In mid-July, business and social media was abuzz with the announcement that two long-time rivals, Apple and IBM, would team-up in an alliance to create business apps leveraging Apple’s iPhone and iPad devices. Under the alliance, IBM will create what it terms as “simple” business productivity apps leveraging the respective Apple mobile devices.
Today, Bloomberg released some somewhat stunning news which many are speculating is directly related to above announcement. Supplier sources informed Bloomberg that Apple is preparing to manufacture the largest model iPad ever, a 12.9 inch screen device, with production scheduled to commence in the first quarter of 2015. That is 6-9 months from today.
As we have echoed in previous Supply Chain Matters commentaries, the Apple supplier network is feverishly ramping-up production volumes for new models of iPhones and iPads for the all-important upcoming holiday buying surge period. Apple’s three key suppliers of LCD screens are especially challenged due to a rather late design change incurred on the new iPhone 6 model.
According to the Bloomberg report, this rather large iPad screen model is being positioned to compete in the business applications arena as an alternative device for business tasks currently performed by laptops. The Q1 timing is especially noteworthy since that is the time when Apple’s China based suppliers and contract manufacturers temporarily shut-down for celebration of the Lunar New Year as workers return to their homes and families. It is a period where suppliers recover from the hectic end-of-year scramble. The fact that Apple is targeting yet another product release in this period is a probable sign that the IBM-Apple discussions were already in the planning stages prior to the official announcement last month. Both parties are aggressively planning to take advantage of the alliance opportunities.
Apple’s supply chain, S&OP teams and value-chain partners are once again going to be put to the test of simultaneous volume production ramp-ups involving a multitude of products including a new iWatch as well as phones and tablets. There is obviously little room for snafu’s and LCD screen suppliers may well be the critical linchpin to pull-off a series of simultaneous successful product launches.
Supply Chain Matters has featured previous commentaries reinforcing the critical dependence of product design and new product introduction (NPI) with supply chain network decision-making. We now have another real-world reminder of the challenge that many high tech and consumer products focused supply chains continually encounter in the constant dependency and alignment of NPI decisions with the external supply chain network.
Reuters, in an exclusive report, indicates that LCD suppliers for the pending Apple iPhone 6 product NPI launch have been scrambling to scale volume production, after a late product re-design disrupted supplier production plans. The Reuters report cites two supply chain sources as indicating that the backlight design of the LCD panel was supposed to feature a single layer instead of the standard two-layers of film. Apparently the new design was not bright enough to meet Apple’s product management expectations and was sent back to design to fit in the extra layer. That step is reported as “costing precious time and temporarily idling some screen assembly operations.”
While Reuters indicates that out is now back on track, suppliers Japan Display, LG Display and Sharp are working flat-out to make-up the lost time.
As noted in many prior reports, Apple is a task master in incorporating constant changes in product design up to the last minute. This culture stems from the passion of Steve Jobs and his relentless pursuit of product perfection. However, Apple’s value-chain ecosystem and production volume requirements are far larger in scope.
An engineering or product-driven culture can certainly be an important factor in delighting customers. However, when such design changes occur in a highly outsourced supplier network involved in the critical phase leading up to new product production ramp-up, information and assessment related to the implications of such product design changes is equally important. Apple has a unique culture, and the firm’s suppliers are well aware that the ability to scramble at the very last moment is an expected and required capability.
Dynamic tension among product design and supply chain teams is a normal occurrence. This latest takeaway for our community is that even one of the top-rated supply chains has its own challenges in synchronizing product design disruption in critical new product ramp-up phases. It is yet another reminder of the critical importance for taking a broader supply chain business network perspective in information integration, assessment and decision-making.
Tomorrow, this author will be joining a distinguished compliment of speakers at the 7th Annual Supply Chain Management Summit sponsored by Bryant University and Benneker Industries. This event is turning out to be one of few premiere New England regional conferences focused on current issues and learning in supply chain management. Last year’s event drew upwards of 250 attendees among many industry settings.
Since many of our readers are located across the globe, the purpose of this Supply Chain Matters commentary is to summarize the key messages and takeaways of my talk.
