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Supply Chain Matters Guest Contribution: Web 3.0 Enables the Smart Supply Chain Network


A Supply Chain Matters Guest Contribution

by Rich Sherman

In my previous Supply Chain Matters guest contribution, I outlined the concept of Web 3.0 enabling a fundamental transformation in supply chain management from linear, sequential thinking and communication to a demand/supply network, systems thinking, and dynamic communication. As we evolve in the Connected Age, the transformation is emerging as the Smart Supply Network 3.0 (SSN 3.0). It’s an extension of the vision I painted of a Smart Supply Network in my book. Two years later that vision is becoming reality as Web 3.0 is becoming a reality.

Smart Supply Network 3.0

Smart Supply Network 3.0

Smart Supply Network 3.0

Supply chain problems are caused from the uncertainty, time delays and amplification of variability based on linear communication of demand changes from one function to another and from one organization to another. The parts of the chain don’t work together. They often work against one another. They may be linked physically; but, rarely are they “plugged” into one another.

They don’t have or share data and information about the plans and performance of their operations or their changing demand/supply requirements. They are consistently “out of sync” with one another. As a system of supply responding to demand variation, they generate uncertainty, waste, cost, time delays, over and under stock, increased transportation cost, inefficient capacity utilization, and, well, you name it. In short, supply chain management is managing the complexity of the never ending consequences of unplanned events. The supply chain is a dysfunctional system that increases the cost of all participants in the system.

Web 3.0 will fundamentally transform the supply chain from a dysfunctional chain of unconnected organizations working separately to create inefficiency into a connected system of organizations supported by smart analytics that simultaneously and synchronously respond to variability to increase accuracy, visibility, and velocity.

We have to lose the notion of a “Supply Chain”. It is not a chain. It is not sequential. It is a system. It is omni-directional. Organizations participate in a dynamic network of other organizations to satisfy demand at a consumption point. The organizations in the network are not “links”, they are nodes. They work together in conjunction with other nodes to distribute material and information across the network to satisfy demand at consumption nodes. Connectivity is provided physically by transportation lanes and carriers and information is provided by communications lanes (Web 3.0) and telecommunication carriers. Forget about supply chain, in the 21st century we must operate and manage a Smart Supply Network 3.0.

What does it look like? Simply stated, SSN 3.0 enabled by Web 3.0’s ubiquitous communications network, automatic identification and data collection, location based services, and business intelligence provides end to end predictive and prescriptive analytics, decision support, and transparency that transcend visibility within the system of systems to synchronize the flow of material, services, and information. More accurate timely data, shared simultaneously, enables the organizations comprising the network to work together to optimize resources and physical flow to reduce time, inefficiency and inaccuracy, and cost while increasing service and capacity utilization to serve the demand of the connected consumer and customers across industries. SSN 3.0 is simply the way to operate and lead in the connected age.

Break the chain and jump on the network.


About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation.

Web 3.0- The Convergence of the Internet of People (IoP) with the Internet of Things (IoT) Resulting in the Internet of Everything (IoE)


A Supply Chain Matters Guest Contribution

by Rich Sherman

Supply Chain Management is at the beginning of a fundamental transformation from linear, sequential thinking and communication to a demand/supply network, systems thinking, and dynamic communication. The transformation is being driven by the new wave of technological change, “The Connected Age.” Since the commercialization of the Internet and development of the Web in the mid-90’s, we have become “wired.” The impact of the Internet, however, may have been understated. As we have become wired, the “Internet of People (IoP)” has become ubiquitous to us and increasingly mobile. There are 6.8 billion people in the world and more than 4 billion have a mobile phone. That’s 500 million more than own a toothbrush!

Mobility has untethered us from fixed locations. Wireless technology and access are becoming as ubiquitous as the Internet. Quite simply, it has enabled people to be always connected and always on nearly everywhere. According to research provided by “path to purchase” data provider Retailigence, 91% of adults have their mobile phone within arm’s reach 24/7. And, the number of mobile phones that are “smart” is increasing. According to eMarketer, in 2014 there will be 1.75 billion smartphone users worldwide and will be growing to nearly half of all mobile phone users by 2017.

