates, not all geographic locations nor regions have similar networks. That adds to challenges of uniform connectivity with added complexity and costs.

New York based MetTel, a provider of integrated digital communications, announced what the company describes as “the first SIM that intelligently roams to identify and automatically connect to the strongest signal globally. Connectivity is achieved by embedding protocols for the four major US and 650 worldwide wireless carriers, allowing any device from a hand-held device to a jet engine to communicate operational data and status. This technology resides on a hardware chip and the provider indicates that it leverages eSIM-ready infrastructure which is being developed as a global standard in the not too distant future. It further includes geo-fencing, providing the additional ability for equipment to report entry or exit specific regions or locations.

The technology responds to the need for always-on connectivity that is not constrained by existing transmission networks or physical location. While this technology serves as a de-facto proprietary software connectivity network, it seems to address challenges that we have heard described from current pilot efforts of IoT enabled process applications.

Our ongoing IoT coverage has also highlighted technology that allows information and PDF files to be electronically stored on physical equipment for reference needs along with next generation electronic labeling technology that supports sensing of product condition. No doubt, with double-digit market growth potential, supply chain teams will be able to take advantage of other new technology for support supply chain related IoT needs.

Bob Ferrari

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


IDC Updates Global Spending Forecast for Internet of Things Technology

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This week, quantitative market research firm IDC released its Worldwide Semiannual Internet of Things Spending Guide, that at the surface, provides strong evidence of meaningful IoT related IT spending this year, and in future years.

Within the announcement are important validation for our supply chain management community, namely that the broadest appeal, value, and attraction for current IoT efforts rests in areas of manufacturing and supply chain focused business processes. IoT 425 IDC Updates Global Spending Forecast for Internet of Things Technology

The industry analyst firm now predicts that worldwide spending on IoT focused technology is expected to grow 16.7 percent this year, reach a level of $800 billion. The firm now forecasts that spending on hardware, software, services, and connectivity that enable IoT will reach $1.4 trillion in five years.

According to the analyst firm, technology hardware, manifested by sensors and modules that connect end points to networks, will be the largest spending category until the last year of the current forecast, when overtaken by the faster growing services category. The forecast indicates that software, namely horizontal and analytics focused, will represent the highest five-year technology growth rates at 29.0 and 20.5 percent CAGR respectively.

IDC indicates that the industrial use cases expected to attract the largest investments this year include $105 billion in manufacturing operations, $50 billion in freight monitoring, and $45 billion in production asset management. According to the forecast, the industries with the largest investments will be Manufacturing ($183 billion), Transportation ($85 billion), and Utilities ($66 billion).

Interesting enough, IDC indicates that the Asia Pacific region (excluding Japan) will represent the leading investment region, followed by United States and Western Europe. From our lens, these regional based forecasts are an indication that Asia-Pac firms view IoT as a core disruptive technology, and are taking an aggressive investment view to leverage such technologies.

On the consumer focused IoT side, the firm now forecasts this area to be the fourth largest market segment this year, and grow to become the third largest segment by 2021. The largest spending growth areas over the five-year window indicated to be 33.4 percent CAGR in airport facilities automation, 21.1 percent CAGR in electric vehicle charging stations, and 20.2 percent CAGR in in-store contextual marketing.

Within our own specific 2017 supply-chain focused technology predictions, we declared that IoT focused technology would continue in early stage pilots or line-of-business driven efforts to prototype new business models. We believed that industry competitor drives need needs to achieve forms of first-mover advantage in either developing new forms of digital-driven business process and achieving newer top-line revenue streams. Early efforts also help in developing required competencies in data security and interoperability among various edge and core business systems.

Judging from the latest IDC forecast data, manufacturing, asset management and transportation processes are garnering the highest interest levels in 2017. Each has a foundational aspect. A further takeaway, again from our lens, is that the near-term investment use-cases for IoT remain in the industrial sector, many of which reflect the digitization of business processes.

