subscribe: Posts | Comments | Email

A Commentary Reflecting on a CEO Change for General Electric

0 comments

General Electric made major business headlines today in announcing that Jeff Immelt will step down as CEO on August 1 after a 16-year run as the company’s chief executive officer.  The announcement was somewhat unexpected and came because of an ongoing CEO succession planning process overseen by GE’s board. None the lees, it was somewhat of a shock to many.

Supply Chain Matters views this announcement with some disappointment.

Succeeding Immelt is John Flannery, a 30-year veteran who has served the bulk of his GE career among the conglomerate’s financial businesses. Mr. Flannery’s most recent position was head of GE’s healthcare unit.

This senior leadership move comes amid a backdrop of increasing pressure from Wall Street and GE investors on a consistently lower stock price of the company’s shares during Immelt’s tenure. A further backdrop has been the presence of private equity ownership of the company’s stock, specifically Trian Fund Management to accelerate cost reductions and boost profits among GE’s core industrial businesses. In its reporting, The Wall Street Journal was quick to cite knowledgeable sources as indicating that Trian was not actively involved in the CEO succession process. We tend to believe otherwise. If not direct, certainly a major influencer to the culmination of today’s announcement.

As a blog focused on global supply chain management, we have consistently admired GE’s efforts both in the company’s global supply chain efforts and IT practices, but also in the vision and current unfolding strategies surrounding the GE Digital Manufacturing and Industrial Internet strategies. Under Immelt’s leadership, GE became to understand that digital disruption was a major threat as well as an opportunity. GE was bold in stating that factories no longer need to be sourced where labor is cheaper, but rather to best service major geographical markets. Instead, they can compete where educated workers can make the most of advanced technology, and where opportunities can be leveraged to shorten supply chains and reduce inventories. The company further understood the various tenets of supply chain risk and of supply chain risk mitigation. GE embraced the notions of Cloud-based ERP technology and was one of the early transformation adopters under the leadership of Immelt and GE’s CIO.

During the second term of the Obama Administration, Immelt served as an influential leader on the Presidential Commission on U.S. Manufacturing Competitiveness, adding an important voice both in words and corporate actions.

The notions of GE transforming itself from that of a traditional manufacturing focused company to a software-driven company were noteworthy and gutsy. CEO Immelt was by our lens, a visionary in understanding the implications of digital manufacturing both from an internal operations and external business perspective. We believe that GE will hence forth be recognized as a pathfinder in the notions of connected machines and Internet-of-Things enabled business models.

The bold decision to move corporate headquarters from a tranquil suburban Connecticut to Boston’s seaport district was to spur a campus environment of constant innovation and paranoia on market competitiveness.

In a call with investors, incoming CEO Flannery indicated he will take a fresh look at various GE businesses, establishing stronger shareholder returns as a goal of this broad review. Business media seems to be of the initial viewpoint that Flannery was chosen because of his financial industry experiences in creating value for shareholders.

In its reporting, the WSJ indicated that succession planning included consideration of both external and subsequently four internal executives including the CFO and heads of the power as well as oil and gas business units. As with all things GE, including the succession of former CEO Jack Welch, today’s announcement may serve as the prelude for other senior leadership or other organizational changes to come in the coming weeks and months. Their impact to ongoing initiatives, particularly the Digital Business and Industrial Internet initiatives is an open question.

It is indeed unfortunate that today’s Wall Street and investor environment remains one of a short-term focus and on individual reward.  Icons such as Dupont, Procter & Gamble and others must now constantly respond to such short-term thinking. Missing is a recollection that it took multiple years of internal investment and corporate-wide initiatives by Amazon to create the ultimate retail industry disruptor that the online provider and technology services provider is today. There again, Wall Street grumbled and grew impatient with near-term stockholder returns. Not so much today.

As a manufacturing and supply chain management social platform, we expressly tank Jeff Immelt for his visions, tenacity and understanding of manufacturing and supply chain needs, and that both truly matter in business outcomes.

We trust that John Flannery will take GE to its next dimension.

 

Bob Ferrari

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


A More Visible Challenge for Tesla Model 3 Production

0 comments

The visibility on Tesla’s Model 3 production ramp-up took on some new dimensions this week, as U.S. national morning news program CBS This Morning aired a segment featuring Tesla auto workers expressing concerns about on the job safety.

