In conjunction with Oracle’s JD Edwards Summit being held this week in Broomfield, Colorado, Oracle has announced a second phase of mobile access applications that are being made available for the specific JD Edwards EnterpriseOne applications suite.  These include:

• Mobile Requisition Self Service Approval – designed to provide real-time transaction processing access for the review, approval or rejection of requisitions.
• Order Approval Mobile Purchase – Helps enable mobile workers to review and approve purchase orders regardless of physical location.
• Mobile Sales Inquiry – Addresses the needs of sales representatives, service technicians and managers by providing access to sales orders, item availability and item base price on-demand.

Each of these applications will now support smartphone enablement to include the Apple, Android and Blackberry specific platforms.

Supply Chain Matters had the opportunity to speak with Oracle JD Edwards Group Vice-President and General Manager Lyle Ekdahl regarding this week’s announcement, and we were especially interested as to why Oracle elected to have its premiere mid-market ERP offering lead the charge for mobile computing enablement, particularly in supply chain related applications.  Ekdahl’s response was that mid-market companies are just as challenged with reduced staffing and doing more with less, forcing many supply chain functional teams to be much more mobile in their day-to-day business activities.  When the JDE customer councils prioritized areas for needed future enhancements, mobile support was at the top of the list. This week’s announcement is the second iteration from a prior announced support of Apple iPad enablement  made at Oracle Open World last Fall. Ekdahl also noted that there will be several waves of JDE mobile enablement over the next 18 months. He also clarified that each of Oracle’s ERP product lines will have separate rollout strategies relative to mobile enablement.

We still find it interesting that that the JDE suite is currently leading Enterprise Business Suite in this area. Meanwhile, SAP and Microsoft continue to be low-key on their respective supply chain applications mobility strategies and support for customers.

The needs for select mobility enablement among certain supply chain business processes is a growing need and it is interesting to observe how the major ERP providers select processes and applications for mobility support.  Security of information however, will continue to remain a rather important requirement for businesses deploying more mobility features.

Bob Ferrari

In a previous commentary posted in October, we alerted our Supply Chain Matters readers to prepare contingency and risk mitigation plans concerning the deepening financial crisis occurring in Europe. In the commentary, we outlined three potential areas of risks in the coming months, and highlighted the ongoing broader risks for currency and cross-border trade. The biggest risks however unfortunately fall on small and mid-sized manufacturers.

A recent Financial Times article (paid subscription required or metered free view) brought to light a stunning effect of these risks.  A Swiss based manufacturer with a 350 year record of continuous operations was forced to outsource the majority of its production activity.  Cham Paper Group, a specialty producer of packaging papers indicated it would cease all production in the village of Cham Switzerland because of the dramatic appreciation of the Swiss franc.  Two-thirds of the company’s 312 jobs would be lost when production is moved to Italy, a country in another fragile financial state as well.

While larger firms can often adsorb financial and currency shocks, smaller as well as some larger firms can succumb. To buffer an unprecedented level of speculation among currency traders concerning the “safe-haven” Swiss franc, The Swiss National Bank has been actively supporting a SFr1.20 floor for the Euro against the franc, but that level may be too high for firms to do business with external customers. The Swiss franc has already appreciated upwards of 9 percent. Manufacturers have had to raise prices, cut costs, raise productivity or shift production to lower-cost regions. Many Swiss manufacturers are forcing workers into longer work weeks for the same or no overtime pay in order to buffer the effects of the currency appreciation.

The FT article also makes mention of Bobst, a SFr1.3 billion producer of packaging equipment with over 90 percent of its sales focused outside of Switzerland. That company has been forced to shed 8 percent of its 5300 workers, mostly in Switzerland.

In today’s global based economy, there are just a handful of companies that boast of a 350 year existence in one manufacturing location.  It is therefore a tragedy to read how a company like Cham Paper has had to forced to adjust and respond to the ongoing European financial crisis. It is yet another stark reminder that in today’s highly uncertain and turbulent business environment, no company is immune to risk.

Bob Ferrari

As we transition into the final month of 2011, we are revisiting the Supply Chain Matters 2011 Annual Predictions for Global Supply Chains which were outlined a year ago.  Our annual process is to first re-visit past projections made for the current year, in this case 2011, and declare some projections for the upcoming 2012 year, which will come in a later series of postings before the end of the year. In this Part Three posting, we will revisit predictions five through seven. Our earlier scorecards can be accessed by clicking on the following links:

Part One- Predictions One and Two

Part Two-Predictions Three and Four

Prediction Five: The year will bring a new wave of turmoil, acquisition and market consolidation in certain supply chain and enterprise technology areas.

