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.

Bob Ferrari

© 2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

We all know that globally extended supply chains business processes add more complexity and added challenges to management processes.  More demanding customers and constant changes across business areas cause Sales and Operations (S&OP) teams to get involved in much deeper business scenario and project planning needs.  There are more frequent new product introduction cycles, constant fluctuations in customer product demand that is now focused for specific geographic markets and business processes need to be focused on supporting more supply chain responsiveness. At the same time, global operations imply a multitude of information sources spanning multiple software applications and systems spread across the value-chain. Supply chain and S&OP professionals are also much more mobile, finding themselves to be loyal members of airline frequent flyer programs as they visit multitudes of suppliers and trading partners.

Often, when senior executives poll their S&OP teams for options and timetables related to many of these challenges, there are often lag times as teams query multiple information sources and analyze all various options to make the most appropriate recommendation.  While the goals of the S&OP process and indeed the overall end-to-end supply chain are often focused on enabling more predictive capabilities to stay in-front of constantly changing business needs, challenges in finding and analyzing insightful information become bogged down in elongated information analysis and search for insights. If there was ever a business process capability that can best benefit from advanced analytical capabilities, it is managing the end-to-end supply chain.

The good news for manufacturers, service providers and retailers is that leading-edge software vendors who understand these supply chain decision support needs now “get-it”.  Newer, more analytically driven decision support and business intelligence tools are making their way to you, business end users.

Here are some examples of capabilities now coming to market just within the last few days.

S&OP process support provider Steelwedge announced this week the enhancement of process support capabilities adding a Steelwedge S&OP Insight module, powered by a separate analytics engine, that combines online analytics and planning to deliver contextual planning to analyze decisions related analysis of product demand segmentation, inventory segmentation or service level planning for key customers. We found, after witnessing a demo, a neat provision for customers to be able to add other analytical “apps” to these capabilities, and then incorporating them into the S&OP process. This is indeed a new opportunity area for S&OP teams to add more responsive analysis and decision support tools to their process framework.

Collaborative B2B execution provider E2open has this week announced the addition of E2 Rapid Resolutions, extending the E2open Business Network with cross-network prescriptive analytics for decision support.  This added capability leverages next-generation integrated data, process, and analysis across the end-to-end network for continuous monitoring, earlier detection, and faster resolution of supply chain disruptions. Supply Chain Matters will feature an additional commentary regarding this capability in a separate forthcoming commentary.

Response management and adaptive planning provider Kinaxis has added deeper analytical planning capabilities including the ability to present analytical planning and decision support information on mobile devices.

Here at the IBM Smarter Commerce Summit, Emptoris, an IBM Company has outlined its roadmap to build the one-stop information repository for procurement, adding broader analytical and decision support capabilities leveraging Cognos analytics capabilities.  IBM also announced that its Watson based analysis capabilities made famous in the Jeopardy game challenge, is now going to be directly provided in areas of customer service and support for manufacturers, services providers and retailers. IMB further announced support to leverage SAP HANA capabilities, particularly related to SAP APO, for those organizations utilizing IBM DB2 database technology.

The takeaway for our readers is that the community of technology providers focused on supporting supply chain and B2B support needs are now quickly responding with deeper business intelligence and predictive analytics support options.  Deployment options include cloud-based, hosted and behind-the-firewall.  Now is the time for your supply chain organization to have a strategy on how to best leverage the benefits of these tools. Your options are getting far broader.

Bob Ferrari

Disclosure: Both Kinaxis and E2open are named sponsors of Supply Chain Matters and clients of the Ferrari Consulting and Research Group.

This week, SAP conducted its combined 2013 ASUG and Sapphire customer conference in Orlando and Supply Chain Matters was able to view some of the executive keynotes and theatre presentations.  This author has attended many prior Sapphire events, and thus has a context of where SAP has come in this event and how overall customer messaging has evolved. In the near past, these events tended to be large on vision but lacking in details for customers to get excited about.

When we shared our Supply Chain Matters perception of Sapphire last year, our headline was one of bold vision but confusing messaging. That changed this year, and we were pleasantly surprised with the improvement in customer messaging and the crispness of product direction and strategy.  Customers should be much more of ease that SAP is now getting its full act together and has obviously completed its homework.

