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Contract Labor Practices Under the U.S. Regulatory Looking Glass


Business media has been reporting on recent rulings from the U.S. National Labor Relations Board (NLRB) that has implications for hiring and labor negotiations practices related to contract workers.  Supply Chain Matters advises operations and customer fulfillment teams to stay abreast of these developments since certain rulings can have noteworthy implications for existing supply chain work practices and cost structures.

Essentially, the NLRB is re-visiting long-standing practices as to when contractual business arrangements, such as the use of supplemental contract workers render the contracting business a joint-employer of workers that are employed by the contract worker firm. An initial ruling involved global restaurant firm McDonalds and its franchisee restaurant operators, when the NLRB reviewed complaints alleging that the restaurant chain and its franchisees had violated the rights of employees who were involved in protest activities. After finding what it believed to be merit in the complaint of unfair labor practices, the NLRB ruled that McDonalds should be considered a joint employer.

A second potential ruling involves Browning-Ferris Industries of California and Leadpoint Business Services, a supplier of contract workers, which concerns a factory located in Milpitas California.  A local Teamsters labor union is arguing that as a labor union, it cannot adequately bargain over labor practices unless Browning Ferris is at the bargaining table as a joint employer. The argument is that since Browning dictates labor practices, scheduling and work duties of both permanent and temporary workers as a single unit, it is a de-factor joint employer. How the NLRB rules in this case has far broader implications for various industry supply chains and partner service firms.

With the dynamic ebb and flow of business operations today, supply chains often have to manage spikes in operational and customer fulfillment, especially in seasonal or holiday-related time periods.  A keen focus on costs has caused many production, fulfillment and logistics firms to utilize significant numbers of on-call temporary contract workers to supplement a leaner full-time, permanent workforce in such periods of work surges. Such practices have drawn protests directed at well-known brands, with protests involving two-tiered labor rates, avoidance in hiring full-time staff, or too much dependence on temporary contract labor in supporting supply chain operational needs. Supply Chain Matters has previously called attention to protest actions involving Amazon, Wal-Mart and certain third party logistics providers, to name but a few, to be placed in the public spotlight.

If the NLRB begins to consistently rule that brand owners who dictate work schedules and practices are to be considered joint-employers, the implications for supply chain flexibilities and costs can well be significant. Readers need to stay abreast of these developments and we at Supply Chain Matters will continue to provide updates as to implications.

Permanent Shifts in Consumer Shopping Trends Have Supply Chain Implications

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This author has penned a number of prior Supply Chain Matters commentaries offering evidence that fundamental structural changes related to consumer shopping habits are occurring in multiple retail sectors. Yesterday, the Wall Street Journal published a report: Shoppers Flee Physical Stores. The most important and compelling takeaway from the article was a citation of Shopper-Trak data indicating that: “physical shopper visits have fallen by 5 percent or more in every month, for the past two years.”  Further noted: “Online sales have grown more than 15% every quarter for the past two years and are having a big impact on the way many companies are looking at their brick-and-mortar stores.”

These are compelling trends that provides a ton of implications. I recently read a commentary that noted that in retail, the supply chain has moved from the back office to the online front office.

As noted by the WSJ, shoppers would rather research online than wander the aisles making impulse purchases.  Rather than physical merchandising and goods placement strategies the new emphasis is on online merchandising and social-media enabled product promotion.  Rather than networks of distribution centers and fleets supporting individual physical stores, the new emphasis will be on high-volume online fulfillment supported by combinations of fulfillment centers and multi-purpose retail outlets.

This author has argued that there are two leadership competencies that will differentiate tomorrow’s executive leaders in retail.  They are a deep understanding of social-media fueled marketing and Internet focused retailing, and a deep awareness, understanding and appreciation of end-to-end supply chain inventory deployment and fulfillment capabilities.  From our lens, recruiting for retail C-level executives has been too focused on classic merchandising, finance or traditional brand marketing. Tons of money and effort are invested in online presence and consumer intelligence without consideration for the impact on supply chain response needs.

