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Market Education Series- A Path Towards Internet of Things Enabled Service Management

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Supply Chain Matters kicks-off the first of a new market education series- A Path Towards Internet of Things Enabled Service Management, in collaboration with supply chain planning and service parts technology provider ToolsGroup.

This supply chain industry analyst is not alone in communicating the long-term implications and benefits of Internet of Things (IoT) technologies applied to multi-industry supply chain business processes.

When I speak to audiences on the future of industry supply chain capabilities, I often context that in over my 30 years of experiences and observations, what I always considered to be the “holy-grail” of our profession was the ability to connect the physical and digital components of various supply chain business processes. That vision is becoming much more of a reality as supply chain teams begin to leverage IoT data and information into planning and customer fulfillment decision-making. From my view, that reality is not the far away.  Planning 3 shutterstock 394279114 300x184 Market Education Series  A Path Towards Internet of Things Enabled Service Management

One of the most promising line-of-business areas that will benefit from IoT enabled technologies applied to supply chain will be equipment services management, especially service and spare parts management. Consider the possibilities when physical objects such as engines, motor vehicles, capital, and other forms of equipment, proactively communicate needs for required maintenance services, replenishment, or repair parts.

Consider the possibilities of far more knowledgeable insights into item-level service or spare parts product demand, more efficient and less costly multi-tier service echelon inventory management, and a more responsive services management process for your customers. A longstanding challenge in service or replenishment parts planning and management has always been the ability to forecast item-level demand when such demand is sporadic or sudden.  Now consider the opportunities to have demand-driven or predictive failure data and information emanating directly from the physical equipment.

Three to five years from today, equipment manufacturers will be communicating to investors about many of these new top-line revenue business growth areas where physical and digital interact in a more predictive service management business capability. Such capabilities insure maximum uptime for customers, supported with a super-efficient supply chain planning and resource management capability connects the physical with the digital.

This is all very possible. However, with any solid business model, there are requirements for foundational process and decision-making capabilities.  If your business or enterprise is considering such business models, now is the time to consider investments in fundamental decision-making support capabilities that can best take advantage of the implications of physical and digital coming together.

We submit one of the most fundamental investments to consider is that of a robust service parts planning and fulfillment process that leverages today’s more advanced capabilities of in-memory computing, machine learning and analytics to support automated decision-making and resource balancing. IoT married to machine learning and more predictive analytics pays near-term dividends for current service management processes as well as future, more robust business models.

In our four-part Supply Chain Matters market education series, A Path Towards Internet of Things Enabled Service Management, in collaboration with supply chain planning and service parts technology provider ToolsGroup, we will help readers to understand and be able to articulate the following:

  • The current state of service and spare parts planning processes and why tailored service parts planning capabilities so different than other forms of supply chain planning? Why is it increasingly becoming fundamental to any service management process and why are so many equipment manufacturers currently investing in this capability?
  • How does a robust service parts planning capability play a foundational role in an Internet of Things (IoT) enabled environment? How does such capabilities, augmented by new advanced technologies, enhancing the effectiveness of an overall IoT integrated process?
  • What are the overall benefits for customers and to the business, and what are some current-day examples? How is this best articulated to the C-Suite? Why equipment manufacturers and services providers are already on this path?

Join us over the coming weeks as we dive deeper into each of these topical areas reflecting on how to build the foundations for both a robust, more efficient, and less costly service parts planning capability as well as laying the critical foundation for new IoT enabled service management business models.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Two Interrelated Events: United Airlines and Jeff Bezos Tenet’s of Business


This week, general media headlines and social media commentary was totally dominated by the images of the United Airlines incident of a passenger being forcibly removed from an aircraft because of an overbooking situation. The experience had to be frightening for all involved and the video is very painful to watch.

Also, this week, business and social media has been echoing the latest Amazon shareholder letter authored by Jeff Bezos.

Whether by design or by chance, the two events are very much linked and serve as timely reminders, but in different degrees.

Most all of us are quite familiar with Amazon, both as online shoppers and as a collective supply chain community.  As customers, it seems that almost all of this online retailer’s persona centers on finding ways to constantly delight customers in the most hassle-free way, whether in searching products, ordering, or returning products, or consistently making good of any screw-ups, regardless of fault.  Loyal Amazon customers consistently return because of these demonstrated business traits.

This week, social media has been echoing the latest Amazon shareholder letter authored by Jeff Bezos. In that letter, Bezos states that making quick decisions and obsessing on customer outcomes are key to avoiding stasis within companies. If the term “stasis” is unfamiliar, do not be alarmed. Our Cortona inquiry indicates the term was derived from modern Latin and Greek meaning “to stand” a state of inactivity or equilibrium.

