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.
This author recently had the opportunity to interview Kinaxis senior executive Trevor Miles where we explored some important topics related to multi-industry supply chain challenges and the Kinaxis efforts in supporting these challenges. In our conversation, we covered a number of topics related to supply chain business processes and enabling software technology, as well as the current state of predictive analytics.
The following summarizes our questions and dialogue.
Q: Would you describe for our readers, your current role with Kinaxis?
My role at Kinaxis is Vice President, Product Innovation and Thought Leadership, and my activities are focused in three areas. They include overseeing long-term strategic direction for products, working with key customers and prospects on future product direction, and providing an external voice for Kinaxis in areas of brand awareness, social-media dialogue and speaking at major conferences.
Q: What in your view have been some of the major accomplishments for Kinaxis during the past year?
We at Kinaxis are very pleased to see strong demand and continued traction among our key targeted industry verticals. The success of any SaaS company is obviously reflected in customer adoption and we are pleased with our broad market traction and customer adoption rates, highlighted in particularly by record quarterly growth in subscription revenue in Q1 of 2015.
From a product perspective, continued expansion of the Kinaxis RapidResponse functionality with the addition of multi-tiered inventory optimization, attribute-based planning and supply chain segmentation support continues to generate lots of customer interest.
A key business accomplishment was our very successful initial public offering last June on the Toronto Stock Exchange.
Q: In your travels, speaking at conferences and talking with prospects and customers, what do you sense as being the most dominant business process challenge described by cross-industry supply chain or Sales and Operations teams? In that same vein, what is described as the most significant technology challenge?
A frequent business process challenge often reflected by multi-industry sales and operations planning (S&OP) teams is the need to attack the various cross- functional information and decision-making silos involved in the process. I often hear needs related to having a more detailed understanding of the various tradeoffs of decision-making, especially related to various competing metrics. Today, many S&OP processes are supported by IT architecture that was largely functionally-focused which perpetuated islands of information. Whereas some of our competitors capture and synthesize data between organizations, our focus is to capture all pertinent information related to planning the entire supply chain.
Regarding the most significant technology focused challenge, it often relates to data. Many of our larger customers average upwards of 19 instances of an ERP application running across the supply chain network, some even higher. When considering today’s needs reflected in S&OP and more frequent new product introduction cycles, some information is not even in the existing ERP system but resides elsewhere. The challenge is making sense of the data and providing proper context in making data actionable.
Industry analyst firm Gartner recently modified its technology maturity model to include five stages, instead of the prior four. Stage 3 equates to integration of all data sources, and I find that repeated over and over again. The challenge is making sense of information.
While we are on the topic of technology, we should include elements of talent management. Today, there is a clear need for a more horizontal focus and understanding of the supply chain. Some organizations have a talent pool that remains too focused on vertical functional requirements without full consideration of the various tradeoffs and impacts related to supply chain-wide decision making.
Q: How is Kinaxis preparing to address the challenges described above?
Customers are looking for a solution to two fundamental challenges. They include the constant need for IT resources to mine ERP data in the desired format and the ability to support larger planning models. The Kinaxis Data Integration Server is directed at these data harmonization needs. By feeding raw data into a separate server we can facilitate significant reduction in the memory requirements for the planning server, allowing greater and more responsive performance in planning process needs along with more flexibility in data integration needs.
Kinaxis RapidResponse is architected as a single data model for planning and it associates data to specific people responsible for decision-making. With the introduction of both an integration server for housing and categorizing raw data, the planning server can be even more responsive in generating supply chain wide planning models. If a demand planner changes the future forecast, there is feedback as to how-much of the plan is likely to be met on-time. Planners can be more proactively alerted to unplanned events, as well as the consequences of the event. Additional what-if scenarios can be generated to ascertain most feasible approaches and/or tradeoffs in accomplishing a certain plan.
Q: Kinaxis and its teams have spoken previously about the notions of Supply Chain Control Tower capabilities. What’s your assessment of where this type of capability stands today? In your view, how long would it be before we begin to observe wider deployments of such capability?
There are two distinct approaches to control towers, one being a logistics execution approach, the other being an operations and planning resource approach. Kinaxis has advocated and supports the latter, but there is a role and value for both capabilities. The need to bring together planning and execution in a near real-time control tower perspective remains an important and differentiated capability.
The logistics approach is focused on day-to-day execution, namely “where’s my stuff?” and “Is it on-time?” From a change management lens, many organizations are not ready to get their hands around both execution and planning and there is currently more internal support right now for an execution focus. However, Kinaxis remains committed in support of the planning and operations focused supply chain control tower.
Q: Supply Chain Matters describes how more predictive analytics capabilities will be widely incorporated within supply chain planning, S&OP and response management capabilities? In your view, what’s the reasonable timetable for teams to expect to be able to leverage these capabilities across multi-industry supply chains?