My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. The key takeaway messages I’ll be delivering is that three converging mega-forces:
- Constantly shifting customer and business needs requiring sense and response, as well as more predictive business processes and decision-making capabilities.
- Supply chain process and IT technology convergence providing more cost affordable opportunities for integrating both physical as well as digital information and decision-making capabilities.
- Digitally enabled manufacturing enabled by the Internet of Things.
are aligning toward extraordinary opportunities for what has long been the Holy Grail of our community, namely, integrating information and decision making across physical and digital supply chain spectrums. The alignments of the above mega-forces are providing significant opportunities in management alignment and top management sponsorship which can be leveraged. New and emerging technologies, especially engineered systems, cloud computing, predictive and prescriptive analytics are becoming the technology catalysts. Besides touching upon the latest advances and significantly changed IT market dynamics surrounding supply chain technology, my primary goal in this talk will be to advise supply chain teams on the most important investments to focus upon in the coming months and years.
First and foremost, and without question, the most important initiative for any supply chain organization today is a concerted set of initiatives directed at Talent Management. The business benefits of advanced technology are marginal without people who have the necessary and required skills to be able to leverage and harness these technologies. Recruitment, retention and increased skill needs are constantly identified as the single biggest challenge across C-level, business, IT supply chain and manufacturing teams, and the challenge will continue as newer technologies make their presence among industry supply chains.
More than ever in the past, supply chain, procurement, customer fulfillment, product lifecycle management and service management teams must have active technology awareness and planning strategies. The umbrella and accountability of the supply chain now involves far broader dimensions of common information and related decision-making needs. The notion of the goal for pursuing Integrated Business Planning is not just IT vendor hype, but a necessary and required capability. An organization’s Sales and Operations Planning capability is thus the most critical to focus and improve upon. That stated, an important reminder for cross-functional and cross-business remains that final objective is not technology alone, but rather required business objectives and outcomes.
I’m also urging technology selection teams to broaden their context of their technology planning to include leveraging information and decision-making capabilities across an end-to-end, value-chain and B2B business network. With today’s pace of business change, supply chain planning or forecasting can no longer stand-alone as a capability, and must be augmented and synchronized with the sensing of actual events occurring across the supply chain network. The good news here is that the supply chain technology market has shifted its emphasis toward broader support capabilities in this area.
For those who plan on attending tomorrow’s Summit, I look forward to meeting and chatting with all of you regarding your organizational and personal objectives. For those unable to attend, be advised that next week we will post a PDF copy of the presentation in our Supply Chain Matters Research Center for complimentary reader downloading. Minimal registration information is all that is required.
As always, give as a call or contact us via email if you require further assistance or if this type of presentation can assist your organization or forum in setting its supply chain management objectives for the coming year. Our home page can be accessed at this web link.
It’s the end of the calendar work and 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:
Google and Barnes and Noble Partner to Take on Amazon
Earlier in the week, the New York Times reported (tiered subscription) that Google and Barnes and Noble are joining forces on for fast, cheap delivery of books. According to the report, buyers in Manhattan, West Los Angeles and San Francisco Bay locales will be able to get same-day delivery of books from local Barnes and Noble retail stores via Google Shopping Express, beginning this week. The effort is billed as a competitive response to Amazon’s same-day delivery services.
Google Shopping Express already allows online shoppers to order products from 19 retailers including Costco, Walgreens, Staples and Target and secure same-day delivery. As noted in a previous Supply Chain Matters News Capsule, the Google Shopping Express strategy is to become an ally and complement a retailer’s local brick and mortar presence, relying on inventory from local retail outlets rather than the deployment of a larger network of fulfillment centers.
Airbus Completes Test Trials of the A350
Airbus completed the route-proving certification phase for operational testing of its new A350-900 model commercial; aircraft, approximately two months after completing the maiden flight of this aircraft. During this completed phase, engineers had to demonstrate to safety and regulatory agencies that the aircraft is ready for commercial service. A Vice president in charge of flight testing for Airbus declared; “The airplane is perfectly fit to go into service tomorrow.” The A350 was designed to compete against the current operational 787 Dreamliner and the 777 aircraft. Bookings for the A350 have surpassed more than 700 aircraft.