Bezos goes on to describe “Day 1” companies that are at the beginning of their potential with that of what he describes as “Day 2” companies, which he essentially describes as stasis, followed by irrelevance, followed by excruciating painful decline.

It is an insightful commentary from a noted visionary business leader who from the beginnings of Amazon, set a direction and focus for long-term growth and market penetration over short-term financial rewards for investors. Amazon suffered much initial abuse from Wall Street regarding its longer-term view and its obsessions for investment in the customer experience.

In the context of a business mission, Bezos observes that mission and focus can be competitor, product or technology focused. His charge for Amazon has always been an obsessive customer focus.

The above statement alone is a very important takeaway for supply chain leaders and practitioners and could have been the entire focus on this Supply Chain Matters blog commentary.

Instead, let’s dwell on today’s airline industry.

Many of us who fly frequently, which likely includes many of our blog readers under the broad supply chain umbrella have witnessed first-hand, the deterioration of customer service. It is fairly clear that the business focus changed from a customer focus to a bottom-line focus. Business decisions are now driven by relentless needs to improve profits, either by charging all forms of supplemental fees to driving all forms of efficiencies that could be garnered by either employees, operating equipment, or technology. Today as airline travelers, we are forced to endure the byproducts of strategies that have taken-on too much dominance. We pay extra fees for services that were once included as a given in airline travel to a point where most of the industry is now obsessed with charging added fees. There have been frequent incidents of airline IT systems failures, driven perhaps by too many changes applied to aged technology or developers rushed for time to make needed software fixes. We could go on to mention aircraft that is over-scheduled, not allowing proper response times for unplanned weather or other schedule disruptions, let alone required preventative maintenance.

The latest absurdity are so-termed basic fares that do not include the privilege of either a carry-on bag, checked luggage, and absent any reserved seat. Just show-up, pay, and will try to figure it out.

However, this week’s United Airlines incident was a far starker reminder of a business and industry environment that has now completely lost its customer focus.

In his letter, Bezos describes a state of customer obsession:

There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.

He then observes the tendencies for Day 2 companies to fall back on managing proxies, particularly those related to the process:

Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.

That, by our lens, is the depiction of this week’s incident- United employees following the process without the context of the outcome, which was incurring needless physical harm to a paying customer and a public relation beating that will do damage to an already battered brand.

The initial response from United Airlines when the video went viral was that the airline followed the process for bumped passengers, after all, it’s all written in our customer contract.  It was not the second response from the CEO, which was do anything to make the situation right.

Not all airlines have deteriorated to such a state. But for the many that have, the context is no way that of Day 1, perhaps not that of Day 2, but very much akin to excruciating painful decline, at least for airline passengers.

And yes, there is a broader takeaway for the supply chain community.

Do not let your organization lose its focus on decisions that achieve positive customer or partner outcomes. As this blog has noted in prior commentaries, activist investors focused on near-term vs. longer-term financial results tend to force a changed context, one that is financial outcome driven. Much of that context eventually impacts supply chain resources and capabilities, including process and decision-making.

Keep a copy of the Jeff Bezos 2017 letter to shareholders prominently displayed and electronically accessible as a continual reminder of the differences in what customer ethos and stasis really mean.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Supply Chain Matters Highlights of Connected Things 2017 Conference

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This supply chain management industry analyst recently had the opportunity to attend the Connected Things 2017- Accelerating the Adoption & impact of IoT for People, Places & Things conference, sponsored by the MIT Enterprise Forum of Cambridge.  This Supply Chain Matters posting shares key highlights, observations, and insights this author gained from the various sessions.

This was a one-day conference designed to exchange the latest thought leadership and information exchange regarding the current state of Internet of Things (IoT) technology strategy and deployment. The conference, as noted in the dedicated conference web page, included a format of keynote presentations from senior technology executives and market influencers along with seven different panel discussions directed at key IoT challenges and topics. MIT Connect Things 2017 2 300x169 Supply Chain Matters Highlights of Connected Things 2017 Conference

From this author’s lens, the content was outstanding and very timely, and brought forward consistent themes related to this growing area of technology interest. Judging from the overflow crowd of conference attendees traveling from different regions and just before a forecasted major snowstorm across the New England region, IoT is obviously a top-of-mind topic within many an industry setting, including industry supply chains.

