This week featured a significant announcement from General Electric, namely that the U.S. Federal Aviation Administration (FAA) certified a 3D-printed manufactured part to operate within certain GE commercial jet engines.
A blog commentary featured on the GE Reports site indicates that a fist-sized piece of silver metal that houses the compressor inlet temperature sensor inside a jet engine, known as T25, is becoming a symbol of one of the biggest changes sweeping jet engine design. GE Aviation is currently working with Boeing to retrofit more than 400 GE90-94B jet engines with the 3D printed part. This family of engines power Boeing’s 777 commercial aircraft. High resolution photos of these parts are featured in the commentary.
The report further indicates that GE Aircraft has already initiated flight tests for the next-generation LEAP jet engine, produced in a 50-50 consortium with CFM International, which will include 19 3D-printed fuel nozzles. The LEAP engine will power Airbus’s newly designed A320neo and Boeing’s 737MAX aircraft models.
The planned GE9X engine will further be developed with 3D-printed fuel nozzles and other parts.
GE was one of the early adopter manufacturer’s that has embraced additive manufacturing methods for nearly a decade. According to GE, additive manufacturing allows design engineers to replace complex assemblies with single parts that are lighter. The use of 3D-printing methods accelerates design development and new product introduction times. Once more, GE is printing parts from materials such a cobalt-chrome alloy. In the case of the GE90 printed nozzle housing, the process from final design to FAA certification and service introduction spans what is described as six months.
In digesting this report, Supply Chain Matters further envisioned that the introduction of such 3D-printed aircraft engine components can significantly benefit both ongoing production as well as operational service parts needs. Instead of stocking global-wide manufacturing or service parts depot inventories, replenishment orders can trigger the printing of an additional part, with considerable inventory cost savings. In some cases, we would envision the part being printed directly at a regional repair and maintenance depot.
Next-generation additive manufacturing methods are indeed beginning to make a presence and the benefits described by global manufacturers such as GE, are indeed described as breakthrough technology.
IBM today announced that it will invest $3 billion over the next four years to establish a new Internet of Things (IoT) business unit to help customers analyze data from sensor-equipped devices. The enterprise technology provider further plans to deploy a cloud-based platform to assist customers in building IoT business applications.
Within the announcement is the creation of three service support components:
- A cloud-based open platform for providing analytics services for vertical industry IoT applications
- A termed platform-as-a-service Bluemix IoT Zone to assist developers to integrate sensor data into cloud-based applications, by infusing more real-time sensor data into applications.
- An expansion of IoT focused partner ecosystem ranging from silicon and device manufacturers to industry-focused applications providers such as AT&T, ARM, Semtech and others.
In conjunction with today’s announcement, IBM further announced a new strategic partnership with The Weather Company through WSI, its global B2B and analytics arm. WSI collects data from thousands of weather sensors resulting in upwards of 2.2 billion unique forecast points. Such weather data can be correlated with business applications where weather plays an influencing factor. Think of the how the consumption of beer, certain snacks, bottled water or cosmetics are influenced by weather or climatic conditions. Think about how weather impacts business operations.
The announcement calls for The Weather Company, including WSI, to shift its massive weather data services platform to the IBM Cloud and integrate its data with IBM analytics and cloud services. The analytics aspects call for the use of Watson Analytics for Weather to leverage applications within industries such as insurance, energy and utilities, retail and logistics and other areas.
What makes these announcements ever more interesting is that weather can influence many supply chain related business and operational processes. Whether it is specific product demand patterns requiring unique customer fulfillment trends and needs, or weather impacting both product and services focused supply chains themselves, there is certainly lots of opportunities for innovation.
Today’s IBM announcement adds more stakes to the technology competitive landscape as providers such as Amazon, Cisco Systems, General Electric, Microsoft, PTC and Qualcomm continue to jockey and position their technology ecosystems in order to be a preferred provider of IoT enabled applications and supporting infrastructure in either B2C or B2B dimensions. There remain many ongoing pitfalls and challenges surrounding full-scale IoT deployment, not the least of which is information and data security. The consortiums and influence of larger vendors along with their building ecosystems are the determinants as to how quickly these challenges are overcome.
