Supply Chain Matters recently had the opportunity to speak with contract manufacturing services (CMS) firm Jabil’s, specifically Vice President of Supply Chain Solutions and Global Logistics, Fred Hartung. If readers had any perceptions that certain CMS firms were laggards in advanced technology adoption, our interview led to quite the contrary perception.
Jabil has been featured in supply chain industry headlines these past two weeks. At the recent Gartner SCM Executive Conference, Jabil’s intelligent supply chain capabilities in real-time visualization and advanced analytics resulted in receiving an award as a “Supply Chaininnovator.” Hewlett Packard unveiled what it termed as the first production-ready commercial 3D printing system and Jabil participated in the press conference. At last week’s SAP Sapphire customer conference, SAP and UPS announced a partnership for services related to an on-demand 3D printing network which involves this CMS as well.
Hartung oversees multiple roles including responsibility for advanced supply chain technology, digital supply chain, advanced planning and trade compliance. He additionally heads a team overseeing Jabil’s supply chain global network.
Our discussion touched on a number of business and technology areas.
Regarding the current CMS industry landscape, Hartung described changing global transportation costs, foreign exchange rate volatility and changes in the “value density” of products as all dynamic industry forces.
More manufacturing focused OEM’s now see themselves as incorporating more and more software and technology as major parts of product design and functionality features and that impact spills over to contract manufacturers. OEM customers were further described as increasingly practicing near-shoring manufacturing sourcing practices aligned to major geographic product demand regions with Mexico and Vietnam really taking off along with resurgence towards manufacturing in Malaysia. Hartung indicated Jabil’s belief that 3-D printing will make a big difference in localized manufacturing tied to customer fulfillment. OEM’s are still experimenting with incorporating 3D printing concepts into product strategy and Jabil is assisting by maintaining various labs across Silicon Valley.
We discussed what is often described as the number one multi-industry supply chain decision-support challenge, that being gaining and enabling end-to-end planning and customer fulfillment visibility. Hartung described this challenge in the context of “actionable visibility”, a focus on the most pertinent information supporting business processes along with “in-control” digitized streaming information flow that is anchored in analytics-driven decision-making capabilities. Another Jabil consideration in its use of advanced analytics is directed at managing and mitigating supply chain risk. Nine separate categories of risk are continually tracked ranging from low to higher supply chain disruption and risk factors.
In the area of addressing Internet of Things, machine learning and cognitive computing opportunities, Hartung acknowledged that information security has got to be an area to be taken very seriously, and prominent in the early design process. Jabil views IoT as an enabler of new business models for customers and for Jabil, and here again, leveraging analytics, either prescriptive or predictive, is the important area of concentration. Responding to the question of whether customers ready for these types of initiatives, Hartung indicated that while Jabil is way ahead on the learning curve, customers indicate that they want to hear more.
Besides incorporating advanced supply chain technology and multi-tenancy practices across Jabil’s own extended supply chain, the CMS is increasingly being called upon to assist OEM customers themselves in deployment of such technologies across their extended supply chains as-well. This has been a new area of technology services for some CMS providers.
As a key supply chain partner in many more multi-industry settings, a contract manufacturer must be knowledgeable of the business process and enabling technology competences that make a difference in meeting both customer and internal business and supply chain outcomes. This is an industry that moves in lock-step with its customers, and is constantly challenged with narrow margins to work with.
As a recognized supply chain industry analyst, this author has had the opportunity to view a number of Jabil industry presentations over past years as well as to speak with the firm’s executives. This CMS has consistently demonstrated a willingness to leverage and collaborate with customers on advanced technology use cases across its supply chain management processes. After my recent interview, I am further impressed with the firm’s understanding and practice of leveraging areas where technology enablement can indeed be a facilitator of a more adaptive and resilient supply chain.
© Copyright 2016. The Ferrari Consulting and Research Group LLC and Supply Chain Matters® blog. All rights reserved.
