In mid-July, business and social media was abuzz with the announcement that two long-time rivals, Apple and IBM, would team-up in an alliance to create business apps leveraging Apple’s iPhone and iPad devices. Under the alliance, IBM will create what it terms as “simple” business productivity apps leveraging the respective Apple mobile devices.
Today, Bloomberg released some somewhat stunning news which many are speculating is directly related to above announcement. Supplier sources informed Bloomberg that Apple is preparing to manufacture the largest model iPad ever, a 12.9 inch screen device, with production scheduled to commence in the first quarter of 2015. That is 6-9 months from today.
As we have echoed in previous Supply Chain Matters commentaries, the Apple supplier network is feverishly ramping-up production volumes for new models of iPhones and iPads for the all-important upcoming holiday buying surge period. Apple’s three key suppliers of LCD screens are especially challenged due to a rather late design change incurred on the new iPhone 6 model.
According to the Bloomberg report, this rather large iPad screen model is being positioned to compete in the business applications arena as an alternative device for business tasks currently performed by laptops. The Q1 timing is especially noteworthy since that is the time when Apple’s China based suppliers and contract manufacturers temporarily shut-down for celebration of the Lunar New Year as workers return to their homes and families. It is a period where suppliers recover from the hectic end-of-year scramble. The fact that Apple is targeting yet another product release in this period is a probable sign that the IBM-Apple discussions were already in the planning stages prior to the official announcement last month. Both parties are aggressively planning to take advantage of the alliance opportunities.
Apple’s supply chain, S&OP teams and value-chain partners are once again going to be put to the test of simultaneous volume production ramp-ups involving a multitude of products including a new iWatch as well as phones and tablets. There is obviously little room for snafu’s and LCD screen suppliers may well be the critical linchpin to pull-off a series of simultaneous successful product launches.
Tomorrow, this author will be joining a distinguished compliment of speakers at the 7th Annual Supply Chain Management Summit sponsored by Bryant University and Benneker Industries. This event is turning out to be one of few premiere New England regional conferences focused on current issues and learning in supply chain management. Last year’s event drew upwards of 250 attendees among many industry settings.
Since many of our readers are located across the globe, the purpose of this Supply Chain Matters commentary is to summarize the key messages and takeaways of my talk.
My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. The key takeaway messages I’ll be delivering is that three converging mega-forces:
- Constantly shifting customer and business needs requiring sense and response, as well as more predictive business processes and decision-making capabilities.
- Supply chain process and IT technology convergence providing more cost affordable opportunities for integrating both physical as well as digital information and decision-making capabilities.
- Digitally enabled manufacturing enabled by the Internet of Things.
are aligning toward extraordinary opportunities for what has long been the Holy Grail of our community, namely, integrating information and decision making across physical and digital supply chain spectrums. The alignments of the above mega-forces are providing significant opportunities in management alignment and top management sponsorship which can be leveraged. New and emerging technologies, especially engineered systems, cloud computing, predictive and prescriptive analytics are becoming the technology catalysts. Besides touching upon the latest advances and significantly changed IT market dynamics surrounding supply chain technology, my primary goal in this talk will be to advise supply chain teams on the most important investments to focus upon in the coming months and years.
First and foremost, and without question, the most important initiative for any supply chain organization today is a concerted set of initiatives directed at Talent Management. The business benefits of advanced technology are marginal without people who have the necessary and required skills to be able to leverage and harness these technologies. Recruitment, retention and increased skill needs are constantly identified as the single biggest challenge across C-level, business, IT supply chain and manufacturing teams, and the challenge will continue as newer technologies make their presence among industry supply chains.
More than ever in the past, supply chain, procurement, customer fulfillment, product lifecycle management and service management teams must have active technology awareness and planning strategies. The umbrella and accountability of the supply chain now involves far broader dimensions of common information and related decision-making needs. The notion of the goal for pursuing Integrated Business Planning is not just IT vendor hype, but a necessary and required capability. An organization’s Sales and Operations Planning capability is thus the most critical to focus and improve upon. That stated, an important reminder for cross-functional and cross-business remains that final objective is not technology alone, but rather required business objectives and outcomes.
