After receiving its initial $12 million in Series A funding in July, FogHorn Systems formally announced this week the general availability of its new Lightning software platform for real-time analytics and Internet of Things (IoT) focused applications running on ultra-small edge footprint physical devices. Suffice to indicate that this will not be the only time our blog will provide commentary related to FogHorn along with other innovative IoT technology players that are now emerging to support such needs.
According to the announcement, the technology allows application developers, systems integrators and manufacturing engineers the ability to quickly and easily deploy high-performance edge analytics for industrial operations and industrial IoT use cases.
The name FogHorn may have some familiarity with our Supply Chain Matters readers since a form of this vendor’s technology has been validated as part of General Electric’s Predix® Industrial Internet operating environment. The company’s Series A funding was led by both March Capital and GE Ventures with additional participation by Robert Bosch Venture Capital, Yokogawa Electric Corporation and Darling Ventures. One of GE’s existing “Brilliant Factories” that produces industrial grade electrical products used in power grids is utilizing FogHorn to apply real-time analytics to help maximize manufacturing yields from data emitted by hundreds of assembly line sensors.
Indeed, the best way to describe FogHorn is an emerging provider of edge or “fog computing” intelligence for industrial and commercial IoT applications. This author had the opportunity to speak with some of the senior management team this week and I was impressed on viewing some of the early adoption customer use cases deploying its FogHorn Lightening software platform in areas such as factory yield optimization, locomotive fuel efficiency, industrial pump cavitation alerting and wind energy forecasting.
The differentiator of FogHorn is its powerful miniaturized analytics engine that can run on low footprint machines. Rather than setting up expensive electronic connections and the passing of huge amounts of detailed machine sensor data to other Cloud-based platforms, FogHorn’s miniaturized complex event processing (CEP) engine coupled with an expressive domain specific language (DSL) to express rules on the incoming sensor data steams allows for the aggregated data to exist at the machine level via an Edge Gateway, passing information to the Cloud only when certain thresholds or operational alerts are encountered. The Edge software stack is responsible for ingesting various data streams from sensors or industrial devices into a high speed data bus as well as executing user-defined analytics expressions on the streaming data to optimize such devices.
The FogHorn platform further includes services that run in the Cloud or behind the firewall to remotely configure and manage edge devices. This week’s announcement indicates availability of two versions of the FogHorn Lightening Edge intelligence software platform. A Lightening® Micro Edition is embeddable software with a very small memory footprint while Lightening Standard Edition includes all of features of the Micro edition with additional support for advanced analytics and edge applications for different languages.
The Lightening software platform is further accessible on the Microsoft Azure Marketplace and FogHorn indicates that it has gained certification as an SAP HANA application solution partner which we believe provides an interesting future perspective as to which direction this provider takes in leveraging more widespread adoption of its technology.
Suffice to indicate that this will not be the only time our blog will provide commentary related to FogHorn along with other innovative IoT technology players that are now emerging to support such needs.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Acquisition interest focused on integrated supply chain planning and execution technology has indeed re-energized during this Q3 period. We previously alerted our Supply Chain Matters readership to last week’s published report indicating that Honeywell was in talks to acquire JDA Software. Also last week, mid-market ERP technology provider Plex Systems announced that it had acquired supply chain planning technology provider DemandCaster.
Last week’s blockbuster news regarding the potential acquisition of JDA Software came from an exclusive report published by Reuters which cited unnamed sources familiar with the negotiations. Today, The Wall Street Journal, further citing its own sources, reports that a deal is near among the two parties. The report further highlights JDA’s former strategy for integrating planning and execution including its prior acquisition of RedPrairie. The WSJ confirms that the deal values JDA at around $3 billion and could be announced rather shortly. The acquisition would reportedly boost Honeywell’s efforts to enter the software area with an integrated supply chain planning and execution provider.
Our Supply Chain Matters view of this latest report leads us to believe that Honeywell may be making a play to penetrate the Internet-of-Things (IoT) segment with a concentration on supply chain management and execution focused processes, We will know more once a deal is announced and consummated. Keep in-mind that another suitor could surface by the revelation of the very significant $2 billion debt burden of JDA places a high hurdle, one that only a large enterprise software vendor would undertake.
Plex’s Acquisition of DemandCaster
Plex’s acquisition, on the other hand, is focused on further enhancing its Cloud-based ERP platform with broader capabilities in supply chain and sales and operations planning support for its traditional manufacturing based customers. Since both firms are privately-held, no financial terms were disclosed.
For those unfamiliar, Plex has its original roots in support for the Automotive industry supply chain, specially multi-tier suppliers that constantly respond to changing component demand and replenishment signals from various OEM’s. The firm’s technology has had an end-to-end focus that includes a strong concentration and linkage of ERP to manufacturing execution systems (MES). The mid-market ERP provider has since branched out to other manufacturing industry verticals including after-market services and support.
