Prior to this week’s IBM Smarter Commerce Summit, Supply Chain Matters posed the question as to whether IBM has upped its game in B2B and supply chain technology solutions. After two days of sessions, we found evidence that many of the end-to-end pieces of supply chain and Omni-commerce vision are beginning to fall into place but the roadmap to customer availability needs further acceleration. For that matter, clearer roadmaps would greatly assist.
To refresh our reader’s awareness, IBM has invested upwards of $3 billion in strategic external acquisitions to build out the various components of the Buy-Sell-Service and Market capabilities that make-up the IBM Smarter Commerce portfolio. The effort began three years ago, while the first public market presence for customers was two years ago in the first of the series of summits. Major acquisitions for the supply chain and Omni-Commerce aspect were Emptoris for the Buy segment, Sterling Commerce for the Sell and network messaging segment, ILOG for enhancing Buy, Sell and Service needs, DemandTec for pricing optimization and a whole host of specialized vendors for predictive analytics to name a few. This year’s summit introduced a major new element, the unleashing of IBM’s corporate research and development efforts in coming up with potentially breakthrough approaches for the online Sell and Service aspects.
Two years ago in the first summit, the overall messaging was clearly slanted towards a CIO and IT audience. This year’s summit left no doubt in our mind that the IBM marketing machine can right itself to today’s changed market needs. The messaging and audience was targeted for line-of-business and solutions selling addressing business problems. IBM executives and product marketing now speak in the language of end-to-end supply chain. More subdued however was overt messaging related to public and private clouds buying options.
In our attendance at both general and executive briefings, coupled with some general sessions, IBM is on the way towards embracing the integration of the front-end selling to the back-end value-chain response. The most premiere enterprise technology provider has also become more pragmatic regarding the reality that not all customers will be total IBM shops, and that there are the clear realities of prior investments in legacy ERP or best-of-breed software that needs to be enhanced. Keynotes during day one were broad and visionary while day two included more of the required end-to-end accounting of how each of the Smarter Commerce components can interact.
Our one on one sessions uncovered the internal IBM discovery of the key linchpin that enables tomorrow’s more responsive and adaptable supply chain, that being the information network the spans the entire supply chain. In the specific case of Smarter Commerce, that discovery was that the many roads surround the capabilities of the Sterling Commerce messaging and information integration network. What we assessed as Sterling Commerce capabilities three years ago have clearly changed, bearing the mark of additional IBM development resources. The voices of existing high profile and influential Sterling customers have added to these efforts. We extend a shout out to that community for your openness and perseverance.
In the all-important area of supporting both direct and indirect sourcing and indirect procurement process and predictive analytics capabilities, our perception is that Emptoris is leading the charge up the value-chain to all important integration to Fulfill, Sell and Service. Our current perception is that Emptoris is further into this journey than perhaps SAP and Ariba. Emptoris is also reaching out to the broader elements of ILOG business rules, predictive analytics and other areas. We secured a commitment from IBM executives to keep us updated on this roadmap journey and we look forward to a subsequent update in the fall.
The other area we would like to mention is IBM’s introduction of cognitive based computing, namely Watson and other components, into the Smarter Commerce portfolio. We witnessed some extraordinary demonstrations of a Watson learning system supporting customer service processes. An application which IBM has named Augmented Shopping Advisor, developed by its research labs in Haifa Israel monitors consumer movements within a retail store via the presence of a mobile device, and actually assists consumers (with their permission) in making a smarter product selection. IBM executives disclosed that the application was actually running in the vendor showcase area and monitored the various movements of attendees as to which patterns and which kiosks were visited. The possibilities to integrate this capability for supply chain sensing of product demand and replenishment are exciting. In perhaps the same context, if you believe that sales and marketing teams drive you crazy in product forecasting and integrating to a single product demand plan, wait to they get their hands on augmented shopping and online experience capabilities.
We have many more detailed notes to absorb and thus we close out this initial impressions commentary with our key takeaway. You, the supply chain and Omni-commerce professional will have many more enhanced technology tools in your arsenal in the not too distant future. The all important question, however, are which partners will you decide to invest in.
There are a slew of product announcements and studies that were spawned by this year’s summit and most can be viewed on the IBM Smarter Commerce Blog site.
Stay tuned for further Supply Chain Matters impressions from this year’s Smarter Commerce Summit.
In the meantime, if you have specific questions, send us an email or call. Contact information can be found on our main web site.
Our European based and other readers are probably very aware of the news last week that Swiss frozen foods producer Findus was forced to recall its beef lasagna products in the United Kingdom after it was determined the product contained horse meat. This is not exactly a savory development, to state the least, and British and European media have been quick to call more oversight in food product quality.
In the wake of this development, global consumer goods provider Nestle indicated that it has intensified the screening of and traceability of its food products. Nestle CEO Paul Bulcke indicated to business media that the horsemeat scandal will affect the entire industry even though Nestle product is not directly involved. In a Financial Times interview, Bulcke noted: “We check our suppliers very carefully, and of course, when something like this happens we intensify our procedures. But everything under our labels is not affected.”