The year 2010 brought a wave of consolidation and acquisition in the supply chain technology area and we predicted that this trend would continue in 2011. Although there was some activity in 2011, it was not a new wave, as we predicted.

We anticipated consolidation acquisition and consolidation fueled by needs to tap growth potential in emerging markets, adjust strategic focus, fill-in solution areas or take advantage of opportunities.  In essence it was a somewhat quiet year with the exception of perhaps the procurement, sourcing and 3PL areas  Worth noting was:

Sourcing, Supply and Contract Management

Emptoris acquired both telecommunications expense management vendor Rivermine, and later, provider of supplier lifecycle management support vendor Xcitec.

B2B E-Commerce and Supplier Networks

GXS acquired supplier information and community management provider Rollstream

ERP

Oracle acquired information search and intelligence provider Endeca.

3PL

Transplace acquisitions of both Celtic International and SCO Logistics.

There were no major supply chain related acquisition plays concerning major players (IBM, Google, Microsoft, Oracle, SAP) in 2011, and no major acquisition announcements concerning SAP itself. It was perhaps a year of digesting previous acquisitions of 2010 and a keen concentration on mining business from existing applications.

Manufacturers and retailers continued to have heartburn regarding annual maintenance fee burdens  placed on them by the major ERP vendors but that did not impact the revenue streams of the major players in 2011. Make no mistake, the heartburn issue of high recurring maintenance fees for enterprise software will remain an issue among both IT and supply chain functional teams for some time to come, and will lead to different alternatives in the market.

One rather big surprise in the services area was the announced acquisition by PwC of supply chain benchmarking firm PRTM.  We note surprise since the announcement seemed to be rather low-key and even missed our keen eye. The long-terms implications of this acquisition on benchmarking services are somewhat unclear.

Prediction Six: Cloud computing options directed at supply chain business process enhancement will explode in popularity and adoption.

We believed that the adoption wave of cloud computing alternatives would likely accelerate in 2011 and the largest benefactors would be small and medium sized businesses. The momentum and reality of adoption continued in 2011, however is was not as originally hyped by vendors. Buying trends were motivated by larger companies that needed to either springboard overall IT adoption or required specific tactical fixes to supply chain problem areas such as procurement spend or broader supplier integration, visibility and collaboration.

Adoption favored larger vs. smaller or mid-range companies because on the whole, price points remain at higher enterprise software levels. Smaller organizations still remain interested because their larger key customers require more electronic integration. More importantly, in our view, the mid-market continues to experience confusion as to what processes lend themselves to cloud computing alternatives. As Jim Cantrell of Hubspan noted to us in a recent briefing: “not all clouds are created equal.” Having a comfort level with software vendors hosting supply chain mission critical applications on a multi-tenant cloud, and persistent concerns regarding data security remain barriers to further adoption.

A significant announcement in this area in 2011 was the market launch of Kenandy, a new vendor conceived from the stewardship of salesforce.com founder Marc Benioff, Perkins Caulfield & Byers partner and former Oracle executive, Ray Lane, and former Ask Computer founder Sandra Kurtzig.  Kanandy presents itself as a social based manufacturing management cloud-based application that embraces a new paradigm of networked manufacturers, suppliers and partners. Also announced was salesforce.com financial investment in privately held ERP provider Infor, with the specific purpose in jointly developing a global marketing and order management system that will reside on the Force.com platform. The goal here is to make cloud computing more attractive for smaller companies.

We also predicted mixed buying signals relative to options for deploying private vs. public clouds.  Private clouds, where sufficient controls and security measures are monitored, continued to be favored by larger companies.

Prediction Seven: Wider scale leverage and adoption of in-memory computing, coupled with broader application of information discovery platforms could be game changing influences on supply chain wide business analytics.

When we framed this prediction, there were two important technology developments that had the potential to have significant impact on predictive analytical capabilities in 2011.  The first was incorporation of integrated in-memory technology among software and hardware appliances. The second was the wider adoption of Google-like information discovery tools that can mine hidden data, especially unstructured data and information.  If technology providers were agile enough in 2011 to incorporate these technologies not as tool sets, but rather incorporated into turnkey supply chain planning and analysis application appliances, we could have seen some dramatic uptake in customer interest levels in the second half of the year.