It has been noted that 7000 engineers worked on the development of the A350, with roughly half of these engineers stemming from key suppliers. Important learnings have included the need for a singular Product Lifecycle Management (PLM) software system, creating a single electronic rendering of an aircraft that every program engineer can reference or modify when needed.
Administrative reporting to various agencies remains a milestone before this aircraft can be officially certified for commercial use. Meanwhile, the Airbus supply chain ecosystem continues preparations and scaling to support planned production levels of 10 A350’s per month by 2018.
Boeing to Make Additional Cost Cuts from Defense Focused Supply Chain
Supply Chain Matters has posted numerous commentaries related to Boeing’s commercial aircraft focused supply chain ecosystem, faced with a dual challenge of having upwards of 8-10 years of customer order backlogs while continually being challenged to reduce costs.
Boeing’s defense businesses have a far different problem. Cutbacks in military and government spending programs have led to declining business, and a supply chain oriented to engineer-to-order specialized aircraft and spare parts. Early this week the head of Boeing’s defense, space and security business unit called for an additional $2 billion in cost cutting, two-thirds of which is being targeted among suppliers. Boeing has already cut $4 billion in spending related to its defense businesses. The unit chief called on suppliers to note efficiencies that have been gained in Boeing’s commercial aircraft programs.
Hewlett Packard Announces Smaller, Less Costly Cloud Platform
Hewlett Packard announced what it is communicating as a less costly cloud based IT platform under the Helion brand name.
Helion Managed Virtual Private Cloud Lean is being targeted for use by small and medium sized businesses looking to move applications development, software testing and workplace collaboration onto a Infrastructure as a Service platform. According to HP’s announcement, the new service offering can further provide services around SAP’s HANA in-memory systems.
With the new service offering, HP’s goal is to provide the same level of large enterprise services but at a lower-priced alternative. Pricing for this announced service is noted as $168 per month for a small virtual service configuration. A pilot trial service also is available for customers who want to certify an application to run in the cloud with the full support of the HP team.
U.S. Job Openings at a Thirteen Year High
Talent management, retention and skills development has been a constant theme among supply chain management forums and indeed many Supply Chain Matters commentaries. Executives and team leaders constantly lament on how difficult it is to find people with the right level of skills. Current forces of supply and demand in the U.S. labor market are not going to help in overcoming this challenge.
The number of job openings across the U.S. reached a 13-year high in June with U.S. employers announcing 4.7 million job openings. Reports indicate that employers additionally hired 4.8 million workers in June; an indication that the U.S. labor market is showing new momentum. With this increased level of hiring activity, existing workers have showed increasing willingness to seek other opportunities, given the level of new opportunities. A reported 2.53 million U.S. workers quit their jobs in June, up from 2.49 million in May.
Bloomberg BusinessWeek published an article profiling General Electric’s efforts to get the company acting more like a 21st Century startup. Taking a cue from Silicon Valley’s start-up culture, GE recruited tech entrepreneur Eric Reis, author of the book The Lean Startup, to initiate the company-wide movement titled FastWorks.
Similar to Lean Six Sigma that fueled rallying and transformational efforts in the 1990’s, FastWorks is targeted to motivate GE employees to be more customer focused, speed new product development, reduce costs and improve customer engagement. The Reis philosophy is that faster product innovation is garnered from building imperfect early versions, gaining timely customer feedback, while continuously “pivoting” and adapting products to address market opportunities. The initiative is described by GE Chief Marketing Officer Beth Comstock as “giving employees the freedom to try things that may not prove successful: Fail fast, fail small.”
Easily stated, but with far different implications for a rather large, global based manufacturer.
According to Bloomberg, GE has already trained 40,000 employees in FastWorks. With more than 300 projects underway, the program is described as one of the largest initiatives in GE history. Early product development projects include a high-output gas turbine developed two years faster with 40 percent less cost than would traditional program management would have yielded. Other product initiatives cited were a light bulb with built-in wireless dimming chip, an oil well flow meter which launched after a year in development and is being commercialized in alliance with an energy company.
