We provide a contextual follow-up to our ongoing Supply Chain Matters observations and insights regarding the current holiday focused surge period among retail supply chains. This week, The Wall Street Journal observed (paid subscription required) that unsold goods and added inventories are piling up on retailer’s shelves possibly making it challenging for some retailers to hit their earnings targets in this critical quarter of performance.
We have previously called attention to the implications for this year’s expected online fulfillment volumes, a recent consumer sentiment survey indicating shoppers may elect to shop earlier this season, and the important technology enabling considerations for the rapidly changing Omni-channel world.
The WSJ report cites supplier sources and industry watchers as indicating that some department stores have experienced an overhang of inventories in anticipation of the coming holiday period, and beliefs that with far lower energy prices and higher employment levels, consumers will spend more on gifts in the upcoming holidays. The publication indicates that specialty stores and apparel manufacturers are each experiencing a “build-up in inventories beyond the natural increase ahead of the holidays.”
Separate reports this week indicate specific retailers such as Macy’s and Wal-Mart specifically stepped-up inventory buying activity to offer more attractive promotions and selection for consumers. Earlier this week, Cowan and Company published a warning to investors indicating that inventory is above sales growth across the retail industry.
Amidst this collective optimism among many retailers, the WSJ observes that industry executives are beginning to question whether this year’s sales predictions have been too optimistic. While the gap is reportedly not as wide as that in 2013, it is concerning, since new inventory brought in for the holidays must compete with unsold inventory overhang, some as a result of last year’s U.S. West Coast port debacle which had holiday goods arriving after the holiday period had passed.
The implication remains that retailer’s, and their associated customer fulfillment teams will need to promote and fulfill merchandise orders earlier in the holiday period rather than later. The upcoming Thanksgiving holiday and the days leading into early December will be critical determinants of whether inventories will be sufficiently depleted among both online and physical stores, and whether sales and profits will meet business expectations.
The ability for sales and operations teams (S&OP) to quickly assess multi-channel sales volumes, remaining network-wide inventory levels associated and profitability outcomes will likely differentiate winners from losers, especially when considering that online fulfillment costs may be prove to be more than traditional sales channels. Waiting to discount merchandise later in December could be troublesome because retailers will likely be aggressively competing among themselves for limited consumer interests in categories such as apparel, footwear, jewelry and home goods vs. electronics and gadgets while risking added or peak-period shipment costs among parcel carriers.
Supply chain wide visibility, analytical and intelligent fulfillment capabilities have never been as important as they are for this holiday surge.
Supply Chain Matters at Oracle Open World 2015- Reflection on the Importance of Accurate Information
We continue with our series of Supply Chain Matters commentaries concerning this week’s Oracle Open World Conference being held in San Francisco. Our previous commentaries can be viewed here and here.
While attending enterprise vendor related conferences, I make it a point to attend sessions that provide updates on new functionality and inputs from customer advisory councils. Attending two such sessions at this year’s Open World provide some consistent evidence that technology consumers are becoming far more concerned with ongoing data management, discovery and maintenance. That is clearly good.
While attending a session related to the latest 12.2.5 release of Oracle E-Business Suite Order Management (OM) application, a reflected theme was customer advocating for information discovery tools. A product manager described Oracle’s prior acquisition of Endeca as the “greatest acquisition that Oracle has made” regarding the ability to leverage its information discovery capabilities across order management capabilities. With its latest release, OM includes the ability to perform 360 degree customer views of information related to orders from various channels including online. There is added application in quoting, where users can explore which quotes were the most successful along with product pricing attraction trending.
One of Oracle’s more popular applications in the area of supply chain management is Oracle OTM (transportation management), the result of the prior acquisition of G-Log. The session related to the latest version of Cloud OTM reportedly responded to customer council input related to more simplified, automated tools to update freight rate changes. Rate simplification maintenance includes the ability to easily download rates to a spreadsheet for easier user update. Also included were needs for improved dashboards, data visualization and adoption of Oracle’s standard ADK web user interface that can accommodate a wider variety of computing platforms including tablets and smartphones.
The session related to the current release of Oracle Value Chain Planning (VCP) outlined four development themes in the 12.2.5 release which all touched upon easier data management, update and discovery. VCP has now adopted the Oracle ATK web user interface, while the look and feel among the Oracle Demantra and VCP has been unified. There are now new, user-configurable, Oracle ASCP workbenches including the ability for planners to view key information they need to review on a daily basis. VCP now includes simplified export to spreadsheet capabilities, another customer advisory input. Users further requested workflow enhancements that help enable group workflow collaborations and quickly recover data from a stalled workflow.