After many months of searching, Target has announced Brain Cornell as its new CEO. The retailer elected to select an external executive candidate with experience in consumer goods supply chains including Pepsico and Tropicana, along with retail experience acquired in a stint at Wal-Mart. According to reporting by the Wall Street Journal, Cornell was an outside contender to succeed current PepsiCo CEO Indra Nooyi. Target was willing to compensate its new CEO with over $19 million in equity grants to convince him to join the retailer.

Of more interest is that Mr. Cornell should obviously understand the important contribution that supply chain will have in the new era of retailing.  Time and events will tell the next chapter for Target.

There are many other executive recruiting efforts underway among retailers including JC Penny. The time clock continues to tick and the retailers and leadership teams that internalize the permanent changes in shopping and customer fulfillment will outshine those that do not.

Bob Ferrari

The Implications of SAP Run Simple for Supply Chain Applications Support


SAP conducted its annual Sapphire NOW users conference in the U.S. and utilized this customer forum to once again communicate significant changes and implications concerning future direction.  The prime theme that SAP management delivered to customers was the SAP Run Simple message, which for many day-to-day users of SAP, is a message that is received with some cynicism. None the less, the implications are rather profound and real. Supply Chain Matters penned a prior commentary regarding the implications of SAP’s new strategies focused on integrated business planning that has since received significant reader and social media activity.

Among the keynotes delivered at Sapphire was the often anticipated talk by Hasso Plattner, one of the original founders of the company and existing Chairperson of the company’s Supervisory Board. While Hasso’s annual talks to SAP customers tend to sometimes be academic and lengthy, they often contain candor and important insights regarding SAP direction or missteps in the market.  This year was no exception.

One of the most significant messages delivered by Hasso was that enterprise software running on-premise is going to the cloud, no matter what.  That is why SAP’s new strategic emphasis is now all about reengineering for “the cloud.” The message from Hasso was that it is no longer a matter of if but rather a matter of time. That alone is a significant message coming from SAP’s founder and most influential investor.  He further indicated that four years ago, SAP leadership was initially very apprehensive regarding the challenge to change 400 million lines of code within its ERP backbone system, but has now come to the conclusion that it would have no choice but to do so. Software that was designed many years ago under different assumptions related to business processes and existing technology at the time, now has to better match the realities of today’s new business and technology paradigms. Hasso’s drumbeat message remains: “simplicity beats complexity”.

A very significant implication of SAP’s ongoing re-engineering towards leveraging HANA and the cloud is the goal to eliminate “aggregates” within its internal system’s functions.  Aggregates are when the system calculates for instance, gross margin, income statements or a supply chain planning optimization. Long-time SAP APO user teams can best relate to this concept by considering APO’s in-memory or former “live cache” design concept, where all planning related transactional and master data is drawn into the planning engine to formulate optimized supply chain plans.

Instead, the new HANA based cloud or on-premise technology will store all of SAP transactional data in memory (column-store) and will respond to information needs and reporting requirements by assembling models and algorithms on top of transactional data. The implication is a system with a far smaller footprint that users will eventually have the infinite freedom to re-arrange information hierarchy’s on-the-fly in a matter of a few seconds. By Hasso’s description, that opens opportunities for the system to perform all functions via models and algorithms and the ability to perform more predictive and simulation based analysis capabilities based on system-wide data.

Other significant implications will be the even more critical importance to accurate master data, internal skills in modeling and simulation of supply chain related data and the ability of supply chain planning and fulfillment teams to perform multitudes of what-if or target supply chain goal fulfillment analysis.

Of course, this broad and sweeping scope of SAP focused change is going to take additional time, perhaps years in scope. There will be critical decisions that customers will need to make over that time period.  At Sapphire, SAP further communicated its increased dependence on select key partners to assist both SAP and its existing customers to more quickly and successfully navigate this ongoing and significant transition.

