There have been some noteworthy announcements related to both supply chain B2B network and PLM technology providers this week which Supply Chain Matters highlights in this news roundup commentary.
JDA Software Names Permanent CEO
In the press release, CEO Dail states: “The potential for JDA now, and into the future, is tremendous and I am excited about the opportunity to continue leading this innovative company.”
Since assuming interim CEO leadership, Dail has instituted a sorely needed Global Industries and Solutions Business unit responsible for product portfolio and industry support strategies, established an Innovation Lab to build transformational technology leveraging next-generation platforms, including cloud, and appointed a new leader for global sales.
JDA is also in the process of unveiling a new look and brand identity over the coming months and readers can anticipate broader industry focus and clearer messaging.
SAP Announces Expanded Cloud Relationship with IBM
This week, SAP announced that its SAP HANA Enterprise Cloud services will be made available through IBM’s global cloud infrastructure. The joint announcement came with enthusiastic statements issued by both tech CEO’s. The expanded partnership provides broader global hosted options for moving business applications from on premise to the cloud. According to published reports, this deal provides SAP with access to near 60 data centers between those SAP has deployed and the addition of IBM’s centers.
According to a specific report from IDG News Service, revelations over the past year about domestic surveillance by U.S. intelligence agencies has raised data sovereignty and data privacy sensitivities among several countries, and this arrangement with IBM provides SAP with a greater ability to accommodate such concerns by cloud services hosted in designated domestic countries. It is therefore little surprise that the joint announcement emphasizes security for enterprise customers. Broader cloud infrastructure and open standards based approach inherent in the footprint of IBM Cloud additionally provides SAP more scalability options in growing HANA Enterprise Cloud.
Arena Solutions Announces PLM Collaboration Platform
Mid-market PLM technology support provider, Arena Solutions announced two new modules plus enhanced functionality incorporated in its fall product release.
Arena Scribe provides a collaboration platform that supports comment and collaboration in the context of each individual process or record within Arena PLM. Users or suppliers can follow comment streams and receive dashboard and email alerts to stay up-to-date with fast-moving information. Arena DataExtract supports the ability to extract process datato a standard, flat file format, which can be analyzed using a variety of analytic tools from the range of basic spreadsheetstosophisticated business intelligence and analytics applications. This type of functionality provides enhanced ability to identify trends and solve problems related to product development, trends in engineering change orders or cycle times.
The new fall release includes what is described as significant ease-of-use enhancements to Arena Quality, a module introduced earlier this year. This module supports broader visibility, cross-functional team collaboration and tracking of product quality resolution.
Readers can gather detailed information related to Arena’s fall release in the news announcement.
This week brings two visible and poignant reminders of the perils for being an Apple supplier. There are of course, the positives related to the sheer production volumes that doing business with Apple provides, along with being on the leading-edge of product or component innovation. Along with the positives come the perils for dealing with a highly demanding and influential customer.
Today’s printed edition of the Wall Street Journal cites suppliers and other sources as indicating (paid subscription) that because of the current surging demand for Apple’s newly announced iPhone 6 models, the Apple supply chain ecosystem has altered previous plans for ramping-up production volumes associated with new models of iPads, and instead are allocating current production resources to iPhones, specifically the iPhone 6 Plus. Apple’s Sales and Operations process has obviously issued marching orders that indicate all hands on deck supporting iPhone shipment needs. That implies a invariable delay for new iPad market availability plans as critical component supplies such as displays allocated their current efforts strictly to supporting current iPhone output demands.
Foxconn, Apple’s prime contract manufacturer has again placed in the role of doing whatever it takes to keep-up with demand, fulfill customer orders and not let lack of finished goods supply be an inhibitor to Apple’s financial results in this all important holiday shipping quarter. The WSJ reports that Foxconn’s Chairman Terry Gou is personally at the Zhengzhou assembly facility “… to monitor production closely.”
In prior Supply Chain Matters commentaries we have pointed out that Foxconn’s real desire is to continue to diversify its business models with less overall dependence on the ebbs and peaks of Apple. That includes building independent branded products. The contract manufacturer has thus been willing to assume a secondary provider role for other of Apple’s products such as the iPad Mini. But, when the stakes are really high, the Apple operational pattern is to turn to its long-standing CMS provider to pull the proverbial rabbits out of the hat in providing almost virtual capacity to move finished goods to consumers and channel partners.
