The Wall Street Journal has reported that General Motors will allow 400 U.S. and Canada based component suppliers for GM vehicles being produced in Brazil and Mexico to be able to periodically renegotiate their supply contracts. These suppliers are currently challenged with the effects of a volatile foreign currency environment causing rising material and labor costs. At least once per year, suppliers can renegotiate terms when impacted by unexpected external economic factors.
This development is newsworthy because among long time automotive industry watchers, GM has developed somewhat of a past reputation as a strict negotiator with what the WSJ describes as “ironclad” contracts with suppliers. Annual industry surveys ranking the relationship of suppliers with various global OEM’s have consistently ranked GM much lower in past surveys.
This latest move is attributed to support a new GM strategy that involves investing $5 billion over the next ten years to develop a new line-up of Chevrolet branded vehicles for consumer markets in Brazil, Mexico and foreign markets such as India and China. Thus, procurement strategy has taken on a more active strategy to longer-term support product development needs. GM’s new chief procurement officer, Steve Kiefer has reportedly been exploring alternative supplier management efforts with GM’s supplier base since taking on the CPO role in late 2014.
What we believe should go unnoticed is that Keifer’s previous industry background included roles at Tier One industry supplier Delphi Automotive, thus providing a fresh bottoms-up perspective on supplier relationship management. Since taking over leadership of GM procurement, he has reportedly fostered the creation of longer-term supplier contracts that include co-innovation in component design or automotive sub-systems for areas such as safety and more intelligent vehicles. The WSJ report quotes a marketing executive for supplier Magna International as reinforcing that GM has taken on a more collaborative approach with that supplier.
We wanted to highlight this report for Supply Chain Matters readers because it is indeed noteworthy. We thought about extending our “Thumbs-Up” recognition but we will hold off somewhat until there is further history in these ongoing efforts.
However, in the meantime, well-done, GM…
Supply Chain Matters has provided our readers visibility to emerging industry disruptors who are leveraging advanced technology and platforms directed at supply chain related business process and asset needs. Such visibility included the entry of Uber and Lyft and their potential to move beyond people transportation.
We now bring visibility to Nikola Motor Company and its ongoing development of a Class 8, 2000 horsepower electric powered semi-tractor truck that will be named the Nicola One.
According to this manufacturer’s founder, the name Nicola was named from electrical engineer Nikola Tesla, whose last name is now affixed to one of the most visible automotive industry disruptors. Similar to electric car manufacturer Tesla, even before the first prototype truck is produced, Nicola’s founder indicated last week that the manufacturer has booked 7000 reservations, each accompanied by a $1500 deposit, totaling more than $2.3 billion in cash. Any tractor-trailer fleet manager will probably view $1500 as a pittance sum when considering the purchase of a Class 8 semi-tractor truck. None the less, the fact that 7000 organizations are willing to queue-up in line, with five months remaining until physical product unveiling, indicates something special in product development.
Founder and CEO Trevor Milton indicates that Nicola’s technology is 10-15 years ahead of any heavy equipment truck manufacturer in fuel efficiencies and emissions. According to the firm’s web site, the Nikola One will feature 4 times the horsepower, 2.2 times the torque and twice the miles per gallon of a standard diesel powered Class 8 tractor. Acceleration from zero to 60 miles per hour under load is claimed as 30 seconds, twice as fast as an average diesel powered vehicle. The vehicle features six-wheel drive, allowing the vehicle to both push and pull loads. With 6X6 regenerative braking and air disk brakes, the combined electric and compressed natural gas (CNG) powered semi-truck claims to stop nearly two times faster than any other semi- truck on the market – cutting stopping distance in half.
Once more, this upstart is offering a compelling opportunity that will allow owner-operators and fleets to get into a new Nikola One and know their total cost of ownership every single month, regardless of fluctuating fuel costs and miles driven. The Nikola Complete Leasing Program will offer unlimited miles, unlimited fuel, warranty and scheduled maintenance, all for only $5,000 per month. Then for no additional cost, tractor-trailer fleet operators’ can trade-in for a new Nikola One every 72 months or 1,000,000 miles, whichever comes first. Whether a customer drives 8,000 miles per month solo or 16,000 miles per month as a team, total fuel cost is covered by Nikola. Tax, title and license not included.
As noted in a recent press release, the average diesel truck burns over $400,000 in fuel and racks-up $100,000 in maintenance costs over a million miles, and Nicola claims these costs are eliminated with its lease program.