Co-CEO Bill McDermott’s opening keynote that featured an entire sports business theme candidly did not hit the mark for us, but subsequent executive keynotes from Co-CEO Jim Hagemann Snabe and Board member and CTO, Vishal Sikka were crisp and focused.  Snabe outlined SAP’s strategic advancements in three significant areas:

1. The ability to bring data and information, both transactional and analytical, of large global and other companies into one area.  In essence, a declaration that SAP will support all applications and information intelligence from main memory, vesting improving response times.
2. Introduce innovative new applications that can leverage the power of SAP HANA, as well as the power of cloud and mobile computing. This was the opportunity to introduce the Sapphire audience to SAP HANA Enterprise Cloud, which we previously commented on.
3. Much more increased attention by SAP on the end-user experience and how users desire to interact with SAP applications, which was described as completely new thinking on the user experience. SAP now views its benchmark for usability to not be contrasted with other enterprise systems but to consumer software such as Amazon.com and others.

In the context of B2B and supply chain messaging, there was a real effort to have Ariba, SAP’s most visible B2B acquisition, and gain maximum visibility in conference presentations. Similar to what occurred after SAP’s same-year acquisition of BusinessObjects, there was all gloss, with no real substance in articulating for SAP customers the all-important progress being made in integration of all of SAP’s current sourcing, procurement, electronic invoicing and catalog support functionality, not to mention the overall direct material B2B networking support strategy timeline. The emphasis was more to have SAP sales teams selling the potential of Ariba vs. the all important questions of what does Ariba bring to my existing product supply chain landscape vs. general procurement process support needs.

We did have the opportunity to view a presentation anchored by Hans Thalbauer, Senior Vice President, Line of Business Solutions for Supply Chain.  That presentation provided a bit more clarity as to long-term direction setting, including some integration among and between Ariba and other existing SAP supply chain applications.  However, for us, the important news from Thalbauer was that finally, SAP will begin to deploy SAP APO (Advanced Planning and Optimization) on a HANA architectural platform.

Last year, what seemed little noticed was a passing reference by SAP Supervisory Board Chairperson Hasso Plattner on the ability to significantly accelerate the performance of SAP APO by leveraging HANA capabilities.  In April of this year, SAP quietly announced in a News Byte the planned availability of SAP liveCache technology powered by the SAP HANA platform.  SAP APO users know all too well that liveCache was SAP’s original manifestation of in-memory computing and that it serves as the foundation of all data brought into the application.  Users, however, had to often deploy instances of SAP Business Warehouse (BW) in their landscapes as a supplemental repository of the APO information that could not be supported by liveCache.  In its earliest days of introduction, it was often referred to as “live crash” because of its limitations.  That has since greatly improved but make no mistake, this move to HANA will be the most significant announcement in the history of SAP APO.

It now opens the door for the application to support both planning and predictive analytical capabilities along with a more compressed footprint of data and information. It should also enhance the overall scalability and response times of not only APO, but other supply chain support applications in the SAP Business Suite.

We heard encouraging words from some customer presentations regarding the building interest with the SAP Sales and Operations Planning Powered by HANA application. We were previously disappointed with the released functionality at the time of announcement but it appears that gaps are now being addressed by SAP development teams and key implementation partners.

One other noteworthy mention was a clarification we heard regarding the near-term availability of both the SAP Business Suite on HANA and HANA Enterprise Cloud offerings.  Apparently the initial released versions will contain limited supply chain management support applications and no initial Ariba support.  That will hopefully change in the coming months.

Supply Chain Matters will follow-up with a more detailed commentary regarding SAP in B2B and supply chain management support in the coming weeks.

Bob Ferrari

As the Q1 earnings and economic forecast cycle winds down it should be somewhat clear to supply chain teams that the planning for product demand and associated resources across the Eurozone, and in some cases, China, will continue to be challenging at best.

Last week, the International Monetary Fund trimmed its forecast for total European output to a negative 0.3 percent this year. The agency also trimmed its 2013 forecast for global-wide growth from 3.5 percent to 3.3 percent.

As Supply Chain Matters has noted in our previous commentary concerning global output activity, PMI levels for Europe continue to trend further downward. Uncertain signs are now appearing concerning China. The Wall Street Journal reported today that industrial profits in China for the March timeframe rose just 5.3 percent, down from the 17.2 percent growth rate posted for the first two months of this year.