Existing SAP customers need to seriously think about the implications of this shift in technology direction, especially as it relates to supporting today’s and tomorrow’s broader and more complex supply chain management needs.  While complexity and frustration may rule today’s mindsets, start seriously thinking about what these new changes imply for integrated supply chain and business planning support needs under the SAP HANA enabled banner. Such changes involve a changing mindset, new and different skill needs as well as a reliance on a trusted external consulting and support partner.

It is no secret that SAP APO, while designed as a bullet-proof supply chain planning system built around SAP master and transactional data, is somewhat difficult and inflexible in its ability to provide a means to support rapidly changing supply chain business processes or to support a new data paradigm where the majority of supply chain related data exists in an external demand or supply network. In a prior Supply Chain Matters posting, we noted that the structural design rigor and tight internal system linkages has led to many work arounds, including spreadsheets and supplemental systems. In many cases, the full potential of supply chain optimization, such as optimized supply planning is avoided because of the complexity and lack of understanding of innards of SAP APO. However, those teams that have taken the dedicated time and patience to learn and understand such innards with supplemental tools have managed to leverage APO functionality and subsequent benefits.

As noted in prior commentaries, as SAP continues to build out its described muscle platform, organizations need to focus efforts on the further mastering of broad-based supply chain planning and fulfillment process modeling, optimization, simulation and master data management capabilities. There are available tools and knowledgeable partners who can help you to re-focus your current efforts and direction and better respond to line of business needs, customer fulfillment or product management requirements, while helping to facilitate the skills and new capabilities roadmap that prepares for what will come in the new world of SAP.

Key SAP strategic partners such as Intrigo Systems, are not only focused on SAP APO, but the broader SAP Supply Chain Management, both today, and in the realities of the SAP HANA enabled environment. The Intrigo Systems Optek tool suite consists of modules that have been designed to place the planner more in control of the process while making SAP APO functionally more effective today, and in the future capabilities of SAP Supply Chain Management.

Bob Ferrari

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

Disclosure; Intrigo Systems is a current client of the Ferrari Consulting and Research Group.

Important Technology Services News: Vishal Sikka Appointed CEO of Infosys Technology

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Global information technology services provider Infosys has announced the selection of Dr. Vishal Sikka as Chief Executive Officer and Managing Director (CEO & MD) of the company. According to the announcement, Dr. Sikka will be inducted as a whole-time director of the Board and CEO & MD (Designate) on June 14, 2014. He will take over as CEO & MD from Mr. S. D. Shibulal on August 1, 2014.

Sikka until recently served as a high visibility executive at SAP AG serving as a member of the Executive Board and Chief Technology Officer (CTO). He suddenly resigned that position in early May.  At SAP, he was responsible for all products, from traditional and cloud-based applications to technology and platform products including SAP HANA, analytics, mobile and middleware. Many rumors abounded from Sikka’s departure from SAP.

Sikka is the very first outsider and non-founder ever appointed to the CEO leadership position and his tenure will no doubt involve lots of scrutiny by business, technology and social media circles. Media outlets in India indicate that Sikka will continue to have his family reside in Northern California but will make frequent visits to Infosys facilities in India including the firm’s corporate headquarters campus.

In conjunction with this latest announcement, the Infosys Board made other important announcements that indicate a rather significant new operating leadership structure for the firm. Mr. U.B. Pravin Rao, President and whole-time director, was appointed Chief Operating Officer, effective June 14, 2014, no doubt to manage day-to-day activities. Twelve existing executives were appointed to Executive Vice President role’s with additional responsibilities.

