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Supply Chain Matters Initial Impressions of LiveWorx 2015 Conference

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We are once again in the high point of this spring’s industry conference season and this author finds himself mostly mobile, attending and checking-in on the major important conferences that we believe have context to the broad supply chain management, manufacturing and product management community that represents Supply Chain Matters. Since we are quickly getting backlogged on content, we are going to provide our readers brief summary impressions and takeaways from such conferences to be followed by more detailed and retrospective observations and commentaries in the coming weeks.

We have previous highlighted our impressions of the JDA Software FOCUS 2015 conference held last week in Orlando.  This week, SAP is conducting its annual Sapphire and ASUG customer conference in Orlando and next week, Gartner will be hosting its annual SCM Executive Conference in Phoenix. We are planning to provide commentary related to each.

The Internet of Things is becoming a very hot topic, and this week, we were invited to attend the LiveWorx 2015 conference in Boston, sponsored by PLM, SLM and IoT technology provider PTC.  If you have been following our Supply Chain Matters coverage of PTC, this vendor has been on an acquisition spree directed at gaining market influence in both the Service Lifecycle Management (SLM) and Internet-of-Things (IoT) technology enablement segments. In the latter, PTC previously invested a collective sum of $300 million by acquiring providers ThingWorx and Axeda.

LiveWorx 2015 was PTC’s effort in bringing a conference together that had a sole focus on its IoT market strategies moving forward. The topic and the interest levels are high, and PTC managed to attract over 2000 attendees, having to add an additional meeting venue.

LiveWorx 2015 in one respect, reminded this author of the very early days of the vast hype associated with the introduction of RFID technology incorporated within various industry supply chains. My observations at that time, which seem so long ago, reflected on vendor and systems integrators in hyper-ventilation mode, thinking about the vast amounts of money to be made in implementing IoT. And so it seemed with LiveWorx sponsors, presenters and attendees among this community. Also in attendance were companies and service providers trying to figure out what business processes could most benefit from IoT and whether they should consider adoption, but they seemed to be overwhelmed by mostly partner attendees.

Regardless, the takeaway from LiveWorx was the added profound context that was provided in the potential game-changing implications related to industry, product and value-chain competitiveness.   That was articulated by Professor Michael Porter of the Harvard Business School who in his address, demonstrated a perceptive understanding of the impacts IoT will have on many firm’s value-chains, and indeed, how they will compete in the technology wave.  Porter’s message was that it is not a question of whether firms evaluate the impact of IoT on their industry, but rather how long does one wait before the industry is disrupted by those who exploit these strategies.

Returning to our analogy, while RFID had tactical business process connotations, IoT has far broader business related connotations.  While RFID vendors and service providers tended to not want to openly talk about needs for industry standards, bullet-proof security and organizational change management connotations, the IoT community assembled this week in Boston seemed to be willing to be more up-front and proactive in acknowledging such concerns and beginning dialogues and efforts. History has indeed provided important learning, as we noted in our most recent commentary related to RFID.

There were a number of important announcements made in conjunction with LiveWork15. PTC signed a definitive agreement to acquire ColdLight, a termed big data machine learning and predictive analytics technology provider, for approximately $105 million. According to the announcement, the acquisition of Cold Light’s Neuron automated predictive analytics platform will enrich PTC’s IoT technology portfolio. This author had the opportunity to sit in on a presentation delivered by ColdLight’s CEO regarding its capabilities and it certainly has interesting possibilities when applied to IoT.

Another important announcement was ThingWorx Converge™ an application that leverages the ThingWorx® platform for connectivity, device management and rapid application development. This application supports pre-built capabilities for companies who create, operate and service manufactured products as well as application developers and system integrators who deliver solutions. It serves as evidence that PTC wants to be the tools provider, providing its rapidly evolving partner network a more streamlined tool to develop a mass of industry specific applications.

As noted, Supply Chain Matters will feature additional observations related to PTC ThingWorx in the days to come.

Bob Ferrari


Bob Ferrari’s Guest Posting- Supply Chain Transformation and the Importance of Information Strategy

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As a broad based supply chain community, we often context and plan supply chain transformation initiatives under the three-pronged perspectives of People, Process and Technology enablers. I would urge transformation teams to seriously consider a fourth component, that being Information, including the velocity, context and clarity of information. While some may be of the mistaken belief that the element of Information is solely the perspective of IT, it is rather a jointly-owned, cross-functional element of transformation.

On the Kinaxis 21st Century Supply Chain blog, Executive Editor Bob Ferrari has penned a guest posting, Supply Chain Transformation-The Important Element of Information Strategy.

Enjoy and comment.


IBM Makes Major Commitment to Internet of Things and Analytics Enablement

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IBM today announced that it will invest $3 billion over the next four years to establish a new Internet of Things (IoT) business unit to help customers analyze data from sensor-equipped devices. The enterprise technology provider further plans to deploy a cloud-based platform to assist customers in building IoT business applications.

