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A Time for Broader Technology Vision Across Supply Chain Execution Partner Ecosystems

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This author has been writing and speaking on the significant impacts that the Internet of Things (IoT) will have on industry supply chains in the next five years. Physical devices such as sensors, production equipment, transport vehicles and other supply chain focused devices connected to the Internet, transmitting valuable data and insights, literally bring the notions of connecting the physical and digital supply chain closer to reality.  

More and more industry supply chains have opted to outsource logistics, transportation and customer fulfillment to outsourced logistics and transportation partners and thus leveraging the potential benefits of IoT becomes a de-facto capability requirement. They also require broader vision among supply chain service providers for incorporating such strategies in their strategic planning.

Industry supply chain teams have gained significant learning from previously vendor hyped, single focused initiatives such as RFID, which ultimately had to overcome initial unplanned and unforeseen cost and technical infrastructure hurdles to reach compelling cost and operational benefits.  The broader vision of cost-effective item tracking and data management was a missing element. Similarly, the context for the benefits of IoT itself need to include leveraging the convergence that is now occurring in data analytics, in-memory, mobile and software engineered systems technologies that are providing deeper capabilities at less cost than a mere few years ago.  

Last week I had the opportunity to speak with Chris Power, Director of Product Management for Airclic.  For those readers unfamiliar, Airclic supports the critical last-mile of the supply chain, providing a cloud-based proof-of-delivery and routing service for food service, retail, healthcare, third-party logistics (3PL) and transportation industries.

In our discussion, Power observed that B2C/B2B Omni-channel fulfillment requirements are presently driving profound impacts on logistics and customer fulfillment needs. More and more B2C focused supply chains are moving their focus toward increased requirements for cross-dock, sorting and service center capabilities.  Goods are becoming more in-motion vs. traditional aspects of transport, store and ship. From Power’s observations, teams initially tend to seek more and more data regarding different logistical touch points, but “their eyes more often become bigger than their stomachs” when all that data overwhelms systems and people resources. That is often when Airclic gets the call. The need then shifts toward the broader need for making more effective use of data and avoiding data overload.

We discussed the notion that the term “big-data’’ may be disserving, and that a better term may well be what we at the Ferrari Research Group advocate, which is “smarter data”. Smarter objects that report on exceptions or abnormalities beyond a threshold provide a huge opportunity for managing the critical last mile of the supply chain.

Airclic advocates a three-stage maturity model.  First is harnessing capabilities to gain more automated visibility.  A second phase addresses managing exceptions, “tell me when there is a problem” vs. a hose line of streaming, overwhelming data. The third phase, one that Powers observes that few supply chain have achieved to-date, is predicting what is going to occur, especially in peak or seasonal demand periods when all resources are stretched. One example we discussed was last winter’s situation when horrible weather conditions caused noteworthy transportation and logistics delays, especially during the critical holiday buying period. Supply chain teams were often reacting to bottleneck disruption vs. anticipating such disruptions and executing alternate strategies that buffer or overcome disruption quicker.

However it is quite important to point out that the true benefits of harnessing IoT, smarter sensors and more predictive analytics within the physical aspects of products in movement is highly dependent on the ability of key upstream supply chain participants to have vision and commitment to invest in IoT, coupled with smarter data capabilities. As a community, 3PL’s, with the exception of FedEx, UPS or other visionary players, have not had a track record for investing in leading-edge technologies unless prompted and compensated by specific customers. In this author’s view, the time is long overdue for the broader logistics and 3PL community to broaden their vision and invest in such capabilities without solely passing the tin cup of customer donation. Leveraging the physical and digital capabilities is a service that will attract customers, and the economics for such investments will change for the better. 

The time is now for bold vision and broader technology perspective across supply chain execution partner ecosystems.

Supply Chain Matters invites other supply chain logistics and transportation industry players to share their views on the business benefits of harnessing IoT, enhanced mobile, smarter data and decision-making capabilities for industry supply chains.

Bob Ferrari


Supply Chain Matters News Capsule for July 25- Zara, Pratt & Whitney, Hershey, Mars

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It’s the end of the calendar work and this commentary is our running news capsule of developments related to previous Supply Chain Matters posted commentaries or news developments.