Supply Chain Matters has featured several prior blog commentaries regarding the both the supply chain and actual production ramp-up challenges for the new Model 3 sedan. The reality remains that Tesla must ramp-up its annual production from the current rate of 84,000 to 500,000 vehicles per year over the next two years.  tesla model 3 450 300x148 A More Visible Challenge for Tesla Model 3 Production

Tesla initiated pilot production of the soon to be mass-produced for the masses Model 3 in February, to coincide with company’s annual report to stockholders. In a letter to shareholders, CEO Elon Musk declared that Model 3 product development, supply chain and manufacturing are on-track to support volume deliveries in the second-half of this year, while installation of manufacturing equipment was underway at both the Fremont California and the Nevada based Gigafactory. The company expects to invest somewhere between $2 billion and $2.5 billion in capital expenditures ahead of the start of Model 3 production and by our lens, there is little tolerance for missteps in engineering and process design. Initial reports of strains in the workforce came after the final quarter of 2016 when production workers were called upon to make-up production time for some supply-chain snafus. Additional reports of worker fatigue came prior to Tesla’s February formal reporting of both Q4 and 2016 performance.

This week’s televised report adds yet another dimension, that of a production workforce that continues to express concerns related to excessive work hours leading to added workplace accidents.

The CBS News report cites data from advocacy group Worksafe that released Tesla safety data to back-up worker concerns. A Tesla production worker, on the advice of the United Auto Workers labor union, obtained three years of worker injury reports. A reported independent analysis of the numbers pointed to a 31 percent higher than industry average rate of serious injuries, that resulted in either days away from work or restricted duty.

The segment also features video of Tesla’s HR Manager and three production managers all indicating that the company maintains worker safety as a top priority.  Ongoing efforts to prepare for the addition of Model 3 production include ergonomics experts being brought in and the addition of an extra third-shift, to replace two 12-hour shifts, to mitigate worker fatigue and burnout.

To be balanced, the CBS News report does provide an undertone of an effort by the four interviewed production workers to seek other safeguards. The other backdrop is that the United Auto Workers is possibly marshaling a labor union representation campaign. That adds another dimension of ongoing challenges for Tesla

In either case, as this news report implies in video, Tesla will need to re-double efforts to make the majority of its production workers feel more optimistic that the full ramp-up will not be perceived to be at the expense of worker safety and burnout.

No one, including production workers, seems to be disputing the engineering and design features of the Model 3. But, something compelled a small group of production workers to go public and voice concerns, and that adds a more visible dimension to Tesla’s supply chain and manufacturing ramp-up.

 

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


Report Indicating the Assembly of the First iPhone in India

0 comments

In late January, we alerted our Supply Chain Matters readers to a report indicating that global smartphone and consumer electronics provider Apple was nearing a deal to manufacture its products locally in India. In March, we updated readers to a report from The Wall Street Journal that production could begin in a matter of 4-6 weeksiPhone 6 und 6 Plus 324 267 300x253 Report Indicating the Assembly of the First iPhone in India

The WSJ reports today that initial trail-run pilot production of the Apple iPhone SE model has now begun in Bangalore. (Paid subscription required) with devices scheduled to ship to customers across India this month.

Taiwanese contract manufacturing services provider Wistron is reportedly managing local manufacturing of iPhone6 and 6S smartphones from an existing production facility located in Bangalore, and longer-term plans include a production facility to be in the southern state of Karnataka. The report cites market research data indicating the smartphone ships across India grew 18 percent annually compared to 3 percent globally, thus making the country a very attractive growth market.

According to the latest report, domestic pricing for the iPhone SE still remains unclear, with speculation that Apple would want to maintain its gross margins.  Government officials in India are apparently pressuring for a lower domestic price.

The report again notes that the government of India is very supportive of an Apple manufacturing presence in the country, noting that it represents a sense of great pride for its citizens. Officials in the state of Karnataka are reported as eagerly cooperating to ensure that the future domestic manufacturing site means Apple’s needs.

