In late May, Supply Chain Matters posted a commentary regarding the building of supply chain control (SCCT) capability.  Our primary takeaway from that commentary was that in your organization’s plans for building SCCT capabilities, it is rather important that you spend time in assessing the B2B network platform that will form the all-important foundation of these capabilities. Enabling SCCT is not about ripping out existing IT investments but rather building-out enhanced decision-support capabilities from more streamlined sources of planning, execution and fulfillment information.

In this follow-up commentary, we outline the various approaches that the broader community of technology vendors will undertake to enable various aspects of supply chain control towers.  We will declare up-front that this commentary is not to be considered in in any shape or form as judgmental, but rather to provide an aide toward helping your organization assess which approach makes the most sense for your business and your particular business outcome needs.

Our foremost recommendation is that before beginning to engage with any vendor, take some quality time to assess the following: What is the prime or immediate need for your organization’s supply chain wide decision-making? In turn, what are the more long-term needs?

A.     Is the business need primarily focused on end-to-end planning and bringing supply chain planning and execution processes together into a contiguous process that includes more predictive and insightful decision-making capabilities spanning product demand and supply?

B.     Is it primarily focused on B2B or B2C operational fulfillment synchronization that can support, daily, hourly or near real-time decision-making?

C.     Is it primarily focused on B2B supplier based decision-making where product demand and supplier responsiveness processes are continually monitored and managed in a controlled and more predictive environment?

D.     Is the business need to ultimately enable all three (A, B & C) of the capabilities noted above over time?

We declare up-front that in our view, no vendor can deliver (D) right now, but that does not preclude consideration that that any particular vendors are in better position to deliver all over a reasonable time period. 

There are three broad categories of technology vendors positioning to support SCCT capabilities.  They are:

• Supply chain best-of-breed or specialty vendors
• Cloud-based B2B
• Enterprise ERP or Business Intelligence

The supply chain best-of-breed vendors respond to SCCT needs from their position of business process functionality support strength, whether that is supply chain planning, response management, supply chain execution or fulfillment synchronization. The planning vendor will tend to extend and integrate supply and demand planning with supply chain execution flows, including order fulfillment, transportation, logistics and inventory movement.  Planning and response management vendors have also extended their capabilities in scenario-based planning and execution, along with more predictive supply chain business intelligence.  Supply chain execution best-of-breed vendors take the opposite approach, building on their core strengths in execution and extending into deeper planning and decision-making support.

As noted in our previous posting on this topic, a cloud-based B2B platform vendor builds out from the B2B platform utility, integrating various planning and execution information to support both predictive and context-related decision-making capabilities for both the customer-facing and supply-facing aspects of the end-to-end supply chain. Some cloud-based vendors add social workplace capabilities to support team-based decision-making.

ERP or enterprise vendors tend to approach SCCT enablement as some form of extension to existing supply chain planning, execution or business intelligence software applications.  The approach, in our view, reflects an add-on perspective vs. a holistic set of capabilities that were designed around the specific needs of SCCT. While ERP and enterprise vendors may be in a better position to support the most holistic aspects as noted in option (D) above, it may take these vendors considerable time to both re-design existing applications and build-out required extensions. 

Regardless of what family of vendors your SCCT technology selection team ultimately decides to partner with, we at the Ferrari Consulting and Research Group advise that you consider a technology checklist of capabilities that will be required.  That checklist should minimally include:

• Multi-organizational and trading partner connectivity, visibility and collative decision-making support
• Near real-time integration of events and information flow vs. batch or periodic refresh
• Integration of supply chain planning, fulfillment, execution and B2B/B2C decision-making needs
• Support for scenario-based, what-if and/or simulation decision-making processes
• Advanced visualization, drill-down and/or heat-mapping
• Augmented information discovery tools

The framework for enabling Supply Chain Control Towers requires a holistic set of required capabilities that span organizational, people, change management and enhanced technology dimensions. It is not about ripping-out existing systems but rather building enhanced more time-sensitive and extensible decision-support capabilities. Invest in an up-front framework and do your research. 

Finally, you cannot assume that the broadest end-to-end supply chain control tower capabilities can be delivered in one implementation, but rather in manageable segments that are designed to accommodate business flexibility and scalability needs.

