Industry analyst firm Gartner published its Magic Quadrant Rankings for Supply Chain Planning System of Record applications in mid-January. In this Supply Chain Matters commentary we share some random observations regarding these latest rankings of supply chain planning technology vendors.
First, this particular Gartner Magic Quadrant report is later than usual; the last one was published in March of 2014. Rumor and speculation indicates that a reason for the delay was pushback from certain vendors. While this author does not have first-hand knowledge, having worked at two top-tier industry analyst firms, I would not be at all surprised that the report could have been delayed for such reasons. Supply chain planning vendors, especially the larger ones, have much at-stake in their ranking from Gartner.
Notable observations from our lens:
- Niche players such as Blue Ridge and Tools Group moved to the Leaders quadrant to join incumbents Kinaxis, JDA Software and OM Partners. The crossing of two quadrants from the bottom left to the upper right quadrant in a single bound is a relatively rare occurrence in such rankings. As The Wall Street Journal was quick to observe, vendors currently ranked in the Leaders quadrant share the moniker of being best-of-breed technology focused. The only ERP focused supply chain planning provider is Oracle that straddles the line between Challengers and Leaders.
- Upon reviewing many of the individual vendor capabilities rated as Visionaries, a consistent theme among customer references is Stage 3 or higher planning process maturity. Gartner defines such maturity as horizontally integrated demand and supply planning supporting linked optimization across the supply chain. As one would expect, certain vendors achieve their Visionary ranking because of completeness of technology vision which is a further testament to best-of-breed vendors for the most part. Oracle is one exception. From our lens, current efforts in releasing a full Cloud based planning capabilities for supporting discrete manufacturing planning needs demonstrates a lot in completeness of vision.
- SAP APO slipped from the Challengers to the Niche Players quadrant. Commentary provided by Gartner indicates below-average level of capability as well as below average customer satisfaction inputs. Further noted is Gartner’s view that the level of R&D investment is now significantly less than the investment SAP is exhibiting in its Integrated Business Planning (IBP) application. Ironically, SAP IBP does not yet meet the Gartner criteria for inclusion in its Magic Quadrant rankings because it is too new and according to Gartner is yet to have depth of functionality to be deployed as a planning system of record.
- Infor also slipped, moving from the Challengers to lower in the Niche Players quadrant. That was a surprise. Gartner’s commentary reflects below average vision in comparison with other supply chain planning vendors and a more traditional view of planning vs. response planning. Below average customer satisfaction along with below average future buying intentions are further cited as cautions.
Notably dropped from the latest Gartner SCP SOR rankings were supply chain planning vendors AspenTech and E2open because of not meeting previous inclusion criteria. Additions in the latest rankings were Adexa, FuturMaster, GAINSystems, NeoGrid and Slimstock. Supply Chain Matters has previously highlighted NeoGrid as an up and coming industry specific supply chain provider.
Obviously, one analyst firm’s ranking of supply chain planning market offerings is different than others. In the specific case of Gartner’s rankings, there will always be back and forth debates because of that analyst firm’s broad reach among IT organizations.
However, the current landscape of supply chain planning, sales and operations planning (SO&P) and B2B supply chain network planning technology is far more influenced by line-of-business and supply chain leadership input needs and requirements. Hence many other sources of information support the buying decision.
Yesterday and today, business media has featured front page headlines concerning Apple and its latest report of financial performance. The byline of The Wall Street Journal and other business media is that the latest iteration of iPhones failed to meet sales expectations for the holiday quarter. Once more, Apple indicated to investors that revenues may fall next quarter, the first time that has occurred in 13 years. As I pen this commentary while visiting Silicon Valley and speaking at an Oracle conference, you can literally sense the topic of hallway conversations.
As I pen this commentary, Apple’s stock closed down 6.6 percent today as a result of the latest news.
If readers had been following our most recent stream of Supply Chain Matters commentaries related to Apple’s iPhone supply chain, you would have discerned perhaps a typical pattern of new product introduction and its integration with global supply chain planning and customer fulfillment. The iPhone is a critical product for Apple since it fuels upwards of 60 percent of overall corporate revenues, thus many eyes turn to the iPhone supply chain for indications of trends.
In our early July 2015 commentary, we called attention to a WSJ published report indicating that Apple had requested suppliers to support a production build volume of between 85 million and 95 million iPhones for the all-important end-of-year holiday buying season that ended in December, despite expected modest hardware changes for the latest iPhone model. A third contract manufacturer, Wistron, was brought on-board to support higher volume requirements as was additional hiring of workers among existing contract manufacturers and suppliers.
In contrast, the consumer electronics icon had reportedly planned its supply chain output for a range of 70-80 million phones, and actually shipped 74.5 million smartphones during the 2014 holiday fulfillment quarter. Speculated In July was that hardware changes for the iPhone 6 were expected to be less noticeable and that Apple was in-essence betting that consumers will flock to upgrade their existing iPhones. Subsequent media reports indicated that Apple was making bold bets that emerging market demand, in particular China, would boost holiday sales.
At the end of July Apple reported its fiscal third quarter financial performance and the Wall Street buzz was immediately one of disappointment. This was despite reporting that profits had surged 38 percent from the year earlier period along with total revenues that grew 33 percent. The concern was a perception that Apple was trending toward a one-product company, that being the iPhone. Unit sales of the iPad tablet had declined for the sixth consecutive quarter. As a result of this news, Apple’s shares plunged 7 percent in afterhours trading and dropped as low as 21 points before a small rebound.