Supply chain planning, in all its forms, has been predictive since its inception, demand forecasting being the perfect example. However we find that the notion of predictive analytics is a squishy term, and not clearly understood by industry supply chain teams. And the value of prescriptive analytics – for example, the ability to determine likely demand satisfaction issues based upon supplier decommits – has not been exploited fully by organizations. Supply chain communities are still trying to absorb the potential impacts of Internet of things and data lakes. These can be exploited by supply chain organizations to know sooner and act faster using prescriptive analytics. For predictive analytics it is more about knowing about the specifics of data being collected, the relevancy and context of the data before making the leap towards more predictive analytics. We do not see the supply chain organization leading the charge for predictive analytics, at least not now.
This concludes this executive interview with Kinaxis executive Trevor Miles. For further information, please click on the Kinaxis logo located in our Supply Chain Matters sponsorship panel.
Bob Ferrari, Executive Editor
Disclosure: Kinaxis is one of other current sponsors of the Supply Chain Matters blog.
In our prior Supply Chain Matters posting we called attention to the evolving attraction for leveraging predictive analytics in supply chain decision-making practices which has added to the continued pent-up demand for data scientists. We highlighted a guest contribution indicating that big data and more predictive analytics capabilities can be non-effective if not preceded by a rigorous review in determining if current key performance indicators (KPI’s) and business metrics are actually capturing the true drivers of business outcomes.
During SAP’s recent 2015 Sapphire and ASUG conference, SAP co-founder and Supervisory Board Chairmen Hasso Plattner’s conference keynote touched upon this very aspect, which warrants repeating. He touched upon the notion of the boardroom of the future, not being occupied by reviewing historically based KPI’s but rather “fact-based management.” Hasso described this as a “massive change on how companies manage information” and further, “we cannot hide data anymore”.
That last statement may well resonate with our readers since too often, KPI’s are selected to measure can-do performance areas tied to individual organizational, team and personal bonuses that do not necessarily link to an overall business outcome required for products, processes, margins and/or risks. They are too- often, anchored in past performance coupled to a consensus of what can be comfortably accomplished vs. what should be expected given the industry and business environment. Concerning or bad news can be hidden until it is too late for the business to overcome the effects.
In his keynote, Hasso addressed such a change as “moving from dashboards to active boards.” That is an important and far different metaphor.
It implies continuous and changing analysis grounded in overall outcomes and assumes that business events will indeed be constantly changing and that performance metrics should set both a target and a constant moving analysis of potential outcomes based on various business and product scenarios. Such a moving analysis assumes that organizations and teams can be fluid and flexible, responding to market opportunities, threats or risks in a more proactive and collective manner and in the context of best desired outcomes. It further implies that management is very actively engaged in understanding how the end-to-end supply chain is contributing or detracting from desired and/or expected outcomes. Bonuses and performance are tied to best enterprise outcomes vs. individual outcomes.
Such a change does not occur overnight and will take time to evolve. As noted in a previous commentary, executives need to be granted the broadest end-to-end supply chain leadership and accountability with certain mandates to address existing value-chain challenges and to improve business outcomes. Supporting staff with data science skills, while critical, are not the primary skill need. Knowledge of the business, the end-to-end supply chain, and organizational change management needs to be coupled to data science skills.
In the meantime, we advise supply chain leaders to indeed recruit talent with data science skills, and then rotate these new superstars among various supply chain functional and geographic assignments. Challenge them with local problems and with introducing positive overall change. Insure active mentorship and sponsorship with the end goal being a select group of business analysts that can take on the most difficult challenges while garnering the respect of others.
Included in our Supply Chain Matters Predictions for Industry and Global Supply Chains (available for no-cost complimentary downloading in our Research Center) are what we predicted would be certain extraordinary industry-specific challenges. The packaged consumer product goods and food industry, specifically large, global branded firms and their supply chains, has been included in our list for the past three years. As we approach the mid-way point of 2015, the crisis of “Big Food” has now reached its most disruptive and dynamic point, with consumers sending a very clear message regarding healthier food choices and more natural ingredients in their buying preferences.
The crisis has had acute market, channel, investor and operational implications which continue to cascade among cross-functional CPG supply chain and product management teams. Rather than reminding our readers residing in the industry of the constant pain points they already know and deal with each week, we would rather provide help in providing perspectives on helpful ways to manage in such an environment.
Our previous commentaries have noted that setting continuous improvement goals predicated on months of key performance indicator history, or industry benchmarks is not going to cut it. Managing from the rear-view mirror perspective is not going to cut it. The crisis of big food is moving at unprecedented transformational light speed, which we will touch upon later.