The opening keynote delivered by Harel Kodesh, Vice President, Predix and CTO, GE Digital provided a very timely context for how a manufacturing company such as General Electric is aggressively moving toward a journey to be an Industrial Internet and digital transformation company. This blog has provided several prior commentaries related to GE Digital and its development and rollout of the Predix operating system, and Kadesh’s keynote brought this all together. As an example, GE declares that it will have upwards of 68,000 of its jet engines and 10,000 turbines connected by Predix in three years. Another GE Digital initiative looks to railway locomotives serving as a “data center on wheels” in areas of data sharing not only on equipment and train operation but on the sensing and reporting of rail right of way data, such as the condition of agricultural farms and fields. An important key message reinforced by GE is that upwards of up to 40 percent of operational performance data generated by equipment is spurious, subject to cleansing or deletion. That reinforces the need for the Edge level, or as GE refers to the Digital Twin system, to serve as an actual data rationalization compute mode. We view this as a very important consideration for any form of supply chain or service management focused IoT digital transformation initiative.

The keynote from David Friend, CEO of BlueArchive, and former founder of Cloud storage provider Carbonite, provided clear reinforcement that Cloud based data storage will indeed transform to a utility model in the not too distance future. The current impediment is a generally accepted standard data exchange API for IoT driven processes to integrate with.  Friend’s remarks further reinforced the need for operational data cleansing at the Edge layer, along with today’s overriding concerns for increased data security standards as well as increased data speeds across all the levels involved in an IoT deployment. As an example, Carbonite today manages 500 million storage requests daily.

SAP executive Alan Southall, Vice President and Head of SAP IoT Predictive Maintenance, reinforced that engineers currently do not trust raw data emanating from an asset, and that SAP recently launched SAP Leonardo to be an IoT platform data management system to manage and mitigate semantic data flows from the physical asset to actual business applications. (This analyst recently received an SAP briefing regarding SAP Leonardo design and capabilities) SAP is further working with pilot customers on areas such as machine learning, as well as automated analytics. Southhall also reinforced the message that Edge systems require military grade data security.

We managed to sit-in on three separate panel discussions including one focused on IoT Analytics, Industry 4.0 impacts on legacy industries and the all-important, physical, and cyber security viewpoints.

Regarding an IoT analytics framework, we sensed a consensus viewpoint outlining a tiered analytics strategy, with smart assets and connected devices managing local processing and Cloud-based platforms serving as additional data aggregators and insights engine at high levels of more predictive event context. Regarding the long-term impact of analytics, panelists concurred that industry transitions are already underway but additional challenges need to be addressed in how to better automate data consolidation and aggregation, and yes, the need for more comprehensive network-wide data security practices and standards. Noted was that a lot of industry development right now is focused on Edge systems, namely decisions needing to be made at the machine or manufacturing layer, an initial step in helping organizations to be prepared for later enterprise-wide, IoT digital transformation efforts. A reality remains that most machine-level data resides in industrial environments primarily protected behind-the-firewall.

We were very pleased to hear one panelist declare: “Don’t give me more data- give me smarter data.”

One other theme expressed on this blog in multiple prior commentaries, is the belief that, like other data-focused technology automation transformations of the past such as RFID adoption, ultimate ownership of data remains a big challenge yet to be sorted out. For instance, original equipment manufacturers or digital services providers are positioning strategies based on aggregation and ownership of equipment data for business process management or digital transformation business model needs, while data generators of the equipment declare that actual customers already own such data.  One example mentioned by a panelist is within agriculture settings, where seed providers have been collecting vast amounts of data to provide managed services related to crop yields, while not making such data available to the same specific farms without a bundled service.  In our blog commentaries, we have portended similar conflicts yet to play out in industries such as commercial aircraft, where airlines will claim ownership of their own operational performance data.  Obviously, a period of transition and sorting out must evolve.

Again, this was a beneficial and informative conference addressing a transformative but still young technology with more iterations to come.  Conferences such as these helps in cutting through some of the hype, focusing on key challenges and needs, while providing learning from those in multiple roles of moving such transformation forward.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

What’s Behind Intel’s Intent to Acquire Automotive Technology Provider Mobileye?

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In November of 2016, Supply Chain Matters called attention to the building trend of high profile technology and semiconductor firms beginning to position themselves in automotive supply chains mostly via market acquisitions. This week provided further evidence of this strategy with the headline that semiconductor giant Intel will acquire advanced vision and driver assistance technology provider Mobileye for an estimated $15.3 billion.

As noted in our prior commentary, the strategic stakes involve which company and which advanced technologies will ultimately control and benefit from the movement of more advanced technology being embedded into automobiles, trucks, and other vehicles. Last year, fabless semiconductor and cellular tech provider Qualcomm announced its intent to acquire NXP Semiconductors, a major supplier of semiconductor chips and microprocessors that control more sophisticated automobile functions in power management, security access, media, and audio functions. Qualcomm was willing to pay a hefty sum, upwards of $39 billion, a 34 percent premium in existing NXP stock value, to gain entry into automotive technology value-chain needs. Samsung recently closed on its deal, the largest deal in the company’s history, on the acquisition of electronic components supplier Harmon International in an $8 billion all-cash deal. The deal again had the intent to gain deeper access to the automotive product value-chain, marrying Samsung’s technology based capabilities in mobile communications, electronic displays, memory chip and microprocessors with Harmon’s evolving capabilities to support connected vehicle and lifestyle audio product innovation.

