This Supply Chain Matters commentary is a follow-up to our previous breaking news commentary regarding E2open and its acquisition of supply chain planning, collaboration and response management technology provider icon-scm.
Our initial commentary noted the previous favored Solution Extension partnership that icon-scm had in the area of SAP capabilities in response management or what is sometimes referred to as fast planning. I
In the interests of fairness, we noted that Supply Chain Matters had reached-out to SAP for comment in formulating our commentary, but had not heard back at the time of publishing.
This afternoon, SAP proactively responded and provided additional perspectives which Supply Chain Matters would like to share
We were informed by SAP representatives that the Solution Extension partnership with icon-scm and the application SAP Supply Chain Supply Chain Response Management by ICON-SCM has not officially be dissolved as yet. There is a prescribed process for winding-down such a relationship in terms of communication with existing customers, attending to existing sales cycles and other matters, but we were informed that the partnership is in all practicality is likely to be closed.
SAP confirmed that existing customers that have secured SAP support will be assured that they will continue to receive that support until maintenance contract renewal, or for the life of the application SAP customers utilizing icon-scm will likely have the option to renew maintenance with SAP or opt for another alternative including that of E2open. Existing customers should rest easy that both SAP and E2open have affirmed a transition support plan.
Regarding some background to the partnership, SAP indicated rather positive customer interest and uptake in the initial year of the icon-scm partnership, not so in the second and third year. Mark David, who has supply chain planning solution management responsibilities for SAP affirmed the importance of customer interest in supply chain response management capabilities.
While a lot of icon-scm interest came from customers from the high tech sector, SAP was challenged to generate customer interest from other industries. This was not from a lack of effort from the SAP Supply Chain Management Solutions Management team. a muted admission that SAP sales teams did not have either the domain knowledge or patience to ride out elongated sales cycles. SAP customers were apparently demanding a more harmonized approach in integration to the broader array of the SAP Supply Chain Management applications suite and thus willing to continue use of existing SAP planning applications such as APO, awaiting such harmonization.
While SAP viewed icon-scm as strategic down the road, there was apparently not enough momentum to justify a corporate acquisition decision at this time. SAP however affirmed to Supply Chain Matters that the company has been working on a full harmonized supply chain response management collection of capabilities that would address today’s challenges manifested by multi-channel fulfillment and more outsourced activities. That approach could likely include leveraging of the B2B networking patform provided by Ariba, SAP’s most recent acquisition concerning supply chain and procurement support.
Obviously, the timetable of that effort has a renewed emphasis and urgency.
Since our initial commentary, Supply Chain Matters has received additional background and other information from E2open which will be shared in a later commentary.
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters blog.
In what Supply Chain Matters would context as a sudden and stunning announcement, E2open Inc. announced late last night that it has acquired supply chain planning, collaboration and response management software provider icon-scm in a transaction valued at approximately $34 million in total consideration. (Disclosure: E2open is one of other named sponsors of this blog)
According to this morning’s briefing call with analysts, the transaction itself involves $18 million in cash, $9 million in stock and the assumption of $7 million in existing debt. The transaction is expected to close over the next 90 days. It was disclosed that icon’s calendar 2012 revenue run rate was $10 million in revenues, thus E2Open has apparently secured the company for 3 times earnings, a rather attractive sum by today’s standards. However, the $10 million revenue run rate contrasted with $7 million outstanding debt points to other problems that forced icon to act.
Founded in 1992, icon-scm was a privately held company and is current headquartered in Karlsruhe Germany. Our SAP readers should be familiar with icon-scm because back in 2010-2011, SAP had elevated the icon capabilities into the preferred partner status and announced its intention to incorporate the company’s response management capabilities into its supply chain management support capabilities. Subsequently, SAP announced the product, SAP Supply Chain Response Management by ICON-SCM with a listing on the SAP price list for the sales team to sell. SAP offered the capability as an augmentation for SAP supply chain management customers, especially those residing in high technology, consumer electronics industries. Among current icon-scm customers are Avnet, Foxconn, Hewlett Packard, Pratt & Whitney, Western Digital among others.
