On the eve of Apple’s report of quarterly earnings, its supply chain is leaking all sorts of information regarding the upcoming new production ramp-up of Apple’s new iPhone models in preparation for all important the holiday buying surge period that comes later this year.
Our Supply Chain Matters information alerts regarding Apple have been active for the past five weeks but the trigger point arrived today when the Wall Street Journal featured a front-page article regarding ongoing production plans.
According to the WSJ, Apple’s supply chain planners have placed orders for between 70 million and 80 million iPhones in both 4.7 inch and 5.5 inch screen configurations to be completed by the end of this calendar year. That compares to production orders of between 50-60 million phones for the same period last year as Apple ramped-up for the introduction of the iPhone5 model series. That is an obvious indication that Apple is making big-bets on the expected popularity of the new iPhone models. Apple also does not want to encounter a situation of being short on inventory for the most popular iPhone 5s model, as was the case during last year’s holiday season.
The WSJ report generally correlates with reports from Taiwan media several weeks ago. Where the reports differ is when volume production is scheduled to start. Media outlets in Taiwan reported that the 4.7 inch model would begin volume production this month, while the 5.5 inch would begin production in mid-August. Today’s WSJ report indicates the larger screen version production would begin in September. Previous Taiwan and Chinese reports indicated that contract manufacturer Foxconn was in the process of hiring an additional 100,000 workers to accommodate the cyclical production increase while secondary contract manufacturer Pegatron was in the process of hiring an incremental 10,000 workers. All of this data provides a sense of the sheer scale and flexibility that Apple requires from its supply chain partners.
What is remarkable is that a reading of today’s report gives a true sense of the complexity and variability challenges that Apple’s supply chain planners must manage. The new larger screen is again, as in prior years, presenting production ramp-up and yield challenges due to more advanced in-call technology and a rumored sapphire based screen. The WSJ report indicates that orders for upwards of 120 million displays have been placed to compensate for yield challenges. If that number is accurate, it would imply that planners are factoring a 60 percent yield factor. The report further validates that Apple planners will make production adjustments based on early demand history, which was again demonstrated last year when production volumes for the iPhone 5c were scaled-back based on initial demand from consumers. Last month, China Times reported that global semiconductor chip producer TSMC was expected to produce 120 million touch ID fingerprint sensors for Apple, which is three times the volume produced last year, and a further indication of production yield factors and ramp-up scale.
Then there is the celebration of the Lunar New Year, which next year, arrives in February, when most production grinds to a halt as workers take time to return to their families. Apple planners must insure that adequate inventories remain to compensate for a lull in production, or that contract manufacturers make assurances that some production will continue during the period of the Lunar New Year celebration. Multi-tiered inventory visibility is an obvious necessity.
As was the case last year, Apple’s upcoming new product launches will place its supply chain with even more challenges. The competitive stakes for Apple are far higher this year as market dynamics and overall competition in emerging markets intensifies. Rival Samsung has already felt the effects of intensified competition from lower-price producers Lenovo and Xiaomi in China and Micromax and Karbonn in India.
Pricing strategy will be critical and some reports indicate that Apple is seeking higher list prices from carriers for its upcoming new models. The government of China recently raised media-wide concerns regarding the overall security of Apple smartphones in the midst of ongoing global spying scandals, which could place additional pressures on China Mobile to feature other brands. Android powered phones continue to gain more overall market share while Microsoft and other tech players are providing more incentives for lower-cost providers to adopt Windows based phones.
These are all variables that will drive Apple’s supply chain planning in the coming weeks, one that will again have to demonstrate responsiveness to increased market dynamics, synchronization of NPI and ramp-up plans and resiliency to unplanned disruptions or material shortages.
Then again, Apple continues to be rated by Gartner as the number one supply chain.
Among consumer goods and services focused supply chains, Wal-Mart clearly warrants special attention. The global based retailer continues to provide clout and sheer scale of operations that any producer, manufacturer, direct competitor or supply chain cannot ignore.