In this capsule commentary, we include the following topics: Zara Implementing RFID Tagging System; Hershey and Other Candy Providers Raise Prices to Compensate for Higher Commodity and Production Costs; Pratt and Whitney and IBM Embark on Predictive Analytics Initiative; U.S. Government Announces New Rules Pertaining to Rail Shipments of Crude Oil

 

Zara Implementing RFID Tagging System

Reports indicate that Zara, a known icon in world class logistics and supply chain management, is implementing a microprocessor-based RFID tagging system to facilitate item-level tracking from factory to point-of-sale. This initiative was revealed at Zara’s parent company, Inditex SA, annual stockholder meeting earlier this month.

The tracking system embeds chips inside of the plastic alarms attached to various garments and supports real-time inventory tracking.  The retailer indicated that the system is already installed in 700 of its retail stores with a further rollout expected to be 500 stores per year.  That would imply that a full rollout to all 6300 Inditex controlled stores would entail a ten year rollout plan.  No financial figures have been shared regarding the cost aspects of this plan.

 

Hershey and Other Candy Providers Raise Prices to Compensate for Higher Commodity and Production Costs

One of our predictions for 2014 (available for complimentary download from Research Center above) called for stable commodity and supplier prices with certain exceptions.  One of those exceptions is turning out to be both the cost of cocoa and transportation.

Citing current and expected higher commodity, packaging, utility and transportation costs, Hershey announced last week an increase in wholesale prices by a weighted average of 8 percent, which is rather significant. That was followed by an announcement from Mars Chocolate North America this week that it will institute price hikes amounting to seven percent. A Mars statement issued to the Wall Street Journal indicated that it has been three years since the last announced price hike and that Mars have experienced a dramatic increase in the costs of doing business.

According to the WSJ, cocoa grindings, a key gauge for chocolate product demand, has surged over 5 percent across Asia and 4.5 percent in North America.

By our lens, the next move will more than likely come from Mondalez International.

For consumers, indulging in Hershey Kisses, M&M’s and Snickers will be more expensive.

 

Pratt and Whitney and IBM Embark on Predictive Analytics Initiative

Another of our 2014 predictions called for increased technology investments in predictive analytics.  One indication of that trend was an announcement indicating that aircraft engine provider Pratt & Whitney is partnering with IBM to compile and analyze data from upwards of 4000 commercial aircraft engines currently in service.  This effort is directed at developing more predictive indications of potential engine maintenance needs.  According to the announcement, each aircraft engine can generate up to a half terabyte of operational performance data per flight. According to an IBM statement: “By applying real time analytics to structured and unstructured data streams generated by aircraft engines, we can find insights and enable proactive communication and guidance to Pratt & Whitney’s services network and customers.

Previously, Accenture announced a partner effort with General Electric’s Aviation business to apply predictive analytics in areas of fuel-efficient flight paths.

 

U.S. Government Announces New Rules Pertaining to Rail Shipments of Crude Oil

As a response to heightened calls for increased safety of trains carrying crude oil across the United States, the U.S. Department of Transportation announced this week a set of comprehensive new rules for the transportation of crude oil and other flammable materials such as ethanol. The move follows similar efforts announced by a Canadian transportation regulatory agency.

The new rules call for enhanced tank car standards along with new operational requirements for defined high hazard flammable trains that include braking controls and speed restrictions. The new rule proposes the phase-out of the thousands of older and deemed unsafe DOT 111 tank cars within two years. Rail carriers would be required to conduct a rail routing risk assessment that considers 27 safety and security factors and trains containing one million gallons of Bakken crude oil must notify individual U.S. state entities about the operation of such trains.  Trains that haul tank cars not meeting enhanced tank car standards are restricted to 40 miles-per-hour while trains carrying enhanced tank cars would be limited to a 50 miles-per-hour speed restriction. Further under the proposed new rules, the ethanol industry will have up to 2018 to improve or replace tank cars that carry that fuel.

The proposed new rules are now open for industry and public comment over the next 60 days and are expected to go into effect early in 2015. According to various business media reports, there are upwards of 80,000 DOT-111 rail cars currently transporting crude and ethanol shipments.  When the new U.S. and Canadian rules take effect, there is likely to be a boon period for railcar producers and retro-fitters.

 


Dassault’s Acquisition of Quintiq- Broader Simulation and Decision Support in Product Lifecycle Management

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Today Dassault Systemes announced the signing of a definitive share purchase agreement to acquire supply chain and operations planning software provider Quintiq for approximately €250 million ($338 million). Supply Chain Matters was somewhat surprised with this announcement, not with the fact that Quintiq was an attractive candidate for acquisition, but rather why other enterprise and ERP vendors had not pulled the trigger. Then again, the premium paid may account for this move.