And, the number of mobile phone and smartphone users that use their mobile device to connect to the Internet is growing as well. In 2014 (according to eMarketer), 2.23 billion people will be using their mobile device to access the Internet. With built in intelligence, Internet access, Global Positioning Systems (GPS), and the increase of Location Based Services (LBS), the amount of available consumer market information is, well, Big Data.

You don’t have to imagine it, it is happening as we speak. 81% of smart phone users have used their smart phone to conduct an on line product search with 50% of them making a purchase with one. Retailigence, for example, enables retailers to upload their active store location inventory and pricing data to the Retailigence data base. Mobile App developers can access the data base for on line search to off line purchase applications. As the “connected consumer” searches for a product, their location information is visible to the app which displays not only on line products, but products and prices that are in a store located within a geographic radius of the connected consumer. They can order on line or more probably stop by the store and pick up the product at their convenience, no drones necessary.

The retailers and brand manufacturers can see who and where their products are being considered, automatically collecting “point of demand (POD)” data. Using POD data, retailers and manufacturers can push coupons or other incentives to the connected consumer to encourage them to buy their brand or shop at their location. We would call that “demand visibility” to drive delivery speed and accuracy, and supply chain planning and replenishment.

With 74% of smartphone users using their device while shopping in the store, many retailers are developing and deploying apps to allow the connected consumer to scan their products into their shopping carts and when ready, they simply “check out” providing payment information and departing the store, no checkout counter, no lines, just a satisfied customer. For those customers without a smartphone, wireless scanners are provided by the retailer. Real time “point of sale (POS)” data, store inventory update data, consumer market basket data, location data, demographic data and payment received data to name a few of the outputs. We just need a checkout ringtone; because, that should be music to the retailer’s ears.

Why is this important to Supply Chain?

Traditionally, information on the Internet has been dependent upon people entering the data; hence, the reference to the Internet of People earlier. But, with advances in wireless connectivity and automatic data collection technologies, such as Bluetooth, RFID, sensors, monitors, readers, etc., we have been seeing the evolution of the “Internet of Things (IoT)” as suggested by Kevin Ashton in 1999.

Have you see the new “smart house” technologies that are emerging? No more wires. Using Bluetooth technology video devices, speakers, home theater systems, thermostats, appliances, anything in the household is connected to the home server/wireless hub for access by apps. The resident simply accesses the appropriate app from their smartphone or tablet to receive monitored information about what’s happening in the house and can issue commands to lock doors, initiate video surveillance, speak with other residents or delivery personnel, start the coffee or microwave, turn on or off lights or entertainment, and the list and possibilities are growing. All of these “things” are now connected to the Internet, automatically collecting data about the environment, health, and functions they are operating in.

While these are consumer applications that everyone can understand, the growing convergence of the Internet of People with the Internet of Things is resulting in an “Internet of Everything (IoE)” that is not only transforming the consumer world; but, it is resulting in a fundamental transformation of the commercial work and the supply chain in particular. More and more asset management systems connect the assets to the Internet for collection and communication of location, health, and performance data. Commercial (and passenger) vehicles are outfitted with in cab computers and telematics for monitoring and communicating location and performance data. Estimates on the number of devices already connected top 10 billion and are increasing to more than 50 billion in five years or less. Quite simply, there is a limit to the growth of the IoP; but, growth in the IoT is unbounded.

The IoE holds the promise of transforming the linear supply chain of the past to a transparent supply network system of channel participants driven by real time automatic data collection providing real time visibility and analytics to the information they need to adjust the flow of goods to respond to changes in the point of demand variation that is also being collected automatically in real time.