Financial media reporting reflecting on the latest Q1 quarterly results from manufacturers have specifically taken note on the negative aspects of the Eurozone. Some of the examples across various tiers of industry supply chains include:

• Dow Chemical reporting a 12 percent decline for sales volumes across Western Europe.
• Air Products and Chemicals reporting a 5 percent decline in European revenues with a reduced outlook for the remainder of the year and prompting the need to cut additional costs.
• General Electric, who was one of first multinational companies to warn of European trouble signs last year, recorded a 17 percent decline in European sales.  GE indicated that the contraction was broader and worse than initially thought.
• The Wall Street Journal recently reported that five of the biggest auto manufacturers in Europe reported grim Q1 performance. This included an uncharacteristic 26 percent decline in operating profits at Volkswagen, a 12 percent revenue decline at Renault SA, and a 6.5 percent revenue decline for PSA Peugeot Citroen. Ford Motor Company reported a $462 million operating loss in the region, and despite initial bold efforts to close 3 European factories, expects to take a $2 billion loss by year-end. Even German premium brands such as Mercedes and BMW have begun to feel the effects of slowdown in both the home German and other Eurozone markets, as well as in China. BMW is now forecasting a single digit increase in China auto sales vs. a 40 percent increase last year.
• Global consumer goods company Unilever, previously demonstrating a rather agile and broad support for global product demand also felt the effects of a slowdown in Europe among its various product offerings.

• Global apparel and footwear producer Nike indicated a 20 percent decline in operating profits concerning China while restaurant services provider Yum Brands reported a 41 percent decline in Q1 operating profits in China following media accusations of antibiotic use by its suppliers.

All the above are continued reinforcement that supply chain organizations must be able to refine supply chain planning capabilities.  The ability to plan in more finite segments, by country, region and individual product area are obvious. Scenario-based planning and more insightful business intelligence by country are ever more important.

While the current news of contraction remains negative there will as we all know, eventually be a bottoming.  Some individual countries may bounce back earlier than others. Similarly some markets and product segments may rebound quicker than others.  The key is to be able to assess and determine when it occurs before your competitors.  With capacity and resources continuing to be cut-back across the Eurozone, it is equally important to have adequate lead time to plan for additional resource needs, when the time comes.

While contraction is the overriding headline for Europe, there will come an eventual bottoming and upturn.  Will your organization or S&OP process be able to determine that point quicker than your competition?

Bob Ferrari

Wall Street and business media is abuzz about the latest blockbuster M&A deal, the Berkshire Hathaway and 3G Capital $23 billion acquisition of consumer goods food icon HJ Heinz.

The byline serves as the fourth largest food and beverage acquisition thus far, perhaps the most stunning. Already, Wall Street watchers exclaim that merger activity is on a comeback while sharks are bantering names of new potential consumer goods acquisitions and a new wave of M&A activity for global bankers. Similar to the recently announced mega-deal involving Dell, the purpose is to take Heinz private to work on additional synergies and growth. The deal is expected to close later this year.

The deal itself is a bit unusual since Berkshire’s role is the primary banker while 3G Capital will serve as the hands-on management operator. According to The Wall Street Journal, 3GCapital, a private investment firm based in Brazil, has a reputation for a hard changing management style that has shaken previous comfortable executives at U.S. and European companies. The firm has demonstrated a previous track record of wringing-out operational costs from previous M&A efforts at AB In-Bev and Anheuser Busch, and Burger King. The firm has already cut operating costs at Burger King by 30 percent while shedding significant numbers of former corporate employees.

Heinz itself has a stellar brand and garners 20 percent of current revenues outside the United States. It has delivered five years of previous cost cuts and has delivered 30 consecutive quarters of revenue growth. However, this buyout will double Heinz’s existing debt to over $12 billion and already, its investment grade rating has been cut.

The logic for this pending new M&A wave is, in our view, troublesome for the global supply chain community.  Uncertainty in the global economy is causing noticeable headwinds for top-line revenue growth, especially within the promising emerging market regions of the globe. Just this week, Nestle warned of increased challenges across global markets. Increased occurrences of natural disasters climate extremes and political unrest are impacting consumer markets. Stalwart Procter & Gamble has been under enormous pressure these past months to produce additional growth and revenues.

Meanwhile companies sit on mountains of cash with reports that corporations in the S&P 500 are sitting on more than $1 trillion in such cash.  The banking industry is on the mend, having healed its previous abuses, and now ready to bankroll lucrative new deals.

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 senior executives’ shifts.

Surrounding all of this activity is the strategic use of cash, and potential reinvestment in supply chain productivity, supplier partnerships, business analytics and other required investments.  While the day-to-day challenges for managing the responsiveness and resiliency of the supply chain cry out for such investments, cash is diverted or channeled to other purposes such as increased product promotions, stock buy-back or M&A. In short, the supply chain does the heavy lifting to bankroll other cash and investment needs, without some piece of the investment pie. Business transformation initiatives languish, while priorities are placed in other dimensions.