This morning’s briefing from E2open disclosed that the initial conversations began in March and accelerated to last night’s announcement. E2open managed to have icon-scm sign a no-shop agreement during these discussions. There was also a revelation in the analyst Q&A that SAP may have had intent to acquire but became distracted by other events occurring. For icon-scm, turning over the entire sales process to SAP may not have helped generate desired sales growth.
Supply Chain Matters has reached out to SAP to secure a comment regarding how this announcement will affect previous announced icon-scm capabilities for SAP customers.
E2open CEO Mark Woodward indicated his belief in this morning’s briefing that SAP will henceforth discontinue its partnership with icon-scm but will continue to support any existing customers. Woodward further indicated that all current employees and offices of icon-scm would be retained by E2open.
The announcement itself vastly accelerates the product roadmap timetable for E2open, with an indication of as much as 24 months. The roadmap calls for the first phase of data integration to occur in the first 6 months with plans to integrate icon-scm capabilities into the E2open network in 2014. The balance of icon-scm capabilities will be provided as subsequent versions of Rapid Deployment applications in a timetable that extends across 2014-2015. It is E2open’s desire to convert all existing on-premise customer agreements to a hosted, subscription based model, which will be the model of engagement going forward.
Obviously this announcement has significant impact to the existing supply chain planning, collaboration, response management and B2B network vendor base. It is another endorsement of the need for integrating supply chain planning with real-time execution in order to make more timely supply chain end-to-end resource decisions. For manufacturers and retailers contemplating the need to deploy such capabilities, the announcement provides further evidence that the vendor community is hearing your desire to offer such capabilities in a single vendor capability.
Supply Chain Matters will provide additional insights related to this announcement in subsequent commentary when further information comes forth. In the meantime, we believe this is a positive development for the market.
Disclosure: E2open is one of other sponsors of the Supply Chain Matters blog.
Supply Chain Matters recently had the opportunity to attend the MIT Crossroads 2013 conference sponsored by the MIT Center for Transportation and Logistics (CTL). In our Part One commentary, we highlighted both a UPS presentation and a multi-industry panel discussion of supply chain management futures.
For Supply Chain Matters, Tom Linton, Chief Supply Chain Officer for global based contract manufacturer Flextronics provided the one of the highlights of the conference in his vision of supply chain evolution. Mr. Linton provided a deep level of experience and insights in many aspects of supply chain management along with perspectives of having been based in Asia for nearly 22 years. At Flextronics, his responsibilities span all of procurement (direct and indirect materials), materials management operations, logistics and fulfillment, including managed supply chain for customers. Mr. Linton, in a Dave Letterman Late Show Top Ten delivery style, provided his Top Ten listing of the trends driving the future of supply chains.
We will not steal all the thunder of Linton’s delivery but will highlight what we believe were highlights of his insightful observations. Number 10 on his listing was the adoption of cloud computing, along with his message that this is indeed an emerging low cost and reliable trend in technology adoption, that “apps” for supply chain is an up and coming trend that most firms will utilizing within the next five years. Number 8 was the prediction that global labor costs would equalize, the implication being that labor arbitrage is a declining trend. According to Linton, we are reaching a point where direct labor costs across major geographic manufacturing regions is reaching parity and that leaders of tomorrow will leverage and manage a regional geographic footprint predicated on customer and product fulfillment needs. Strongly related to this prediction was number 5, the new emergence of regional and local sourcing. Mr. Linton observed that as many manufacturers shifted manufacturing sourcing to China, the component supply chains of many industries also shifted toward a China concentration. With the emergence of a renewed manufacturing presence in the U.S. , the challenge is to re-building a competitive supply ecosystem becomes more important. Readers may recall that Supply Chain Matters has observed these same implications and has called for similar investment in supply eco-systems.
Number #6 reinforced the need for supply chain skills specialization and new areas of skill needs in cloud computing, supply chain design, supply chain cost analysis and other areas. The number 4 prediction was the emergence of control towers, described as virtual integration of the supply chain supported by advanced cloud technology. For further descriptions of what is implied in control tower capabilities, readers can review any of previous Supply Chain Matters commentaries tagged with the “supply chain control tower” category. Number #3 prediction concluded that predictability becomes the competitive advantage. For Linton, predictability is defined in three fundamental questions:
- How safe is my supply chain?
- How fast is the supply chain/
- How cost efficient is the supply chain?