DemandCaster was founded in 2004 principally by a former manufacturing operations executive who had a vision for a more user-friendly approach in supply chain and manufacturing support needs. Many former supply chain planning providers were founded by entrepreneurs with operations research or academic resumes. Its approach to the market is somewhat novel in that DemandCaster offers all of its customers the option to cancel their subscription at any time if the service is not providing expected value. The firm and its founders pride themselves in their intuitive end-user interfaces included within applications. The firm’s technology is native Microsoft Cloud multi-tenant based, providing a familiar MS Office and Microsoft Azure based look and feel. The founders additionally have shunned external financial investment partners electing a pure organic growth strategy.
Supply chain focused technology applications include support for basic forecasting and inventory planning, inventory optimization, distribution requirements planning (DRP) and capacity planning. A sales and operations application includes support for demand and supply planning. DemandCaster actually partnered with Plex about a year ago in an OEM arrangement. Earlier, the firm also partnered with Cloud-based ERP provider NetSuite as a supply chain planning focused extension application in a referral arrangement.
This author had the opportunity to directly speak with Jim Shepherd, Plex’s Vice-President of Strategy who confirmed that Plex had initiated its interest in DemandCaster prior to the recent announcement by Oracle of its intent to acquire NetSuite. Most all of Plex’s customers have global based supply chains that require more responsive capabilities to constantly changing product demand and supply needs. Plex was further attracted to the user-friendliness of various supply chain planning modules, the native Cloud based technology as well as the built-in integration to other ERP or best-of-breed SCM focused platforms. Plex having the established one-year relationship provided further awareness to the attractiveness of DemandCaster’s approach to supply chain planning and execution capabilities.
We would quickly add that from our lens, DeamndCaster has more appeal to line-of-business buyer teams who often weigh user-friendliness and time-to-technology value higher in the ultimate buying decision. Shepherd further confirmed that DemandCaster will remain an independent brand, as well as an inherent part of Plex’s future ERP capabilities. This is a similar strategy that ERP providers such as Oracle and QAD have employed in acquisitions specifically related to supply chain management focused technology. Such a strategy opens the door for cross-selling into other ERP or best-of-breed supply chain dominant environments.
Shepherd reiterated that a long list of planned additional investments is planned for DemandCaster, investments that could not be achieved without an external investor. Mentioned were building-out comprehensive analytics capabilities directly related to S&OP focused processes, and that DemandCaster would part of future supply chain focused analytics down the road.
What it Means
While both of these new developments come from somewhat different strategic motivations, they point to renewed and building market interest in integrated supply chain planning and execution capabilities that can be tied to future needs in enhanced analytics driven decision-making, more integrated business planning and abilities to support future IoT based business models that provide enhanced decision-making based on connecting physical and digital processes. By our lens, it will place additional pressures on existing best-of-breed supply chain technology players to further enhance their integration to physical supply chain execution.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
This week, the United States Postal Service (USPS) reported its financial performance for the latest quarter, and from our lens, there are distinct indications that the agency has reached a critical juncture in its ability to be a sustaining competitor and service provider to the world of online fulfillment. As the agency handles more and more package volumes, its transportation and operating costs have risen significantly. Readers, those residing in small and medium as well as large businesses, need to continue to be aware of the implications of this trend.
In September of 2014, Supply Chain Matters declared that the USPS had suddenly changed the industry dynamics of parcel shipping, online commerce and customer fulfillment. The agency established a whole different dynamic for B2C/B2B online commerce by aggressively reducing parcel shipping rates and by declaring to online retailers and businesses that the USPS intended to be a parcel transportation and last-mile delivery partner in the ongoing explosion of online. Suddenly, e-retailers who wanted to maintain attractive free shipping options discovered a potential new alternative to control costs of such programs, and entities such as Amazon were quick to make leverage. Both FedEx and UPS were not all that pleased with the pricing move and began logging protests claiming foul, even though both relied on the agency for completing more costly last-mile delivery needs. However, both were forced to deal with a different competitive landscape in terms of rates and customer alternatives.
Then we viewed the evidence of the results from the all-important 2015 holiday fulfillment quarter, as the agency actually surpassed UPS in total delivered packages. USPS letter carriers delivered about 660 million packages, up from an initial anticipated volume of 600 million packages. UPS reportedly delivered 612 million packages as compared to its initial forecast of 630 million. The postal agency offered the equivalent of as many as 25,000 Sunday delivery routes, up from a normal 4000 pattern. In essence, the USPS became the de-facto go-to carrier for Amazon’s needs for Sunday deliveries. Financially, the agency recorded its first quarterly profit since 2011, earning $307 million, a significant milestone.