I’m also urging technology selection teams to broaden their context of their technology planning to include leveraging information and decision-making capabilities across an end-to-end, value-chain and B2B business network. With today’s pace of business change, supply chain planning or forecasting can no longer stand-alone as a capability, and must be augmented and synchronized with the sensing of actual events occurring across the supply chain network. The good news here is that the supply chain technology market has shifted its emphasis toward broader support capabilities in this area.
For those who plan on attending tomorrow’s Summit, I look forward to meeting and chatting with all of you regarding your organizational and personal objectives. For those unable to attend, be advised that next week we will post a PDF copy of the presentation in our Supply Chain Matters Research Center for complimentary reader downloading. Minimal registration information is all that is required.
As always, give as a call or contact us via email if you require further assistance or if this type of presentation can assist your organization or forum in setting its supply chain management objectives for the coming year. Our home page can be accessed at this web link.
Three weeks ago, Supply Chain Matters commented on the effort underway among Apple’s ecosystem of suppliers and manufacturing partners to prepare for the upcoming product launch and distribution of the new model iPhone. Our commentary made note of reports indicating a number of moving milestones and potential challenges related to new product production ramp-up and product yield. Besides the next generation of the iPhone, there were additional published reports indicating that Taiwan’s Quanta Computer would begin mass production of Apple’s new smartwatch in July, with the planned product launch coming as early as October.
Today, Bloomberg, citing sources with knowledge, is reporting that Apple suppliers have also begun initial manufacturing of the planned new models of the iPad. According to the report, volume production of the next generation full-sized 9.7 inch version of the new model iPadAir is underway, with a newer version of the 7.9 inch iPadmini now entering production with general availability expected by the end of the year. The product introduction announcement is reported to be either at the end of Q3 or early Q4, but many Apple watchers are betting on the month of October, since other next generation products are scheduled for market introduction in that month. In any case, the NPI and volume production scenarios for iPad and iPhone are both pressing towards critical windows for required availability.
The latest quarterly financial results for Apple reflected a marked decline in iPad sales volumes, declining by over 13 million units, thus the upcoming new product introduction cycle is crucial. Timing is critical since there must be inventory available when consumers elect to make their end-of-year holiday purchases.
Like all things related to Apple’s product innovation cycles, design engineers introduce last-minute component features that would challenge any high volume focused supply chain. In our previous iPhone6 commentary, we highlighted reports of yield challenges with the larger LCD screen, the rumored inclusion of sapphire based screens and continued challenges for higher-volume production of fingerprint scanners. The next generation iPad Air is strongly rumored to include more innovative anti-reflective coating as well as a fingerprint sensor.
A separate report from the Associated Press further indicates that Apple’s sapphire glass provider, GT Advanced Technologies, indicated this week that its production facility is close to starting production, but does not expect to reach full operational production until early 2015. That is not an encouraging report for Apple’s supply chain planners and will likely lead to further tough decisions in the weeks to come.
Apple supply chain teams indeed important challenges is the coming 12 weeks with many simultaneous moving milestones impacting multiple product management plans. It is a consummate example of changing information in constant motion. Integration of NPI and supply chain information coupled with multi-tier response planning will invariably be put to the test.
Supply Chain Matters readers residing in the New England region are invited to join me at the 7th Annual Supply Chain Management Summit being held on Thursday, August 21 on the campus of Bryant University in Smithfield Rhode Island.
Over the years, this Summit has grown and matured into a northeast regional event focusing on a new burgeoning supply chain challenges and solutions. I was a featured speaker in the 2013 event which was very well attended and I’m pleased to be invited back to speak at this year’s Summit.
I’ll be joining a distinguished compliment of speakers for this year’s event including a dear former colleague, Dr. Larry Lapide who will be delivering the morning keynote, and Dr. Jim Tompkins who will deliver a very timely luncheon keynote.
My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. This presentation will address:
- How senior industry executives view needs in business-wide decision-making, and what expectations they have for supply chain capabilities.