Finally, Linton’s number one prediction was that non-zero supply chains win, that transparent supply chain ecosystems focus on win-win balance for success vs. win-lose.
We want to also highlight the presentation delivered by Jim Cafone, vice-president of supply network services at Pfizer, who spoke on the challenge of managing highly flexible supply networks in healthcare markets, and how a cloud-based system backbone deployed by Pfizer has helped to overcome challenges of information latency and integration. Like other pharmaceutical and life sciences manufacturers such as Johnson & Johnson, Pfizer has centralized its global supply organization to help drive acceleration in required transformation. One of the unique challenges for Pfizer and pharma supply chains is that because of regulatory requirements, recipes are country specific. As an example, four variants of the highly popular cholesterol control drug Lipitor translate to 800+ global sku’s. Lipitor has recently come off global patent which moves the strategic focus toward a more cost-efficient and effective supply chain. Centralized control helps Pfizer to move toward more agile, cost-focused supply chains, built on enterprise supply platforms. Pfizer has also identified both transactional and analytical supply chain control towers as a long-term capability.
The Pfizer supply chain team has moved toward the cloud to provide what is described as a “device agnostic’ layer of information retrieval, one that spans current existing backbone ERP systems. Pfizer now requires all of its highly specialized logistics providers to automatically send tracking information into the Pfizer cloud that is supplied by GT Nexus. The described advantage was the ability to “plug and play” logistics providers into the network, drive differentiated operating parameters and a new “network” information model. A previous Supply Chain Matters commentary on building foundational supply chain control tower capabilities, stressed the critical importance of a singular information utility that spans the cross-organizational business processes and physical boundaries of the extended supply chain. The Pfizer presentation was a great example of that principle in action and garnering positive business outcomes.
For us, the MIT Crossroads 2013 presentations were the manifestation of industry supply chain executives reinforcement that our community has reached important crossroads into even newer and expanded dimensions of needs for agility, responsiveness and risk mitigation. We once again extend appreciation to the MIT CTL team for inviting Supply Chain Matters to this great annual event.
Supply Chain Matters had the opportunity in late June to attend the MIT Crossroads 2013 conference sponsored by the MIT Center for Transportation and Logistics (CTL). This was the 9th annual Crossroads event and as in past events, did not disappoint in terms of quality of the content and insights shared from the various presentations. Previous Crossroads events we attended were weighted towards an emphasis on select MIT faculty members’ talks on advanced supply chain topics along with faculty panel discussions on these topics. This year’s event was more weighted toward corporate level presentations, and the quality was just as insightful.
Among the highlights, Randy Strang, Vice President, Customer Solutions at UPS spoke of the current and future trends expected in Omnichannel online fulfillment and the single customer experience. One significant statistic shared was that 7 out of 10 shoppers prefer to access retailers via online channels. Nearly 84 percent of shoppers use at least one social media site to research a product in terms of other consumer reactions to the product. Most online shopping occurs between 6-9pm, which has an impact when customers request a next day or same day delivery option.
Many retailers and consumer focused producers are all too aware of the Amazon effect to online buying habits, and UPS has been shrewd enough to benefit from both sides of that equation. On the one hand, Amazon provides lots of revenue opportunities, on the other, retailers who desire to adopt omnichannel methods also seek UPS expertise and assistance in spring boarding their implementation efforts.
As Supply Chain Matters has noted in previous commentaries regarding UPS’s business results, the global logistics provider has been a major beneficiary of consumer’s flocking to online channels to purchase goods. UPS has been working closely with many of its retail clients to help them prepare for the omnichannel fulfillment experience which includes the ability to buy and return goods anywhere, in any channel. One of the biggest impacts cited by UPS is the need to leverage all inventory as a pool, available for multiple buying channels. This area is so critical that UPS helps retailers to perform network inventory optimization analysis in order to determine the most cost and service efficient stocking points. As we have long suspected, UPS also admitted that retail store associates at individual store locations are not necessarily efficient at pick/pack/ship activities, thus UPS is willing to add its time-tested expertise to help setup more efficient mini-distribution fulfillment centers at store level locations. One example cited was that store associates sometimes need aides in picking the right color of garment that the consumer has ordered. What’s the difference in color between malikite and autumn haze? Darn if we know.
