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Supply Chain Matters News Capsule-August 29; McDonalds, Boeing, Oracle E-Business Suite

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It’s the end of the calendar work week and the prelude to the Labor Day Holiday weekend in the U.S… This commentary is our running news capsule of developments related to previous Supply Chain Matters posted commentaries or news developments.

In this capsule commentary, we include the following updates:

Report that McDonalds is Reevaluating its China Supplier

Boeing and a Major Supply Chain Partner Land a Big Order

Oracle Announces Release of E-Business Suite 12.2.4

 

Report that McDonalds is Reevaluating its China Supplier

A few weeks ago, Supply Chain Matters highlighted a Wall Street Journal report that indicated that in the light of China’s food regulators finding the existence of certain expired meat products within the McDonalds supply chain in China that the restaurant chain was going to give the benefit of doubt to its long-time supply chain supplier of 59 years, OSI Group, who’s China based subsidiary, Shanghai Husi Food Company was allegedly implicated in the expired meat mis-labeling investigation.

This week, the WSJ published a follow-up report that now indicates that McDonalds is reconsidering its prior relationship with OSI Group. The report quotes a corporate spokesperson as indicating that in the past six weeks, the OSI partnership for supply of China outlets has been suspended. After due-diligence investigation by McDonalds, the chain suspended all cooperation with Shanghai Husi as of July 20th, which precipitated a near three week shortage of meat products for outlets in China and Hong Kong. The chain is instead positioning alternative suppliers Cargill and Keystone Foods to increase supply capacity within China.

Considering both WSJ reports spanning a month, its somewhat confusing to ascertain if McDonald’s has indeed been standing by a loyal supplier. We can only speculate that due diligence either uncovered troubling labeling practices or the restaurant chain feels an entirely new supplier slate is needed for China and other Asia outlets.

 

Boeing and a Major Supply Chain Partner Land a Big Order

In our ongoing Supply Chain Matters commentaries directed at commercial aerospace supply chains, we have echoed the new buying influence of airlines and leasing operators supporting emerging market regions such as China and greater Asia.

This week, Boeing and Singapore based BOC Aviation, a leading aircraft lessor in Asia, announced a near $9 billion order, at list prices, for a total of 82 new aircraft. The order includes 50 of Boeing’s 737 MAX 8s, 30 Next-Generation 737-800’s and two 777-300 Extended Range aircraft. These new aircraft are destined for expansion or replacement needs for a number of unnamed airline operators across Asia with deliveries spanning the time period from 2016 to 2021. According to a published report by Bloomberg and The Seattle Times, the estimated order is more likely to be $4.2 billion when discounting is factored. That is obviously a reflection of buyer power.

The Boeing order follows a mid-July announcement from BOC Aviation of an order from Airbus consisting of an additional 43 A320 and A321 series aircraft with deliveries extending through 2019. Airbus had additionally landed a sale of $11.8 billion of new aircraft from Japan based lessor SMBC Aviation. The Bloomberg report quotes a spokesperson as indicating that BOC Aviation projects receiving an average 27 planes a year starting in 2015, while also disposing of 20 to 30 annually.

In the adage that a rising tide raises all supply chain boats, another major beneficiary of the bulk BOC Aviation order involves the aircraft engine consortium of CFM International, the joint venture between General Electric and Safran.  CFM was the recipient for orders involving 100 LEAP-1B and 60 CFM56-7BE engines that is valued at $2 billion at list prices.  The engine orders additionally include longer-term, multi-year service and maintenance considerations.

 

Oracle Announces Release of E-Business Suite 12.2.4

Oracle recently announced the release of Oracle E-Business Suite 12.2.4. According to the announcement, this latest release provides an updated user experience, significant customer-driven enhancements across the applications suite, with added integrations to Oracle Cloud Solutions.

This particular release has many enhancements related to the support of various supply chain procurement and customer fulfillment technology enhancements. Highlights include:

Oracle Procurement: Web ADI–enabled spreadsheet creation and modification of purchase order lines, schedules, and distributions to improve buyer productivity when dealing with large orders.

Oracle iProcurement: A streamlined single-step checkout flow allowing employees to quickly complete shopping activities and initiate the requisition approval process.

Oracle Procurement Contracts: Improved buyer efficiency from auditing of contract documents by reviewing details of policy deviations and net clause additions.

Oracle Services Procurement: Enhanced capabilities provide buyers with greater flexibility to support a broad range of complex order scenarios.