This week, and for the first time ever, this retailer is hosting more than 500 manufacturers to spur more “Made in the USA” products that can be offered across Wal-Mart’s outlets. The retailer has committed upwards of $250 billion over the next ten years to support more domestic sourcing of products, and is one of very few companies with the clout and influence to make something happen in this area. Supply Chain Matters has previously complimented Wal-Mart on this initiative and we trust others will as-well. More on this topic in a later commentary.
Business media and indeed Supply Chain Matters have also called attention to troubling signs involving lagging sales growth in the U.S. along with other more visible issues. The retailer recently reported its fifth straight quarter of negative U.S. sales and reduced traffic.
For an in-depth perspective on what is really occurring behind the scenes, along with a renewed sense of urgency, we call reader attention to this week’s Wall Street Journal front-page article: Wal-Mart Looks to Grow By Getting Smaller. (paid subscription required)
This article specifically profiles the retailer’s new CEO, Doug McMillon, described as a “Wal-Mart lifer” and his uncharacteristically new efforts directed at altering prior Wal-Mart business models in favor of more innovative approaches. In essence, the WSJ concludes that McMillon is looking beyond a traditional short-term focus in a concerted two-fold effort to bring the retailer into the next century of retailing. These efforts have considerable supply chain and B2B business network implications in the months and years to come.
Described is a new sense of urgency instilled across the entire executive leadership team which includes increased piloting of new ideas. “For the first time in its history, Wal-Mart will open more smaller grocery and convenience-type stores than supercenters.” The WSJ cites internal sources as indicating that the retailer is evaluating plans to open free-standing liquor stores and adding more gasoline service stations in certain states. A test store near Denver allows shoppers to order groceries online and pick-up that order in a drive-thru. The notion of “everyday low prices” is giving way to “dynamic pricing” based on competitive market data.
In its latest fiscal year, the retailer plowed $500 million into its new online E-commerce business, including the addition of three new online fulfillment centers, and has plans to invest an additional $150 million in the current fiscal year. Last year, the retailer was cited as having the highest online sales growth, 30 percent compared to Amazon’s 20 percent gain. Wal-Mart now has upwards of $10 billion of total revenues coming from its online channels.
McMillon’s focus further remains on day-to-day operations of stores including smarter merchandising and in-stock inventory management along with cleaner stores. The article notes that at a recent annual meeting of store managers, an executive admonished store managers to take more active ownership of stores and clean-up their operations. If you have, as this author has, visited a Wal-Mart store of-late, you may have observed that stores are more disheveled with associates that exhibit a lack of caring about shoppers needs. Wal-Mart also has to come to grip with its ongoing labor management practices. The WSJ makes note that earlier in the year, the National Labor Relations Board accused the retailer of unlawful retaliation against workers who took part in protests over working conditions.
Our community can well relate to the fact that keeping shelves adequately stocked was the primary emphasis of Wal-Mart’s prior RFID item-tracking initiatives, which yielded minimal impact and continual resets.
Whether Wal-Mart will succeed in all tenets of its current two-fold business strategy is certainly fodder for added speculation and water cooler debate. However, the continued clout and influence of the retailer on the ultimate success of supply chain and demand fulfillment initiatives is unmistakable, and thus, cannot be ignored. As a participant in Wal-Mart’s supply chain, your organization will again be tasked with many short and longer-term initiatives in support of these parallel efforts.
Keep in mind what is going on behind the scenes as a giant retailer attempts to change its culture and business models to meet the realities of the new era of retailing and customer fulfillment.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Wall Street insiders and the financial press are hard at work extracting tidbits of information from elements of Apple’s supply chain. The buzz and interest centers squarely on what can be anticipated for Apple’s Fall new product introduction (NPI) pipeline. Obviously there is a lot at-stake.
We at Supply Chain Matters have featured prior commentaries related to information leaks from the Apple supply chain ecosystem. But we put that aside in this commentary. Rather, let’s focus on Apple’s new product ramp-up, overall planning and supplier management strategies that are evolving in this current phase.