The Web was initially limited to the display of static pages. Web 2.0 provided dynamic, interactive, and collaborative capabilities for the IoP. We believe that the emergence of the IoE signals the transformation to Web 3.0. There is considerable debate about Web 3.0 within the technical community; however, simply put, Web 3.0 extends 2.0’s capabilities and is ubiquitous, data driven, analytic (predictive and prescriptive), and actionable. Web 3.0 enables advances beyond traditional supply chain management by collecting real time data and providing predictive analytics to recommend prescriptive actions to manage increased complexity and change for competitive advantage. In my book, I refer to a Smart Supply Network; but, with the IoE, we may be seeing the emergence of a Smart Supply Network 3.0. But, that’s the subject of another blog. Stay tuned.


About the Author: Rich Sherman is an internationally recognized researcher and author on trends and issues across supply chain management. He currently serves as a Principal Essentialist at Trissential LLC in their supply chain consulting practice. His book Supply Chain Transformation: Practical Roadmap for Best Practice Results (Wiley, 2012) has received praise by practitioners, academics, and non-supply chain executives as a great read on business transformation.


Dear IBM Investor- We are Investing Seriously in the New Paradigms for Computing Platforms


Supply Chain Matters has opined in prior commentaries that significant high-stakes battles are underway among the major enterprise-level technology vendors as to which provider will ultimately dominate the cloud computing paradigm.  This battle involves incredible amounts of money and big strategic bets. Vendors such as Amazon Web Services, EMC, Microsoft, Oracle, SAP, Salesforce and IBM, to cite just a few, are placing big money stakes into this computing dimension.

By our lens, IBM got a late start in the area of cloud, but has dedicated much more effort and resources since.  In June 2013, we featured a commentary reflecting on the announcement of IBM’s intention to acquire privately held SoftLayer Technologies Inc. at a deal estimated to be around $2 billion. At the time, IBM signaled its intent to establish a Cloud Services division positioning SoftLayer as an anchor technology.  Our commentary further wondered as to when cloud computing strategies would make a more profound presence in IBM’s Smarter Commerce portfolio which includes elements of Buy, Sell, Service, business analytics and intelligence.

A new data point to IBM’s intent and commitment is IBM’s CEO Virginia Rometty’s published letter to IBM stockholders that, in essence, outlines efforts to invent a new and very different IBM. Ms. Rometty is clear and concise in acknowledging that short-term performance in 2013 did not meet the company’s expectations and that significant business change is underway in two dimensions. The first is shifting IBM’s hardware business to new, more lucrative market opportunities.  A part of that strategy was the January sale of the Intel-based x86 server business to Lenovo. The second strategy component is renewed concentration on future growth markets in specific global regions such as Africa, Asia, Latin America, the Middle East and other growth regions.

A broader agenda involves three declared strategic imperatives, each betting big on what IDC defined as the “Third Platform” of computing, namely Big Data Analytics, Cloud and Mobile.

The first IBM imperative is to leverage market opportunities in an all-in effort to transform industries thru leveraging use of advanced Big Data, analytics and applications technologies.  Stated is that two-thirds of IBM’s Research efforts are now devoted to data, analytics and cognitive computing.  Over $24 billion has been invested thus far in this area, with 15,000 consultants and 400 mathematicians focused on data-driven initiatives. This includes IBM Watson Group which alone consists of 2000 people and a $1 billion investment in ecosystem partners.

The second declared strategic imperative relates to transforming enterprise IT infrastructure for the new paradigm of cloud computing. The letter notes that in 2013, $4.4 billion in revenues originated from IBM’s cloud segments, a 69 percent increase. Approximately $7 billion on 15 acquisitions have been invested to-date to support this initiative. That includes the acquisition of SoftLayer, noted above, which is now characterized as the foundation of Big Blue’s cloud infrastructure level moving forward. Other elements are noted as a “cloud-first” approach for all IBM software development labs globally coupled with a new class of “cloud middleware services” to manage complex environments. IBM is further expanding its global cloud footprint from the current 25 data centers to 40 data centers strategically spread globally.  This is obviously an effort directed at countering cloud computing providers Amazon, Apple, EMC, Oracle and others.