There was a rather interesting panel discussion reflecting on the evolution of supply chain management practices in the coming years among various industries. The panelists included:
Raja Doddala, 7-Eleven Inc., representing retail industry supply chains
Mani Janakiram, Intel Corporation, representing high tech and consumer electronics industry supply chains
Caarl Flatley, Johnson and Johnson, representing pharmaceutical and healthcare supply chains
Jake Barr, Blue World Consulting and former Procter and Gamble, representing consumer goods supply chains.
Among the insights that these panelists converged upon were:
The clock-speed of business has dramatically increased and that translates into needs for a more responsive and risk-aware supply chain capability applied to accelerated new product introductions, online commerce and round-the-clock business operations.
The explosive growth in emerging markets has presented expanded revenue and profitability opportunities but has also brought about needs for significant process innovation. A new awareness is that the global supply chain is the point of differentiation for the business.
There is no such thing as information arbitrage, everyone knows everything, including your competition. Speed becomes the most important differentiator.
The talent gap in supply chain management skills is real. Leaders of tomorrow must be able to connect with customer needs, bring end-to-end process and cross-functional knowledge to the table with the ability to quickly analyze large amounts of data for inherent trends. Foundational skills were described as being both a problem-solver and analytical, the implication of a solid math and science foundation.
This concludes part one of our Supply chain Matters impressions from the MIT Crossroads 2013 conference. In our part two posting, we will highlight other presentations and important takeaways.
In late May, Supply Chain Matters posted a commentary regarding the building of supply chain control (SCCT) capability. Our primary takeaway from that commentary was that in your organization’s plans for building SCCT capabilities, it is rather important that you spend time in assessing the B2B network platform that will form the all-important foundation of these capabilities. Enabling SCCT is not about ripping out existing IT investments but rather building-out enhanced decision-support capabilities from more streamlined sources of planning, execution and fulfillment information.
In this follow-up commentary, we outline the various approaches that the broader community of technology vendors will undertake to enable various aspects of supply chain control towers. We will declare up-front that this commentary is not to be considered in in any shape or form as judgmental, but rather to provide an aide toward helping your organization assess which approach makes the most sense for your business and your particular business outcome needs.
Our foremost recommendation is that before beginning to engage with any vendor, take some quality time to assess the following: What is the prime or immediate need for your organization’s supply chain wide decision-making? In turn, what are the more long-term needs?
A. Is the business need primarily focused on end-to-end planning and bringing supply chain planning and execution processes together into a contiguous process that includes more predictive and insightful decision-making capabilities spanning product demand and supply?
B. Is it primarily focused on B2B or B2C operational fulfillment synchronization that can support, daily, hourly or near real-time decision-making?
C. Is it primarily focused on B2B supplier based decision-making where product demand and supplier responsiveness processes are continually monitored and managed in a controlled and more predictive environment?
D. Is the business need to ultimately enable all three (A, B & C) of the capabilities noted above over time?
We declare up-front that in our view, no vendor can deliver (D) right now, but that does not preclude consideration that that any particular vendors are in better position to deliver all over a reasonable time period.
There are three broad categories of technology vendors positioning to support SCCT capabilities. They are:
- Supply chain best-of-breed or specialty vendors
- Cloud-based B2B
- Enterprise ERP or Business Intelligence
The supply chain best-of-breed vendors respond to SCCT needs from their position of business process functionality support strength, whether that is supply chain planning, response management, supply chain execution or fulfillment synchronization. The planning vendor will tend to extend and integrate supply and demand planning with supply chain execution flows, including order fulfillment, transportation, logistics and inventory movement. Planning and response management vendors have also extended their capabilities in scenario-based planning and execution, along with more predictive supply chain business intelligence. Supply chain execution best-of-breed vendors take the opposite approach, building on their core strengths in execution and extending into deeper planning and decision-making support.
As noted in our previous posting on this topic, a cloud-based B2B platform vendor builds out from the B2B platform utility, integrating various planning and execution information to support both predictive and context-related decision-making capabilities for both the customer-facing and supply-facing aspects of the end-to-end supply chain. Some cloud-based vendors add social workplace capabilities to support team-based decision-making.