The current two areas of focus are on the rumored introduction of Apple’s next iteration of the iPhone along with the so termed, iWatch, a smartwatch that is rumored to have rather mind blowing functionality and characteristics.
Earlier this week, the Wall Street Journal published an article, Can Apple Crack the Smartphone Code? (paid subscription required) The article indicates that Apple will join other consumer electronics firms, namely Samsung, Sony, Intel and a host of start-ups who have already released versions of a smartwatch into the market. We recently called Supply Chain Matters reader attention to reports that Google was ramping-up volume production for a smartwatch product as well. According to the WSJ article authors, thus far the market has been lukewarm in sales volumes. Thus, Apple does not have its usual first-mover advantage, and is compelled to provide more attractive product innovation to differentiate from existing competitors. The publication cites one market research firm as indicating that shipments of so-termed wearable devices amounted to roughly 3 million units in the first quarter of 2014, not a lot in the context of previous Apple product releases.
Regarding supply chain related insights, the WSJ cites a source indicating that Apple’s past ability to integrate both hardware and software design concurrently give it a leg-up in the market. Another source from a component supplier is quoted as indicating that Apple is planning for 2014 shipments ranging from 10-15 million production units this year.
A separate published report by Reuters , citing a source familiar with the matter, indicates Taiwan’s Quanta Computer will begin mass smartwatch production in July, with the planned product launch coming as early as October. Thus, we can surmise that in 3 months, Apple is planning to ship three to four times the market volumes that occurred in Q1. That’s Apple’s big bet on more attractive production innovation. The cited source further indicates that Apple expects to ship 50 million units within the first year of the product’s release, although these types of initial estimates can be subject to change or later adjustment. Further noted is that LG Display Co is the exclusive supplier of the screen for the gadget’s initial batch of production. LG Display has become Apple’s preferred go-to supplier for next generation display technology, that which requires difficult challenges in overcoming initial production yields. Two other sources of Reuters indicated that the subject smartwatch is rumored to also contain a sensor that monitors the user’s pulse. Singapore-based imaging and sensor maker Heptagon is cited as being on the supplier list for that feature, a rather new player in the Apple ecosystem.
Now let’s turn attention to the rumored new iPhone6.
A published advisory on Seeking Alpha cites Taiwan’s Economic Daily News report indicating that global contract manufacturer Foxconn is being tapped to be the prime contract manufacturer and is in the midst of hiring 100,000 workers to help ramp up iPhone 6 production. Fellow ODMPegatron is also said to be ramping iPhone-related hiring. Further noted is the rumor that Apple is targeting a price hike for carriers regarding the new phone model, which perhaps implies a bigger margin. Yesterday, a published report from Bloomberg indicates that production for the new model iPhone will begin in July and include two different models. One model will have a 4.7-inch display, compared to the 4-inch screen of the current iPhone 5s and may be available to ship to retailers around September. A 5.5-inch version is also being prepared for manufacturing and may be available at the same time according to the Bloomberg sources. The new iPhones will also be rounder and thinner than previous models, and include curved glass. Production of the 5.5-inch model is more complicated than the smaller version, resulting in lower production efficiency that must be overcome before manufacturing volume can be increased.
That news concerning Foxconn is incredibly interesting because the CMS was previously transitioning away from Apple’s volume business. Foxconn actually declared in February 2013 that it would freeze all hiring in China. Supply Chain Matters featured a past commentary related to Foxconn’s annual meeting of shareholders that communicated that having Apple as one of your prime customers is probably both a blessing and a curse, because the Apple way requires maximum flexibility with a magnification of the principle that the customer is always right, even when that customer abuses planning norms. In that stockholder event just about one year ago, Foxconn management indicated the intent to lighten its high exposure to Apple related production contracts in favor of both moving downstream in the consumer electronics supply chain and developing its own line of devices and software. At the time we opined that we would not be at all surprised that one day, there will be a number of consumer electronics devices branded by Foxconn, probably in the China market. If the rumors that Foxconn will be the prime manufacturer for the upcoming iPhone 6 turn out to be accurate, that would place a new or different perspective, namely that Apple is leaning on its most trusted and experienced contract manufacturer to insure that innovative design can meet high volume production requirements in a more-timely manner.