APICS and Michigan State University have recently partnered to research top concerns among leaders of supply chain management. This week, both organizations released their latest joint research report: Supply Chain Issues: What’s Keeping Supply Chain Managers Awake at Night? (Report also available for complimentary downloading)
This research represents Michigan State’s research efforts profiling challenges among more than 50 supply chain organizations. Supply chain management executives were asked to assess the challenges their organizations are currently facing along with new opportunities. The research effort was led by David J. Closs, Department Chair and John H. McConnell Chair in Business Administration and Patricia J. Daugherty, Bowersox-Thull Chair in Logistics and Supply Chain Management at Michigan State University.
The six most common issues that were cited by executives were:
- Capacity /resource availability
- Cost/purchasing challenges
Upon reviewing the report, Supply Chain Matters noted lots of common theme similarities that have been identified by other multi-industry focused executive surveys. An important difference in this latest APICS-Michigan State report, however, was how talent issues, namely recruitment, retention, or skills development, permeates all of the other five areas of executive concern. Much of this was summarized in the citing of one executive’s statement:
“It’s a different type of talent that we’re going to need if we’re going to keep up with the pace of change.”
A further common challenge identified by this Michigan State as well as other surveys, is the impact that B2C or B2B Omni-channel business is having on supply chain complexity, SKU proliferation, process and system complexity as well as costs. Similar themes were raised in the third annual PWC Viewpoint study involving 300 retail and consumer goods CEO’s that was administered in late 2015. That survey concluded that over 80 percent of executives were still attempting to breakdown the organizational silos that were hampering a singular Omni-channel customer fulfillment experience. That activity invariably impacts the supply chain in many different dimensions.
Our readers will likely find other common themes and concerns identified in each of the areas. In conjunction with its latest research series, APICS has announced a series of upcoming webinars addressing topics such as capabilities, costing, global talent development, purchasing, sustainability, Omni-channel and complexity.
In today’s business environment of high global uncertainty, activist investor influence and global manufacturing activity contraction, industry supply chains are once again under pressure to uncover opportunities for reducing costs. It seem as though the mantra continues to be a constant effort to drive down costs, increase efficiency and profitability.
After many months, and perhaps years of cost-cutting, the effort becomes harder and harder.
But, what if there are hidden opportunities that have been overlooked up to this point? What if built-up inefficiencies among existing business processes and supporting software applications are driving unnecessary inefficiencies and cost?
This type of opportunity for discovery of hidden opportunities for cost reduction and cash generation can often manifest in complex and precision engineered business systems environments such as SAP ERP. Without constant diligence to exception reports or data misalignments, the system can inadvertently prompt its own set of inefficiencies and cost burdens. Areas of opportunity to uncover such hidden cash opportunities can be in procurement, inventory management, supply chain operations or customer service.
As an example, perhaps the single most common byproduct of an imbalance of product supply and demand can be excess open procurement and inventory. The more complex in terms of number of plants, product lines, ERP instances, and the larger the potential exposure. In SAP ERP environments, when demand shifts downward, MRP creates an Exception Notice in a process termed MD04. If there is not constant review of MD04, unneeded and excess component supply continues to flow in. Real cash money is spent to pay the supplier, the freight, the receiving dock workers, and locations in the warehouse are taken up. The problem can become more compounded in industries such as food and pharmaceuticals where raw materials inventories have shelf-life expiration and there are added risks for unnecessary inventory write-downs.
Another area of potential inefficiency is data misalignment. In the day-to-day pressures to get work completed and customer orders fulfilled, teams can be innovative to find ways to work around systems for the sake of time. Transactional data errors where users inadvertently do not update a completed process in the ERP system cause the system to view orders as incomplete when they really are complete. When multiple organizations or teams download and modify data in individual Excel spreadsheets without closing the data loop in the backbone ERP applications supporting business processes, other system misalignments occur. The result can often be undiscovered bloated inventory.
What if a technology vendor, with multiple years of built-up experience in uncovering hidden value in SAP ERP environments offered over a period of just five days, the opportunity for customers to uncover at least 10 times more in hidden business costs in their SAP ERP environments or the evaluation is complimentary?