 If we can be of assistance in your efforts, call or email.

Bob Ferrari

© 2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

As individuals progress in either a supply chain or product marketing career, they tend to learn the importance of understanding the various nuances of corporate business culture and for being astute in reading into executive level communications. Those of us who have acquired many years of practical business experience have sometimes learned this lesson the hard way, but, once learned, always retained. Regardless of your experience level, when the CEO provides a direct, unfiltered message, than all had better pay close attention to that message.

A couple of weeks ago, enterprise technology provider IBM reported a very uncharacteristic and unanticipated fiscal earnings and profitability surprise. Revenues were down 5 percent and profitability slipped 1 percent. The next day, investors punished IBM stock in an 8 percent decline, eroding $19 billion in market value.  As we have observed in the recent case of Oracle’s reported fiscal performance, management blamed this poor performance on the company’s sales teams, indicating it failed to close a number of pending hardware and software deals.  One of the company’s most senior executives was immediately re-assigned. As we noted in our Oracle related commentary, in the area of technology, poor sales performance is often a symptom of other problems.

IBM CEO Virginia Rometty has since delivered what business media has characterized as a rare event in IBM culture, a company wide reprimand.

Ms. Rometty recorded a five minute internal video message to all of IBM’s employees which the Wall Street Journal characterized as “salting praise with blunt comments about speeding-up the shift to new computing models and getting back on track.” The WSJ reported that it reviewed this video and that the CEO message indicated: “Where we haven’t transformed rapidly enough, we struggled.  We have to step up with that and deal with that, and that is on all levels”

In essence, this CEO’s message is that IBM is not moving fast enough to take advantage of dynamic market and customer needs.  When that message comes unfiltered, direct from the CEO, it had better be perceived as a call to action and accountability to achieve stated milestones, and that there are perhaps too many layers of management to achieve program and customer deliverables.

Since 2011, Supply Chain Matters has been commenting on the various acquisitions that IBM has made for the purpose of building broader and deeper capabilities concerning its Smarter Commerce suite offerings.  We have been impressed with the thinking concerning the strategic purposes of these acquisitions, but candidly disappointed at the overall timetables of progress in overall application to application and cloud based integration directed at solving customer business challenges. The various pieces of a broad B2B and supply chain management support capability are all present but the cohesion appears slower. This very week, SAP is conducting its combined ASUG-Sapphire customer conference and has already announced SAP HANA Enterprise Cloud. Oracle continues moving in the direction of applications deployed on both public and private clouds.

Next week, IBM will be hosting its Smarter Commerce Global Summit 2013 in Nashville, and Supply Chain Matters will be in attendance. The Summit is billed for “attendees to hear smarter ways to put customers at the center, including ways to synchronize the supply chain, optimize inventory, personalize promotions, micro-target marketing, increase relevance and exceed customer expectations at every touch point.” That in a nutshell, is a tall order of expectations and implied deliverables.

Thus, in the spirit of CEO Rometty’s charge, we will spend a lot of our time quizzing and evaluating how quickly IBM is progressing in its broad Smarter Commerce tactical rollout plans concerning the Sell, Buy, Service and other faces of B2B and supply chain technology offerings available for customers.Today, in advance of next week, IBM announced a major agreement with L’Oréal USA for expert procurement services using an advanced cloud analytics application to transform the way L’Oréal USA buys from its network of North American suppliers. The effort is characterized as a unique combination of IBM research, services and software delivery. 

Our goal during the Summit will be to provide our readers our assessment of overall cohesion and integration of various applications, and how they will make a difference for customers. We do not portend to be a blog solely for the IT community and thus our bias will be a perception from the broad functional audience of supply chain management.

If you happen to be attending this Summit as an IBM customer or partner, please seek us out and share your impressions.

Stay tuned.

Bob Ferrari

This author recently had the opportunity to provide some expert commentary regarding today’s supply chain software vendor landscape which Supply Chain Matters would like to highlight.