Oracle Channel Revenue Management: Improved volume offer capabilities and a streamlined user interface enable users to quickly adapt to changing business conditions.

Oracle Order Management: A long overdue new HTML user interface addressing improved usability, greater flexibility, and a more modern user experience.

Oracle Yard Management: A new solution enables manufacturing, distribution, and asset-intensive organizations to manage and track the flow of trailers and their contents into, within, and out of the yards of distribution centers, production campuses, transportation terminals, and other facilities.

Oracle Manufacturing: Significant usability improvements in the Oracle Manufacturing Execution System (MES) help improve operator productivity by simplifying time entry and quality collection. New capabilities to manage the auto-de-kit (disassembly) of serialized products supports customer returns and internal reuse of component parts.

Oracle Enterprise Asset Management: Enhancements to support linear assets in industries, such as oil and gas, utilities, and public sector, help improve productivity and retire costly integrations and custom code.

Oracle Service: Enhanced spare parts planner’s dashboard provides rich user interaction to improve planner productivity.

Oracle Value Chain Planning: Numerous enhancements across multiple products include deeper industry functionality, such as minimum remaining shelf-life enhancements for the pharmaceutical and consumer goods industries, multistage production synchronization for process industries, and integration between Oracle Service Parts Planning and Oracle Enterprise Asset Management for asset-intensive industries. New promotions planning analytics in Oracle Advanced Planning Command Center improve business insight.

 

 


Supply Chain Matters Attendance at 2014 Oracle Industry Connect Conference

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Supply Chain Matters was invited to attend Oracle’s Industry Connect Conference held in Boston at the latter part of March. The conference drew a large compliment of attendees, featured three industry tracts, along with a focus on program management.  We enjoy attending industry focused events because they provide a keener sense of industry-specific challenges, viewpoints and perspectives.  We encourage technology and services providers to host more such events.

Due to a commitment to attend another event, we devoted the majority of our limited time focused on the Retail industry tract of speakers, but did manage to catch a cross-industry panel discussion featuring the theme of the Customer Experience. One clear theme brought out by this panel was that nearly every industry sector is adjusting to more demanding and more personalized experience factors concerning customers. Healthcare consumers now have many more choices for an healthcare provider and with a new emphasis on wellness, consumers have higher expectations as to the healthcare experience. Retailers are of course, continuing to deal with the shift of information power to the side of online and mobile-based consumers. Fellow blogger and panelist Vinnie Mirchandani pointed to the trend of mass customization of products as the antidote to commoditization.

We attended a Retail focused panel discussion of executives representing Deckers Outdoors and Scheels moderated by Susan Reda, Editor-In-Chief of Retail Stores Magazine. One statistic shared was that 73 percent of shoppers want an empowered shopping experience. A retail presence provides the opportunity to connect the passion of consumers with the passion for brands. Both retail executives provided clear examples of how their retail brands concentrate on the consumer experience, community outreach and provide a focused destination for consumers. As an example, Scheel’s is a sporting goods chain that features a ferris wheel, deli restaurant or fudge in any one of its 25 retail outlets. Community outreach includes sponsorship of local athletic or recreation events. A further common theme was a recognized need for the creation of a singular leader for Omni-Channel operations that span both brick and mortar and the online customer fulfillment experience.

Another insightful session titled How to Counterbalance Instinct with Data-Driven Insights, delivered by John Bible, Senior Director of Retail Data Sciences at Oracle, contrasted two distinctly different approaches to retail.  Bible contrasted Amazon’s retail strategy initiatives as those posed as a software engineering problem contrasted to brick and mortar retail brands whose retail strategy focuses on the retail experience and destination. We found that comparison rather insightful. Consumers have tendencies toward cognitive biases and have tendencies shop based on existing beliefs and group dynamics such as consumer feedback on products. The notion of the “wisdom of crowds” is a rather real consideration. An important conclusion was that decisions supported by time-series forecasting and planning can no longer keep-up with constantly changing buying trends. Instead, decisions need to be supported by more-informed insights

Bob Ferrari


Oracle Announces New Innovation Management Application

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Continuing on today’s theme of advanced technology supporting product innovation and management, another interesting announcement came to our Supply Chain Matters awareness.

Oracle announced today a new application termed Oracle Innovation Management, reportedly designed to help organizations make faster and more informed product management decisions.