That seems to be quite a compelling financial proposition, hence the current pent-up interest. Class 8 truck sales have been very depressed of-late because operators have been very reluctant to invest large sums of investment in new trucks with the current financial dynamics of fleets and today’s lower cost of fuel. Nikola could add a whole new dimension, but obviously, has to convince transportation operators that the technology indeed performs as claimed and what Tesla is generating for customer advocacy, Nikola can do the same among a highly conservative lot of buyers.
There has long been skepticism as to whether anyone could develop a compelling electric powered heavy duty truck. It is only a matter of time before a manufacturer addresses such skepticism and it seems that Nikola is positioning itself to be that manufacturer.
Obviously, this is a manufacturer to watch over the coming months. The company indicates that it has completed a seed round of funding and is working of a milestone of $300 million in round A funding to be completed by the truck’s initial launch, which is currently targeted for early December of this year.
Sustainability efforts could well get a huge boost is this technology does come to market. Then again, with all of the advanced hype and pre-orders, other established manufacturers may have something to say or an action to initiate regarding such a disruptive technology.
© Copyright 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
For the commercial aircraft industry and its respective supply chains, a consistent track record of new aircraft development and production release program delays unfortunately remains the same.
To add to its other program woes, Airbus announced this week that initial delivery of its planned A350-1000 model long-range aircraft will slip another year. The initial test flight, originally scheduled for about this time, is now not expected until after September. Indications are that initial deliveries of this new aircraft to launch customer Qatar Airways are not expected until the second-half of 2017.
In a statement, Airbus indicated: “.”We have adapted the A350-1000 schedule to ensure we fully satisfy our customers’ requirements for a mature aircraft from day one.” The manufacturer further added that it would put adequate resources in place to achieve program milestones.
According to business media reports, the first three test aircraft are currently in the final assembly stage. From that fact alone, we suspect that delays have more to do with the readiness of the supply chain to be able to scale to initial productions levels. To date, Airbus has reportedly booked 181 orders from 10 airline customers for this new model, the largest long-range aircraft offering for Airbus.
The 1000 model is the longest-fuselage version of Airbus’ new A350 family of wide-body jetliners. With this design and configuration, the aircraft can accommodate a range of from 366-440 passengers, which means lots of seat per plane. An ongoing constraint in wide-body supply chains has been availability of airline seats in-volume. Powering the A350-1000 will be a higher-thrust Rolls Royce Trent XWB engines from which will allow this largest model to attain even greater levels of fuel efficiency. Newer models of more technologically advanced aircraft engines have had their share of ongoing ramp-up problems as-well.
The program itself has had its ups and downs including in December of 2014, an announcement of a last-minute sudden delay in the initial delivery to launch customer Qatar Airways only to change that two days later. Since that time, the European based aircraft producer has experienced continual delays in its ability to support planned volume production of this model. As noted in a related posting last week, subsequent deliveries of new A350 model aircraft remain impacted due to adequate supply of cabin seating and interior equipment. Plans called for delivery of a total of 50 aircraft in 2016, but Airbus has managed to deliver only 10 so far this year due to the supply delays. There are a reported 40 of this aircraft in various stages of final assembly and Airbus has augmented production with added work stations to get late delivered cabin equipment installed as quickly as possible.
The ongoing tense customer relationship among Airbus and Qatar that dates back to the scheduled initial delivery of the A350 family now takes on more dimensions since Qatar had contracted for initial deliveries of the 1000 model starting this month. No doubt, Qatar’s candid and direct CEO will have the last word regarding this latest delay announcement.
While the latest Airbus program delay was probably motivated by prudence in assuring complete readiness of the supply chain, it does reflect and industry track record of continually underestimating the scope of program and supply chain challenges. With more and more major system components being outsourced to global based suppliers, aerospace supply chains seem to constant underestimate the ramifications and added requirements for increased design and production process coordination with major suppliers. What has not helped is an industry environment where booked orders far exceed available capacity placing more pressure of suppliers to meet aggressive milestones from multiple global manufacturers. Add to that, increased pressures for reduced costs and higher efficiencies and you get the picture of conflicted goals and priorities.
The A350 situation does not currently compare with the ongoing delivery delays with Boeing’s 787 Dreamliner program that has now amassed a reported $28 billion in ‘deferred production costs” because of continued multi-year delays in customer deliveries. None the less, the track record of missed program milestones and lack of supply chain readiness continues across most manufacturers.