In the published SupplyChain24_7 article, Supply Chain Software’s Top 20, I observed that the leading supply chain management software vendors stand out on their ability to innovate, adapt and flex to constantly changing customer needs. They are constantly investing in their technology, investing in thought leadership and listening to customers.  Today’s software marketplace is undergoing its own set of significant changes, and buyers have become much more sophisticated and demanding. What differentiates leading-edge providers is their ability to provide customers the broader set of software deployment models they seek, including cloud-based, hosted, on-demand, private or public cloud support options. Why invest in up-front capital expense in software and IT infrastructure when there are different options for amortization of that expense in a cloud-based deployment?

The article further describes the new emphasis on supply chain analytics, risk management and control tower capabilities.

Over the coming weeks, Supply Chain Matters will be updating our readers on the progress that specific leading providers have made, so stay tuned.

Bob Ferrari

As the Q1 earnings and economic forecast cycle winds down it should be somewhat clear to supply chain teams that the planning for product demand and associated resources across the Eurozone, and in some cases, China, will continue to be challenging at best.

Last week, the International Monetary Fund trimmed its forecast for total European output to a negative 0.3 percent this year. The agency also trimmed its 2013 forecast for global-wide growth from 3.5 percent to 3.3 percent.

As Supply Chain Matters has noted in our previous commentary concerning global output activity, PMI levels for Europe continue to trend further downward. Uncertain signs are now appearing concerning China. The Wall Street Journal reported today that industrial profits in China for the March timeframe rose just 5.3 percent, down from the 17.2 percent growth rate posted for the first two months of this year.

Financial media reporting reflecting on the latest Q1 quarterly results from manufacturers have specifically taken note on the negative aspects of the Eurozone. Some of the examples across various tiers of industry supply chains include:

• Dow Chemical reporting a 12 percent decline for sales volumes across Western Europe.
• Air Products and Chemicals reporting a 5 percent decline in European revenues with a reduced outlook for the remainder of the year and prompting the need to cut additional costs.
• General Electric, who was one of first multinational companies to warn of European trouble signs last year, recorded a 17 percent decline in European sales.  GE indicated that the contraction was broader and worse than initially thought.
• The Wall Street Journal recently reported that five of the biggest auto manufacturers in Europe reported grim Q1 performance. This included an uncharacteristic 26 percent decline in operating profits at Volkswagen, a 12 percent revenue decline at Renault SA, and a 6.5 percent revenue decline for PSA Peugeot Citroen. Ford Motor Company reported a $462 million operating loss in the region, and despite initial bold efforts to close 3 European factories, expects to take a $2 billion loss by year-end. Even German premium brands such as Mercedes and BMW have begun to feel the effects of slowdown in both the home German and other Eurozone markets, as well as in China. BMW is now forecasting a single digit increase in China auto sales vs. a 40 percent increase last year.
• Global consumer goods company Unilever, previously demonstrating a rather agile and broad support for global product demand also felt the effects of a slowdown in Europe among its various product offerings.

• Global apparel and footwear producer Nike indicated a 20 percent decline in operating profits concerning China while restaurant services provider Yum Brands reported a 41 percent decline in Q1 operating profits in China following media accusations of antibiotic use by its suppliers.

All the above are continued reinforcement that supply chain organizations must be able to refine supply chain planning capabilities.  The ability to plan in more finite segments, by country, region and individual product area are obvious. Scenario-based planning and more insightful business intelligence by country are ever more important.

While the current news of contraction remains negative there will as we all know, eventually be a bottoming.  Some individual countries may bounce back earlier than others. Similarly some markets and product segments may rebound quicker than others.  The key is to be able to assess and determine when it occurs before your competitors.  With capacity and resources continuing to be cut-back across the Eurozone, it is equally important to have adequate lead time to plan for additional resource needs, when the time comes.

While contraction is the overriding headline for Europe, there will come an eventual bottoming and upturn.  Will your organization or S&OP process be able to determine that point quicker than your competition?

Bob Ferrari

SAP has announced plans to acquire multi-echelon inventory optimization technology provider SmartOps.

According to the announcement, SAP has plans to leverage SmartOps utilizing the SAP HANA platform. The announcement further indicates an intent to enhance both the SAP Sales and Operations Planning Powered by HANA application and the SAP Advanced Planning & Optimization (APO) application. SmartOps has been a long time preferred partner of SAP for supply chain inventory optimization requirements and thus this announcement in a natural progression of that partnership.

