We pen this commentary from the JDA’s annual Focus customer conference being held this week in Las Vegas.  Supply Chain Matters provided an initial commentary with some general first impressions garnered from day one of the conference, and this commentary comes at the close of day two.

We previously noted the announced strategic shift in JDA’s product strategy over the next five years, being positioned as JDA Cloud. After some further briefings with JDA senior executives, it is the view of Supply Chain Matters is that this strategy is more to do with providing various options for the hosting of JDA applications, coupled with a variety of managed services that can span specific application expertise to full process management.

JDA has been working with these types of models with approximately 100 customers for the past three years.  Senior management indicates that the company’s supply chain functionally oriented customers are seeking more options for implementing more advanced capabilities but seek more options in terms of the value-proposition for IT infrastructure, planning expertise or other required expertise.  Existing customers are obviously interested in the pricing strategy, and JDA management appears to be favoring the classic capital license pricing model, but are quick to point out that subscription based pricing can be supported if that is what customers desire.  Another important clarification was that the platform is not a single instance, multi-tenant architecture because of a strong belief that customers are still favoring defined boundaries in their hosted instance, literally “hermetically sealed”  around the customer’s data.  This is certain to trigger responses from supply chain cloud based competitors.  Another meaningful statement was that over 90 percent of current JDA applications are already enabled for hosting options. Our recommendation to existing JDA customers is to seek clarification as to your supply chain business outcome needs, and contrast that to the specific buying options that JDA will support.

Another takeaway from Focus 2012 is the progress that has made since JDA’s acquisition of i2 Technologies nearly two years ago, Readers may recall our Supply Chain Matters past commentary when the first i2 deal was announced in 2008, JDA indicated that its plans for i2 included a software sales model reflected as a “CD replication” strategy, meaning that potential customers would receive standard, un-customized software.  That was rather significant at the time, since i2 was known for its industry-centric innovation in supply chain technology, and was quickly transitioning to a customized software and service provider with some rather significant customers.  Two years hence, it is clear that JDA has uncovered the need for differentiation and depth that customers require in their supply chain technology. For its part, CEO Hamish points to a four year roadmap related to assimilation of i2, and that the company is just beginning to leverage new innovations resulting from the capabilities that the former i2 provides for JDA.

A final observation is directed at the current customer footprint of JDA. Surprisingly, over 75 percent of JDA’s existing customers stem from manufacturing-centric supply chains vs. retailer-centric supply chains. In our view, the bulk of the conference messaging was directed at challenges in retail and ongoing revolution within online commerce.  JDA needs to not only direct its efforts on the opportunities of retailers and manufacturers coming closer aligned in supply chain capabilities but also focus on the widening gaps among manufacturing companies that are best-in-class in capabilities vs. those that need to close these gaps.

Bob Ferrari

We pen this commentary from the beautiful Aria Hotel in Las Vegas which is hosting supply chain technology vendor JDA’s annual Focus customer conference for three days this week.   This was the first time since the inception of Supply Chain Matters that we have been invited to attend Focus, and we praise both the JDA social media and industry analyst relations teams for their recognition of the influence of supply chain social media platforms such as ours. By the way, the Aria has some pretty nifty high-tech laden rooms.

We begin our initial commentary with some general first impressions garnered from day one of the conference.

One of the more pleasant surprises regarding this conference was to note the sheer presence of slightly over 2000 attendees at a conference dedicated to enabling supply chain business processes with technology. That should be an indicator that either conference education budgets are far healthier, or that the focus by many businesses on enhancing supply chain capabilities is a lot more focused.  We hope to gain a better sense of this in tonight’s networking reception.  Attendees are reading these commentaries are welcomed to share their motivation for attending.