Thus, one peril for being an Apple supplier is having the capability of high agility in the wake of what others would view as rather difficult obstacles.
The other supplier peril reminder comes from this week’s sudden and unexpected news regarding evolving sapphire glass supplier GT Advanced Technologies and its filing for Chapter 11 bankruptcy protection, sending its stock plummeting. This was a classic current day example of what various supply chain academics have noted as bad supply chain news directly correlated to negative stock performance. In GT’s case, it was literally wiping out upwards of $1 billion in equity value according to one report.
Since the GT news broke earlier this week, the reports we have been monitoring indicate that after further testing of the new sapphire glass material that GT was producing a its new start-up plant near Mesa Arizona, Apple engineers determined that the material was not appropriate for the new iPhone models, and reportedly, withheld the final seed investment payment involving upwards of $130 million. Today, the WSJ reports that GT Technologies will exit the business of manufacturing sapphire. A U.S. bankruptcy judge allowed GT to keep the details of its relationships with Apple secret, no doubt from the influence of Apple as a major creditor. Apple has apparently declined any further statements to business media regarding its relationship with GT.
We sense that this Supply Chain Matters commentary regarding perils will resonate with our readers residing within either Apple’s or other supply chain dominant customer supply chain business models. We know that there not much any of you can state publically. However, we as a broader community, in just one week, have open visibility and can dwell, albeit briefly, to such perils.
We usually strive to point out important takeaways for readers in our individual postings. In this particular case we rather play the observer role and state that perhaps this is today’s mission for supply chain, namely dealing with whatever is required to make the business model successful, including a can-do relationship with the most influential and important of customers. It is what is expected for today’s industry supply chains.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
In a sudden and startling announcement, GT Advanced Technologies Inc., a developing supplier for new, more durable sapphire glass applications for Apple’s product lineup, announced today that it had commenced a voluntary filing under Chapter 11 of the Bankruptcy Code as a best means to reorganize and protect that company and provide a path to future success. In the announcement, GT indicated that as of September 29, 2014, the company had approximately $85 million in cash, but there is no mention in the release of current outstanding liabilities.
In early August in its announcement for fiscal year second quarter results, the company indicated six month, year-to-date revenues of $80.5 million including $49.7 million attributed to sapphire equipment and materials. Non-GAPP operating expenses were reported as $76.3 million year-to-date and the supplier incurred a $139 million net loss from operations. GT reported ending its second quarter with $333 million of cash, cash equivalents and restricted cash, compared to a $509 million at the end of the company’s first quarter.
A statement from this supplier’s CEO states:
“GT has a strong and fundamentally sound underlying business. Today’s filing does not mean we are going out of business; rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business, and improve our balance sheet.”
The company indicated that it expects to provide additional details with respect to the Chapter 11 filing as soon as they are available.
Readers may recall that in our previous commentaries related to Apple’s ongoing efforts in product innovation, that Apple provided a long-term strategic seed investment in GT, valued in excess of $500 million, to develop a stronger more durable alternative to the use of gorilla glass for displays in Apple’s forthcoming line-up of products. GT invested in a 1.4 million square foot production facility near Mesa Arizona to produce sapphire at high volumes at comparative cost. There was further speculation that GT was being positioned as the prime supplier of sapphire for the iPhone line-up and the now announced Apple wearable watch scheduled to ship early next year. The recent iPhone 6 new product announcements from Apple did not include sapphire glass as a feature, leading to speculation that GT could not initially ramp to Apple’s high volume production requirements for its newest model.
Suppliers with groundbreaking technology can often fall victim to a far larger and very influential customer with demanding requirements. What happened with GT Technologies will obviously unfold in the coming weeks including its current relationships with Apple.
General Motors Attempts to Turn to a New Chapter of Growth, Customer Loyalty and Supply Chain Practices
The public relations teams supporting General Motors have been in high gear these past weeks for obvious reasons. Lapses in product design and quality management practices, and what has been billed by business and general mediaas the worst U.S. product safety crisis in recent memory has led to a series of product recalls among multiple GM brands involving upwards of 2.6 million vehicles.