Apple is obviously deep into two major new production introduction ramp-ups with entirely new product designs, over the next several months. Notice that the windows are shorter, production start in July with possible global product launches in September or October. Usually, these NPI ramp-up phases start earlier in the year, perhaps May or June.
A brand new product area, namely a wearable device, far different iPhone design functionality (bendable glass, touch fingerprint sensor, wireless charging to name but a few rumors) blended among dynamic connections among product design, management and contract manufacturing partners. No doubt, this is an intense effort, with high stakes. Apple’s information connections from product management to the manufacturing shop floor, its inventory positioning and overall S&OP coordination are all dynamically at-play. We would not be all that surprised to hear that product designers are still making changes. That is the Apple way.
Yet, if any supply chain is up to the task, it certainly will be that of Apple.
We all await the results that come over the coming months.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Across the United States, besides the U.S. team’s accomplishments in the World Cup competition, another dominant traditional and social media based news headline reflects of the incredible number of automobiles and trucks being subject to product recall.
The primary story focuses on General Motors, which after intense scrutiny from U.S. regulators and legislators regarding faulty ignition switches among multiple models, is recalling all sorts of models that are believed to have been exposed to a component design problem, faulty ignition or otherwise. Thus far in 2014, GM has announced 44 product recalls involving nearly 18 million previously sold vehicles. Today’s social and business media buzz blares that the vehicles been recalled thus far is more than the total number sold in the U.S. in 2013.
In a previous Supply Chain Matters commentary, we called attention to product recalls involving airbags supplied by Japan based Takata Corp. that were expected to expand and involve millions of affected vehicles. Today, both Honda and Nissan recalled close to an additional 3 million vehicles worldwide to repair the subject airbag problem, bringing the total number involved with the airbag defect to roughly 5 million vehicles.
An article syndicated by the Washington Post News Service features the headline: More than 1 in every 10 vehicles on the road has been recalled since January. That articles notes that the defects range from rather serious (faulty ignition switches, overheating exhaust parts, power steering problems) to other problems where automakers are now highly sensitized to any potential liability problem. This article goes on to note that in the spirit of crisis bringing opportunity, that there may be an upside of this extraordinary situation: “ … meaning that dealers get to have their old customers back in the showroom. There, they can show off the new models and, at minimum, be in a position to sell drivers on some repairs they previously were not considering.”
This author, for one, was completely floored by the above statement. Are you kidding me! One in every ten vehicle owners being inconvenienced to have to make a service appointment and bring their vehicles for service, and dealers have the “blank” to try an upsell these consumers?
Beyond the lunacy of such statements, there is a parallel and very critical challenge about to happen.
Automotive service focused supply chains are going to be exercised to their biggest stress test, ever. All of the subject recalled vehicles will require some form of a repair part, one that has hopefully, been correctly modified to remediate a suspected problem. The sheer numbers imply that some inventory will have to be re-allocated from those destined to support ongoing production schedules for newer vehicles. In some cases, necessary repair parts will not be able to meet overall demand, and dealers will have to be very careful in scheduling service appointments and setting customer expectations. During Toyota’s past product recall crisis process involving unattended sudden acceleration, Toyota worked directly with its dealer network to coordinate extended service hours for consumers, including nights and weekends. Coordinated round-the-clock efforts among certain component suppliers and respective dealers were directed at insuring repair parts were adequately distributed and vehicles were scheduled for repair based on availability of necessary parts.
In short, the folks that do necessarily receive all the hero badges, those directly supporting service focused supply chains will be called upon in the coming weeks to literally save brand focused reputations.