Bob Ferrari

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

 


A Path Towards Internet of Things Enabled Service Management- Service Parts Planning Realities

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This blog posting represents the second of a four-part market education series, in collaboration with supply chain planning and service parts technology provider ToolsGroup.

 In our initial posting in this series, we declared that one of the most promising line-of-business areas that will benefit from Internet of Things (IoT) enabled technologies applied to supply chain management will be equipment services management, especially service and spare parts management.  Planning 3 shutterstock 394279114 300x184 A Path Towards Internet of Things Enabled Service Management  Service Parts Planning Realities

A longstanding challenge in service or replenishment parts planning and management has always been the ability to forecast item-level demand when such demand is sporadic or sudden.  Now consider the opportunities to have demand-driven or predictive failure data and information emanating directly from the physical equipment.

But with any major business transformation, there are always foundational capabilities that come first. In the specific area of IoT enabled equipment and services management, a foundational capability is usually the need for a robust, responsive, and analytically-driven service parts planning (SPP) capability.

Yet an unfortunate reality is that many manufacturing and services organizations with lower levels of process maturity have not recognized the differing process and decision-making needs required for responsive and effective SPP.  Considering a leap to an IoT enabled service management business model will likely expose this weakness.

 

What Makes Service Parts Planning Different?

Three fundamental differences often found in SPP are the following:

  • Contracted service levels and customer contracts determine the overall parts distribution and required service response network. When there is either equipment downtime, caused by a failing part, or when equipment consumables are suddenly out-of-stock, equipment is no longer generating value for end-customers. There is very little tolerance for inventory back-orders since non-performing equipment results in downtime costs that can far outweigh the cost of the replacement part.

 

  • Service parts component demand is often manifested in intermittent or lumpy demand signals, caused by actual equipment operational conditions or changes in operating environment. That means planning in an environment of long-tail demand, parts that exhibit larger numbers of variability, lumpy or seasonality focused demand patterns. Traditional forecasting or demand planning techniques are often ineffective in planning parts demand in such environments. That’s because SPP is far more concentrated in individual item-level planning as contrasted to product family or aggregated planning techniques. SPP planning models feature higher stock keeping unit (SKU) counts and associated long-tail demand planning computations than traditional supply chain planning models. Algorithms that capture actual parts demand, or plan for future demand need to be far more sophisticated in item level and shipping location mathematical modeling.

 

  • Service parts networks require the need for multi-echelon and multi-tiered inventory stocking strategies tied to more predictive parts demand. Long-tail demand can be best managed by planning that factors item level and shipping location simultaneously. SPP must therefore be able to effectively manage and optimize inventory within such multi-echelon stocking environments.

 

A Path to the Future

Three to five years from today, even more equipment will be acquired by “services by the hour” payment methods, saving on front-end capital equipment costs for equipment operators. Physical objects such as complex equipment, engines, motor vehicles and other forms of equipment will be communicating operational performance and service needs via IoT enabled data and information flows. For equipment manufacturers, the opportunities are new lines-of-business and incremental multi-year top-line revenues flowing from such models.

The good news for IoT enabled service management processes is that the equipment itself can provide more proactive or prescriptive indications of when a part is scheduled to fail, as well as actual maintenance data related to parts failure. Such capabilities will provide added intelligence and more accurate parts demand information that will provide additional service uptime and operational cost savings for customers and service parts providers. In addition, the ability to link the physical equipment and operational data related to equipment with a robust SPP environment adds important benefits in the ability to capture and plan more accurate, and more predictive information related to service parts or consumable parts needs and requirements across a service management network.

However, the savviest businesses recognize that the end-goal is not IoT per-se, but in building the foundational people, process and technology capabilities that can best leverage the digitization of supply chain management and decision-making processes. An IoT front end isn’t much good without an equally responsive back end planning system.

Businesses that recognized the critical differences in more effective service parts management and made the initial foundational investment in more responsive SPP process capabilities will be far better positioned to harvest the benefits of smarter and more efficient network wide inventory levels, more timely decision-making and most important of all, more responsive service and satisfaction levels for equipment customers.

 

Bob Ferrari

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

 


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