Netherlands based Quintiq has dramatically increased its brand profile globally and specifically in the U.S. market. The company’s on premise and cloud-based software offerings include highly customized applications supporting operations, scheduling and supply chain planning, optimization and decision support. This provider boasts of over 500 implementations across 80 countries with many involving rather complex operations and supply chain planning needs.  Many of its applications have been highly customized to support rather unique business, operations and optimization needs.  It is one of very few planning support vendors having an installed base profile in areas such as air traffic control, airline and fleet scheduling, complex process and discrete industry scheduling needs. Co-Founder and CEO Dr. Victor Alles, an experienced computer scientist prides his company in solving planning puzzles that no one else can solve, hence Quitiq’s vertical industry coverage is extraordinary. Supply Chain Matters can attest to that passion after speaking directly with Dr. Allis in November.

With the tag line of the 3D Experience Company, France based Dassault Systemes provides technology to support product design, engineering, CAD modeling, simulation, data and process management process areas.  The current product portfolio is extensive and includes over 190,000 customers within 140 countries. Support for manufacturing industries includes aerospace and defense, engineering and construction, complex manufacturing, medical equipment and other areas.  The firms most high profile customer is Airbus but also includes names such as Medtronic, NASA, Rolls Royce and others.

According to the announcement, Quintiq is being positioned to expand Dassault’s DELMIA suite of offerings which is the product area focused on PLM Digital Manufacturing. This suite includes simulation software capabilities supporting product design, design creation, planning, monitoring and controlling of production processes. Thus, this is one of Dassault’s prime product focus area in supporting new areas of what The Economist coined as the “Third Industrial Revolution, which includes manufacturers leverage of the Internet of Things and Digitally Enabled Manufacturing. Dassault further provides a large services complement in areas of consulting, technology delivery, engineering and other services.  Thus it would appear that this acquisitions positions Quintiq as being strategically positioned to support customized planning and decision-support needs across the broad spectrum of product design production ramp-up, services and product end-of-life.

Of further interest is that this acquisition announcement comes a day after arch rival PTC announced another one of its IoT related acquisitions. Thus, by our view, both announcements are indicators that the PLM technology segment has aggressive intentions to be a player in the new wave of Digitally Enabled Manufacturing.  While each is taking different strategic approaches, the goal seems rather apparent, namely beat other enterprise and ERP focused vendors in depth of support in this new area of product centric decision-support that integrates physical and digital information elements. 

For Dassault specifically, the challenge will be to allow Quintiq to integrate with broader simulation and decision-support needs without being swallowed by complex corporate overhead and complexity.

The takeaway is an emerging new dawning of capabilities that allow manufacturers to integrate and simulate information and make more informed decisions that span the entire product lifecycle.

Bob Ferrari

© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.


The Implications of the Announced Apple and IBM Alliance

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Business and social media is abuzz with today’s announcement that two long-time rivals, Apple and IBM, are teaming-up in an alliance to create simple business apps on Apple’s iPhone and iPad devices.  As pictured in the Times Square featured announcement, both CEO’s are pictured in a casual and friendly stroll.

Apple and IBM Alliance Announced

The obvious question is which of the vendor’s benefit the most from the proposed alliance.  Another question is the potential impact on supply chain and B2B business network technology deployment. In this Supply Chain Matters initial viewpoint commentary; we briefly dwell on both questions.

Under the alliance, IBM will create what is termed as “simple” business apps leveraging the respective Apple mobile devices.  IBM employees will further provide on-site services and support for Apple mobile devices. Of more interest is the report that IBM is planning to make 100,000 employees available to the Apple imitative, which is rather significant. Both alliance CEO’s made themselves available for a joint media interview. IBM CEO Virginia Rometty indicated: “This is just the beginning” and Apple CEO Tim Cook indicated: “This is really a landmark deal”. The apps themselves are reported to draw on IBM’s computing services including security, device management and big-data analytics. Apple and IBM engineers will jointly be developing more than 100 new business applications tailored for specific industry needs. The apps will begin arriving in the fall and IBM will resell iPhones/iPads containing the apps to its business enterprise customers.

The initial online consensus is that both vendors will benefit from this alliance and this analyst shares that opinion.  Apple has struggled to penetrate the coupling of its mobile devices with business enterprise applications since the market continues to perceive the company as just a consumer electronics provider, albeit with elegant offerings. Security of mobile based information remains a big concern for both supply chain and IT teams. IBM with its deep ties to C-Suite and IT teams has been struggling with the need for more positive revenue momentum. A late entry and lack of momentum in supporting cloud-based and mobile computing needs has not helped. Thus, benefits and rewards loom large for both vendors under this alliance.  They just need to collaborate and execute.