Last week, Supply Chain Matters was invited to attend the PTC Live Global 2014 customer conference held in Boston. One of PTC’s product suites is technology focused on Service Lifecycle Management (SLM) which has been amassed from previous acquisitions of vendors such as Servigistics, MCA, Kaidera, Xelus and others. In one of the sessions, PTC executives noted that expectations have never been higher on the customer and business side of service management. Yet, service management tends to suffer from immature business processes, not from a lack of dedication and effort, but rather a lack of broader understanding to the importance of service management. Mingling in the hallways and networking sessions, we once again had an immediate sense of how dedicated these people are, and also how unappreciated and frustrating their efforts can sometimes be.
Across automotive, the service focused supply chain will be put to its largest and most expansive stress test from the scope of sheer numbers of vehicles and information required to coordinate service scheduling needs. Some will rise to the task at hand. Some will not.
One fact is very clear- auto dealers are advised to take-off their sales hats and concentrate on service and customer satisfaction efforts, in all dimensions. That includes a very close, almost intimate relationship with those dedicated professionals who plan, manage and fulfill service parts planning and order fulfillment. Forget for the time being, the algorithms and calculations related to mean time between part failures. It is going to be “all hands on-deck” augmented by information coordination and supply chain intelligence that separates the best in class performers.
Supply Chain Matters was invited to attend the IBM Smarter Commerce Global Summit this week which was held in Tampa Florida. This was our third annual attendance at this venue and by each of our encounters, we have gathered a stronger sense of IBM’s continued direction in supporting the Buy, Sell, Service and analytics needs for industry supply chains. As noted in our prelude posting last week, IBM has been following a broad strategy, primarily through strategic acquisitions to assemble a portfolio of end-to-end commerce applications and solutions that extend from online marketing and selling through customer fulfillment. In early March, IBM’s CEO, Virginia Rometty, outlined in her open letter to stockholders and customers, a crisper set of strategic priorities that now include a heavy emphasis on cloud and services based solution offerings. The open question in our mind as we traveled to Tampa remained with the timetables, urgency and overall integration progress.
Ironically, the Summit theme this year was: Moments Matter, and just about every keynote amplified the reality that the speed of change and innovation determines today’s business environments. After a packed two day agenda of activity, our overall impression of this conference was that IBM has indeed stepped-up its internal development pace, and the initial signs of cross-application integration capabilities are beginning to come to market. However, the overall timetable is one that IBM customers will need to consider in their technology planning.
There were two significant product announcements made in conjunction with this year’s summit. Big Blue introduced IBM ExperienceOne, a new integrated portfolio of cloud-based and on premise offerings directed at helping customers to deliver deeper customer engagements by bringing marketing, sales and services business practices together in a singular information utility capability. This capability is essential an IBM consulting services service offering that leverages the company’s WebSphere Commerce, Customer Digital Experience and Enterprise Marketing Management software. That software includes elements of Sterling Commerce, Coremetrics, DemandTec and Silverpop, among others, all of which were prior acquisitions.
What should be of keen interest to our Supply Chain Matters readership was the announced launching of IBM Multi-Enterprise Relationship Management (MRM) platform that features cloud-based or on premise supplier and partner engagement capabilities directed at enabling a more adaptive end-to-end value chain. As can be noted in the IBM announcement, MRM leverages functionality from Emptoris for quicker on-boarding of suppliers and trading partners, supplier lifecycle and contract lifecycle management. MRM leverages the IBM Sterling B2B Collaboration Network for reporting and monitoring of transactions and IBM Aspera eXtreme File Transfer and Enterprise File Sync and Share, for sending very large amounts of information across a network including use of desktop and mobile devices.
In our previous conversations with IBM executives, we often probed on the opportunities for assembling an end-end supply chain support capabilities across a contiguous business network, while integrating all of the various IBM vendor acquisition products within such a network.