With the current clock-speed of business across multiple industries, supply chain teams are managing the realities that planning and execution information synchronization are new table stakes for more responsive Sales and Operations Planning (S&OP). Applied use of more predictive analytics to anticipate events and better respond to events is only effective as the accuracy of the data and information fueling applications. A emphasis on easier and more automated means to insure data is accurate and timely is arguably a wise and prudent investment, and technology vendors such as Oracle are responding to such needs.
Insure that all of your on-premise and Cloud based applications software vendors are similarly sensitized to the reality that the velocity, clarity and accuracy of data and information are now rather important in insuring more contextual, relevant and timely decision-making. Tools that automate-simplify-enhance-alert to information management, discovery and maintenance will pay dividends.
With today’s ever increasing clock-speed of business, there should be little question that the overall planning, execution and synchronization of supply chain operational processes and resources has become far more complex and demanding. Yet, it is becoming more essential.
Industry market change is constant, customers are more-demanding and risk or disruption is a constant threat. These past two months alone, we have called reader attention to the severe typhoon that impacted Taiwan and coastal China, the sudden de-value of China’s currency and the significant warehouse explosions occurred in Tianjin China. Global equity markets continue to react to deep concerns about China’s economic growth and export economy.
Supply chain business and operational intelligence is not solely about business reporting, but increasingly focused on the ongoing performance, uncovering hidden risk factors and synchronizing performance of the entire supply chain.
Supply chain teams thus require intelligence capabilities appropriately configured and tuned for analysis of root causes of bottlenecks or supply and demand shortfalls.
Traditional Business Intelligence (BI) technology has evolved from a termed vertical design principle that allows users the ability to compare plans with actual results. The architectural approach stemmed tapping centralized data warehouses, where business software applications feed their data and information.
However, the success and uptake of these traditional BI approaches has been frustrating since more than often, effective use or specialized intelligence needs require the direct assistance of IT. The ability to leverage hidden intelligence is often constrained because of the resource limitations of IT, or the complexity of the centralized information warehouse.
Newer, horizontal approaches anchored in data discovery and more de-centralized business process or predictive analytics concentration such as supply chain and product management have since made their presence in technology markets. The design principle of this approach is root cause analysis, to tap important data and information existing in specific applications such as supply chain planning, operational execution, fulfillment and product management applications. Their premise is to identify bottlenecks and provide early warning to operational process outliers and exceptions.
As one can imagine the fundamental determinant of termed horizontal BI user uptake and adoption rests with user friendliness and empowerment. It is about empowering business users to support more informed decision-making predicated on operational intelligence and appropriate business process context.
Major ERP vendors are caught in the middle of this changing paradigm. As an example, older version of SAP ERP supported information architecture that fed operational data and information to SAP Business Warehouse (BW), where either SAP or external BI applications tapped that data for general business reporting needs. The flexibility to hone-in on specific root cause and supply chain operational business process needs was limited to the innovation and resources of IT or system integrators. Such requirements often came with a high cost in terms of resources and time-to-value.
Responding to the compelling market changes outlined above where users require more user-friendly, self-service operational BI tools, SAP continues to evolve its overall approach to accommodate such needs. And there lies a growing tide of confusion. The stated migration from Business Objects BI, Crystal Reports, and now SAP Lumira has both IT and business functional teams confused as to which strategy to employ. Least we mention the other elephant in the room, that being SAP HANA, and its foundational relationship to leveraging data and information across the entire SAP landscape.
In the light of this product strategy confusion, innovative best-of-breed players have gained additional attention and deployments.
In a prior posting, we called Supply Chain Matters reader attention to Every Angle Software, which provides a self-service and operationally focused business intelligence tool designed to leverage information within SAP R3, SAP ECC, and SAP Business Suite environments. What impressed this author about Every Angle was not only its ability to add in-process logic and sophisticated calculations that adapt to an SAP operations management configuration, but customer testimonials testifying to the end-user friendliness of the software itself. The software comes with built-in adapters for SAP, includes hundreds of pre-configured templates and built-in, configurable business rules, and accommodates access by end-user device of choice including mobile devices. The software can be deployed for either on premise, cloud, or outsourced hosted needs.
Functional supply chain teams have a lot on their plate right now with little patience nor tolerance for having their IT teams figure out the long-term BI product strategy, architecture and functionality of a large ERP provider such as SAP. That is why many continue to opt towards filling-in such technology needs with experienced best-of-breed specialists.
Disclosure: Every Angle Software is one of other sponsors of the Supply Chain Matters blog.