According to the product announcement, this application was designed to support both bottom-up innovation and top-down financial impact and strategic fit analysis. The tops-down aspect comes from analysis tools directed at product innovation compared to stated business objectives such as revenue, profit or resource constraints. It was further designed to integrate with this ERP provider’s existing Oracle Agile Product Lifecycle Management, to provide needed integration to product management planning and controlled release to manufacturing, and will be a resident application within Oracle Value Chain solutions. Oracle, along with SAP, has PLM technology position under the broad umbrella of supply chain management focused applications.

Supply Chain Matters has not had the opportunity thus far to review this new application and we hope to do so in the coming weeks and add more detailed perspectives in a follow-on commentary.


SAP Ariba Announces Application Supporting Supply Chain Risk Mitigation

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Supply Chain Matters does not elect to echo technology vendor announcements unless we feel such announcements should capture the attention of our readers. This week, B2B procurement platform Ariba an SAP Companyprovider Ariba, now an SAP company made a rather noteworthy announcement in conjunction with this provider’s annual Ariba LIVE customers’ conference being held this week. 

The announced application is targeted at managing supply chain risk, and adds predictive analytics capabilities that extend beyond typical B2B supplier management or procurement spend analysis applications. Ariba developers teamed up with Supplier InfoNet, another SAP company to allow users to capture many forms of structured and unstructured information to develop a risk profile among key suppliers.  All of the data and information is captured on an SAP HANA© database platform.

Such information is that currently provided on the Ariba platform that includes structured vendor master data, supplier key performance indicator data, along with financial profile data from external sources. Augmented additional support for capturing unstructured data related to specific suppliers is provided by Supplier InfoNet. That would include news filters involving 160,000 news wires along with social media extracted and other focused unstructured information.  Supplier InfoNet’s leveraged use of the SAP HANA platform provides additional for additional capabilities for predictive analytics to be layered across these combined information streams, allowing for a form of machine learning relative to patterns of information that would correlate with expected outcomes, such a supplier major disruption or failure.  The important benefit for Ariba and SAP centric procurement teams is the ability to capture a much broader array of data and information across multiple systems landscapes with the ability to be more proactively alerted to risk conditions among multiple tiers of the supply and value-chain.

In a brief briefing by Ariba and Supplier InfoNet executives, Supply Chain Matters ascertained that to gain this new supply chain risk mitigation capability, customers will have to incrementally license Supplier InfoNet if they have not already done so.  We were additionally informed that no separate licensing of HANA is required for this functionality. Further, the widely speculated transition of the majority of Ariba functionality to the SAP HANA platform will take far more additional time, with Ariba reluctant to commit to hard timelines. That is not surprising given that a significant amount of existing customers support the Ariba Network with non-SAP databases such as Oracle. However, it seems clear that Ariba’s strategy is committed to gradually transition its data and informational compute functionality to SAP HANA, starting with Ariba Spend Visibility.

Ariba further announced today that AribaPay, a cloud-based B2B payments application, jointly unveiled last year with Discover Financial Services will be offered for general availability in the United States during the second quarter of 2014. The application combines Ariba pre-settlement business collaboration with Discover’s global payments infrastructure to effect supplier payments.  Arlington Computer Products is featured as a lighthouse go-live customer.


Gartner’s Magic Quadrant for Supply Chain Planning SOR Reflects Compelling Trend

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April 7, 2014 Readers Note: The below posting has subsequently been edited from its previous appearance because of communication received from Gartner, Inc. Office of Ombudsman regarding Gartner Copyright and Quote Policy.

Last week Industry analyst firm Gartner released its 2014 Magic Quadrant for Supply Chain Planning System of Record technology. We compliment Gartner for somewhat more rigorous ranking criteria in the latest iteration.

From our Supply Chain Matters point-of-view, there is an important takeaway concerning this year’s rankings of vendors. Four of the total five vendors ranked in the upper right-hand quadrant, those that Gartner ranked as leading on completeness of vision and ability to execute, are all termed best-of-breed vendors in supply chain planning.  If one adds the three other vendors ranked high in completeness of vision (lower right-hand quadrant), there are seven of eight best of breed vendors listed. 

Common themes were broad vision, completeness of functionality in terms of supply chain process maturity and the quality of customer references and satisfaction rankings. Another important aspect to the rankings was customer’s use and dependence on a single planning platform.  Much of this is reinforced in the individual listings of individual vendor strengths. These overall strong rankings of best-of-breed SCP vendors reinforce that product innovation, attention to customer process needs and overall solution value for the customer remains an advantage for this family of vendors.