At last year’s summit, we noted that Emptoris’s senior development director Terrence (TC) Curley, was assuming a lead role in the initial integration of Emptoris suite components with those of Sterling Commerce and other IBM technology components. The current MRM announcement is the first phase of that effort and admittedly, an initial release. We had the opportunity to review the 12 month product roadmap for MRM and noted that beyond baseline an Enterprise Partner Engagement Foundation, the roadmap includes further adapters that integrate not only IBM Sterling B2B Collaboration Network, but also IBM B2Bi and SFG applications which can provide capabilities for quicker on-boarding of financial services, third-party logistics, business services or product management partners. The interesting aspect for MRM are the design principles that stress deeper levels of visibility, end-to-end network scale and collaboration along offering capabilities for supporting cognitive based commerce. If readers have not yet figured out what all of this implies, it means that IBM is gunning to be a viable player in offering an end-to-end business network platform. Again, more work and time is required, but the component assembly and roadmap milestones are now underway.
We do want to mention one other vivid impression from this year’s summit. We had the opportunity to sit in on a keynote session that outlined IBM’s vision for Cognitive Commerce as well a follow-on session that outlined the vision and roadmap for IBM Commerce Solutions. Make no mistake, IBM is indeed committed to huge investments in customer engagement, predictive analytics and machine learning capabilities tied to online commerce. One example of cognitive commerce service outlined was the ability to analyze peak selling periods and be able to predict the depth and breadth of product peaks and optimize inventory allocation to those peaks. Sales and Operations Planning teams should reflect on that type of capability.
There are plans for both enhanced B2C as well as B2B online and multi-channel stores, field sales applications that enhance mobility based applications and planned ecosystems of pre-integrated customer fulfillment partner solutions, including same-day delivery. Finally, there was an example of quickly IBM is responding to current day brick and mortar retailer needs. There are plans to be able to process an online order, by inventory checks of both fulfillment and store-level inventories. To the surprise of some in the audience, IBM described a “dark store” which is one that can serve as a localized fulfillment entity for limited volumes, or be able to convert to a broader based customer shipment fulfillment entity after retail closing hours. In essence, IBM is prepared to support a rather innovative capability for a multi-purpose use store.
Supply Chain Matters will feature additional observations and thought commentaries gathered from this year’s Smarter Commerce Summit in the days to come.
© 2014, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog, all rights reserved.
This author had the opportunity to recently speak with Michael Schmitt, Chief Marketing Officer for E2open, Inc. Our discussion reflected on clarification of the different levels of visibility within today’s global supply chain networks.
At first blush, the term “visibility” can trigger different definitions for supply chain management teams and the term is often over utilized and somewhat abused in communicating supply chain business process needs and requirements. Today, supply chains need to respond and calibrate on a daily basis as opposed to weekly or monthly. Michael Schmitt often articulates such response from the notion of four separate stages of visibility capabilities.
The goal of our interview was to communicate to our Supply Chain Matters reading audience a definition for each of these levels and to provide a basis for helping teams to be able to seek clarity in such definitions as they map out where process and technology capabilities need to be developed.
Level One- Static Visibility
According to Michael, Level One visibility equates to how much inventory you have on-hand internally or externally, based on future customer fulfillment needs and requirements. An initial viewpoint would conclude that this level of visibility should not be that difficult to achieve, yet the reality for today’s predominantly global, multi-tier supply chain networks add a far different reality to this challenge for many teams. Add in a new urgency for industry supply chains to be able to respond to requirements for supporting online and Omni-channel commerce business initiatives, and this level of visibility is even more complex.
Manufacturers with different versions of existing ERP or legacy systems or retailers with both outsourced store and online inventories that were implemented prior to major movements toward outsourcing often struggle with this Level One challenge. Add in today’s realities for outsourced logistics, customer fulfillment and transportation coupled with just-in-time strategies that postpone fulfillment to a different process stage, such as individual logistics providers and the task becomes rather frustrating. Different versions of ERP or legacy systems or supply chain planning systems that are not integrated to the external network add more complexity in achievement of this goal. Add hundreds of locations to the mix along with constant business changes including acquisitions, and basic visibility takes on a unique challenge that forces organizations to revert back to spreadsheets and other labor-intensive means as a basis of gaining forms of Level One visibility.