While Slowdown in China Attracts Attention- Focus on a Holistic and More Predictive Planning Perspective
These past few weeks, there has been a lot of business and general media attention focused on the threat or existence of a considerable economic slowdown across China. The reasons are obvious. Today, when China sneezes, the rest of the world feels the effects, especially in specific industries such as commodities, alternative energy, high-tech and consumer electronics.
A significant slowdown in China threatens global economic growth prospects. This week, the International Monetary Fund (IMF) indicated that it plans to once again downgrade its outlook for economic growth prospects, which would position its October outlook to be the weakest growth indicator since the financial crisis.
Industry supply chain and sales and operations (S&OP) planning teams should already have first-hand knowledge of these trends, and are obviously preparing various supply chain scenarios to be able to meet specific business revenue and growth objectives. There are now clearer signs that growth prospects are slowing not only in China, but in other emerging markets. Once more, industry and product trends may be compounding the current picture, and there lies the most important trends to decipher.
Within our Supply Chain Matters Quarterly Newsletter, we track the trending of important country and regional PMI indices which are key indicators of global supply chain activity. This week, we reviewed actual reporting numbers through August, and certain trends are becoming obvious.
We have been tracking the China PMI reporting conducted by Markit Economics. Below, we provide a trending graph that spans the years 2013 to date. The important 50 point differentiating expansion or contraction is highlighted.
First, the slowdown in China, which really began in early and mid-2014, has become much more discernable. Readers should observe that the since the beginning of 2015, while with some variation, the slope of the decline in manufacturing is now increasing. Even an economist at China’s National Bureau of Statistics has indicated that: “There is insufficient growth momentum in the country’s manufacturing sector.” Since China continues in its efforts for its economy to be more consumption vs. export driven, the recent PMI trending could be a reflection for both domestic and global export demand trending.
However, it is not just China that is showing signs of supply chain activity decline, and teams need to focus beyond just China to decipher other industry related trends. As an example, a similar analysis of PMI trending for Taiwan, a global hotspot for semiconductor, high tech and consumer electronics industry, shows more acute declining supply chain and manufacturing activity.
Supply chain teams in the smartphone sector are certainly aware that product demand, of-late, has been slowing, product pricing points are falling falling and inventory levels are building. Similarly, PMI indices for Malaysia, Singapore, South Korea, and to some extent Vietnam, all of which are rooted in high tech manufacturing, are similarly on the decline. These market declines have an obvious ripple effect on the cascading tiers of high tech supply chains.
The Wall Street Journal recently quoted Lenovo’s CEO as indicating earlier this month that this past quarter was possibly the “toughest market environment in recent years.” Samsung Electronics executives have indicated a slowing in smartphone and other consumer electronics sectors. Hewlett Packard in its recent financial results reported a rather challenging past quarter for PC and laptop sales. Today’s WSJ features a report indicating that some analysts are now questioning whether Apple can sustain its iPhone volume output growth rates.
The takeaway for our commentary is that supply chain teams need to view the full global demand and supply picture, beyond a single country, even if that country is a primary hub of global manufacturing and a major source of current and future product demand.
Do not fall into the trap of a singular focus. Now is the time for deeper visibility and more informed context in decision-making.
The J.P. Morgan Global Manufacturing PMI for August fell to its lowest level since July 2013. At 50.7, the index hovers close to the all-important 50 mark that differentiates global expansion from contraction. Yet because of the continuing increases in the currency value of the U.S. dollar, the Eurozone is experiencing growth in exports to the U.S.
Senior executives are becoming increasingly concerned about global economic trends and S&OP teams need to be prepared to provide informed, insightful analysis and scenarios of impacts and/or opportunities to current near-term and longer-term business and resource plans.
All of this points to the importance for exercising more active and frequent business and supply plan chain plans, scenarios and operational intelligence over the coming months.
Supply Chain Matters will provide further analysis in upcoming commentaries as well as in our upcoming quarterly newsletter reflecting on Q3 developments.
In early January, Supply Chain Matters provided our positive review of the book SAP Nation by Vinnie Mirchandani. We felt that although this book may be considered controversial by some vested in SAP’s success, the book’s observations are for the most part objective, insightful and written in a context for what SAP as a global technology provider needs to address to make its customers’ successful in their business and technology deployment goals.
The book describes SAP’s ongoing efforts of strategic pivoting, efforts to become more nimble, cloud-focused and more simple for customers to do business with. Yet, as witnessed by the messaging delivered at the recent SAP Sapphire conference, the rate and complexity of ongoing changes being introduced to the SAP customer base is dizzying, and perhaps overwhelming. As users are well aware, while SAP applications have bullet-proof design and rigor, end-user productivity and simplicity have not been the strong point to-date. Thus the continued skepticism associated with the tag line: SAP Run Simple.