More importantly, converging forces of a more rapid clock speed of business, along with senior management imperatives for quicker, more-timely decision making have been motivating companies to re-look at sequential supply chain planning and execution in favor of merged planning and execution, and augmenting planning with more predictive analytical tools to support predictive vs. more reactive decision-making.

The reality was that many vendors got ensnarled in hyped product development initiatives that were too broad and multi process focused.  The biggest player with the highest game-changing impact in this space was SAP and its HANA development efforts. SAP’s efforts in 2011 became too broad and ran into the reality of scope and impact to existing application landscapes. SAP’s supply chain related applications therefore received little benefit in 2011.  Information discovery vendor Endeca lost its dedicated focus to manufacturing and supply chain process needs earlier in the year, and was recently acquired by Oracle.

The closest vendors to supply chain predictive analytics are JDA Software, Agistix and Kinaxis, with the latter having more of a focus on response management and a new initiative of supply chain control tower applied to overall supply chain planning and key decision processes. Progress Software is another vendor attacking predictive analytics and supply chain control tower from the business process management platform perspective, with an initial offering in supply chain execution control.

The bottom-line is that while game-changing in potential, predictive analytics capabilities will need more market education and more concentrated supply chain focus. Stay tuned for our 2012 predictions for more in this area.

This concludes our Part Three scorecard update of our Supply Chain Matters 2011 Predictions for Global Supply Chains.  In our Part Four update, we will revisit or other predictions.

Bob Ferrari

©2011, The Ferrari Consulting and Research Group LLC and Supply Chain Matters, all rights reserved.

It is a Monday morning and I’m facing a six hour plane ride enroute to the Kinaxis Kinexions conference.  Noting that my carrier is Southwest Airlines, I was compelled to not only bring my own food and snacks but to bring lots of reading material to compensate for zero entertainment and creature comfort amenities. One of the best companions, I have found for a long plane ride are unread copies of Economist magazine where there is ample time to read from cover-to-cover. The October 8 issue provided an insightful but stark commentary on the business implications of current economic events occurring across Europe which I suspect will have many potential implications for global supply chain strategy and preparedness.

The article is titled: Under the volcano- how companies are preparing for various scenarios, (paid subscription or metered view requirement) and it provided some stark reminders that European businesses remain highly concerned about current events surrounding Europe’s ongoing sovereign debt crisis and how these events will unfold in financial and economic terms.  Some business forecasters believe that the Eurozone could fracture or possibly break apart completely.  That would imply implications for credit, inflation, currency and cross-border trade. Reading of the various scenarios and contingencies that some European manufacturers are undertaking should cause supply chain executives to also reflect on contingency planning.

Supply Chain Matters believes that senior supply chain executives, if they have not done so thus far, should be initiating and contemplating scenario plans and contingencies in three potential areas of supply chain impact. These three areas are to buffer overall business impacts, but in the perspective of crisis bringing opportunity, there may be some opportunistic considerations to consider as well.

The three contingency areas should include:

• An impact to B2B, P2P and E-Commerce fulfillment strategies involving suppliers and customers located within Eurozone countries.  These processes are currently predicated on a single Euro-based currency. If the Eurozone were to split into two-zones, strong and weak, or to split altogether, the implications for systems supporting B2B commerce would be rather fluid, and potentially complex.  There would be implications in supplier contracts in adjusting or re-negotiating financial exposures, invoicing and currency collection. While contracts may have contingencies already identified, it would be wise to begin a contingency focused analysis of areas of potential impact or exposure.  Similarly, IT support teams should be thinking about potential systems impacts and response strategies.

• Another area could be supply chain shocks in logistics/transportation and customs requirements.  Today, Europe and global-based manufacturers can assume a seamless physical flow of component and finished goods across Eurozone countries.  Hopefully that will continue, but then again, sudden shocks could occur if certain countries are jettisoned out from the Eurozone or forced to fall back on independent customs and transport regulations. Severe financial crisis could bring motivation t0 add more import tariff revenues to depleted treasuries or weakened economies.