In the article, a Harvard Business School professor is quoted as observing that as large companies get bigger and scale, they tend to slow down because they have so many processes, systems and structures. Having worked at large and small companies on technology related projects, and having observed the enterprise and supply chain technology marketplace for over ten years, this author can well relate to the obstacles and bureaucratic inertia of large organizations. Most of the innovation in software has come from smaller, best-of-breed start-ups who were laser focused on customer and supply chain needs. That said, failing fast is quite different in a larger vs. a smaller organization. If the philosophy is an integral fabric of the organizational culture, than teams expect to incur failures, learn quickly and move on. In larger organizations there tends to be analysis paralysis as to why the failure.
Supply chain transformation initiatives take on similar characteristics. In a previous Supply Chain Matters commentary highlighting the Supply Chain Management Review article, Culture Eats Strategy, authors John D. Hanson and Steven A. Melnyk provide us reminders that organizational attempts for implementing strategies of radical innovation are often stymied by inherent organizational culture. That includes the spillover of efforts directed at a firm’s value-chain focused processes. If an organization was previously managing suppliers based on cost competitiveness, adding quicker product innovation implies a potential conflict in culture. The article reminds us that the management myth of showing teams a better way and they will embrace it is often de-railed by an inherent organizational culture that can, and often will, resist radical change unless old ways are discredited.
Similarly, many organizational transformational initiatives need to address inherent organizational culture, especially if it detracts from desired outcome objectives, whether they target innovation, efficiency or responsiveness. Is it any surprise that certain enterprise software vendors have embarked on an acquisition frenzy to secure product innovation?
In the case of GE, culture has always been addressed from the top, and down. The legacy of Jack Welch and the current leadership of Jeff Immelt each demonstrated personal passion toward changing organizational culture. FastWorks will no doubt include GE’s internal business groups but its value-chain suppliers as well.
The takeaway is regardless of what name and purpose an initiative takes on, it must incorporate strategy and organizational culture needs.
What’s your view?
Are large organizational transformational efforts another means to employ large numbers of teams, or is changing existing organizational culture the prime objective?
Three weeks ago, Supply Chain Matters commented on the effort underway among Apple’s ecosystem of suppliers and manufacturing partners to prepare for the upcoming product launch and distribution of the new model iPhone. Our commentary made note of reports indicating a number of moving milestones and potential challenges related to new product production ramp-up and product yield. Besides the next generation of the iPhone, there were additional published reports indicating that Taiwan’s Quanta Computer would begin mass production of Apple’s new smartwatch in July, with the planned product launch coming as early as October.
Today, Bloomberg, citing sources with knowledge, is reporting that Apple suppliers have also begun initial manufacturing of the planned new models of the iPad. According to the report, volume production of the next generation full-sized 9.7 inch version of the new model iPadAir is underway, with a newer version of the 7.9 inch iPadmini now entering production with general availability expected by the end of the year. The product introduction announcement is reported to be either at the end of Q3 or early Q4, but many Apple watchers are betting on the month of October, since other next generation products are scheduled for market introduction in that month. In any case, the NPI and volume production scenarios for iPad and iPhone are both pressing towards critical windows for required availability.
The latest quarterly financial results for Apple reflected a marked decline in iPad sales volumes, declining by over 13 million units, thus the upcoming new product introduction cycle is crucial. Timing is critical since there must be inventory available when consumers elect to make their end-of-year holiday purchases.
Like all things related to Apple’s product innovation cycles, design engineers introduce last-minute component features that would challenge any high volume focused supply chain. In our previous iPhone6 commentary, we highlighted reports of yield challenges with the larger LCD screen, the rumored inclusion of sapphire based screens and continued challenges for higher-volume production of fingerprint scanners. The next generation iPad Air is strongly rumored to include more innovative anti-reflective coating as well as a fingerprint sensor.
A separate report from the Associated Press further indicates that Apple’s sapphire glass provider, GT Advanced Technologies, indicated this week that its production facility is close to starting production, but does not expect to reach full operational production until early 2015. That is not an encouraging report for Apple’s supply chain planners and will likely lead to further tough decisions in the weeks to come.
Apple supply chain teams indeed important challenges is the coming 12 weeks with many simultaneous moving milestones impacting multiple product management plans. It is a consummate example of changing information in constant motion. Integration of NPI and supply chain information coupled with multi-tier response planning will invariably be put to the test.