- The new requirements of Plan-Sense-Adapt- Synchronize and the new levers of information velocity-context- clarity
- A new thinking required to overcome current organizational and supply chain collaboration barriers
- What you should know as operations, planning, procurement or supply chain management professionals in terms of skills readiness and tool adoption
Individual registration for this upcoming conference is $150 with discounts available for organizational table sponsorships. Registration is available at this web link but act quickly since the event is a sure sellout.
If your organization has needs for a dynamic speaker, panelist or roundtable facilitator on compelling topics impacting supply chain management and B2B business networks, you are welcomed to review our Speaking Services page.
It’s the end of the calendar work and this commentary is our running news capsule of developments related to previous Supply Chain Matters posted commentaries or news developments.
In this capsule commentary, we include the following topics: Zara Implementing RFID Tagging System; Hershey and Other Candy Providers Raise Prices to Compensate for Higher Commodity and Production Costs; Pratt and Whitney and IBM Embark on Predictive Analytics Initiative; U.S. Government Announces New Rules Pertaining to Rail Shipments of Crude Oil
Zara Implementing RFID Tagging System
Reports indicate that Zara, a known icon in world class logistics and supply chain management, is implementing a microprocessor-based RFID tagging system to facilitate item-level tracking from factory to point-of-sale. This initiative was revealed at Zara’s parent company, Inditex SA, annual stockholder meeting earlier this month.
The tracking system embeds chips inside of the plastic alarms attached to various garments and supports real-time inventory tracking. The retailer indicated that the system is already installed in 700 of its retail stores with a further rollout expected to be 500 stores per year. That would imply that a full rollout to all 6300 Inditex controlled stores would entail a ten year rollout plan. No financial figures have been shared regarding the cost aspects of this plan.
Hershey and Other Candy Providers Raise Prices to Compensate for Higher Commodity and Production Costs
One of our predictions for 2014 (available for complimentary download from Research Center above) called for stable commodity and supplier prices with certain exceptions. One of those exceptions is turning out to be both the cost of cocoa and transportation.
Citing current and expected higher commodity, packaging, utility and transportation costs, Hershey announced last week an increase in wholesale prices by a weighted average of 8 percent, which is rather significant. That was followed by an announcement from Mars Chocolate North America this week that it will institute price hikes amounting to seven percent. A Mars statement issued to the Wall Street Journal indicated that it has been three years since the last announced price hike and that Mars have experienced a dramatic increase in the costs of doing business.
According to the WSJ, cocoa grindings, a key gauge for chocolate product demand, has surged over 5 percent across Asia and 4.5 percent in North America.
By our lens, the next move will more than likely come from Mondalez International.
For consumers, indulging in Hershey Kisses, M&M’s and Snickers will be more expensive.
Pratt and Whitney and IBM Embark on Predictive Analytics Initiative
Another of our 2014 predictions called for increased technology investments in predictive analytics. One indication of that trend was an announcement indicating that aircraft engine provider Pratt & Whitney is partnering with IBM to compile and analyze data from upwards of 4000 commercial aircraft engines currently in service. This effort is directed at developing more predictive indications of potential engine maintenance needs. According to the announcement, each aircraft engine can generate up to a half terabyte of operational performance data per flight. According to an IBM statement: “By applying real time analytics to structured and unstructured data streams generated by aircraft engines, we can find insights and enable proactive communication and guidance to Pratt & Whitney’s services network and customers.”
Previously, Accenture announced a partner effort with General Electric’s Aviation business to apply predictive analytics in areas of fuel-efficient flight paths.
U.S. Government Announces New Rules Pertaining to Rail Shipments of Crude Oil
As a response to heightened calls for increased safety of trains carrying crude oil across the United States, the U.S. Department of Transportation announced this week a set of comprehensive new rules for the transportation of crude oil and other flammable materials such as ethanol. The move follows similar efforts announced by a Canadian transportation regulatory agency.