In the meantime, today’s IBM announcement provides the real opportunity for bringing together weather sensors and trending data, prescriptive and predictive analytics tools, and business process support applications for more responsive industry supply chains.
This is additional supplement to our previous Supply Chain Matters commentary highlighting FedEx’s latest fiscal third quarter earnings.
In mid- December of 2014, Supply Chain Matters called attention to the FedEx announced acquisition of GENCO, billed as one of the largest 3PL’s in North America operating more than 130 warehouse and distribution facilities. At the time, we also called attention to FedEx’s acquisition of Bongo International, an e-commerce platform that facilitates international customers purchasing items from domestic websites
Based in Pittsburgh Pennsylvania with reported revenues of $1.6 billion, GENCO provides a rather diverse collection of forward and reverse logistics services including distribution, contract packaging, customer returns processing product refurbishment, disposition and recycling. FedEx executives positioned this acquisition as significantly expanding FedEx services to further include returns, test, repair and remarketing of products.
In late January, FedEx reported that it had closed on the acquisition and that GENCO would operate as a subsidiary led by Todd R. Peters, GENCO’s Chief Executive Officer with future revenues reported under the FedEx Ground business segment.
Today, in a short news brief, The Wall Street Journal indicated that according to its recent quarterly report with the U.S. Securities and Exchange Commission (SEC), that the price paid by FedEx for GENCO was $1.4 billion. FedEx reportedly funded the acquisition using a portion of proceeds from a January debt issuance.
This is rather interesting news since it indicates that FedEx paid less than current GENCO’s existing earnings. It is perhaps an indication of further factors or monetary considerations or that the close relationship among the two companies was indeed close.
Additionally, FedEx disclosed it paid $42 million in cash from operations for the acquisition of Bongo International LLC.
A Sudden CEO Leadership Change at Honda and Another Reinforcement of the New Product and Operations Grounded CEO
In the wake of continued challenges involving quality glitches and mass product recalls, Honda Motor Company announced today that is current CEO will step-down in June to make way for a new breed of leadership.
Takahiro Hachigo, a trained engineer and currently a managing officer within China, will replace Takanobu Ito as president and CEO in late June. Mr. Ito has led Honda since 2009, at the height of the global recession.
According to reporting from The Wall Street Journal, this executive leadership change comes at a critical juncture for Honda, which is being challenged by Nissan Motor for the number three brand leadership for the U.S. market, and amid continued product recall actions involving airbag inflators produced by supplier Takata Corporation. Honda has been one of the brands most affected by the defective airbag inflator quality crisis, and in October, top executives took on salary cuts to demonstrate responsibility for quality problems.
Reportedly, company insiders were taken by surprise by the timing of this announcement, and the choice of a younger executive promoted over those executives expected to be considered as the next Honda CEO. The global auto company further indicated that several directors who ranked higher than Mr. Hachingo would retire. In a released statement, Mr. Ito stated: “Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team.”
Mr. Hachigo’s experience includes stints in product design, production operations, and procurement, which provides yet another example of a trend for new senior management appointments involving executives with product and supply chain management prowess. According to Honda’s announcement, Mr. Hachigo’s previous experience includes roles as a vice-president of Honda Motor Technology- China, representative of development, purchasing and production- China, president and director of R&D in Europe, general manager of the Suzuka manufacturing facility production operations , general manager of purchasing and vice-president of R&D in the Americas.
This resume adds further evidence of the new importance of global-based experience, including operational experience within China.
In December of 2014, BMW appointed new replacement CEO Harold Kruger, with a background in operations, engineering and manufacturing. A year earlier, General Motors rocked the global automotive industry by appointing the first ever female CEO, Mary Barra, who had risen through the GM ranks in roles in manufacturing, engineering, product design and other leadership positions. Mrs. Barra has since experienced a baptism of fire involved in GM’s massive product recall incidents.
This trend extends beyond the automotive industry, with product management and supply chain experience in the current CEO’s of Apple, Home Depot, McCormack Foods and other firms large and small.
There is an adage that one data point is interesting, two consistent data points are more interesting and three or more consistent data points is obviously a sign of a trend. For the global automotive industry, the new trend for senior management is showing a common denominator for sensitivity and grounding in product design, operations and global supply chain management leadership.