Supply Chain Matters Impressions of PTC LiveWorx 16 Internet of Things Technology Conference- Part Two
Product Lifecycle Management (PLM) and Internet of Things (IoT) technology provider PTC held its annual LiveWorx 16 IoT conference in Boston last week amid over 4500 attendees. Supply Chain Matters in the person of this industry analyst was invited to once again attend this annual event and walked away with varying impressions regarding the state of IoT adoption and on some shifts among PTC’s ongoing product strategies.
In our previous Part One commentary, we shared various overall impressions, insights and takeaways. In this Part Two posting, we share additional impressions.
Prediction Seven within our 2016 Predictions for Industry and Global Supply Chains (available for complimentary download in our Research Center) anticipated that B2b focused manufacturers and services providers would broaden their perspectives on connected devices and enhancing customer needs, but also stumble because of conflicts in approach, conflicts in stakeholder interests or data silo approaches. We were therefore especially eager to attend the LiveWorx panel discussion featuring select PTC partners. This panel consisted of executives from Cognizant, Dell, Flowserve, Glassbeam, HP Enterprise, National Instruments, ServiceMax and SAP.
Most all of these panelists observed that for now, most customers are not seeking out a specific IoT initiative per-se. Instead, they are seeking technology to assist in resolving use cases involving ongoing business challenges in manufacturing or supply chain or tapping new business opportunities and revenue streams. One panelist indicated that the current hype surrounding IoT has many teams “scratching their heads” in terms of selecting start points or understanding what business problems IoT will solve. From our lens, that reflects a need for broader market education.
Where projects lean toward IoT, the sales and approval cycle tends to be elongated, cited in the range of 6-12 months, with indications that discussion with up to 7 people representing different business functions such as IT, manufacturing, service management and other functions are involved.
Regarding project ROI, the panel indicated that IoT related projects must address definitive returns to the business in areas such as moving the revenue needle, avoidance of expensive downtime particularly in process intensive industry settings, safety of operations and of-course, enhanced customer service and response.
Another common challenge cited by panelists was the need for ubiquitous connectivity of networks, both in broadband Internet connections and mobile devices. Noted was that today, many customers do not have the scalable networks to support the large amounts of data flow implied by IoT use cases, along with the perception that doing so now would be cost prohibitive. One panelist questioned the large amounts of “junk” data now being collected.
As noted in our Part One posting, information and data security remains a top customer concern with panelists indicating that a lot of additional multi-industry education remains to be done. A separate panelist noted this as consistently one of the top three concerns from any customer. One panelist with lots of experience in process based industry observed that industry already has data security standards that are well-understood. This panelist pointed out that the controller domain will always be protected by separate protocols than the data extract domain.
One other area we wanted to highlight for our readers was the topic of what is commonly termed agile engineering. This is practice commonly adapted by software and technology companies that promotes the creation of scrum teams that conduct frequent product prototypes, gaining immediate customer feedback on a proposed new product, and moving forward with yet another improved prototype until the ultimate product is released. With more multi-industry products now having more and more technology and software content, classic “waterfall” engineering processes have a hard time keeping up with needs for constant agility. Readers may note the common thread among equipment product recalls of-late has been problems with the functioning software component or needs to update that software to address hardware issues.
PTC executives addressed this specific challenge in the industry analyst and press briefing, along with why they believe that augmenting PLM processes with more AR and VR tools can help support more agile engineering needs. To help in this effort, PTC is sponsoring specific thought leadership for customers to more fully understand agile engineering needs and requirements.
We did manage to attend a couple of breakout sessions focused on Service Lifecycle Management (SLM) and specifically customer efforts to upgrade older versions of either MCA or Xelus service parts planning application to PTC’s latest releases. From the customer presentations we observed, the upgrade process was reported in positive terms. What was more interesting was the motivations for upgrading, which ranged from internal business changes or consolidation to needs to upgrade to more modern and more advanced planning capabilities.
Finally, during the executive Q&A, PTC CEO Heppelmann indicated that he does not expect PTC to get any more deeply involved in supply chain management focused IoT application needs. Rather, PTC will allow its partner network to address SCM business and process needs utilizing PTC technology platform and applications.