Readers may want to checkout Supply Chain Matters sponsor Every Angle Software’s announced Business Value Discovery program offering. It includes an analysis of business value draining activities and an evaluation of results monetized into optimistic, realistic and pessimistic categories. Every Angle will produce an additional proposal to realize quick win savings along with recommendations to harness longer-term recurring ones as well.
Disclosure: Every Angle Software is one of other sponsors of the Supply Chain Matters blog.
This Editor had the opportunity to view our Supply Chain Matters readership analytics (thanks to Google Analytics) for all of 2015 and can now share our ten most popular 2015 commentaries during the year.
In reverse order:
Highlights of the APICS Annual 2015 Conference held in Las Vegas in October, and specifically ex-GE CEO Jack Welch’s keynote interview. Welch expressed a number of insights on the topic of leadership, and more specifically, supply chain management, and the professionals who manage today’s supply chains. We are very pleased that this commentary made our top ten.
Our September commentary related to Tesla Motors contracting of strategic supply of lithium for its new gigafactory. Our commentary addressed the broader strategy unfolding, one that extends beyond automotive supply chain needs, including the power storage needs of homes and businesses. The site was chosen because of its close proximity to supplies of the all-important raw material of lithium as well as to the Tesla factory in California.
It seems that our readers were quite interested in all news related to Tesla since the auto manufacturer appears twice in our Top Ten.
Our July commentary addressing the needs of supply chain business intelligence for SAP environments, specifically that 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 felt and sense that this is indeed representative of the broader SAP community, and brought awareness to other options. Our commentary brought wider attention to Supply Chain Matters Named sponsor Every Angle Software who’s self-service operationally focused business intelligence tool includes an extensive list of European installed base customers with SAP backbones.
Our January commentary, “Extended supply chain” is the new supply chain, a guest contribution by Prashant Mendki, Director Alliances and Business Development for supply chain systems integrator Bristlecone. The commentary called for a holistic “integrated extended supply chain” rather than independent business processes where the entire ecosystem would be treated as part of the supply chain, and where suppliers would have complete visibility into key customer demand and have their response plan ready.
Our September market education commentary bringing visibility to Xerox’s new more cost affordable smart labeling technology and the availability of two printed electronic labels that can collect and store information about either the authenticity or condition of products flowing across the supply chain. From our lens, the availability of such advanced labeling technology will foster new, more affordable dimensions of item level tracking, security and authenticity specifically related to products. This author characterized the development as the dawning of item-level tracking technology that industry supply chain teams have versioned for quite some time.
The highlights of our Supply Chain Matters interview with Irfan Khan, CEO of Bristlecone while attending the Gartner Supply Chain Executive conference. Our interview touched upon a number of areas including predictive analytics applied to supply chain decision-making needs. Irfan opined that mainstream acceptance of the full spectrum of smarter analytics (Descriptive, Prescriptive and Cognitive) applied to supply chain and manufacturing capabilities will take additional time for most organizations to be fully prepared to leverage. He confirmed organizational change management readiness and client skill impacts that take time to work through
Oracle’s July announcement of expansion of public cloud capabilities applied to order fulfillment, specifically Oracle Order Management Cloud and Oracle Global Order Promising Cloud. Out takeaway for readers was that Oracle remained committed toward a broader development and release plan surrounding SCM applications in the public cloud platform than perhaps other competitors such as SAP.
Later in 2015, in conjunction with Oracle Open World, the full Oracle SCM Cloud suite was announced by Larry Ellison in his opening keynote. From our lens, Oracle had developed one of the broadest cross-functional supply chain management, public cloud based applications currently available in the marketplace. That stated, there are qualifiers in that this public cloud suite provides standard functionality as opposed to the ability to support customized customer business needs. Its strength resides in faster time-to-value and potentially lower IT infrastructure deployment costs.