The third strategic imperative is to enable “systems of engagement” for enterprises. That should be music to many supply chain and B2B/B2C focused teams. Quoted are forecasts that in just two years 57 percent of companies now expect to devote more than a quarter of their IT investments in this specific area. Unstated but implied is that the implication is that business focused teams will drive and own more of the final say in technology selection and adoption. This area is about leveraging social media based tools, mobile based interaction and computing needs. Over a dozen acquisitions have been initiated thus far to support this imperative. IBM is further leading by example, launching an internal Connections social platform supporting 300,000 users and 200,000 communities. Client Collaboration Hubs have also been formed to support collaboration and coordination directed at IBM’s top 300 accounts.

Many of today’s enterprise technology vendors hype their efforts for investing in cloud and other “Third Platform” computing support strategies and the reality is that this is indeed a high-stakes effort as to which vendors will dominate the future technology landscape.  IBM is not the only vendor that is quickly altering its strategic agenda, betting over $30 billion to-date on the new technologies that will form the landscape of future IT technology needs. Not all vendors have that clout as well as existing reach and mind-share, and this represents the high-stakes of this massive competition for technology dominance.

In prior commentaries, Supply Chain Matters noted that IBM’s most significant challenge was in cutting through layers of organization to harvest strategic investments into compelling solution offerings for customers, much quicker than others in the market.  It would appear that the company is starting to internalize that very need, including leveraging the use of “systems of engagement” for its own internal needs to accelerate time to benefit for its B2B and B2C customers.

For the product management, supply chain, and B2B/B2C networks community, the added proof points are the declared IBM strategic imperatives applied to the key competency components that make up IBM’s Smarter Commerce portfolio.  This coming May, the annual Global Smarter Commerce Summit once again convenes, and we, along with others, will be seeking and probing for evidence of harvesting strategic investments to dramatically enable faster, smarter and more timely value-chain business process capabilities for manufacturers, retailers and services providers. That is where the rubber truly hits the road in strategic imperatives.

Bob Ferrari

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


Startling Revelation that Foxconn is Collaborating with Google on Advanced Robotics

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In what we would characterize as a significant development, a posting on the Wall Street Journal Digits Technology blog quotes informed sources as indicating that global-wide contract manufacturer Foxconn, also known as Hon Hai Precision Industry, has been quietly working with Andy Rubin of Google on developing advanced robotics that can be deployed within Foxconn factories.  The posting further indicates that Foxconn has dispatch engineers to the campus of the Massachusetts Institute of Technology (MIT) to learn the latest in manufacturing automation technology.

Google has acquired eight robotics companies in the last year and has established a robotics development group. The WSJ posting makes note of the recent acquisition of Boston Dynamics, a company that has designed mobile research robots for the U.S. Defense Department. Speculation is that Google’s interests are in building a new robotics operating system for manufacturers, similar to its Android mobile operating system.

What makes this revelation more interesting is that Foxconn is the major contract manufacturing services provider to Apple and other high tech and consumer electronics providers.  In essence, Google may be assisting these OEM’s in assuring a considerable manufacturing presence in China and other lower-cost manufacturing regions.

A number of major players are vying for control of the next iteration of automation and/or operating systems associated with the “Internet of Things”.  In addition to Google, Amazon, General Electric, Siemens, Qualcomm and others are investing large amounts to be on the forefront of the next iteration technologies that leverage combinations of robotics, additive manufacturing and predictive analytics techniques.

Supply Chain Matters has previously brought attention to Foxconn’s aggressive goals to automate its factories with a million robots to counter increasing direct labor costs in China. This revelation comes after other announcements that Foxconn had established a joint engineering development effort with Carnegie Mellon University in the U.S.

This revelation comes in the throes of a recent revelation that Google’s Chairmen Eric Schmidt was the recent recipient of a $100 million compensation package, and the release of a former Yahoo senior executive with an exit package in excess of $100 million. There have been public protests in the San Francisco area concerning the growing wealth disparity among Silicon Valley companies, which gets continually reinforced by these revelations.

One can trust that Google will share intellect and collaborate with other manufacturers located across global regions including the Eurozone, North America and other regions. It would indeed be unfortunate that a future headline declares that other manufacturing regions are placed within a strategic competitive disadvantage because of the actions of a Silicon Valley giant with a singular goal.