As for the potential impact for supply chain and B2B business network technology support, it’s too early to tell.  As we have noted to our readers, IBM has amassed a broad suite of end-to-end supply chain, B2B, customer fulfillment network, service and business analytics capabilities that can all benefit from further leveraging of mobile-based applications.  The open question remains on IBM’s track record of delivering on broader supply chain process integration in a much more time-to-market manner.  We anticipate there will be opportunities to enhance mobile-based apps in Emptoris Supply Management Suite, Sterling B2B and online fulfillment network as well as end-to-end supply chain focused analytics. Customers will just have to wait and see what develops in the coming months.

A further implication of this alliance announcement will be how other business enterprise vendors such as SAP, Oracle, Google and Microsoft eventually respond. Each has positioned the leveraging of mobile devices within business applications from a multi-vendor perspective in an effort to support multiple brands. This week’s announcement may prompt a re-visit of these strategies, and consumer electronics providers Samsung, Lenovo or perhaps HP, could benefit with enterprise software vendors again seeking deeper development alliances.

Bottom-line, our community can well anticipate some benefits of the Apple-IBM alliance along with the competitive response from other competitors in the market.  IT teams will be able to rest more easy knowing that burden of integrating application with mobile device will be assumed by alliance partners.

The open question however is how mission critical supply chain and B2B mobile computing needs will be viewed in the light of implementing other more simplified apps that meet alliance objectives for total apps availability.

We all need to stay tuned.

Bob Ferrari


Supply Chain Matters Impressions from Smarter Commerce Global Summit 2014

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Supply Chain Matters was invited to attend the IBM Smarter Commerce Global Summit this week which was held in Tampa Florida.  This was our third annual attendance at this venue and by each of our encounters, we have gathered a stronger sense of IBM’s continued direction in supporting the Buy, Sell, Service and analytics needs for industry supply chains. As noted in our prelude posting last week, IBM has been following a broad strategy, primarily through strategic acquisitions to assemble a portfolio of end-to-end commerce applications and solutions that extend from online marketing and selling through customer fulfillment. In early March, IBM’s CEO, Virginia Rometty, outlined in her open letter to stockholders and customers, a crisper set of strategic priorities that now include a heavy emphasis on cloud and services based solution offerings. The open question in our mind as we traveled to Tampa remained with the timetables, urgency and overall integration progress.

Ironically, the Summit theme this year was: Moments Matter, and just about every keynote amplified the reality that the speed of change and innovation determines today’s business environments. After a packed two day agenda of activity, our overall impression of this conference was that IBM has indeed stepped-up its internal development pace, and the initial signs of cross-application integration capabilities are beginning to come to market.  However, the overall timetable is one that IBM customers will need to consider in their technology planning.

There were two significant product announcements made in conjunction with this year’s summit. Big Blue introduced IBM ExperienceOne, a new integrated portfolio of cloud-based and on premise offerings directed at helping customers to deliver deeper customer engagements by bringing marketing, sales and services business practices together in a singular information utility capability. This capability is essential an IBM consulting services service offering that leverages the company’s WebSphere Commerce, Customer Digital Experience and Enterprise Marketing Management software. That software includes elements of Sterling Commerce, Coremetrics, DemandTec and Silverpop, among others, all of which were prior acquisitions.

What should be of keen interest to our Supply Chain Matters readership was the announced launching of IBM Multi-Enterprise Relationship Management (MRM) platform that features cloud-based or on premise supplier and partner engagement capabilities directed at enabling a more adaptive end-to-end value chain.  As can be noted in the IBM announcement, MRM leverages functionality from Emptoris for quicker on-boarding of suppliers and trading partners, supplier lifecycle and contract lifecycle management. MRM leverages the IBM Sterling B2B Collaboration Network for reporting and monitoring of transactions and IBM Aspera eXtreme File Transfer and Enterprise File Sync and Share, for sending very large amounts of information across a network including use of desktop and mobile devices.

In our previous conversations with IBM executives, we often probed on the opportunities for assembling an end-end supply chain support capabilities across a contiguous business network, while integrating all of the various IBM vendor acquisition products within such a network. 