• The third contingency area would be financing of inventory and working capital.  Similar to what immediately occurred during the 2008-2009 financial meltdown, some European manufacturers, especially those residing in financially weakened banking sectors such as Greece, Ireland, Italy, Portugal or Spain are already experiencing difficulty in acquiring affordable access to credit and loans.  A worsening of bank fragility or more outright bank failures would cause an additional credit crisis for these companies, and this would impact supply chain working capital, production and inventory deployment strategies.  Mid-market firms are especially vulnerable. Financial supply chain, suppler health checks, inventory and tooling investment implications should be considered.

The Economist article additionally notes that many European firms are now accelerating efforts to buffer exposure to a potential Europe financial crisis, and are thus are aggressively accelerating plans to market and sell their products within the emerging market economies of China, India and Latin America.  That makes lots of sense.  But at the same time, non-European companies may be afforded added opportunities to compete for additional business in these emerging markets by virtue of the existence of a more stable currency, banking or financial system that provides affordable access to financing product innovation, services or added inventory pipeline.

The intent of our commentary is not to raise immediate alarms but to begin prudent planning for possible supply chain disruption scenarios.  Just like last year’s volcanic ash incident that shutdown Europe’s air traffic, high uncertainty should motivate active contingency planning.

Readers and supply chain focused consultants are welcomed to share their perspectives for contingency plan considerations.

Bob Ferrari

In a recent study, The U.S. Auto Supply Chain at a Crossroads, sponsored by the Labor Market Information Offices of the states of Indiana, Michigan and Ohio, researchers from Case Western Reserve University outline two possible futures for America’s automotive industry supply chains.  One is optimistically characterized by collaborative relationships between firms at all tiers of the supply chain.  The other path speculates that fickle relationships and fear of investment will prevent progress at each tier of the supply chain. This study was conducted between July 2010 and June 2011 and came about from funding generated from the recent American Recovery and Reinvestment Act or so-termed stimulus bill.

What is most interesting about this study is its focus on the smaller “tier two” and “tier three” suppliers that comprise U.S. automotive supply chains, firms that suffered from the effects of industry upheaval and dramatic demand declines bought about from the last global recession. According to this study, these firms account for 30 percent of current employment in the supply chain, and have been previously rather difficult to target and study.

The study points to some good news, namely that there is evidence that supplier relationships are indeed becoming more collaborative. Yet, other evidence points to the continued presence of short-term cost-cutting with larger OEM’s and suppliers passing the burden of cost cutting down to lower-tier suppliers. An interesting finding of a noted interview of a representative of a tier one supplier states the following:  “At (this company), everything is short-term Today is everything. That mentality drives the behavior: Get it now, and don’t worry about the out years…  Focus on today; worry about tomorrow tomorrow.” The report goes on to cite findings related to firms that adopt “high road” practices, namely higher wage, worker training, process investing in product and production process capabilities faring much better in the wake of recession than those that did not. Noted was that two-thirds of firms surveyed chose to postpone investment in equipment and process improvements.  The reasons cited were twofold:

“Customer purchasing strategies in many cases did not allow suppliers the financial or organizational resources they would need to implement such practices, and

Public policies (that) do not do enough to pave “the high road” and block the “low road”.”

Supply Chain Matters happened to read of this Case Western Study while also reading a recent article, Dan Akerson is Not a Car Guy, appearing in the August 29 edition of Bloomberg BusinessWeek. For readers unfamiliar with Daniel Akerson, he is the recent chairman and CEO of General Motors whose background originates primarily from the telecom industry and private equity.  He follows several other CEO’s who have led GM since the beginning of the bankruptcy crisis.  The BusinessWeek article makes note that Akerson has moved GM out of survival mode and is purposefully challenging the previous management culture of GM. The article cites a particular example.  Teams presented a plan to build 45,000 of the new hybrid Chevrolet Volt in 2012, after supplier contracts were already in place to support that volume. According to the article, Akerson challenged his management team to put together a plan to support a more profitable build plan of 120,000 Volts in 2012, a significant threefold increase. GM’s engineering team was concerned not only for the radical change of ramp-up, but also the effect on quality if GM pressured suppliers to nearly triple output volumes of newer high tech parts. After four months of fact finding, Akerson had to back off his plan because suppliers would not take on the risk of building enough lithium-ion batteries unless GM guaranteed to pay their capital investment, should sales fall short of the build number. In the end, GM settled on a build number of 60,000.