As large CPG firms continue to serve up grim or disappointing financial results as a result of these forces, as well as others, Supply Chain Matters offered three important strategies for our CPG industry readers. They included a critical need for increased product innovation and quicker introduction of new products in spite of continued pressures to reduce costs. Volatile and rapidly changing global markets require that Sales and Operations Planning (S&OP) teams anticipate such market changes with the ability to sense and respond on a more timely basis. The focus clearly turns toward an outside-in perspective, allowing the supply chain to respond as quickly as possible to market opportunities or threats. Today, natural and organic foods have a high online presence including online outlets such as Amazon Fresh. Finally, supply chain segmentation strategies, those that orient supply chain resources to the most influential customers, most profitable market segments or highest customer growth opportunities are now ever more essential.
As more global food companies turn their attention to acquiring more organic, sustainable and/or ethical food supply chains, we offered pointers for more effective supplier management, specifically an emphasis toward longer-term buying agreement that assist smaller suppliers in the required investments needed to produce healthier food. We noted how industry observes pointed to Hain Celestial, Pacific Foods and Chipotle Foods as good examples for these strategies.
In this commentary, we call reader attention to two industry focused articles published this month that are now drawing very wide interest and attention among traditional print and social media channels. They offer similar industry observations but slightly different tactics, because their prime industry audience is different.
The AdvertisingAge’s arictle Big Food’s Big Problem: Consumers Don’t Trust Brands, addresses the current crisis from a branding lens concluding that:
“Quite simply, big brands are losing one of their most valuable assets: consumer trust. And the fight to regain it will shape the industry for years to come.”
The article cites Boston Consulting Group and IRI data indicating that some $18 billion in sales have shifted from large to smaller CPG firms from 2009 to 2014. Major retailers, convenience foods and restaurants are responding to consumer desires are now shifting supply chain sourcing, retail assortment and merchandising strategies away from processed to feature more natural and organic food products on shelves or on menus. On the subject of acquisition of other more desirable brands as a strategy, the message is avoiding some major mistakes incurred by the likes of Kellogg with its acquisition of Kashi. It further advocates for a hands-off strategy in terms of blended marketing strategies.
What we believe is an even more profound article, one that we highly recommend, was one published by Fortune, The War on Big Food. We view this article as one with a perceptive product operations and supply chain perspective, in addition to branding.
Need more facts related to industry change- the article cites a Credit Suisse equity analyst as declaring that the top 25 U.S. food and beverage companies have lost an equivalent of $18 billion in market share since 2009. A former Con Agra executive who know runs a natural foods company is quoted: “I’ve been doing this for 37 years and this is the most dynamic disruptive and transformational time that I’ve seen in my career.”
Fortune observes that almost all big CPG companies are radically re-thinking their own product recipes while some are attempting to buy their way into the natural space through acquisition. Brought forward on a positive acquisitions theme are the positively perceived strategies of Campbell’s in its strategies with Boathouse Farms, General Foods in its acquisition of Annie’s Foods. The most important takeaway here was a perspective of acquiring more agile talent and resources and allowing the new entrant to continue to be independent in marketing and distribution strategy needs. The CEO of yogurt producer Stonyfield Farms notes that major food companies can bring their acumen, deeper pockets and global supply chain scale “but they should stay the heck out of their brand.” Rather than homogenize acquisitions into the huge supply chain, the acquired company determines best competitive strategy in its market segment.
Positive examples of rethinking existing recipes are Nestle and Hershey with their new ingredient approaches to current iconic brands. In the case of Hershey, it was helping longstanding suppliers understand that the company was committed to GMO-free or growth hormone free milk products. An important takeaway- for now, Hershey is reportedly willing to adsorb the added costs for the ingredient changes while it looks for savings elsewhere.
A final important takeaway of the Fortune article came from Hain Celestial’s CEO who admitted to the magazine that he is often grilled on a regular basis on margin growth. His reply to Fortune: “ If your products are non-GMO, organic and have no artificial ingredients you’re always going to give up 10% to 15% on margin.” He questioned whether other big CPG companies are really willing to leave such margin on the table. That perspective is ever more echoed by the post Heinz-Kraft merger and the notion of 3G Capital’s current assault on the industry.
For this author, the most important and powerful analogy describing current global CPG and food industry supply chains is indeed winning short-term battles to satisfy activists while losing the longer-term war of the brand and of the supply chain’s efficacy in fulfilling consumer needs. The supply chain’s goal is in the end, delivering satisfaction and service for product consumers.
In times of crisis, one has to invest in accelerated transformation, more agile business processes and better technology to accomplish such objectives. Many years of investment made up processed food supply capabilities and distribution channels and similar longer-term investments will be required to augment and sustain fresher, organic and artificial ingredient free supply chains. Work with and continue to educate your senior management teams in the balancing both short and long-term needs.
© 2015 The Ferrari consulting and Research Group LLC and the Supply Chain Matters© blog. All rights reserved.
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.
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.