Another impression to share is the announced strategic shift in JDA’s product strategy over the next five years.  In the opening keynote, president and CEO Hamish Brewer announced to his assembled customers the intent of JDA to move toward a cloud-based solutions provider, with JDA Cloud being positioned as a prime business development offering. Brewer’s message to customers was to not overtly change the current collection of product offerings but to give consideration to moving to the cloud delivery model over the next 3-5 years.  That statement comes with a lot of open questions for JDA as well as its current customer base.  The specifics as to what components are to be included in JDA Cloud seem to be a bit vague after day one.  This author managed to attend a customer presentation delivered by Lenovo’s E-Commerce business, which was an early adopter of JDA hosted systems. While we were able to gain some additional knowledge of what is being defined as Managed Services, JDA will need to get much more specific since the target buying teams now include functional supply chain and IT constituencies.

Late this afternoon, JDA hosted for invited industry analysts, media and influencers a specific demonstration of a rather cool product being termed JDA 3D, which was jointly developed by JDA and Red Dot Square Solutions. Our best description of this product is a combination of simulated retail merchandise planning, retail planogram, and 3D visualization wrapped together in software. The application fuses the needs for retail assortment planning, sales and marketing effectiveness and product demand sensing in a single application.  The application is being positioned to either help consumer goods manufacturers inspire customers to buy their products, help retailers to design a more pleasant and effective floor environment, and allow product development teams to virtualize how a product might fare in the market in a digital simulation.  Lots of possibilities for this application and hopefully JDA will provide more specifics.

Our final observation relates to the conference access that JDA grants to industry analysts and bloggers.  This is one of the very few technology providers that restricts attendance to certain product or customer presentations.  I was informed by long-time industry analyst attendees that the restricted list is narrower this year than in previous years, and thus JDA’s outreach teams should be commended for practicing some internal change management.    That aside, if a technology vendor believes in its products and its abilities to solve customer problems, than it should be willing to be transparent.  Heck, even enterprise vendors SAP and Oracle provide total access to all presentations.

Bob Ferrari

The Eurozone composite PMI, which includes manufacturing and services related output, fell to 48.7 in March, from 49.3 in February.  This is the largest drop in the index in the last two years.  Once more, economists are expecting Eurozone output to decline an overall .2 percent this quarter, compared to a .3 percent decline in the fourth quarter of last year, which is the technical indicator of recession. Unemployment among the Eurozone 17 nations now averages above 10.5 percent. Many economic forecasters indicate that consumer spending in the region is unlikely to improve anytime soon.

Of more concern, the latest numbers indicated further weakness in France and Germany, the two principle engines of manufacturing growth.  The composite PMI for France dropped to 49.0 in March, from 50.2 the previous month.  Germany’s composite PMI fell to 51.4 in March from 53.2. The implications of these latest economic indicators is that the region has more than likely entered a recessionary phase and the real question is how long and severe it will ultimately end up to be.

For Eurozone manufacturers the implications are both a contraction in spending with continued concentration in other geographic regions to support growth and profitability needs.

As an example, French based food producer Danone recently reported that more than 60 percent of current sales growth and 75 percent of operating profit growth came from 6 countries, Brazil, China, Indonesia, Mexico and Russia). Similarly, other Eurozone based manufacturers are concentrating on emerging market regions and the U.S. for growth and profitability needs.  These trends make the issue of the value of the Euro and the overall long-term stability of Eurozone ever more important. Similarly, European firms such as Nestle, Siemens and Unilever have concentrated growth and output strategies outside the Eurozone.

Meanwhile, the manufacturing-led resurgence in the U.S. continues. The ISM PMI for March increased one full percentage point to a reading of 53.4 in March.  While the employment indices increased, new orders declined slightly, indicating some caution for sustained momentum.

Supply chain planning teams need to continue to have a keen eye on individual regional economic indices to spot sudden trends as 2012, as was 2011, will turn out to be a challenging year for predicting output needs by region.