Infosys co-founder Mr. N.R. Narayana Murthy who recently returned to lead the firm and has driven wholesale changes in senior leadership of the firm, will voluntarily step down as Executive Chairman on June 14, 2014. India based media further reports that Murthy’s son, Rohan, will also step down from leadership. Non-executive Vice Chairmen Mr. S. Gopalakrishnan will additionally step-down on June 14.  To insure a smooth transition, both Murthy and Gopalakrishnan will continue on the Infosys Board until October 10.

Infosys additionally announced Executive Chairman’s office will be dissolved. Dr. Rohan Murty, whose appointment was co-terminus with the Executive Chairman, will leave the company on June 14, 2014. The remaining members of the Chairman’s office will take up other responsibilities in the company.

Current CEO Mr. S. D. Shibulal will step down as CEO & MD and from the Board on July 31, 2014 after a very difficult tenure period including resignation of many high-level Infosys executives who might have been considered internal candidates for the CEO slot or were perceived as not meeting the firm’s operating objectives.  Early in this author’s career, I had the opportunity to work directly with “Shibul” while we were both part of Sun Microsystems’s internal IT team supporting after-market online customer fulfillment. I wish him well in his new chapter.

Supply Chain Matters has been very familiar with Infosys having the firm as a prior sponsor of this blog.  In addition, this author’s industry analyst presence has caused me to interact with many members of the Infosys executive team over prior past years. We came to notice a lack of cohesiveness across Infosys operating units, an indication of conflicting goals and objectives with a dilution of strong marketing and brand presence in areas of supply chain and customer fulfillment related technology services. Towards the end of our prior relationship, we found ourselves performing a lot of the heavy lifting related to services marketing messaging and supplementary thought leadership.  Our parting of ways was more of a mutual decision.

Much work remains particularly in areas of more cohesive strategy, building broader and deeper strategic partnerships with clients.  There is no doubt in our mind that Dr. Sikka’s technology strategy skills are impeccable, but his broader leadership skills will be challenged in providing vision and leadership for Infosys moving forward.  An important area to watch is whether a strong, capable, hands-on leader of global marketing will be brought on-board and supported.  By our lens, Infosys needs to represent its services in technology, vertical industry and business process enablement dimensions in more impactful dimensions.  Service areas related to online customer fulfillment, online commerce, manufacturing and value-chain enablement must have tighter linkages. Driving industry thought leadership needs to become more external, beyond certain academic arrangements.

In essence, this series of new leadership changes represents a new dawning for Infosys with opportunities for new vigor and market presence.  The opportunity remains to become a continued strategic partner among many industry settings including manufacturing, retail and online services.

We extend to all of the Infosys new executive leadership team and employees our best wishes for this new era of leadership.

Bob Ferrari


Supply Chain Matters Highlights of the Gartner Supply Chain Executive Conference- Part Two

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In our previous Part One commentary, we cited some of the key research highlights delivered at the Gartner 2014 Supply Chain Executive conference held in mid-May. Two other important components of this conference are Gartner’s unveiling of the Top 25 Supply Chains ranking along with assorted vendor showcases and sponsored presentations.

Supply Chain Matters has previously provided our initial commentary and impressions of the 2014 Gartner Top 25 Supply Chains ranking.  Overall, we were a bit taken back by the similarity of this year’s rankings to that of 2013.  With the exception of two new well deserved entrants, Kimberly Clark and Seagate Technology, the named Top 25 Supply Chains remain essentially the same. Perhaps that is a sign that world class supply chain capabilities overcome multiple years of challenges. That is, of course how Gartner is communicating the 2014 ranking. Since our commentary published, former Gartner research vice-president Kevin O’Marah, who actually became Gartner’s primary leader in the research efforts that led to the Top 25 rankings, penned a posting on his SCM World blog with the title: The Supply Chain Top 25 is Getting Boring. Admittedly, there may be an argument that SCM World is a direct competitor to Gartner as a provider of supply chain management focused research, and there may be another motive to O’Marah’s commentary. The commentary however captures much of the event discussion that we picked-up along with our own conclusion.  O’Marah notes: “I thought I was looking at the 2013 list when I first saw this year’s ranking unveiled. I’m sorry, but that is simply not enough movement to get anyone excited- not even the winners!” Included in the commentary is a chart depicting Top 25 Index of Changes which would lead most readers to conclude that any significant changes to the Top 25 rankings have ceased to occur since 2011-2012. O’Marah further observes what we at Supply Chain Matters concluded two years ago, the lack of engagement of more global based supply chains. Enough stated on the reaction to this year’s Top 25 Supply Chains ranking.