For non-subscribers to Gartner’s supply planning research, a summary of this report can be viewed at this web link.

Bob Ferrari

 


A New Awareness Surrounding Legacy ERP Systems

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Industry Analyst firm Gartner has issued a new advisory, namely that CIO’s and their IT teams must take action to address the fast-approaching reality of ‘legacy ERP’.  According to Gartner’s latest prediction, by 2016: “heavily customized ERP (Enterprise Resource Planning) implementations will be routinely referred to as ‘legacy ERP. CIO’s and application leaders must take action to address the fast-approaching reality of ‘legacy ERP.’”

Pause for a moment and reflect on the above statements.  The analyst firm that first introduced the applications IT market to the concepts and benefits of Enterprise Resource Planning systems along with the rating of capabilities among ERP vendors so many short years ago is now raising warning flags for technology end-users. A Gartner Vice President observes: ”The need for agility and responsiveness has led highly customized ERP implementations to an impasse, creating a subset of legacy ERP installations that must be dealt with constructively.” Similarly, analyst firm IDC has been strongly urging IT vendors to concentrate all future applications development on the so-termed “Third Platform” namely cloud, mobile and business intelligence enabled applications.

From our experience within the industry analyst world, that is the clearest acknowledgement by the traditional analyst firms that traditional ERP platforms and applications are struggling to  keep pace with supporting required business change utilizing legacy behind-the-firewall applications. Keep in mind that these same analyst firms garner significant revenues from ERP vendor clients but must advise multitudes of end-users.

Most in the supply chain and B2B fulfillment community who have had any experience with information systems or transformation initiatives have long discovered the obstacles and pain levels associated to highly customized ERP systems. Customization becomes a significant obstacle to timely business process innovation not to mention the heartburn for streamlining information flows and decision-making.  Legacy ERP was constructed with the design principle of inside-out control, but today’s businesses are faced with the challenge of outside-in information, planning and decision-making needs.

IT leaders who follow Gartner’s research may recall that a couple years ago, the analyst firm articulated three layers of systems innovation:

Systems of Record (presumed to be legacy ERP systems)

Systems of Innovation (presumed to be best-of-breed or cloud-based point solutionbs_

Systems of Engagement (presumed to be extensions social based systems in the concepts of Facebook, Linked-In, Twitter and others)

A new reality is occurring however, at a far more rapid pace.  Business and supply chain functional teams are stepping-up to accept more time-phased accountability for delivering required business outcomes or dynamically responding to ever changing business process requirements. Accountability includes more responsibility in IT applications funding and selection.  The CIO and his/her IT teams have similar strategic needs to accelerate the pace of business innovation but also reduce the legacy IT infrastructure costs.

As noted in Prediction Ten of our 2014 Predictions for Global Supply Chains, the fate of technology investments now rest in the hands of business and supply chain teams, with the counsel and assistance of IT.  The days of multi-year, highly disruptive IT transformation has been subsumed by highly targeted business process initiatives directed at phasing-in continuous improvement capabilities toward a desired business end-goal.

Gartner, IDC and indeed ourselves in our advisories are acknowledging the reality of today’s IT landscape, namely that continuous innovation and faster time to business value dominate the C-level agenda.  Leveraging the technologies of cloud and mobile computing, deeper business analytics and faster decision-making processes are increasingly looked upon as systems of innovation and engagement enablers.

Need more evidence.

SAP, a major player in ERP, announced to its investors that it has elected to forgo previous profitability goals for the next two years in order to accelerate development efforts to transform its business suite of applications to better leverage cloud platforms. Co-CEO Bill McDermott told investors: “we have bold ambitions in the cloud.” Bloomberg reports: “SAP is searching for a balance between expanding cloud-software offerings and safeguarding its mainstay license business.”

Similarly, Oracle has been aggressively investing in cloud offering through both acquisition and internal development as are many other ERP providers.

In today’s new normal of business, industry competitiveness is predicated on seizing market, product and services opportunities quicker and faster than competitors. The new realities of business imply a globally based supplier and trading partner ecosystem bringing increased dimensions of complexity, scope of control and risk.  The IT applications landscape supporting end-to-end supply chain business process innovation will benefit from the rapidly changing applications development trends being enabled by today’s cloud, mobile and analytics technologies.

Heed the growing evidence that highly customized ERP systems are headed toward legacy status and systems of innovation, engagement and deeper supply-chain-wide intelligence and insights should be your organization’s priority.

Bob Ferrari

© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.


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