That article along with the Case Western study caused us to ponder about yet another industry supply chain at the crossroads.  On the one hand, smaller suppliers continue to seek broader collaboration and support from their upper tier customers, avoiding the trickle –down “you get the burden of cost’’ or “our way or the highway” procurement behavior.  On the other hand, change agents with non-industry biases such as GM’s Akerson attack the culture, but lack sensitivity and attention to the overall cascading impacts to the overall supply chain. The jury is still out regarding Chrysler’s new infusion of Fiat’s management influence which seems grounded in operational management.

It would seem that the U.S. automotive industry needs to foster senior management that is willing to challenge the old norms of trickle-down impact among OEM’s and tier-one players, while having an operational and supply chain grounding to the cascading effects of build plan changes across the entire value-chain.

In 2009, this author, along with others, opined that the U.S. automotive industry’s greatest risk was a collapse from the bottom vs. the top.  Two years later, the U.S. government through its stimulus funding programs, brought both GM and Chrysler out of bankruptcy. However, this latest study from Case Western provides qualitative and quantitative reminders that the industry still remains at a crossroad.

We are again interested in hearing from U.S. auto industry readers.  Has supplier collaboration practices on the whole really changed?  Do you believe that the U.S. auto industry is more sensitive to supplier collaboration and investment?

Bob Ferrari

General Electric CEO Jeff Immelt is the Chairperson of President Obama’s Presidential Council on Jobs and Competitiveness, a commission that is addressing a set of policy recommendations for long term U.S. competiveness and job growth in manufacturing.  In a previous Supply Chain Matters commentary, we provided our impressions of the interim report of this commission.

Immelt recently hosted a select group of financial media journalists on a tour of three GE manufacturing facilities.  The GE team took the time to share with reporters some significant trends and observations regarding manufacturing, and the critical role played by industry supply chains.

Daniel Gross, economics editor at Yahoo Finance penned a fairly comprehensive blog commentary sharing his impressions of the GE tour. In his commentary, you will note some rather insightful points:

Modern manufacturing process is all about doing more with less: less time, metal and labor.  Work teams have repeatedly developed time and material saving innovations, which translates to higher and higher levels of manufacturing productivity.  Noted is that GE can accommodate a 20 or 30 percent increase in order volumes without the need for a corresponding increase in its employee base.

Readers may ask- where, if anywhere does job growth come from?  According to Immelt, it comes from the supporting supply chain.  Large manufacturers such as GE have placed ever more dependency on networks of suppliers.  GE’s Greenville South Carolina plant relies on 16 Tier One suppliers,  Immelt’s ratio is that for every employee at the factory, there are 8 jobs in the supply chain, because smaller suppliers lack the scale and resources to invest at the same level as global manufacturing OEM’s.

Another belief from Immelt is that the U.S. has to take market share in order to drive growth. Market share for U.S. based manufacturers is the product of endless product and process innovation, along with export markets. During the recent severe recession, GE elected not to cut back on research and development and came out of the recession with more products in the pipeline.

Some readers, and indeed journalists come to different conclusions, namely that the U.S. is in the midst of a jobless recovery.  John Gapper, and editorial writer at the Financial Times were also invited on the GE tour. In his column, (paid subscription or free metered view required) Gapper expresses the view that from what he observed, there is little cause for optimism in U.S. job growth. He cites statistics from the McKinsey Global Institute indicating zero growth in U.S. manufacturing jobs by 2020. He notes that the best hope is that manufacturing productivity rises so high that offshoring is no longer worth the effort.

For our part, Supply Chain Matters offers two of our own conclusions for readers and legislative policymakers to consider.

Long-term U.S. manufacturing competiveness must be predicated on a robust and competitive supply chain networks, particularly in key growth industries such as alternative energy and aerospace.  Mid-marker and smaller suppliers continue to struggle with financial lending and legislative policy practices that stem growth and investments in innovation.  Make no mistake that countries such as China have adopted policies and mechanisms to promote domestic manufacturing and supply chain growth, including favoring of domestic companies for strategic growth markets.

Second, with the current gridlock in the U.S. Congress, any form of a long-term strategic strategy seems to get totally lost in short-term parochialism and playing to the next election.  The U.S. needs a long-term strategic manufacturing and supply chain competiveness strategy and the time is now.

Too much time is being wasted on political gamesmanship and agendas. Mr. Immelt and GE should be applauded for raising more awareness but what is needed now is not tours, but concrete initiatives and action.

Bob Ferrari