The threat of a renewed hunker-down emphasis has the potential to once again foster highly lean supply chains with little flexibility or capability to respond to more demanding customers, market opportunities or global risk. Highly lean supply chain resources lead to breakdowns in product quality monitoring and assurance processes and increased occurrences of product recalls, ultimately damaging the brand.  Supply chain teams will thus revert back to efforts of outsourcing, operational consolidation and further cost cutting vs. selective investment in more productive and predictive business process capabilities.

We certainly do not want to sound alarmist but when will Wall Street ever understand that financial engineering does not necessarily equate to the existence world class supply chains, and of talented, skilled supply chain teams that are valued for their contributions.

The M&A bankers have big payoffs in their sights but not necessarily resilient supply chains.

Bob Ferrari

Last week SAP made what it thought was a major announcement, that being the product launch and availability of SAP Business Suite Powered by HANA. 

As has been the tendency of SAP of late, many of SAP’s trusted market influencers, industry analysts and media sources were summoned to Palo Alto for the grand announcement.  Point of clarification, Supply Chain Matters was not on the invitee list, probably because we do not tend toward SAP group think or have significant revenue streams predicated on SAP activities. Our perspective has always been objective, and not what SAP’s media machine tends to want to hear.  One further disclosure: this author was a previous employee in SAP’s marketing groups for over two years.

This release offers SAP Business Suite applications on the in-memory architecture based SAP HANA platform, including transactions and business intelligence. This includes SAP Supplier Relationship Management and SAP Supply Chain Management suites. The primary marketing message is supporting a real-time business platform. There is a SAP HANA Analytics Foundation offered as a separate package to support analytical needs.

What’s really interesting about this announcement is the mixed reaction it has garnered, even among favored sources.  For the record, Supply Chain Matters stated over two years ago that HANA, SAP’s newest database architecture could be game-changing for B2B, supply chain applications and predictive analytics computing. After watching the videos of the new SAP Business Suite Powered by HANA, we get the sense that SAP has come up with a cool new set of tools, but the burden of turning these tools into compelling business support applications is up to SAP installed base users and their IT teams.  It was rather disappointing to note that there is a foundation of business analytics but customers need to both license and develop their business support needs.

Turning to some other enterprise software influencers on social media, Dennis Howlett, blogger for ZD Net and Irregular Enterprise penned a commentary that acknowledges a polarization of opinion.  Video interviews of other bloggers such as Brian Sommer, Ray Wang and Jon Reed further contrast both the positive and not-so-positive aspects of the announcement.  While our readers can form their own opinion, the summaries point to a promising new technology platform that lacks specifics, compelling business proposition as well as pricing details. There is a belief expressed that SAP is relying too much on system integrators and/or customers with the burden of developing compelling business applications on the new Business Suite platform. In his commentary, Howlett takes some issue with enterprise software blogger Vinnie Mirchandani’s posting, Here Comes the Gold Stack. blog commentary. (This author has come to enjoy Vinnie’s views and has contributed a guest posting on his Deal Architect blog).  We believe Vinnie’s commentary makes good points especially about vendors constant needs for customers to chase the technology stack.

Rather than prolonging the enterprise level debates, we will summarize the takeaway for SAP focused supply chain functional and IT teams.

SAP Business Suite Powered by HANA is yet another building block to SAP’s road toward market differentiation, and another strategic step in allowing customers to upgrade SAP functionality with less business disruption.  The proposition that SAP wants to be both a database and applications provider is too biased toward justifying SAP’s business interest vs. the needs of its customers. IT teams are not going to inclined to rip out existing database platforms supporting multiple business needs beyond just SAP.  It is expensive, painful, and frankly not cost justified until SAP dramatically undercuts existing pricing.

The compelling business needs of supply chain applications rests in broader and more-timely supply chain wide and B2B business intelligence and predictive analytics.  That includes needs for enabling virtual B2B and collaborative sales and operations planning (S&OP) and supply chain control tower processes that synthesize both structured and unstructured information.  As we have stated in prior commentaries, SAP HANA certainly has the potential to meet these needs, but SAP has to lead the way by demonstrating that these applications can be implemented and supported on HANA at competitive cost and benefit for its customers. It needs to better synchronize its development timetables to the needs of its entire customer base, large global and mid-market, not just the goals of its executive and sales team.

Supply chain functional teams utilizing SAP are advised to take a wait and see perspective regarding this latest product announcement.  There is a need for a lot more specifics and demonstration of benefits.

Bob Ferrari