In the area of vendor presence, the usual collection was present, but there were, by our perspective, some notable ones that readers should be aware of. 

Supply Chain Matters sponsor E2open was a conference premiere sponsor, and post Gartner conference, announced its acquisition of SERUS, who also had a management presence at this conference, including SERUS’s visionary CEO, Henri Menon. Newly launched Elementum had a booth and senior management presence, offering an initial look be attendees at that vendor’s innovative, socially focused planning and visibility functionality. Supply Chain Matters profiled Elementum in a February posting and we continue to be briefed on ongoing developments. Kinaxis who this week, announced completion of its IPO in Canada dropped a considerable amount of bucks to raise its visibility among Gartner conference attendees, including having its lighthouse customer Schneider Electric as a prominent platform speaker.

The Gartner conference was the opportunity for Kenandy to announce its presence in supply chain technology support.  Sandra Kurtzig, who previously founded Ask Computer Systems and the MANMAN ERP suite, founded Kenandy with the urging of CEO Marc Benioff. We sat in on a joint presentation from Kurtzig and Salesforce executive vice-president John Wookey on the topic of the new cloud, mobile, social supply chain which was rather intriguing. Supply chain IT teams can anticipate a collection of vendors leveraging the Salesforce cloud platform for supply chain business process support and our research arm will be featuring a future research report regarding this area. Supply Chain Matters sponsor Steelwedge Software provides a new Sales Pipeline  app” that leverages product demand information on Salesforce.

Supply chain planning provider Quintiq had a significant presence, and this author had the opportunity to be previously briefed on this vendor’s broad and deep supply chain planning technology support. Other vendors present, that had previously impressed us with offered functionality were FusionOps and Tata Consulting Services (TCS). Former Aberdeen supply chain analyst Nari Viswanathan has joined TCS and has introduced us to some exciting new functionality in that firm’s development pipeline, including deeper demand sensing capabilities. Supply chain risk and resiliency services provider Resilinc, captured some corrider and networking event buzz, and we had the opportunity to catch-up with founder and CEO Bindiya Vakil.

While the above vendors paid for Gartner sponsorship, there were far more technology vendors and service providers present, all attempting to snooze and network with whatever supply chain executives or IT leaders that could muster.  Then again, that continues to be the other drawing attraction of the Gartner conference.

The next ten years of supply chain management will indeed be an exciting era, one in which the new inflection of technology and services will play an ever more prominent role.

Bob Ferrari

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

Supply Chain Matters Highlights of the Gartner Supply Chain Executive Conference- Part One

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Supply Chain Matters had the opportunity to attend the Gartner Supply Chain Executive conference held in mid-May.  As an AMR Research alumni analyst who specialized in research coverage of supply chain software and network technology, I am fully aware that the roots of this particular conference are deep, extending to the late nineties.  The conference featured many well-known and respected research analysts and its reputation was often that of “must attend” among any who either practiced supply chain leadership or provided technology and services to the supply chain community. While we have admittedly not attended this conference for the past several years, we decided at the last minute to attend this year’s conference.  Overall, the conference provided some highlights and disappointments. We walked away with impression that the conference is not what is used to be in terms of research depth, insights, and analyst personalities, although it still draws a very influential audience.