GM desperately needs to move beyond its current state and restore confidence in its brands and in its business management model. Suppliers and partners associated with supporting this U.S. based OEM need to also move on to more collaborative and win-win relationships, but that requires a different GM perspective.
When Mary Barra was appointed CEO of General Motors, this author communicated our Supply Chain Matters elation for this announcement. Our enthusiasm came from the dual fact that not only was Barra the first senior female executive ever to lead a global automobile manufacturer, but more importantly, because her 35 year background included plant management, manufacturing, product design and development leadership experience. She is also an engineer by training. Barra likely understands the elements of producing high quality cars and trucks and the important contribution of the GM supply chain ecosystem in achieving that goal.
If readers want to gain a candid perspective on Mary Barra’s current challenges in transforming GM, we recommend the recently published Time article, Mary Barra’s Bumpy Ride at the Wheel of GM. Author Rana Foroohar pens an insightful perspective on Barra’s management style and her efforts to change a rather in-bred corporate culture built around functional fiefdoms and little accountability. She describes Barra as the consummate “outsider-insider” with a far different style from most of her CEO predecessors. She has been put in charge to become the change agent and apparently has the support of many of GM’s employees in that task. In our previous commentary in December 2013, we called attention to the Wall Street Journal characterizing Barra as “having a reputation for speaking her mind, a trait that hasn’t always been appreciated in GM’s executive suite.”
This week, business and general media are featuring reports of GM’s latest earnings announcement. The WSJ reported that after nine months, Barra wants to switch gears towards a multi-year strategy to deliver increased revenues and profits while restoring consumer trust. She explained to a group of GM’s top 300 executives that the company must do what it takes to be the “world’s most valued automotive company”. The going forward strategy leans heavily on reliance on planned new models expected to come to market, many of which were shepherded under the leadership of Barra when she previously led new product development. A goal is to have 47 percent of global sales to be fueled by these new models by 2019. It further includes market expansion and growth within China through investing in five additional auto assembly plants and he introduction of nine new Cadillac models in that country.
GM will further focus on the broader supply chain’s contribution to its renewed business goals.
According to a recent WSJ report, there is an internal belief that GM pays more than its competitors for materials and technology because the company bases parts purchases on unrealistically high forecasts that burden suppliers with high fixed costs when ultimate demand falls short. Our community is more blunt in such an explanation: it is lousy forecasting predicated on achieving functional stovepiped goals. The WSJ quotes some analysts as indicating that the automaker could save upwards of $1 billion a year with smarter purchasing practices, which as we know, is a typical Wall Street short-term perspective these days. Squeeze those suppliers!
GM’s existing product development chief, Mark Reuss, actually met with executives representing 700 suppliers indicating that the company is ready to share more financial risks if sales projections are high. At that same meeting, GM’s purchasing boss, Grace Lieblein indicated that the supplier base will likely need to add capacity to support growth plans. In a Detroit Free Press published report, she is quoted as stating: “we just have to be cautious and strategic about how we add that capacity and not move too fast.” Lieblein further communicated that an important strategy is convincing suppliers to locate closer to GM assembly plants to reduce transportation costs.
Obviously that’s a tall order for suppliers since transportation cost savings do not necessarily weight themselves to the benefit of the supplier. Adding production capacity to support additional volume and spreading that capacity further across the globe requires a significant financial investment. Add some history of throwing suppliers “under the bus” when quality plans go south because of component design flaws, well, you get the picture of legacy trust.
The new era of GM obviously requires what Barra has described as bold thinking and leadership. What this author was hoping to read is that goal of GM’s supply chain going forward is to support continued product innovation while controlling costs and accelerating productivity. Perhaps that will be articulated in the coming months.
It is this author’s view that such thinking can benefit by a broader and deeper perspective by GM’s executive leaders on how more modernized supply chain business practices, new product introduction (NPI) practices incorporated to supply chain impacts, more collaborative based inventory and supply chain planning practices have led to benefits among other industries as well as other automotive OEM’s. Today’s supply chain and B2B business network technology capabilities can further link the global end-to-end supply chain with more granular levels of planning and supply chain execution synchronization.