The now four-year effort for convincing customers to deploy the HANA in-memory based technology platform (including upgrades to major ERP business suite applications and other associated cloud-based applications supporting end-to-end supply chain business process needs) has customers in a predominately wait and see mode. A recent posting by Information Age has the headline, SAP users struggling to keep pace, citing research from the UK and Ireland SAP User Groups indicating: “74 percent of members indicating that SAP is bringing innovations to market quicker than their organizational ability to adopt.”
As supply chain business processes become ever more complex, teams try to fill the gaps with downloads of static reports and ancillary spreadsheets to provide more meaningful operational analysis. We feel and sense that this is indeed representative of the broader SAP community.
IT support teams need to sort out the various cost, data and technology platform tradeoffs as well as the risks to added business disruption. Meanwhile, supply chain functional and operations teams continue to be challenged with increasing business fulfillment needs related to global markets and rapidly changing business events. The development and rollout timetable of SAP is not correlated to the current needs for increased predictability, broader supply chain business intelligence and more-timely decision-making.
This line-of-business and functional frustration is described in SAP Nation, specifically why existing best-of-breed and other cloud-based competitors are gaining increased attention and consideration. The consequence is increased momentum of the “ring fence” of cloud-based applications that surround SAP applications. The strategies and purposes may have different motivations and timetables. Those committed to SAP will perhaps continue with their wait and see approach, but at the same time, will consider the deployment of augmented cloud-based applications to enhance extended supply chain focused decision-making and other line-of-business needs.
In an effort to assist our SAP installed base readers, Supply Chain Matters has called attention to various technology providers who possess deep knowledge of the SAP information landscape and understand the current business and functional needs for quicker time-to-benefit. We have called attention to planning and B2B business network support needs, but have not dived deeply into on-demand business intelligence until now.
We call reader attention to Netherlands based Every Angle Software , a self-service operationally focused business intelligence tool providing an extensive list of installed base customers with SAP backbones. We are further very pleased to announce to our readers that Every Angle will be a new Named sponsor of Supply Chain Matters, as this provider expands its footprint into North America from successful implementations and market presence across Europe and other regions.
Founded in 1996, Every Angle provides insights into the operational progress, status and performance of the entire supply chain along with a transparent overview of current and future supply chain focused bottlenecks, including root causes. They describe their value-add as transforming SAP data into simple actionable information in the language of supply chain.
In product briefings thus far, we have been impressed with their inherent in-depth knowledge of the SAP applications landscape applied to supply chain business process and decision-making needs, along with a clear user-interface. A glance of customer testimonials listed on the Every Angle web site have consistent themes of providing a powerful yet simple insights tool, offering end-user friendliness flexibility and impressive response times. Every Angle is quick to point out that rather than being characterized as traditional business intelligence (BI) that has a vertical information perspective, an Operational BI application is more horizontally focused on real-time operational analysis which is critical to extended supply chain decision-making and synchronization needs.
In the coming weeks Supply Chain Matters will provide added perspectives of ring fence strategies applied in supplier relationship and supply chain management environments, easier methods in tackling master data rationalization in SAP environments and other topics related to enhanced business intelligence time-to-value in SAP environments.
In the meantime, have a look at Every Angle Software. Readers can obtain additional information by clicking on the logo that appears on our blog sponsorship panel.
Disclosure: Every Angle Software is one of other sponsors of the Supply Chain Matters blog.
Supply Chain Matters has provided previous commentaries citing next generation technology involving smart item-level labeling technology that can be applicable to either supply chain business intelligence, demand sensing or tracking needs. Evolving next-generation labeling utilizes printed electronics and near-field communications (NFC-enabled) smart labels to track products and their various states. This new evolution is the dawning of a new era for item-level tracking, one that will harness the potential of the Internet of Things (IoT) as well as the abilities to bring together the physical and digital aspects of supply chain management the added ability to enhance the brand experience.
A technology provider we have profiled in this area has been Norwegian based Thin Film Electronics ASA. Our last commentary focused on Thinfilm’s joint announcement involving Diageo in the development of a prototype connected smart label for the Johnnie Walker Blue® brand.
This smart-label technology provider has now announced that it has received an additional $22 million in funding in a private placement involving several U.S. funds. According to the announcement, these funds will facilitate expansion of printed logic production needs to meet expected market demand from current and prospective customers, including Diageo.
The latest funding round is described as a significant opportunity to scale operations as well as to attract an additional investor base in the U.S. We would add that it is yet another reflection of investor interest in emerging new IoT based technologies focused on supply chain business process and intelligence needs.