Overall, LiveWorx 16 was a much more productive and educational conference this year, one that reflected on PTC making its own transitions into the current realities of the current Industrial IoT market.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters Impressions of PTC LiveWorx 16 Internet of Things Technology Conference- Part One
Product Lifecycle Management (PLM) and Internet of Things (IoT) technology provider PTC held its annual LiveWorx 16 IoT conference in Boston last week amid over 4500 attendees. Supply Chain Matters in the person of this industry analyst was invited to once again attend this annual event and walked away with varying impressions regarding the state of IoT adoption and on some shifts among PTC’s ongoing product strategies. Unlike last year’s LiveWorx conference, this year’s audience messaging was much more focused on broader and more succinct strategies and actual technology users seemed to outnumber prospective technology providers looking to cash in on a new wave of technology.
In the opening keynote address referencing the current state of IoT adoption, PTC President and CEO Jim Heppelmann established this year’s conference themes, namely that IoT is the defining technology of our times and that it has the potential, more than any other technology, to enable journeys of business transformation. He cited researcher and scientist Roy Amara and what has since been known as Amara’s Law:
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
Heppelmann went on to describe his ongoing collaboration with Harvard Business School professor Michael Porter in outlining both the immediate and longer-term business impacts of this technology along with current barriers of adoption. We should point out to our readers that Professor Porter is a member of the board of directors at PTC.
The remainder of the opening CEO keynote reinforced in onstage and live software demonstrations somewhat of what we believe is a shift in PTC’s product strategies concerning IoT. There is now for more emphasis on leveraging both augmented and virtual reality technology to IoT and PLM focused applications. Stated was the belief that the combination of AR and VR, aligned with forms of analytics, is game changing to IoT, and is a capability that will differentiate PTC in the broader IoT spectrum.
We learned later that PTC has garnered 700 IoT focused customers, more than half of which have begun migrating from a PLM software installed base perspective. To springboard this journey going forward, PTC has developed a series of business process journey roadmaps for customers addressing both engineering and manufacturing process migration needs. That stated, the vision and journey for IoT must come from higher C-level executive sponsorship and a broader buyer audience. PTC has adjusted its sales prospecting strategy to target C-level executives via the joint research efforts with Professor Porter.
A second broad keynote focusing on overall platform strategy, anchored by Group President Rob Gremley addressed 30 months of ongoing development and acquisitions that now make-up what was described as a PTC integrated platform of applications:
- PTC kepware to support industrial network connectivity.
- PTC ThingWorx supporting applications and advanced analytics
- PTC Vuforia Suite supporting augmented reality applications.
Noted was that there are two general paths for enabling IoT, one being the deployment of applications and solutions to business needs, the other being deployment and leveraging of an IoT platform. PTC intends to support both of these needs,
Regarding the latter platform, announced at this conference was a new partnership with Amazon Web Services (AWS) to provide industrial network infrastructure support for customers. AWS executive Mark Relph noted for the audience that Amazon has been supporting IoT and more complex industrial network needs for quite some time. Further announced was that AWS would be one of four other Cloud platform partners for PTC. At a later senior executive level news conference, I queried Gremley on potential names of the three other network partnerships. They apparently include Microsoft and its Azure platform, SAP and its HANA platform, and perhaps Salesforce. Another mention was that of the potential of General Electric’s Predix industrial platform. Gremley further indicated that PTC will not necessarily cap these network partnerships, that such partnerships will be based on specific customer needs and desires. However, he clarified that network partners are not going to be unlimited.
One obvious takeaway for our readers is this analyst’s impression that PTC has now taken a more open system approach to IoT platform technology deployment, which is good for customers.
As our readers are very aware, data and network security is one of the fundamental concerns related to broader deployment of IoT business process models. Thus we had anticipated that this year’s LiveWorx would feature a keynote addressing this area. That did not occur for various reasons.
However, we did attend a breakout session titled: Facing the Real Security Challenges of IoT, and delivered by PTC Senior Director Rob Black. By our view, this was a session that should have been featured as a main stage keynote. It was informative and addressed current vulnerabilities in older industrial network data protocols, how IoT Cloud based security is different than standard applications, and what organizations are responsible for information security. Attendees had to walk away much more informed and much more aware of security needs. By our lens, such sessions need to be incorporated in any and all IoT focused conferences. Teams need to be aware and must be prepared to address the realities of information security. At last fall’s Oracle Open World conference, we were pleased to observe Oracle founder and senior executive Larry Ellison address the need for information security directly in an on-stage keynote.
In Part Two of our Supply Chain Matters LiveWorx attendance commentary, we will some other impressions and takeaways, including highlights of a panel of PTC partners who addressed current IoT customer initiatives and how they are being approached. We found quite a number of learnings from this session that need to be shared.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.