The year 2015 may well be a watershed year as this new generation of product design and operations background CEO’s continue to take the leadership helm. For global supply chain ecosystems across the automotive industry, these are, by our Supply Chain Matters lens, encouraging signs.
© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Last year, in what was billed by business and general media as the worst U.S. product safety crisis in recent memory, a series of large scale product recalls among multiple General Motors brands involving upwards of 2.6 million vehicles brought this company to crisis footing as it attempted to restore consumer confidence and establish a new footing for growth.
The defective ignition switch recalls involving thousands of vehicles triggered consequent increased regulatory and business media scrutiny. An additional response among GM’s product teams was to subsequently review all potentially harmful vehicle safety and parts quality issues and err on the side of caution with even more product recalls involving multiple parts issues.
In conjunction with its earnings reporting in October 2014, CEO Mary Barra assembled the company’s top 300 executives to declare that that the company must do what it takes to be the “world’s most valued automotive company”. That included a renewed more passionate emphasis on quality as well as reliance on an expected crop of planned new models expected to come to market, many of which were shepherded under the leadership of Barra when she previously led new product development. The goal is to have 47 percent of global sales to be fueled by these new models by 2019. Supply Chain Matters has also called reader attention to GM’s goal to further focus on the broader supply chain’s contribution to its renewed business goals.
This week, GM reported what is reported as better than expected financial results for the December-ending fourth quarter. While revenues slipped slightly, GM posted a noteworthy 91 percent increase in profit compared with the year prior quarter.
The full-year results also provided quantification of the costs of product recalls. GM reported $2.8 billion in costs associated with product recalls including the ignition-switch related recalls. According to reports, GM will likely pay $9000 in profit-sharing to its upwards of 48,000 U.S. hourly employees, somewhat more than actual North American operating results to compensate for the impact of the product recalls.
Thus, at the conclusion of GM’s fiscal year, there is quantification of the specific financial costs of a previous corporate culture that eluded accountability and fostered functional fiefdoms. In what appears to be an increasing global trend, GM is considering appeasing its stockholders with plowing some profits in stock buy-back or increased dividend actions.
Moving forward in the new fiscal year, GM has to strengthen its supplier relationships and foster a climate of joint innovation and accountability for quality. We trust that such efforts would include more financial consideration toward stronger supplier relationships and an increased emphasis on joint quality management monitoring and remediation practices.
Billions of dollars expended in product recalls is better invested in addressing the root causes of either product design or supplier quality practices.
Yum Brands Challenges Within China Continue: The Importance of Proactive Supplier Quality Management
Supply Chain Matters often provides our readers education on the costs of supplier non-performance or the risks of supply chain globalization efforts. Such efforts take on critical importance in food and food services focused supply chains.
In the summer of 2014 well-known global restaurant brands such as McDonald’s, Yum Brands (operators of Kentucky Fried Chicken, Pizza Hut, Taco Bell) and Burger King were named by both media and Chinese food regulatory agencies for offering expired meat products to customers. The expired chicken and beef meat products were traced by restaurant operators to food supplier Shanghai Husi Food Company, which was affiliated with U.S. based OSI Group, a $6 billion producer of food products. OSI itself had garnered what is reported to be a solid reputation as a quality focused food supplier. Unfortunately however, wide-scale publicity across China and continued regulatory scrutiny hampered efforts to restore consumer confidence.
Since that time Yum Brands as well as McDonalds have attempted to recover from potential damage to their brands by China’s consumers in the wake of this incident.
This week, in conjunction with reporting fourth quarters earnings, Yum Brands who derives almost half of its revenues from China operations, reported an 11 percent sales declines for China with sales for established stores down 16 percent. Revenues for the December-ending quarter fell 4.4 percent and the firm reported a loss of $86 million compared with a year earlier profit of $321 million.
By now, readers are also aware that McDonald’s has initiated a CEO change based on continued disappointing revenues and earnings for both China and U.S. outlets. McDonald’s has since encountered and overcome a shortage of French-fried potatoes within its Japan outlets.
Strategic sourcing and procurement teams are often well aware of the critical importance of proactive supplier quality management. Continued incidents such as those that occurred in China bring that awareness to the executive suite and boardroom.