We view Apple’s manufacturing strategy concerning India to be quite savvy, one that when completed, can provide a lot of market and supply chain benefits down the road. The key however, as always, will be Apple’s pricing and distribution strategy for smartphones managed in this country.

Bob Ferrari

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


Describing an Exponential Organizational and Supply Chain Capability

Comments Off on Describing an Exponential Organizational and Supply Chain Capability

In February, this supply chain industry analyst attended the Oracle Modern Supply Chain Experience Conference held in San Jose California.  Through Supply Chain Matters, I have shared several prior observations and takeaways from this conference. We noted the extraordinary attendance, upwards of 2800 attendees at a supply chain management information technology focused conference. We further highlighted the momentum of Cloud-based technology deployments in the many different business process areas that today come under the umbrella of supply chain management along with the building interest levels surrounding Internet of Things (IoT) technology being applied to future supply chain management processes.

There was one keynote that I initially did not share in prior conference highlights, principally because I needed time to absorb the many compelling messages that were delivered. The title was Exponential Organizations and the presenter was Yuri van Geest, Co-Founder of Singularity University. Yuri Exponential Organizations sized 207x300 Describing an Exponential Organizational and Supply Chain Capabilityhas a background in organizational design and is noted as a keen observer of exponential technologies and trends.  He is a co-author of the book- Exponential Organizations- Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it).

The keynote opened with van Geest recounting the dizzying exponential developments that have occurred in artificial intelligence, alternative energy, biotechnology and medicine, robotics, additive manufacturing, sensors, and drones. His primary message was that most of these exponential technology developments will eventually impact supply chains and the organizations and people that makeup this community. His takeaway message was that the best vision of the future is happening at the peripherals of such technology development.

My initial presumption was that many of the conference attendees would have a difficult time absorbing the stark nature of the messages or would dismiss this talk as that of a technology genius speaking far above an ability to absorb the real implications.  Frankly, the conference organizers should have allowed additional time to accommodate all the content as well as to allow for further audience interaction.

Since the conference, I have had the opportunity to read the book and revisit my notes from the keynote. My goal in this blog is help distill what I perceive to be some other key takeaway messages related to future supply chain management organizational purpose, design, and work activities, at least from my perspective after having time to really absorb the content.

Geest did a suberb job of translating today’s far more exponential technology trends to what he viewed as direct impacts on industry supply chains. As an example, he stated that over the next ten years, the exponential developments in 3D printing capabilities will foster the ability to print nearly everything in materials including molecular assembly. The implication is the ability for products to be produced within primary areas of consumption, with the model of contract manufacturing being one of virtual capabilities to receive electronic design information and print on-demand products. A further implication is a more localized supply chain or regional network.

The notions of machine learning or cognitive acquired deep learning technology capabilities will at some point in the future lead to autonomous supply chain planning and customer fulfillment, where algorithms and physical sensing manage supply chain needs. While on the subject of planning, the book declares traditional five-year planning as obsolete, and that in exponential organizations, there should never be more than a one-year planning cycle supplemented by continuous just-in-time learning and events.

Regarding the physical, Geest further spoke to the compelling impacts that IoT focused developments would have on supply chains.  In the book, there is a passage that is worth sharing:

In the same way that today we can no longer handle the complexities of air traffic control or supply chain management without algorithms, almost all the business insights and decisions of tomorrow will be data-driven.”

Obviously, the messages are profound and perhaps threatening to many. None the less, van Geest’s message is that we cannot ignore compelling events and individually, people need to be trained and prepared with new individual and team-based skills.

To better understand the implications, I turned back to book to ascertain what were described as the key competencies of the future Chief Operating Officer, Chief Human Resources Officer and either Chief Data or Chief Innovation Officers.

Here are just a few excerpts to ponder:

  • Digital based production and the unbundling of production steps will free the company to focus on its core competencies (customer relationships, R&D, design, and marketing)
  • The notion of a recycled materials supply chain where production materials recycled and reused multiple times.
  • Internet of Things sensors used to monitor the entire supply chain.
  • The need for long-distance transport to drop over time due to the rise of localized production and a closed-loop material supply chain.
  • Universal Cloud access to social technologies, data, and services, independent of physical location.
  • Data management systems that use methodologies, processes, architectures, and technologies to transform raw data into meaningful and useful business information, available to all teams.
  • The need for Big Data security practices.
  • The hiring of employees based on overall potential, not just past record of accomplishment, and on the premise of who can ask the right questions.
  • New notions of peer-based and continuous learning.
  • Reputation measured by contributions in communities and work teams.