Our highlights and impressions regarding the FedEx acquisition of both Genco and Bongo International. Genco was one of the largest 3PL’s in North America and Bongo International provides an e-commerce platform that facilitates international customers purchasing items from domestic websites. We were intrigued by the low price paid for Genco which as less than current earnings.
Our February commentary reflecting on Tesla’s operating results reflecting some supply chain strains. Our observation was that while showing some supply chain strains at the end of 2014, even more challenges remained for Tesla’s supply chain in 2015. Tesla has often demonstrated the effective use of advanced technology applied to manufacturing and supply chain business processes, and that 2015 will be no exception to that trend.
We just published a follow-on commentary reflecting on Tesla’s 2015 delivery performance leaving some Model X customers rather frustrated.
Finally, our Number One most read 2015 content was:
Our unveiling of the full listing of 2016 Predictions for Industry and Global Supply Chains published on December 15th. We interpret that to mean that our readers are keenly focused on what lies ahead in the New Year, and that’s OK with us.
We trust that all of our line-of-business, IT and cross-functional supply chain readers have gained value and insight from our independent lens on supply chain focused business developments, business process and technology challenges among various industry and global perspectives. We believe we have accumulated a truly in-depth library of industry-specific and functional content.
Once again, as we enter our ninth year and remaining as a top ten or top twenty-five presence among supply chain blogs, we again thank our loyal global based readers and our sponsors for their continuing support.
Bob Ferrari, Founder and Executive Editor
© 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog.
Content appearing on Supply Chain Matters® may not be used by any third party without written permission of the author and/or our parent, The Ferrari Consulting and Research Group LLC.
In what is being reported as a first-of-its kind settlement with U.S. federal regulators, Boeing has agreed to pay $12 million in penalties as part of a settlement mandating tighter oversight of suppliers and tighter quality controls inside its own production facilities.
This settlement resolves 13 pending or potential civil enforcement cases with the Federal Aviation Administration (FAA). According to reports, the settlement subjects Boeing to as much as $24 million in additional penalties if manufacturing, auditing and regulatory reporting improvements are not implemented in the coming five years.
In its announcement, the FAA stressed the importance of internal corporate controls to insure that the design-to-manufacturing to maintenance processes are “operating according to the highest standards.” FAA Administrator Michael Huerta stated:
“Compliance requires all certificate holders to develop and implement internal controls that ensure they’re operating according to the highest standards. “Boeing has agreed to implement improvements in its design, planning, production and maintenance planning processes, and has already implemented several of these improvements.”
Process areas cited for attention include, among others:
- Improved management and accountability systems including a requirement that Boeing managers review regulatory compliance performance.
- Improvement in internal audit processes across designated processes with audit teams reporting directly to Boeing’s Vice President of Quality.
- Enhanced supplier management to determine whether incomplete work is being accepted.
- Review and simplify at least 15 process specifications used to design, build, deliver and support Boeing products.
- Report to the FAA at least on an annual basis on the effectiveness of Boeing’s regulatory compliance activities including a final comprehensive report after the fifth year of the agreement.
According to the FAA statement, prior issues involved installation of fuel tank flammability reduction equipment on Boeing 747 and 757 aircraft and insufficient corrective action after discovering that a supplier was providing incorrectly shaped fasteners. Details related to other specific enforcement matters were not released by the FAA.
Supply Chain Matters readers might recall that in March of 2014, after the FAA initiated a thorough formal joint review of Boeing’s 787 Dreamliner aircraft program, a subsequent report indicated that Boeing had placed too much reliance on suppliers for the overall quality of 787 components and systems. It further stated that Boeing’s sometimes ambiguity in stating what was required of partners led suppliers to believe that they had met requirements.
Certain suppliers within Boeing’s supply chain will likely feel the effects of this new announced compliance agreement with the FAA. It comes as Boeing continues to ramp-up its production cadence for delivery of booked customer orders involving newly designed aircraft that stretch out over the enhanced conformance period.
This development is yet another reinforcement of the importance of effectively integrating product lifecycle management, manufacturing and quality management systems together in a continuous information and decision-making flow.