Bob Ferrari

Lessons From a Flawed Software Deployment Plan

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In the Business Technology section of Wednesday’s edition of the Wall Street Journal, an article appeared that is often the nightmare of any provider of enterprise software. The article, Avon to Halt Rollout of New Order Management System (paid subscription or free metered view) reports that Avon Products has elected to pull the plug on a $125 million SAP software implementation. That is no small amount.

It is further a fresh reminder for supply chain leaders and technology selection teams of two very fundamental shifts occurring in software evaluation deployment and acceptance.

Readers familiar with Avon Products will recall that they practice a unique business model.  Independent (non-employee) salespeople of all walks of life represent and sell Avon products to friends, colleagues and acquaintances, with sales assistance tools provided by Avon.  The personal relationships among the independent Avon representatives sustain continuous sales cycles involving varieties of product offerings. Orders are continuously inputted by the independent sales representatives and order status is in-turn provided on a continuous basis.

The WSJ reports that Avon began its implementation of an SAP order management system in Canada in the second quarter of this year, and while the system was described as working as planned, it apparently was disruptive for Canadian Avon representatives. Plans called for a broader worldwide rollout over the next four years. The WSJ further reported that this was not the first broad system implementation problem encountered by Avon.  Two years ago, the Brazil operation attempted to move from manually intensive operations to a deployment of enterprise software from Oracle, without acceptance.

According to a filing with regulators this week, Avon elected to halt the company-wide rollout and expects to incur anywhere from a $100 million to $125 million write down of the cost of the software. The company will continue using the software in Canada. In the earnings conference call, the CEO of Avon acknowledged the issue in Canada but indicated the system was working as designed.  Further acknowledged was the degree of disruption that occurred in daily processes associated with independent representatives that resulted in steep fallout of sales resources.

In the article, a spokesperson for SAP is quoted as indicating the order management system “is working as designed, despite any issues with the implementation of this project.” A further statement indicated a “solid and productive relationship.”

Solid and productive, but at a significant cost write-off and another lesson learned.

While we may not have added testimony to what did or did not occur at Avon,  Supply Chain Matters has two observations to share with our community of broad supply chain management followers.

The first and most obvious is the critical importance and weighting of user acceptance in any evaluation and systems implementation.  The most advanced and sophisticated technology is of little use if those that interact with the system on a frequent basis have no confidence in the system’s value in helping with completion of their work or providing deep insights to decisions. Avon’s unique requirements concerning daily use from thousands of independent representatives had to have been a key concern. With today’s increased availability of cloud-based software alternatives, end-user acceptance and uptake takes on even more meaning.

The second involves the groups that are involved in selection and accountability for the results from investments in advanced technology.  Last week, Supply Chain Matters called attention to IDC’s validation that the information technology buyer influence continues to shift to the business side.  The industry analyst firm predicts that 61 percent of technology focused projects will be business rather than IT funded.  The implication is that business and supporting supply chain functional teams now hold far more influence on specification of required business process and associated technology investments. With that comes more direct accountability for successful implementation and timely business benefits.

While some may view the Avon story as another knock on the complexity and cost risks of complex ERP systems, it is rather important to focus on how important user input, change management, comprehensive training and acceptance make for successful systems implementations.

The business is clearly gaining more influence in technology specification, selection and deployment.  Gaining timely business benefits and expected outcomes is ever more dependent on insuring the commitment of those end-users accountable for getting the work done is incorporated into planning and deployment.  Too often, teams dwell on specifications and cool functionality without allocating adequate time for user acceptance.

Bob Ferrari




Kellogg Embarks on Multi-Year Supply Chain Efficiency and Effectiveness Initiative

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The Kellogg Company, a consumer goods icon with brands such as Kellogg cereals, Cheez-Itc rackers, Keebler cookies and Eggo waffles, earlier this week announced a billion dollar cost cutting plan that would extend over the next four years.  