As part of this acquisition, existing SmartOps employees will join SAP.  The transaction is expected to close during the first quarter of 2013, which is a good indicator that talks were already in an advanced stage.

Supply Chain Matters will provide a deeper dive into the implications of this announcement when additional information comes forward.

Bob Ferrari

Last week SAP made what it thought was a major announcement, that being the product launch and availability of SAP Business Suite Powered by HANA. 

As has been the tendency of SAP of late, many of SAP’s trusted market influencers, industry analysts and media sources were summoned to Palo Alto for the grand announcement.  Point of clarification, Supply Chain Matters was not on the invitee list, probably because we do not tend toward SAP group think or have significant revenue streams predicated on SAP activities. Our perspective has always been objective, and not what SAP’s media machine tends to want to hear.  One further disclosure: this author was a previous employee in SAP’s marketing groups for over two years.

This release offers SAP Business Suite applications on the in-memory architecture based SAP HANA platform, including transactions and business intelligence. This includes SAP Supplier Relationship Management and SAP Supply Chain Management suites. The primary marketing message is supporting a real-time business platform. There is a SAP HANA Analytics Foundation offered as a separate package to support analytical needs.

What’s really interesting about this announcement is the mixed reaction it has garnered, even among favored sources.  For the record, Supply Chain Matters stated over two years ago that HANA, SAP’s newest database architecture could be game-changing for B2B, supply chain applications and predictive analytics computing. After watching the videos of the new SAP Business Suite Powered by HANA, we get the sense that SAP has come up with a cool new set of tools, but the burden of turning these tools into compelling business support applications is up to SAP installed base users and their IT teams.  It was rather disappointing to note that there is a foundation of business analytics but customers need to both license and develop their business support needs.

Turning to some other enterprise software influencers on social media, Dennis Howlett, blogger for ZD Net and Irregular Enterprise penned a commentary that acknowledges a polarization of opinion.  Video interviews of other bloggers such as Brian Sommer, Ray Wang and Jon Reed further contrast both the positive and not-so-positive aspects of the announcement.  While our readers can form their own opinion, the summaries point to a promising new technology platform that lacks specifics, compelling business proposition as well as pricing details. There is a belief expressed that SAP is relying too much on system integrators and/or customers with the burden of developing compelling business applications on the new Business Suite platform. In his commentary, Howlett takes some issue with enterprise software blogger Vinnie Mirchandani’s posting, Here Comes the Gold Stack. blog commentary. (This author has come to enjoy Vinnie’s views and has contributed a guest posting on his Deal Architect blog).  We believe Vinnie’s commentary makes good points especially about vendors constant needs for customers to chase the technology stack.

Rather than prolonging the enterprise level debates, we will summarize the takeaway for SAP focused supply chain functional and IT teams.

SAP Business Suite Powered by HANA is yet another building block to SAP’s road toward market differentiation, and another strategic step in allowing customers to upgrade SAP functionality with less business disruption.  The proposition that SAP wants to be both a database and applications provider is too biased toward justifying SAP’s business interest vs. the needs of its customers. IT teams are not going to inclined to rip out existing database platforms supporting multiple business needs beyond just SAP.  It is expensive, painful, and frankly not cost justified until SAP dramatically undercuts existing pricing.

The compelling business needs of supply chain applications rests in broader and more-timely supply chain wide and B2B business intelligence and predictive analytics.  That includes needs for enabling virtual B2B and collaborative sales and operations planning (S&OP) and supply chain control tower processes that synthesize both structured and unstructured information.  As we have stated in prior commentaries, SAP HANA certainly has the potential to meet these needs, but SAP has to lead the way by demonstrating that these applications can be implemented and supported on HANA at competitive cost and benefit for its customers. It needs to better synchronize its development timetables to the needs of its entire customer base, large global and mid-market, not just the goals of its executive and sales team.

Supply chain functional teams utilizing SAP are advised to take a wait and see perspective regarding this latest product announcement.  There is a need for a lot more specifics and demonstration of benefits.

Bob Ferrari