As Michael explains, Level One visibility transcends beyond batch Electronic Data Interchange (EDI) transactional activity because of the need for additional context as to existing product demand or alternate part numbers that need to be fulfilled along with challenges for integrating multiple master data requirements. There is the further need to be able to synchronize the data and propagate product demand signals across the Business Network. Thus, Level One visibility requires additional logic and context to the network and to fulfillment requirements across an extended timeframe. As an example, an organization may be short 10 units today, but that requirement extends to well over 10 units in the context of multiple added days and changing order flows over a lead time window. The result often leads to a swelling of inventories to maintain customer service requirements for key customers.
Some large organizations with large-scale supply chain networks can achieve significant cost and customer service benefits at this level of visibility, particularly when the business and the Business Network are in a state of continuous change.
Level Two- Assets in Motion
Michael articulates Level Two visibility as the looking forward stage of capabilities when dealing with the realities of constant inventory in movement across the value-chain. Where is either work-in-process and finished goods inventory headed and when is going to arrive? It is a process for verifying information across the network in the context of revenue, profitability or service objectives. In includes the Level One capability with the added dimensions of assets and resource movements.
If an organization strives to perform what-if planning, information has to be in context of projecting inventory with constant movements, one-two- three weeks from now. Nothing is static in today’s industry supply chains. Michael further pointed out the reality that the value of the projection rises exponentially the closer you get to the end of the shipping quarter when business goal fulfillment becomes a prime consideration or when key customers call with unplanned requirements. This is especially valuable to an S&OP process that is more ways than not, scrambling during the final weeks of a quarter to achieve business objectives. In some industry supply chains, the bulk of profitability may be achieved in the immediate weeks prior to quarter end.
Level Three- Predictive Multi-Tier Inventory and Capacity Planning
This is a capability that is weighted more toward predictive or projected visibility. Michael indicates that some organizations describe this stage as “state management” while others use the term “concurrent computation.” For fulfillment execution to be synchronized, context is critically important. For example, a specific order change involving a key customer cannot wait for multiple batch re-runs of the MRP process. Today’s reality for network based supply chains is that planning and execution must morph into a continuous, collaborative based planning and execution based process that is synchronized to specific objectives. Traditional supply chain business process provides different steps for demand commitments, network supply allocations, and production scheduling, forcing additional planning steps which increase response time and efforts while reducing demand-supply matching efficiency.
Level Three is the routing and time-slicing of projected ins and outs of inventory or capacity among specific time periods in the context of the end-to-end network. It pegs an end-item through bill-of-material and where-used context across the entire network and provides alerting to when exception management needs to occur and when. It is synchronization of the network across its multiple tiers and provides visibility to a future projected problem, affording the organization more up-front time to address any potential problem. Michael is quick to point out that only a small handful of current Business Network network technology providers can support this Level Three capability.
Level Four- Prescriptive Inventory and Capacity Planning
Schmitt describes the biggest benefit of today’s industry supply chains as the ability to transition into Level Four visibility, the marriage of predictive and prescriptive planning capabilities across the end-to-end Business Network network. It is a response to the most complex challenge of most S&OP processes, namely a near-term integrated business planning capability that leverages information across tiers of the supply chain network. What-if simulation and scenario management capabilities are married to defined business rules so that various scenarios can be compared to their effect on revenue, profitability of key customer service goals. Advanced visualization tools provide the ability to spot exceptions and to drill-down to various tiers or nodes to determine where corrective activities need to take place.
In the specific case of E2open, the prior acquisition of icon-scm and the subsequent release of the newly announced E2 Planning and Response 11.2 Data Hub capability form the core of this Level Four visibility.
We would like to thank Michael for sharing these definitions of visibility and we trust they can help our readers to differentiate what capabilities are needed in their process and technology initiatives related to supply and value-chain networks.
Supply Chain Matters encourages reader feedback to these articulated levels of visibility which can be shared in the Comments area associated with this posting.
Disclosure: E2open is a current sponsor of the Supply Chain Matters blog.