Within the announcement is the creation of three service support components:

  • A cloud-based open platform for providing analytics services for vertical industry IoT applications
  • A termed platform-as-a-service Bluemix IoT Zone to assist developers to integrate sensor data into cloud-based applications, by infusing more real-time sensor data into applications.
  • An expansion of IoT focused partner ecosystem ranging from silicon and device manufacturers to industry-focused applications providers such as AT&T, ARM, Semtech and others.

In conjunction with today’s announcement, IBM further announced a new strategic partnership with The Weather Company through WSI, its global B2B and analytics arm. WSI collects data from thousands of weather sensors resulting in upwards of 2.2 billion unique forecast points. Such weather data can be correlated with business applications where weather plays an influencing factor. Think of the how the consumption of beer, certain snacks, bottled water or cosmetics are influenced by weather or climatic conditions. Think about how weather impacts business operations.

The announcement calls for The Weather Company, including WSI, to shift its massive weather data services platform to the IBM Cloud and integrate its data with IBM analytics and cloud services. The analytics aspects call for the use of Watson Analytics for Weather to leverage applications within industries such as insurance, energy and utilities, retail and logistics and other areas.

What makes these announcements ever more interesting is that weather can influence many supply chain related business and operational processes. Whether it is specific product demand patterns requiring unique customer fulfillment trends and needs, or weather impacting both product and services focused supply chains themselves, there is certainly lots of opportunities for innovation.

Today’s IBM announcement adds more stakes to the technology competitive landscape as providers such as Amazon, Cisco Systems, General Electric, Microsoft, PTC and Qualcomm continue to jockey and position their technology ecosystems in order to be a preferred provider of IoT enabled applications and supporting infrastructure in either B2C or B2B dimensions. There remain many ongoing pitfalls and challenges surrounding full-scale IoT deployment, not the least of which is information and data security. The consortiums and influence of larger vendors along with their building ecosystems are the determinants as to how quickly these challenges are overcome.

In the meantime, today’s IBM announcement provides the real opportunity for bringing together weather sensors and trending data, prescriptive and predictive analytics tools, and business process support applications for more responsive industry supply chains.

Bob Ferrari


More on the Heinz-Kraft Mega-Merger

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Since the announcement earlier this week, business and other media has generated a lot more background regarding the mega-merger of HJ Heinz and Kraft, and specifically the prime players behind this merger.

Reports indicate that the talks began in January when 3G Capital approached Kraft.  This reports indicated that Kraft management was quite receptive to a potential merger or takeover, and the mutual talks moved swiftly leading to a Kraft board discussion in late February leading to the decision to sell the company.  As occurred when 3G acquired HJ Heinz, Warren Buffet’s Berkshire Hathaway was brought in for financial backing.

The merger’s ramifications are already stark. The Wall Street Journal indicated that this merger promises to reshape the food industry and “could send rivals scrambling to shore themselves up with tie-up of their own.” In our Supply Chain Matters initial commentary, we pointed to additional tremors for consumer goods supply chains.

Further amplified has been 3G Capital’s current track record for aggressive cost-cutting, which sends further tremors among industry players.  Since assuming operations management of HJ Heinz, upwards of 7000 jobs were eliminated in a 20 month span. New CEO Bernando Hees ultimately cut a third of the staff at Heinz’s headquarters including 11 of the company’s top 12 executives. Obviously, under 3G, there is little need for cross-functional collaboration.  Readers can garner one descriptor of the 3G cost cutting methodology but viewing a Reuters / Chicago Tribune article, Pack up the peanuts: Kraft’s party is ending.  Other CPG players will likely be broadening discussions with other private equity or activist firms for M&A opportunities that can match the industry shadow and bottom-line returns of 3G.

Beyond the current ebullient lens of Wall Street are the longer-term realities for both addressing the market challenges of Kraft as well as the fusing the synergies of two very large consumer goods entities.

From a supply chain perspective, Heinz garners nearly 60 percent of current revenues from international markets.  Thus its supply chain capabilities are grounded in global customer fulfillment nuances. Heinz further has a keen focus on food and restaurant channels and services, especially in the light of 3G Capital’s other investments. Kraft on the other hand has been completed focused on North American customers.  That strategy was cemented with the prior split-off in 2012 that created Mondelez International, which was created and resourced to be the global growth entity. An area to keep an eye on is the how the merged company focuses on core channels and customers, whether they are supermarket, food services or convenience store. As noted in our prior commentary, how suppliers are treated under the merged entity will be another area to watch, particularly concerning efforts directed at product and process innovation.

Today, Mondelez holds product licensing agreements to distribute certain Kraft brands globally, which promises to be very interesting in the months to come when 3G begins its consolidation and global growth efforts for Kraft. The Heinz and Kraft supply chain resources are likely to be brought together very quickly with additional consolidation and collapsing of organizations.

To be balanced, some Wall Street influencers praise 3G for its willingness to sustain its investments and management of the companies it has acquired, far more than other private equity firms.  However, the difference with Kraft is that it is a far larger and far more complex entity with lots of moving parts. If 3G proves successful in its efforts over the long term, then so be it.

One thing is certain, throw away all of the prior notions of consumer product goods historic industry indices, managed transformation or continuous improvement.  This week marks a considerable change and a new playbook for CPG focused supply chain teams. What appears today and what the industry ends up to be in two or three years can well be dramatically changed.