The new rules call for enhanced tank car standards along with new operational requirements for defined high hazard flammable trains that include braking controls and speed restrictions. The new rule proposes the phase-out of the thousands of older and deemed unsafe DOT 111 tank cars within two years. Rail carriers would be required to conduct a rail routing risk assessment that considers 27 safety and security factors and trains containing one million gallons of Bakken crude oil must notify individual U.S. state entities about the operation of such trains. Trains that haul tank cars not meeting enhanced tank car standards are restricted to 40 miles-per-hour while trains carrying enhanced tank cars would be limited to a 50 miles-per-hour speed restriction. Further under the proposed new rules, the ethanol industry will have up to 2018 to improve or replace tank cars that carry that fuel.
The proposed new rules are now open for industry and public comment over the next 60 days and are expected to go into effect early in 2015. According to various business media reports, there are upwards of 80,000 DOT-111 rail cars currently transporting crude and ethanol shipments. When the new U.S. and Canadian rules take effect, there is likely to be a boon period for railcar producers and retro-fitters.
Dassault’s Acquisition of Quintiq- Broader Simulation and Decision Support in Product Lifecycle Management
Today Dassault Systemes announced the signing of a definitive share purchase agreement to acquire supply chain and operations planning software provider Quintiq for approximately €250 million ($338 million). Supply Chain Matters was somewhat surprised with this announcement, not with the fact that Quintiq was an attractive candidate for acquisition, but rather why other enterprise and ERP vendors had not pulled the trigger. Then again, the premium paid may account for this move.
Netherlands based Quintiq has dramatically increased its brand profile globally and specifically in the U.S. market. The company’s on premise and cloud-based software offerings include highly customized applications supporting operations, scheduling and supply chain planning, optimization and decision support. This provider boasts of over 500 implementations across 80 countries with many involving rather complex operations and supply chain planning needs. Many of its applications have been highly customized to support rather unique business, operations and optimization needs. It is one of very few planning support vendors having an installed base profile in areas such as air traffic control, airline and fleet scheduling, complex process and discrete industry scheduling needs. Co-Founder and CEO Dr. Victor Alles, an experienced computer scientist prides his company in solving planning puzzles that no one else can solve, hence Quitiq’s vertical industry coverage is extraordinary. Supply Chain Matters can attest to that passion after speaking directly with Dr. Allis in November.
With the tag line of the 3D Experience Company, France based Dassault Systemes provides technology to support product design, engineering, CAD modeling, simulation, data and process management process areas. The current product portfolio is extensive and includes over 190,000 customers within 140 countries. Support for manufacturing industries includes aerospace and defense, engineering and construction, complex manufacturing, medical equipment and other areas. The firms most high profile customer is Airbus but also includes names such as Medtronic, NASA, Rolls Royce and others.
According to the announcement, Quintiq is being positioned to expand Dassault’s DELMIA suite of offerings which is the product area focused on PLM Digital Manufacturing. This suite includes simulation software capabilities supporting product design, design creation, planning, monitoring and controlling of production processes. Thus, this is one of Dassault’s prime product focus area in supporting new areas of what The Economist coined as the “Third Industrial Revolution, which includes manufacturers leverage of the Internet of Things and Digitally Enabled Manufacturing. Dassault further provides a large services complement in areas of consulting, technology delivery, engineering and other services. Thus it would appear that this acquisitions positions Quintiq as being strategically positioned to support customized planning and decision-support needs across the broad spectrum of product design production ramp-up, services and product end-of-life.
Of further interest is that this acquisition announcement comes a day after arch rival PTC announced another one of its IoT related acquisitions. Thus, by our view, both announcements are indicators that the PLM technology segment has aggressive intentions to be a player in the new wave of Digitally Enabled Manufacturing. While each is taking different strategic approaches, the goal seems rather apparent, namely beat other enterprise and ERP focused vendors in depth of support in this new area of product centric decision-support that integrates physical and digital information elements.
For Dassault specifically, the challenge will be to allow Quintiq to integrate with broader simulation and decision-support needs without being swallowed by complex corporate overhead and complexity.
The takeaway is an emerging new dawning of capabilities that allow manufacturers to integrate and simulate information and make more informed decisions that span the entire product lifecycle.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.