At last year’s summit, we noted that Emptoris’s senior development director Terrence (TC) Curley, was assuming a lead role in the initial integration of Emptoris suite components with those of Sterling Commerce and other IBM technology components.  The current MRM announcement is the first phase of that effort and admittedly, an initial release.  We had the opportunity to review the 12 month product roadmap for MRM and noted that beyond baseline an Enterprise Partner Engagement Foundation, the roadmap includes further adapters that integrate not only IBM Sterling B2B Collaboration Network, but also IBM B2Bi and SFG applications which can provide capabilities for quicker on-boarding of financial services, third-party logistics, business services or product management partners. The interesting aspect for MRM are the design principles that stress deeper levels of visibility, end-to-end network scale and collaboration along offering capabilities for supporting cognitive based commerce. If readers have not yet figured out what all of this implies, it means that IBM is gunning to be a viable player in offering an end-to-end business network platform.  Again, more work and time is required, but the component assembly and roadmap milestones are now underway.

We do want to mention one other vivid impression from this year’s summit. We had the opportunity to sit in on a keynote session that outlined IBM’s vision for Cognitive Commerce as well a follow-on session that outlined the vision and roadmap for IBM Commerce Solutions.  Make no mistake, IBM is indeed committed to huge investments in customer engagement, predictive analytics and machine learning capabilities tied to online commerce. One example of cognitive commerce service outlined was the ability to analyze peak selling periods and be able to predict the depth and breadth of product peaks and optimize inventory allocation to those peaks. Sales and Operations Planning teams should reflect on that type of capability.

There are plans for both enhanced B2C as well as B2B online and multi-channel stores, field sales applications that enhance mobility based applications and planned ecosystems of pre-integrated customer fulfillment partner solutions, including same-day delivery. Finally, there was an example of quickly IBM is responding to current day brick and mortar retailer needs. There are plans to be able to process an online order, by inventory checks of both fulfillment and store-level inventories.  To the surprise of some in the audience, IBM described a “dark store” which is one that can serve as a localized fulfillment entity for limited volumes, or be able to convert to a broader based customer shipment fulfillment entity after retail closing hours. In essence, IBM is prepared to support a rather innovative capability for a multi-purpose use store.

Supply Chain Matters will feature additional observations and thought commentaries  gathered from this year’s Smarter Commerce Summit in the days to come.

Bob Ferrari

© 2014, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog, all rights reserved.


The Interest Level in Supply Chain Control Tower Capabilities

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In 2012, this author was quoted in an article published in a MS Dynamics World article on the subject of emerging multi-industry interest supply chain control towers.  I was asked by the contributing writer to define this capability and describe the then current market interest. At the time, I was pleased to be able to contribute to the market education of this concept, and we continue to provide such education on this blog.

Full disclosure to readers: in 2012, two of the named sponsors of the Supply Chain Matters blog were supporting and delivering control tower capabilities to customers the names of which we could not disclose because of confidentiality and non-disclosure agreements.

I was recently contacted by the author of that same 2012 article to provide an update on the current market uptake in control tower capability.  Unfortunately, because of other business commitments, I was not able to circle back with the reporter up to this point. Shame on me!

I state that because the reporter has reissued an updated article (no-cost sign-up login account required), feeling somewhat loose to quote my original statements but not indicating that I was unable to comment by press time.

If I had spoken to this reporter, I would have stated the following.

The interest level in supply chain controls does indeed remain high, but most of that interest is in educational and foundational initiatives at the organization level. The aspects involve understanding the current capabilities and how they relate to current and future supply chain competency objectives.  When I speak to audiences about these capabilities, I often stress the wide change management aspects to consider in building a path towards a control tower.  That path includes training or recruitment of teams with advanced analytical and program management skills as well as determine where in a firm’s organizational structures such capability can best be nurtured and sponsored. There may be some further interim competency and technology implementation steps required in that journey which relate to data management, visualization and supply chain business intelligence tools.

In short, supply chain control tower is a phased journey with different timetable requirements and needs.

While I tend to agree that control towers may have been overhyped by some specific technology vendors I do not necessarily agree that a single instance of an ERP system necessarily provides an advantage. Nor do I agree that starting on the execution vs. planning end is a more viable roadmap. It is more about having a strategy that relates to a set of desired business outcomes where a supply chain control tower provides a significant competitive advantage for a business or product focused supply chain.

Industry supply chain momentum in control towers will continue but do not necessarily look to the technology vendors for crisp definition.  It will come from those knowledgeable resources in market, including the early adopters that understand and can articulate the various aspects of these capabilities as well as the benefits. 

Now you have my updated perspective.

For our part, we will continue to utilize Supply Chain Matters as a medium to provide a forum for market education as well as an exchange of various viewpoints regarding supply chain control towers. If you have perspectives or viewpoints to share, please contact us.

Bob Ferrari

 


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