ERP or enterprise vendors tend to approach SCCT enablement as some form of extension to existing supply chain planning, execution or business intelligence software applications. The approach, in our view, reflects an add-on perspective vs. a holistic set of capabilities that were designed around the specific needs of SCCT. While ERP and enterprise vendors may be in a better position to support the most holistic aspects as noted in option (D) above, it may take these vendors considerable time to both re-design existing applications and build-out required extensions.
Regardless of what family of vendors your SCCT technology selection team ultimately decides to partner with, we at the Ferrari Consulting and Research Group advise that you consider a technology checklist of capabilities that will be required. That checklist should minimally include:
- Multi-organizational and trading partner connectivity, visibility and collative decision-making support
- Near real-time integration of events and information flow vs. batch or periodic refresh
- Integration of supply chain planning, fulfillment, execution and B2B/B2C decision-making needs
- Support for scenario-based, what-if and/or simulation decision-making processes
- Advanced visualization, drill-down and/or heat-mapping
- Augmented information discovery tools
The framework for enabling Supply Chain Control Towers requires a holistic set of required capabilities that span organizational, people, change management and enhanced technology dimensions. It is not about ripping-out existing systems but rather building enhanced more time-sensitive and extensible decision-support capabilities. Invest in an up-front framework and do your research.
Finally, you cannot assume that the broadest end-to-end supply chain control tower capabilities can be delivered in one implementation, but rather in manageable segments that are designed to accommodate business flexibility and scalability needs.
If we can be of assistance in your efforts, call or email.
© 2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Supply Chain Matters has dedicated lots of time to speak with clients and audiences regarding the purpose and benefits of a supply chain control tower (SCCT) capability, along with key design principles building the overall framework of an SCCT. Today’s global supply chains are far more complex with fast moving business events. They need the ability to foster more responsive and timely decisions across the extended supply chain with the context of these decisions grounded in customer, operational and/or financial priorities.
This author will often stress that any control tower needs to be anchored with a singular information utility that spans the cross-organizational business processes and physical boundaries of the extended supply chain. (See below figure).
This backbone utility needs to support both predictive and context-related decision-making capabilities of both the customer facing or demand-sensing aspects as well as the supply facing or responsive replenishment aspects of the supply chain. In essence, the supply chain control tower must foster both a synchronized planning and fulfillment execution capability coupled with deeper two-way customer and supplier collaboration. SCCT can further be a rather important facilitator for responding to major supply chain disruptions such product recalls or natural disasters.
Supply chain teams are sometimes confused as to whether the roadmap to SCCT includes an extension of current supply chain planning, integrating into fulfillment execution, or the other way, supply chain execution integrating with overall planning. The path toward expanded capabilities is not as important as the all-important B2B network platform that forms the foundation of SCCT capabilities.
Those supply chain organizations that are planning to invest in SCCT technology support should therefore spend extra time in architecting the architecture of the network backbone. Make doubly sure that the backbone can support both structured and unstructured information integration needs. The good news is that the vendor community has begun to respond to these needs in both the backbone as well as the supporting software applications that leverage advanced SCCT capabilities.
Here are some examples.
Last week, E2open announced a new capability the vendor has termed as E2Rapid Resolutions. This capability builds on the foundation of the E2open B2B network by adding pre-designed demand/supply fulfillment, and replenishment workbench capabilities to synchronize activities and/or decisions among network participants. The capability is designed to help organizations match both inbound and outbound product demand with changing supply plans, and to promise inventory to the most profitable channels.
A little over a year ago, Kinaxis partnered with supply chain execution network provider GT Nexus to provide SCCT like capabilities by integrating more predictive planning with execution. The Kinaxis Rapid Response Control Tower planning and response capabilities are permeated across the GT Nexus execution network to facilitate more informed decisions.
Similarly, enterprise vendors such as IBM, Oracle and SAP are now beginning to understand the importance of providing supply chain teams with an enhanced B2B network backbone that enables supply chain teams to synchronize planning and execution, support more predictive decision-making and build control tower like capabilities. These vendors however have more work to do.
Any house, big or small, austere or grand, is built upon a well -designed and solid foundation. When initiating an SCCT roadmap, insure that the foundation and supporting information architecture will meet your needs.
©2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Disclosure: Both E2open and Kinaxis are current named sponsors of the Supply Chain Matters Blog.