In the latest June ending quarter, while total revenues increased 7 percent, the agency reported a controllable loss of $552 million compared with a year-earlier controllable loss of $197 million. Overall volumes were down slightly while package volumes increased 14 percent, an indication of offsetting declining volume in standard mail. The agency reports that it is now delivering to one million additional addresses across the U.S..
In the latest quarter, operating expenses increased 12 percent. The agency’s CFO indicated that transportation and compensation costs continue to rise despite strict cost controls, and according to The Wall Street Journal, the majority of compensation cost increases were related to the growth in package volumes. Further noted was that transportation costs rose in part due to added air freight expenses to meet customer expectations. According to a statement from the Postmaster General, while a recent package rate increase helped to boost revenues in that segment, it was not enough to offset rising costs. By the way, the principle air freight services provider to the agency is FedEx, who obviously benefitted from increased USPS package volumes.
From our lens, the USPS cannot continue to sustain its growth in package deliveries related to current and more expanded online commerce package volumes without investments in newer equipment, systems, and more flexible people resources. Most current delivery vans are over 20 years old and added package volumes are obviously taking a toll on these trucks. The agency is close to awarding contracts in evaluating new delivery van prototypes with larger cargo capacities while consuming less fuel, but the timetable obviously needs to accelerate. Most of the agencies inter-city and cross-country surface delivery needs are established with external transportation firms or independent trucking contractors. As noted, air freight resources are contracted as well.
Scalability of this model does not equate to added efficiencies and cost control. As a government agency, beholden to the U.S. Congress, there are obvious political constraints. Some in Congress want to be rid of direct government ownership yet many current and retired postal workers as well as associated contractors are voters who expect their interests to be considered. Add to this a heightened and highly partisan Presidential campaign environment and readers can get the picture.
The agency and its associated postal workforce have proven viability as an option in package delivery and last-mile fulfillment. The latest TV commercials depicting USPS vans branded with virtual retail branding has purposeful meaning for online consumers. But, the crossroads has been reached in terms of added scalability without losing additional monies.
It is time for the U.S. Congress to act. Either allow the agency to manage, invest and compete as an alternative e-commerce delivery provider or take action on other options.
The analogy is perhaps a teenager that proves to his or her parents that they have finally grown-up and matured, and desire to launch on a chosen career, and seek the support to do so. So is the situation with the USPS and the Congress. The crossroads is at-hand.
In the meantime, businesses need to stay aware to the implications of these trends especially in the light of continual evidence indicating that supporting online customer fulfillment has become more expensive with every passing campaign.
© Copyright 2016. The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved
No sooner had Supply Chain Matters raised our awareness to the collective march to the bottom of the U.S. airline industry came this week’s network-wide computer systems disruption impacting Delta Airlines. As we observed, it is looking more and more like the industry is being led by financial types who seem to have completely ignored the tenets and principles of basic operations and network management.
But, Supply Chain Matters wants to extend direct praise to Delta Chief Executive, Ed Bastian. The primary reason- as the CEO he stepped-up and took full responsibility for the systems failure resulting in the cancelling of thousands of flights and inconvenience to countless customers. He further praised all of his employees for the extraordinary effort in delaing with this crisis and efforts to assist impacted customers.
The airline further posted a video where the CEO directly apologized to Delta customers.
According to Bastian, the disruption began when a power switch failed causing a power outage that subsequently led to other cascading incidents including a transformer blow out in Delta’s data center. The entire system crashed and backup systems did not perform as expected. Bastian indicated openly: “This is our responsibility- the buck stops here.”
What impressed us even more was Bastia’s statement:
“It’s not clear the priorities in our investment have been in the right place. It has caused us to ask a lot of questions which candidly we don’t have a lot of answers for.”
Unlike some other airlines, Delta has invested in operational capability both in aircraft and in supporting systems. In 2012 we praised Delta’s bold supply chain vertical integration initiative in acquiring its own oil refinery. We have also highlighted innovation in aircraft re-purposing.
Yet, this week, the system failed, and the airline has taken full responsibility to find out why and hopefully correct flaws.
Too often in times of major operational or supply chain disruption, CEO’s turn silent and de-facto let operational executives take the arrows and blowback. Some are arrogant enough to openly blame disruption on suppliers, partners or equipment, not acknowledging the principles of ownership and accountability.
Hopefully this week’s incident may provide a watershed for the U.S. airline industry. The compass of services focused on customer needs for a convenient, somewhat pleasant and reliable travel experience has been pointed in the wrong direction, and the consequences and cost of these decisions are coming home to roost.
Praise to a CEO who demonstrates accountability and leadership. We need more of this.
This week the Associated Press reported that two major labor unions at Southwest Airlines are demanding that the carrier replace its CEO because of a recent technology outage that resulted in the delay or canceling of thousands of flights. Twelve percent of the airline’s scheduled flights were reportedly canceled over a subsequent five day period.