Bob Ferrari

In late 2010, Supply Chain Matters published a commentary describing Lokad,  A Twist in Cloud Computing- Forecasting Mathematicians On-Demand.  This rather unique cloud based technology provider provides its customers with highly sophisticated product demand forecasting services which differentiates itself on the sophistication of its staff of mathematicians who take on challenges reflected in difficult or complex forecasting problems. We sometimes refer to the company as “mathematicians on demand’.

CEO Joannes Vermorel recently corresponded with us regarding his team’s current efforts in the area of quantile forecasts, which represent the most significant upgrade for Lokad technology since the company’s launch.  As opposed to deterministic or mean-driven forecasts where respective forecast weighting are averaged, quantile forecasts introduce a purposeful bias in the forecasting algorithm. Quantile methods can be viewed as a stochastic method for forecasting.  This method can be routinely used in retail, distribution-driven or process manufacturing environments where “spike” demand is prevalent. It can be a more accurate method to address seasonality of demand such as the manufacturing of seasonal products or goods. As Vermorel describes, rather than forecasting deterministic average behavior, quantile forecasting embeds specific distribution uncertainty for each forecasting period (intra-year, intra-month, intra-week). A quantile approach assumes that a perfect accurate forecast cannot be achieved because many variables are not clearly defined, and instead, attempts to balance the risk of over or under forecasting.

Lokad reports that it continues to test its quantile methods on many industry verticals including the production of auto parts, electrical supplies, textile products, spare parts and packaging materials. Keep in mind that the company generally takes on rather difficult or troublesome forecast challenges to begin with. Vermorel and his team are also rather pragmatic in the view that the goal is not to have the most accurate forecast, but rather a more automated means to determine the best best response to fulfilling product demand under challenging constraints.

Bob Ferrari

The following is a guest commentary that is published on the Supply Chain Expert Community website.

This author just returned from the Supply Chain World North America 2012 conference, sponsored by the Supply Chain Council, which was held this week in Miami. The theme for this year’s gathering was Taking Supply Chains to the Next Level, and as was the case last year, the speakers were extraordinary and the messages fairly consistent.

I had the distinct opportunity to moderate a panel consisting of various well noted supply chain thought leaders and influencers. The panelists included:

Steven A. Melnyk, Professor of Operations and Supply Chain Management, Michigan State University

Roddy Martin, Senior Vice President, Global Supply Chain Practice, Competitive Capabilities International (Former Vice President at AMR Research/Gartner)

Matthew Davis, Research Director, Supply Chain, Gartner Inc.

Bob Parker, Group Vice President, IDC Manufacturing Insights and IDC Retail Insights

One particular question that I posed to the panel was on the topic of S&OP and included the following:

Many companies are now embracing sales and operations planning (S&OP) processes as a key mechanism to align anticipated product demand with supply and operations requirements.

What do you believe are the logical next steps for organizations in their S&OP journey?

Do you believe that the benefits of S&OP are being overhyped?

In the spirit of education and continual learning, I wanted to highlight with this broader supply chain community some insightful responses from our panelists regarding this important topic. Too often, as a community, we tend to get wrapped up in project management thinking, viewing an existing process in the lens of sequential steps.  Sometimes it helps to take pause and instead reflect on the overall business and supply chain outcomes required from an important process such as S&OP.

All the panelists were in agreement that S&OP is not a short-lived, vendor-hyped process and is not going away anytime soon. They characterized S&OP as a journey toward multiple outcomes and benefits. What is most important is knowing what the current and required maturity level should be.

Matthew Davis observed that S&OP can be positioned as a means to determine where decisions and what decisions need to be made regarding the need to represent the one face of the firm to customers.  It brings together teams that directly touch and/or influence product demand and supply, along with those responsible for influencing resources or making decisions as to options. The activities incorporated are generally focused on demand shaping or the ability to influence and respond to changing customer needs.  In terms of future needs, with more and more manufacturing and service firms positioning product offerings as “solutions-centric”, the process will need to synchronize a combination of product, technology and coordinated services needs. As an example, in the high tech industry, a product could involve a combination of hardware, software and services coordination.  All of this implies that the planning process changes from that of materials and physical needs to further include a broader context of project management based synchronization.