In Intel’s case, the semiconductor and microprocessor provider was willing to pay a 34 percent premium over Mobileye’s closing share price at the time on the announcement. This Israeli-based technology firm, founded 20 years ago, at the Hebrew University of Jerusalem, develops the sensors and artificial intelligence that allow a vehicle’s on-board computer to know the context of where the vehicle is in relation to other vehicles and surroundings. Mobileye recently reported revenues of just over $358 million with net income of $108.4 million.

Our readers may recall that in July of last year, Mobileye elected to drop Tesla as a customer, and according to news reports at the time, the cause was attributed to “disagreements about how the technology was deployed.” Earlier in May, a fatal crash involving a Model S operating on semiautonomous mode autopilot control had reportedly motivated the decision to drop Tesla at contract renewal time because this supplier wanted more control as to how its camera technology would be operationally deployed. Tesla has since indicated that its autopilot system will rely more on its radar sensors and advanced software to detect obstacles, rather than the forward-facing camera. That decision impacted Tesla’s production cadence in Q4, requiring a huge spike of production in December to make customer delivery commitments.

According to Mobileye, the company’s technology is installed in more than 15.7 million vehicles globally, and includes relationships with 21 automotive brands including General Motors, Honda, and Volkswagen AG.

In statements regarding the acquisition, Intel CEO Brain Krzanich indicated to investors; “You can think of the car as a server on wheels.” In an internal note to employees, regarding the acquisition, the CEO indicated: “The saying ‘what’s under the hood’ will increasingly refer to computing, not horsepower.”

Indeed, that is how tech companies now view automotive value-chains, providing intelligent transportation services with lots and lots of on-board technology and autonomous decision-making.

According to reports, after the completion of the acquisition, Mobileye’s development and operations will remain headquartered in Israel and led by the company’s co-founder, chairmen and CTO, Amon Shashua.

As noted in our prior November commentary, when a major new technology trend emerges, innovators can try to capitalize on the trend by creating and fostering a consumer product or service, or by creating the tools and technologies (the product supply and value-chain) that both enables and controls the intellectual property of the consumer product or service.  Like the California gold rush analogy, you can either make money in providing the service to multitudes of consumers or in supplying all the pick axes and supplies needed to mine for gold. This is the analogy now emerging among today’s global automotive supply chains and there continues to be big money and large technology stakes at-play.

Who knows what the names of key automotive suppliers and brands will be over the next five years. Your shiny new auto or SUV made have an “Intel Inside” emblem on its dashboard. An automobile, a truck or a municipal bus could morph to an on-call or on-demand transportation services business controlled by a lots of embedded dat and technology.

One thing is certain, the march of technology continues to impact all forms of traditional industries and their supply relationships.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Updated Research Advisory- The New Phase of Online and Omni-Channel Customer Fulfillment

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From time-to-time as developments warrant throughout the year, we have published various succinct but brief research advisories to clients and blog readers focused on specific industry, line-of-business, functional or technology trending that warrant specific attention for both management teams and supply chain management professionals.  hands typing 4 300x200 Updated Research Advisory  The New Phase of Online and Omni Channel Customer Fulfillment

There have been several phases related to the ongoing explosion of online commerce and its impact on traditional retail and B2C focused industry supply chains. In August of 2016, we published the research advisory: The Beginning of a New Phase of Online and Omni-Channel Fulfillment for B2C and Retail Supply Chains, where we cited the beginning of the newest phase, namely impacting the long-term presence of brick and mortar retail and the accelerated need for more agility from supporting supply chains.

Our August 2016 Advisory outlined the tenets and impacts for the beginning of a new phase of an omni-channel driven retail business model. With the increasing results and implications from traditional retailers throughout 2016, we have now updated our advisory to reflect evidence that indeed, a new phase is underway and comes with many implications for the industry’s supply chains.

Consumer preferences and desires have permanently changed in retail, and online platforms and consumer loyalty programs such as that of Amazon are rapidly garnering consumer loyalty and dependence.

Supply Chain Matters and Ferrari Consulting and Research Group clients can now download our updated March 2017 advisory: The New Phase of Online and Omni-channel Fulfillment for B2C and Retail Supply Chains. This report is now available for complimentary downloading in our Research Center by providing basic user registration information.

We reiterate that all research download information is utilized solely for our internal tracking needs and will not be sold or made available to third parties.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

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