This effort is reported by business media to be motivated by increased competition in the breakfast and snack food industry segments along with softer demand from economically distressed consumers. Business media reports that these cutbacks would result in the estimated loss of 2000 jobs, however, with the four year window, Kellogg management aims to achieve headcount reductions through normal attrition. From our Supply Chain Matters lens, the new Project K efficiency program looks more like an effort to drive global supply chain wide efficiencies and create more integrated supply chain business processes and services across global product lines.

In its most recent fiscal third-quarter financial results, Kellogg reported essentially flat revenues and decreased operating profits. While global net sales are increasing, North America based sales declined by 1.3 percent. The company has been forecasting sales growth of between 4-5 percent for the current fiscal year.

According to a report published in the Wall Street Journal, the new Project K initiative involves a complete re-tooling of the company’s supply chains that includes spending $1.4 billion by the end of 2017 to relocate production lines and globally integrate business process services.  Kellogg is targeting upwards of $475 million in annual cost savings as of 2018, as an outcome from this latest announced initiative.

Supply Chain Matters calls reader attention to our June 2012 commentary regarding the acquisition by Kellogg of the Pringles snacks business from Procter and Gamble.  In 2012, Kellogg was handed a fortunate opportunity to acquire the Pringles business after the deal to sell that line to Diamond Foods was undone because of certain revelations.  Kellogg quickly agreed to a $2.7 billion all-cash deal to acquire a global, well-run brand and become a top player in the global savory snacks industry segment. However, Kellogg had to bring on a high debt load in order to pull off the financing of this deal, reported to be upwards of $2 billion. In the latest fiscal quarter that ended in September, the Kellogg balance sheet reported $6.3 billion in long-term debt.

At the time of our 2012 commentary, the combined synergies of the existing Kellogg and Pringles snack businesses were reported to be $10 million in 2012 and a range of $50-$75 million after 2013.  In 2012, Kellogg has been in the process of re-implementing SAP within its U.S. operations, and the addition of the Pringles business presented an added opportunity to integrate within the SAP environment. P&G itself has committed ongoing service arrangements to transition Pringles and was a very sophisticated user of SAP applications. We speculated that Kellogg teams would gain valuable learning and insights particularly regarding deployment and use of SAP advanced supply chain related applications.

Prior to  2012, Kellogg had some previous supply chain related quality setbacks related to past product recalls involving its Eggo product line prompting its CEO to declare that the company had to restore investor confidence in Kellogg supply chain capabilities. The Pringles integration again offered opportunities to revisit needs in this area.

Of late, CPG companies continue to feel the Wall Street based reverberations of the previously announced $23 billion acquisition of HJ Heinz by Berkshire Hathaway and 3G Capital. Heinz, a stalwart of global brand identity was acquired to harvest the cost savings synergies of its global operations, and that tremor seems to haunt existing CPG manufacturers since activist investors continue to want to play-out the next cash generating opportunity. We have opined that In the light of challenging revenue headwinds, company senior executives have launched aggressive stock buy-back programs with available cash to ward off hostile takeovers. Alternatively, Wall Street analysts conclude that previous efforts at cost cutting and headcount reductions have run their course and the new path to growth lies in more industry consolidation and financial engineering. Thus another era of mega acquisition activity seems at the ready, and the psychology of CPG senior executives’ shifts. These pressures naturally flow to supply chain leaders who must deliver more cost savings to fund other business investment needs.  Some supply chain analysts chastise supply chain teams for not delivering industry leading metrics of performance.  We believe that the realities of current or future business outcomes have more to do with performance goal setting.

The new Project K multi-year cost saving effort presents opportunities to rationalize global production capacity, consolidate category product management to a regional focus and provide common supply chain related business processes across multiple regions.  It is probably another response to ward-off mega acquisition industry pressures. This effort probably should have pre-ceded efforts to adopt a standardized systems platform.  None the less, Kellogg is now a global CPG branded company and must demonstrate market and supply chain response capabilities that exhibit responsiveness to changing consumer needs across global markets.

The Kellogg corporate mission statement includes the following: “We are a company of promise and possibilities.”

From this author’s perspective, the success of Project K needs to be firmly grounded in the above principle.

Bob Ferrari

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