 

The book addresses the obvious question regarding the impact on future jobs. The premise is that the democratization of technology will allow individuals and teams to follow their passions and create new economic opportunities and businesses, far different than work being performed today.

These are heady messages, and will cause some pause or skeptics. We applaud Oracle’s supply chain management  conference organizers for hosting such a thought-provoking presentation.

From our lens, there is no denying that the exponential changes occurring in technology and business will eventually impact how supply chains are manifested and managed. The question is in what time frames.

The other obvious question, will teams and individuals be prepared?

We encourage readers to share further thoughts and comments.

Bob Ferrari

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


Apparel and Footwear Supply Chain Meets Industry 4.0 Adoption

Comments Off on Apparel and Footwear Supply Chain Meets Industry 4.0 Adoption

The first notions of what is today ‘s prolific global industry supply chain presence began with the apparel and footwear industry. Now this same industry is moving in the direction of Industry 4.0.

A posting by Digiwaxx Media’s TheBlast  observes that German based apparel and footwear manufacturer Adidas will soon start the marketing of shoes manufactured by robots within Germany.

This posting notes:

More than 20 years after Adidas ceased production activities in Germany and moved then to Asia, Adidas unveiled the group’s new prototype “Speedfactory” in Germany.”

The German footwear provider is also planning to operate similar “Speedfactory” in the United States along with one in Western Europe. Both the German and U.S. automated factories are initially being planned to produce upwards of half a million pair of shoes annually, and according to reports, would be priced similarly as those produced in Asia.  Addidas Futurecraft MFG 300x145 Apparel and Footwear Supply Chain Meets Industry 4.0 Adoption

The basis of the supply chain strategy is to produce closest to the major areas of product demand, thus avoiding added global transportation and inventory carrying costs. What has brought this strategy closer to fruition is the combination of higher direct labor costs in high volume manufacturing areas such as China, meeting the technology convergence of faster, more dexterous, and cheaper robots.

In his book, Thank You for Being Late, An Optimist’s Guide to Thriving in the Age of Accelerations, internationally recognized author Thomas Friedman has an entire chapter devoted to what is described as The Supernova. Noted by Friedman:

With each new (computing and technology) platform, the computing power bandwidth and software capabilities all meld together and change the method, cost, or power and speed in which we do things, or pioneer totally new things we can do that we never imagined- and sometimes all of the above. And these leaps are now coming faster and faster, at shorter and shorter intervals.”

Many publications cite the statistic that it took 50 years for the world to install the first million industrial robots while the next million will take only eight years to reach that milestone. That includes the wide-scale adoption of automated assembly techniques within China itself. Thus is the opportunity being provided to apparel and footwear providers, as well as other industry supply chains that have a high sensitivity to direct labor costs within respective products. Noted is an estimate from German robot producer Kuka indicating that a typical indutrial robot can cost in the area of 5 euros an hour to operate.

Nike was one of the first shoe manufacturers to pioneer the 3D printed Flynit athletic shoes five years ago and now, Adidas is pioneering its application of automated shoe manufacturing.

In the not too distant future, apparel manufacturers will do the same. Industry disruptors focused on “fast fashion” business strategies have been leveraging supply chain near-shoring strategies to provide far more agile responses to the latest and most prominent fashion trends. Their appeal to higher margin, in-demand fast fashion supports higher pricing and thus flexibilities to support near-shoring of fast production. The key to fast fashion has proven to be more agile supply chain sourcing strategies and such strategies will be enhanced further when robotics is applied to the precision cutting and sewing of fabrics.

Of course, there are many social and workforce implications to these trends, all very important to social responsibility practices. That topic deserves a more detailed blog commentary.

Suffice at this point, to close with the takeaway that an industry that was noted as one of the earliest adopters of global based, low-cost manufacturing outsourcing is now on the verge of adopting Industry 4.0 supply chain practices.

Bob Ferrari

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


« Previous Entries