Bob Ferrari

© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.

 


Andrew Liveris Shares Winning Formula for Manufacturers

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Supply Chain Matters has in the past cited Andrew Liveris, Chairmen and CEO of Dow Chemical Company for his understanding and appreciation for the value and contribution of manufacturing and supply chain capability to business outcomes. Besides his current leadership of Dow, Mr. Liveris is an author and U.S. Presidential advisor on manufacturing competitiveness. In a September 2013 commentary, we highlighted his keynote delivered to the MIT Production in the Innovation Economy (PIE) Conference which unveiled results of MIT’s study on U.S. manufacturing competiveness.

Thus we were pleased to be alerted to a commentary appearing in the online version of Chief Executive Magazine where  Mr. Liveris shares his winning formula for manufacturing success with other chief executives. His prime messages was for manufacturers to rethink the role in evolving global supply chains and actively address workforce training and development needs for today and the future.

One of the more powerful statements brought out in this interview article deserves highlighting:

Entrepreneurial action and its ability to pivot, according to the world we face, is one of America’s greatest attributes. Manufacturers, for far too long, did not really display agility when global competition disrupted supply chains. We are in a different world. We’re traveling at the speed of flight. We are so connected to the information age without realizing that we’re still at the dawn of it. The smarter companies have figured out their place in the global supply chain and have adjusted their service and product models accordingly.”

Those statements are rather powerful when considering that they come from a CEO.  They reflect the new awareness to supply chain’s contribution.  Within his own industry, Mr. Liveris points out that of the top 20 global chemical manufacturers in 1990, 17 disappeared by 2010. Dow prevailed because of its ability to pivot to dramatic market changes.

A further pearl of wisdom:

Manufacturing today means you’ve got to innovate faster than they commoditize you.

On the all-important skills challenge:

The biggest issue we have is training a new skilled workforce to deploy against that value add, and for me, that is the key topic in manufacturing today. We need technically trained people at the German skill level, in automation, robotics and fine-precision manufacturing. This is the world that we’re in today and we’ve got to adjust to it, and frankly that’s what I spend my time on.”

From our lens, there needs to be many more global manufacturing firm CEO’s possessing the wisdom of Andrew Liveris, one’s that understand that supply chains and manufacturing capabilities do matter.

Bob Ferrari


Johnson & Johnson Moves to Close a Chapter in Multiple Branded Product Recalls

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In the period between 2008-2010, pharmaceutical and healthcare products provider Johnson & Johnson, and in particular, its McNeil Consumer Products operating unit, faced a building crisis involving multiple branded OTC healthcare remedies such as Tylenol, because of quality and process issues focused on  a specific production facility in Fort Washington Pennsylvania. After numerous product recalls, that plant was subsequently shutdown for remedial actions and has yet to re-open.

This week, McNeil announced an agreement with the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the U.S. Department of Justice to resolve the previously disclosed government investigation relating to the manufacturing of certain over-the-counter products at its Fort Washington facility. The company agreed to pay a $20 million criminal fine and forfeit $5 million. Under this agreement, McNeil reportedly pleaded guilty to a misdemeanor violation and accepted responsibility for the inadequate filing of required documentation during the manufacturing process. In its announcement, McNeil states in-part:

McNeil has been implementing enhanced quality and oversight standards across its entire business to ensure we are best able to meet our commitment to consumers, patients and doctors who rely on our products.”

In a July 2013 Supply Chain Matters commentary, we highlighted all of the efforts that were underway to transform all of Johnson & Johnson’s supply chain processes. Senior executive changes were part of that transformation effort along with a declaration of five strategic priorities:

  1. Deliver on FDA consent decree milestones
  2. Ensure reliable supply of OTC products to retailers and consumers
  3. Achieve brand leadership
  4. Rebuild customer trust including top retail customers
  5. Execute a return to market plan for core U.S. brands and SKU’

J&J subsequently centralized its supply chain efforts under a singular leadership model, along with a singular quality and compliance model. In the systems area, a four year program was outlined to consolidate an overall systems landscape that was described as 60 different ERP systems supporting 275 operating companies

The McNeil statement indicates: “this plea agreement fully and finally resolves the federal government’s investigation, and closes a chapter on actions that led the company to review and significantly improve its procedures.”

In its reporting, The Wall Street Journal cited the U.S. Justice Department as indicating that McNeil continues working to bring the Fort Washington facility into regulatory compliance and plans to re-open the facility once it gains approval from the U.S. Food and Drug Administration. McNeill’s other production facilities are reportedly running under a 2011 permanent injunction and Consent Decree. McNeil indicates that a third party cGMP expert has now submitted written certification to the FDA after determining all sites are conforming with applicable laws and regulations.

Seven years and a considerable financial sum later, J&J continues in its organizational wide efforts to address consistency in good manufacturing practices.

No doubt, this has been an expensive lesson for Johnson & Johnson, as well as a rather important learning for the remainder of the industry regarding the critical importance of consistent product quality and supply chain wide standards in avoiding negative business outcomes.

Bob Ferrari

 


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