Of course, every CEO of a consumer goods company wants to insure traceability across the supply chain but then again, how many have funded the proper tools and resources to insure such traceability? Once more, when the threat of acquisition and cost cutting looms large, will traceability needs see the light of day?
As investigations related to the European horse meat scandal run their course, companies may again discover that traceability and conformance extends to the lowest tiers of the supply chain. It is not about a primary supplier attesting to product conformity, but the supplier to that primary supplier. The rub often comes when negotiating supply contracts, when the customer refuses to acknowledge the need for added costs to insure product traceability and quality conformance.
In many of our past Supply Chain Matters commentaries related to specific food or drug product recalls, a common pattern is the eventual breakdown in quality conformance monitoring, latency in detecting unusual patterns, and waiting too late before a governmental regulator forces a product recall. In the specific prior case of the numerous Johnson & Johnson product recalls, an internal audit pointed to cuts in key quality conformance resources as the catalyst.
Many companies have painfully discovered that indeed, traceability is the key to food safety as well as protecting the brand. Europe now has a pointed reminder to that principle.
Earlier this year, Supply Chain Matters wrote of the uncharacteristic supply stumble for Procter and Gamble, specifically related to the market introduction of its new Tide Pods laundry detergent. Our byline was that in these challenging business times, even superior rated supply chain organizations can experience a supply snafu.
The supply snafu involved the market introduction of the newly branded line of Tide Pods, a capsule blended laundry detergent that was originally planned for market introduction in August of 2011. P&G product management had to push the market entry date to early 2012 due to production supply challenges that limited how much supply that would have been available at retail outlets to support a broad product launch. Meanwhile, P&G’s competitors in the home laundry market segment were given a market opportunity to perhaps garner market-share in the one-dose, convenience segment, which is more profitable than the bulk laundry detergent segment.
We can now share an update to this former P&G challenge with Tide Pods. A mid-December article published on AdvertisingAge notes that P&G is now projecting first year retail sales of $500 million for the Pods product offering. This article notes: “… a major feat considering that of the 1,500 new consumer-packaged goods launches tracked by SymphonyIRI in 2011, only 21 percent reached one year sales of even $50 million. Moreover, because of product scarcity, P&G has not offered promotions on the premium-priced Pods, so discounting hasn’t had a role in its success.”
The article goes on to note that supply shortages still linger and that smaller bag packs remain on allocation to retailers. Despite all of these challenges, P&G’s supply chain and product marketing teams have successfully managed to garner a 73 percent share of the unit-dose market segment including notable retail outlets such as Wal-Mart. All of this has been accomplished as sales in the broader laundry detergent segment are actually down 0.2 percent.
Once again, the cross-functional efforts of P&G teams have turned the challenge of supply adversity into a major market win.
That qualifies for a hearty 2012 thumbs-up award from Supply Chain Matters.
At the beginning of January, Supply Chain Matters commented on certain signs of supply chain structural changes that were being attempted by noted disruptors Google and Walmart. We specifically observed how Google, having muscled its way into branded smartphones announced that it planned to sell such phones directly to consumers, bypassing major carriers and electronics retailers. By establishing an online store, Google planned to offer an ‘unlocked version’ of its Nexus One phone for $529 which consumers could purchase and later enable with a wireless carrier of choice.
From the get go, Google experienced multiple issues related to consumer difficulties in purchasing and activating phones. Google’s worldwide contract manufacturer, HTC of Taiwan, was also placed in a rather difficult position to attempt to support worldwide fulfillment and returns generated from online store purchases. Now, nearly four months later, the initial results of this attempted disintermediation are presenting themselves. A recent Financial Times article, Google backtracks on phone strategy, (free preview sign-up or subscription required) indicates that the company has decided to sell the Nexus One in Europe through mobile operators rather than its online store. A Google spokesperson notes: “We have decided that the best and fastest way to get Nexus One into the hands of European consumers is through our partners.” The article further quotes industry analysts as noting that the wireless carriers can make or break a device, and Google is not an exception. One analyst speculated that Google sold just 135,000 units in the first 64 days. Google is of course, refusing to disclose any sales numbers.
In a related development, a posting on SiliconValley.com notes that Google indicated that it is dropping plans to produce a version of its Nexus One smartphone for Verizon Wireless, the U.S.’s largest mobile carrier. A Google spokesperson noted that the new Droid Incredible, a smartphone Verizon will begin offering this week with the same Android operating system and made by the same manufacturer as the Nexus One, made production of a Nexus One for Verizon superfluous.
In our view, Google’s ill conceived product marketing strategy coupled with a not well thought out supply chain fulfillment and channel partner strategy have all come home to roost. I suppose it would not shock readers if I described Google as “arrogant” but attempting to go it alone in worldwide distribution and marketing of smartphones tips arrogance to a new dimension. Google needs to invest in people who understand all the tenets of responsive global supply chain management vs. just being disruptive for the sake of making a statement.