The report and past outage, we believe, provides interesting operational management insights for our supply chain management focused readership. Right up-front, I want to warn readers that following may be appear as an overly lengthy rant, but perhaps it may well resonate.
On July 20th, Southwest Airlines experienced an elongated IT outage that involved a system-wide outage of reservation and scheduling applications. The airline’s Chief Commercial Officer indicated to AP that the outage will cost the airline tens of millions of dollars when the dust settles. He further stated that the IT outage was the worst he could recall in his 28 year tenure at Southwest. Of late, Southwest is not the only airline to experience IT disruption.
We all know that information technology applications are mission critical for the airline industry, in fact, they are equivalent in criticality to safe and consistent operation of aircraft. The airline was quick to blame a faulty router as the potential cause of the outage. That should sound familiar. However, IT experts have already opined that such an explanation likely does not hold water given the layers of redundancy that are built around airline transactional systems to avoid single points of failure. Instead, experts believe it points to broader software issues. Further noted by the AP report is that airline executives see existing labor unions as leveraging the outage to gain collective bargaining power.
This author has previously flown Southwest to many engagements. I did so for two specific reasons; one is the usually lower fares which are an important consideration for any business’s travel budget. The other was the airline’s demonstration of consistency, reliability and efficiency in spite of weather or unplanned events. We have observed erosion for both of these decision factors. Southwest’s air fares have been steadily increasing, lately with no differentiation from other carriers, and on some routes, higher than other carriers. As for efficiency, on a recent return trip from Nashville, our flight was delayed over six hours because of a combination of mechanical and weather issues. More revealing, constant updates to passengers, by our view, did not reflect the realities of what was actually happening. A smartphone search of FlightAware or other online weather sites yielded more realistic, plausible and more updated information, yet Southwest gate agents seem to have little of such knowledge. After four hours of waiting, patience grows very thin, and after six, transforms to disgust.
We state all of the above to focus on what is the key takeaway from the current state of Southwest and the U.S. airline industry overall. Key labor unions of the airline, those that the reader can assume have first-hand day-to-day knowledge claim that the airline has focused too much on investing in stock buybacks and more cost controls rather than investing in needed IT and flight operations management investments. Company management naturally views such statements as a means to gain leverage and influence in ongoing collective bargaining for higher wages and benefits. Translation- we need to keep our costs down.
What is missing in this discourse is the all-important customer view, those that actually engage the airline for travel needs and services. As our readers readily know, the supply chain exists to serve the customer by the most differentiating means.
It is no secret that the U.S. airline industry as a whole has managed to erode many forms of customer service to the point that constant delays and breakdowns in equipment and services have become the norm. The entry of low-budget, low fare airlines such as Southwest prompted such a movement that was supposedly to focus on higher efficiency and lower costs coupled with a differentiated experience for travelers.
Today, it clearly appears that accountants and financial engineering experts call the shots for airlines, an industry that was once customer and service focused. We are charged added fees for baggage, priority boarding, preferred seating, meals, and the list goes on. All were expected services not so long ago. The further notion is that if I, the flying customer have to pay extra for such services, I damn well expect that such services will be differentiating and consistently delivered.
Today, there remains continued evidence that airline route scheduling is planned to keep aircraft operating as long as possible in a 24 hour period. Maintenance checks appear deferred to the point of actual component failures, overall network scheduling with little or no tolerance for weather occurrences and/or expected delays. People and airline crews often appear overworked and not valued. In short, the industry has sunk to its lowest common denominator and the once industry innovator, Southwest, is spiraling to the point to joining the company of once stellar carriers such as American and United who have managed to reach the bottom in customer service ratings.
Anyone who has had training and on-the-job experience in logistics or manufacturing operations knows the principles of network efficiency. Keep internal and external based processes well identified and as simple as possible. Plan-in redundancy or back-up resources in case of failures, and constantly maintain equipment to avoid operational breakdowns. Invest in people and maintain constant training for change and innovation.
For the airline industry, the analogy is an air traffic controller. She or he adheres to well understood processes, knows that unplanned disruption can occur on any given day or any given hour and utilizes well-defined, network-wide exception based processes to respond and manage such exceptions. All of this is supported by technology and training directed at supporting constant communication and information flow with built-in redundancy of processes. All is directed at enabling resources and customers to be better informed and anticipate disruption before it occurs. It is further enabled by people who care about excellence, pride and safety in what they do every working day.
The Southwest Airline and indeed the United Airlines sagas point to an overall industry and perhaps business wide problem that stems from a missing compass. Investor returns trump customer needs. Wall Street trumps overall customer satisfaction and labor relations trends.
If a business does not consistently invest in people, processes, technology and equipment, the results often speak for themselves. Short-term gains are nullified by long-term degradation.
Thanks for reading this entire commentary and please share your own perceptions as well.