Technology’s role in the process is to help overcome time latency and aide in the ability to integrate information with the capabilities needed to influence and respond to customers. A broader scope of product solutions adds a project management dimension to the process.

Bob Parker added the need to incorporate portfolio, situational and scenario based analysis to manage products, tradeoff decisions, as well as to mitigate risk, with an overall goal of continuous planning. He cited as an example, Procter and Gamble’s circles of cadence, involving strategic, tactical and operational decisions that need to be coordinated.  The S&OP process never ends, it is continuous.

Professor Melnyk added the need to focus the process on required business outcomes, not so much in the sense of hard metrics, but on the required outcomes needed to satisfy customer and business needs.

Roddy Martin added that the future of S&OP is framing the process differently, as a journey toward integrative decision-making. Too often, S&OP teams rush to include senior executives in the process without the process maturity, and the right level of information that can context business impact or business options. Having arguments as to the accuracy of information or the meaning and implications of information, chases senior executives away and can derail efforts. That is perhaps, the worst mistake. Executive S&OP is the summarization of all business planning and execution across various time horizons, along with the business decision implications related to resource plans.

What I took away from these combined insights is that we as a community may be framing the question of the future of S&OP in an improper context.  The future is a given, the opportunities are enormous, but our context and lens needs to broaden.

Bob Ferrari

We provide a brief but important update regarding Supply Chain Matters ongoing commentaries addressing significant supply breakdowns of critical life-saving drugs within pharmaceutical and drug supply chains.

Yesterday the U.S. Food and Drug Administration (FDA) approved two additional suppliers for two life-saving cancer drugs that have experienced short supply because of the unplanned shutdown of contract producer Ben Venue Laboratories, a division of Germany based Boehringer Ingelheim GmBH.

To respond to the critical shortage of ovarian cancer treatment drug Doxil, distributed by Johnson and Johnson, the FDA has approved temporary importation of the replacement drug Lipodox as an alternative to Doxil.  The FDA has authorized a limited arrangement specific to Mumbai India based Sun Pharm. Global FZE and its authorized distributor, Caraco Pharmaceutical Laboratories Ltd., based in Detroit. In its press release, the FDA reinforces that temporary importation of unapproved foreign drugs is considered in rare cases when there is a shortage of an approved drug that is critical to patients and the shortage cannot be resolved in a timely fashion with FDA-approved drugs.

Another drug that is in critical short supply in the U.S. drug supply chain is the drug methotrexate, prescribed to treat many forms of cancer and chronic disease. Their have been recent media reports indicating that only two weeks of supply of the drug remained to fulfill patient demand. The FDA has additionally approved a preservative-free generic equivalent manufactured by Illinois based APP Pharmaceuticals, a division of Fresenius Kabi AG based in Germany. Drug maker Hospira additionally expedited release of additional 31,000 vials of methotrexate, described as the equivalent of one month’s demand for this drug. The FDA is also working with other drug producers to free-up additional supplies.

The FDA also issued additional guidance to drug manufacturers regarding more detailed requirements for both mandatory and voluntary notifications to the FDA regarding future drug shortages or potential drug shortages.

Supply Chain Matters applauds these latest actions coming from both the FDA and the industry.  The fact remains however that the potential for stockouts of any critical life-saving drug remains unacceptable, and the industry continues to find itself in a situation of too much sourcing risk, without contingency plans for augmenting supply.  We also strongly suspect that the new FDA directives regarding notification of short supply will only increase the visibility to other drugs in short supply, adding more embarrassment, patient and healthcare provider mistrust concerning the U.S. drug supply chain.  We fear that this will only add to the growing problem of counterfeit and grey market supplies of critical drugs.  We hope that we are proven wrong.

Bob Ferrari