The business practices and enabling technology are available but it requires a good dose of change management infusion before real benefits can flow. We trust GM will hence forth nurture the leadership to set such perspectives.
© 2014 The Ferrari Consulting and Research Group LLC and Supply Chain Matters. All rights reserved.
Supply Chain Matters has queued-up a series of follow-up postings related to previous supply chain related commentaries we have featured on this blog related to important supply chain and B2B/B2C network fulfillment capabilities.
The following six updates provide updated developments.
We, along with other business and social media outlets called attention to the problematic last minute postponement of the scheduled release and availability of these new models across China. There was widespread speculation as to the cause of and potential length of the delay. Despite this situation, Apple had a rather successful first weekend of shipments. However, arch competitor Samsung countered with a quick maneuver in offering its new Galaxy Note 4 smartphone initially within China before other countries.
Today, various published reports now indicate that China’s Ministry of Industry and Information Technology has indeed granted the iPhone 6 models their network access permit.
The latest from Apple is that pre-orders for the new models will begin on October 10 and the phones will be made available by all three state-run mobile carriers. However, these state-run carriers have reduced the subsidies for high-end smartphones such as the iPhone 6, which implies that the higher-end iPhone will retail for 6088 yuan ($990).
According to a published Bloomberg report, the approval process included scrutiny on potential leaks of personal data, with Apple having to take measures in the new release of iOS 8 to eliminate risks from three background diagnostic tools. Apple reportedly continues to provide specific comment related to specific changes having to be made in the OS to satisfy Chinese regulators.
This latest development places Apple’s channel plans for China back on-track, albeit with a month’s delay in planned product availability. Apple supply chain planners will be adjusting inventory movement plans once again. While all of this is occurring, a robust grey market of product demand has been underway to get the new iPhone models into the hands of eager Chinese consumers who can afford them. That should ease in the coming weeks.
This week, a significant milestone occurred for the global supply chain ecosystem of the new generation Airbus A320 aircraft. The first Airbus A320neo completed its maiden flight at 2:22pm local time yesterday after its two-and-a-half test run flown by Airbus’s experimental test pilots over southern France. The maiden flight comes weeks ahead of prior program expectations. Video and a complete program overview can be viewed via the Airbus web site.
The Neo (new engine option) of the workhorse A320 includes newly designed more fuel-efficient aircraft engines with incremental innovations in aerodynamics and updated cabin features. That aside, the most significant customer feature for the Neo and its promised, more enhanced fuel burning efficiency expected to be upwards of 20 percent more efficient. The A320neo family will consist of A319 and A321 variants as well, the latter offering seating up to 240 passengers. Airbus touts the A320 as the globe’s best-selling single aisle aircraft and thus the program stakes are especially high. To date, the A320neo has garnered 3200 orders involving 60 customers and thus more innovative, stepped-up production cadence will be an important requirement for the end-to-end supply chain.
The aircraft for the maiden voyage was powered by two of the newest Pratt and Whitney PW1100G-JM engines which features that supplier’s new geared-turbofan technology. According to Pratt, the engine successfully completed its first development flight in May of last year and has completed 11,000 hours of testing across the supplier’s PurePower engine family. The stakes for Pratt are additionally high with its newest innovative geared turbofan technology. The Neo is also offered with CFM International’s LEAP-1A power plant as an airline customer option. The LEAP-1B engine was selected as the prime power plant for Boeing’s planned 737 MAX aircraft, which is the prime competitive offering in contrast to the A320neo. According to CFM, there are already orders amounting to 6770 LEAP family engines.
This maiden flight milestone kicks-off 3000 hours of rigorous flight test process involving upwards of eight aircraft with various options and engine options. As Supply Chain Matters has noted in many prior aerospace industry highlighted commentaries, many things can be discovered in the flight testing process, some with reverberations up and down the supply chain. The A320neo with Pratt engines is currently planned to enter service in the fourth quarter of 2015, with the first airline customer being Qatar Airways.