The opening keynote was a highlight since it reflected on a look back of supply chain management for the prior ten years, and Gartner’s perspective of supply chain requirements and needs for the next ten years. Acknowledged was that the span of control among industry supply chains are indeed wider and that 40 percent of senior supply chain leaders now report to their respective CEO. As we at Supply Chain Matters can certainly attest, Gartner further noted that articles about supply chains have tripled in the Wall Street Journal. That is somewhat of good news, and not so good news aspect since what happens in the supply chain more directly affects business results and overall performance.  Further noted was that the adoption of cloud-based technology within industry supply chain IT environments has increased 40 percent, which is a rather significant development when one considers that supply chain systems are often viewed as mission critical in nature and scope.

Reflecting on the next decade for supply chain management, Gartner’s viewpoint is that industry supply chains will continue to lead in the next decade. However, spaghetti-like networks with silos of conflicting goals, not aligned to singular, over-arching goal remain as an obstacle that needs to be overcome. According to Gartner, too many people are bogged down in trivial tasks. Analysts pointed to talent management as a continuing challenge and top priority for the next three years. Further noted was that universities are not keeping up with changing skill needs.  We are not completely convinced about that conclusion, but colleges and universities that specialize in supply chain management need to do a better job at overcoming cross-curriculum barriers to insure that students are prepared with broader exposures to other required skills. For technology adoption needs, Gartner cited social, mobile, cloud, advanced information analytics and the Internet of everything as the only feasible way to manage supply chains more profitably.

Tom Peters, noted author of the iconic book, In Search of Excellence provided the second day keynote, and candidly, could have well been the opening keynote because of Tom’s unique, direct communication style. He opened with the statement that “there is no more sexier profession than that of supply chain management.” He pointed to the management conundrum of “damned if you do, damned if you don’t” as especially pertinent to supply chain professionals and made reference to the “huge, huge, huge issue of supply chain network vulnerability.” Peter’s viewpoint was that supply chains are the focal point of all operations and should be more responsible for sales and marketing goal fulfillment as opposed to reducing costs. His belief is that a supply chain must have formal research and development or center of excellence group, or go home. One quote that especially caught this author’s attention related to the critical importance of managing supply chain risk: “You (the supply chain), can destroy an 80-year-old brand in a matter of a week.” Dwell on that statement the next time Finance questions the overall supply chain budget. Peter’s final words of wisdom were to de-emphasize items, trucks and planes and concentrate on big “S”, services.

Two other sessions we found to be insightful were one titled: The New Realities of Digital Manufacturing delivered by analysts Simon Jacobson and Mike Burkett, and the session: Key Findings from Gartner’s Chief Supply Chain Officer (CSCO) study also delivered by research vice-president Mike Burkett. Both sessions stressed the needs for industry supply chains to think more about product management and its integration to the new era of digital manufacturing technologies. Both the digital and physical worlds of supply chain processes are indeed on the verge of coming together. Among the key highlights of Gartner’s latest CSCO study was data reflecting that new product introduction and sustainability capabilities have been the most often added in the last three years by either direct or dotted-line reporting responsibility. According to the Gartner CSCO study, the top priorities for supply chain centers of excellence are:

  • Standardize and improve processes
  • Performance management and analytics
  • Supply chain strategy
  • Supply chain technology enablement

Yet, talent and change management appears to be lower in priority and Gartner raised the concern of why so low, since both of these competencies are required for the above to succeed. 

Another rather important takeaway from Gartner’s latest CSCO study was the survey reflecting expected levels of investment and expected benefits over the next two years. Without taking thunder away from Gartner, the important takeaway for us was that product launch and portfolio management along with supplier collaboration and flexibility are highlighted as emerging medium and top priorities for investment in the next two years.  That correlates with what we have been hearing and picking-up with our conversations with clients and readers.

In our Part Two posting, we will provide additional comments of some other highlights of the recent Gartner supply chain conference including the annual Top 25 Supply Chains announcements, along with some interesting and noteworthy presence among supply chain technology providers.

Bob Ferrari

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


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