By January of this year, the WSJ validated what those in Apple supply chain ecosystem had already suspected, that the global consumer electronics icon was scaling back supply chain requirements for iPhones. Citing three informed sources familiar with the Apple supply chain, the report indicated that order forecasts to iPhone suppliers have been pared back in the prior several months. Apple was in essence, dynamically adjusting its supply chain plans based on expected iPhone demand volumes. Further noted was that iPhone factories had some idle capacity in the final two months of the calendar year when they typically would be all-out. That situation surprised this author since Apple has consistently been good at product demand forecasting. Major contract manufacturer Foxconn Technology reportedly began dismissing some employees earlier than usual from its Zhengzhou China facility that employs upwards of 200,000 workers.
This author’s January commentary therefore opined that financial and operational performance results for the all-important holiday quarter were therefore a rather important indication of the consequences of iPhone focused supply chain activity in the first-half of 2016.
Now we have visibility to the results of the holiday quarter.
For financial performance, Apple reported a net income rise of 1.9 percent and total revenue increase of 1.7 percent, somewhat of a shock from a track record of previous double-digit growth in financial performance, and the slowest growth since June 2013. The top line revenue number was nearly $1 billion short of analyst estimates. Sales in the now closely watched greater China region rose 14 percent, considerably down from the 84 percent growth trajectory reflected in the September ending quarter.
Operational performance included 74.5 million iPhones sold in the December ending quarter, slightly higher than the 76.5 million iPhones shipped in the prior year’s holiday quarter.
We often lament that hindsight can provide important learning and perhaps planning for the new model iPhone at previous production volumes may have averted supplier shock and cutbacks. Then again, sales and operations (S&OP) teams can set bold objectives and expectations for a new product, but also must incorporate timely product demand sensing capabilities at each and every review period.
The evidence suggests that supply chain teams were indeed re-calibrating and lowering production requirements, but the decline was steep. Further, when planning one of the most highly watched supply chains on earth, decisions are scrutinized and speculation is pervasive. When it comes to Apple, all decisions have implications because so many fortunes are predicated on Apple.
This commentary should not be perceived as a negative connotation to Apple’s new product planning and S&OP processes. Rather it provides our community additional reinforcement that synchronization of decision-making among product management, sales, supply chain planning and fulfillment is essential and that includes the most up-to-date information on product demand and supply. Bold product decisions are fine, provided they can be supported by dynamic and well-informed integrated business planning. When planning millions in shipment volumes, monthly planning does not suffice and sometimes weekly planning has it drawbacks. The linkage of product management, procurement and supply chain is no longer an option, it is essential and it includes far more integrated business planning.
© 2016. The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved.
What is the business value proposition for adopting a Cloud computing strategy? In this Supply Chain Matters commentary, we wanted to dwell somewhat on the implications of a full Cloud suite in supporting broad supply chain business process needs.
This author just completed nearly two days of briefings and conference presentations related to Oracle’s Cloud based technology offerings. The first day included a full day of industry analyst briefings that updated us to the latest product strategies and customer interest levels generated by end-to-end Cloud suite offerings. The second day included attending Oracle’s Cloud Computing roadshow that has been touring across the U.S. and other countries.
As previously highlighted in our nuggets from Oracle Open World 2015, this enterprise technology vendor is convinced that wide-scale adoption of Cloud is an unstoppable force. So much so, that Oracle has released a broad spectrum of Cloud based technology that spans everything from hosting an entire computing, networking and data management infrastructure to various enterprise suite applications that can either run on the Cloud or behind the firewall. This includes the Oracle SCM Cloud suite that supports end-to end supply chain business processes that span planning, procurement, product lifecycle management, order fulfillment, transportation and warehousing. A Cloud based manufacturing management suite focused on discrete manufacturing process support has been added this month.
One specific area brought forward in the analyst briefings was the compelling pressures that today’s businesses are struggling with. Oracle CEO Mark Hurd is a masterful communicator of such pressures. More demanding customers, new industry disruptors and relentless pressures to reduce costs and increase productivity abound. I’m fairly sure that readers can relate to the environment described.
According to Oracle, thus far, many of the early adopters of the provider’s Cloud based technology offerings are indeed would-be industry disruptors or up and coming businesses. Rather than adopt an overhead structure that includes owned data centers and IT infrastructure along with supply chain, procurement or product management applications developed years ago, before today’s globally extended supply chains, they instead appear eager to adopt a different pay-and-adopt- as-you-go structure that offers flexibility to needs.
Think about that!
An industry disruptor with lower overhead, infinite flexibility to add technology when needed, and not burdened by supply chain applications that are too disruptive and far too expensive to upgrade. Instead, supply chain functional and line-of-business teams have turn to opportunistic strategies to augment problem business processes, more often adopting a singular Cloud based application. The problem with this strategy is that while it addresses specific one-time process needs, it risks another Cloud-based island of information needing future information integration when other processes and/or applications change.
Another compelling business trend is that all corporate functions are under enormous pressures to reduce costs. That includes IT where studies consistently reinforce that 50-75 percent of costs stem from maintaining existing IT infrastructure or business software applications. Thus at every annual budget cycle, IT executives must present cost avoidance alternatives. In large businesses, IT is often classified as a corporate-wide service that evokes a tax burden on various lines-of-business and functions such as supply chain operations. Throw in frustrations relative to on premise business applications that were designed prior to today’s changed business and supply chain frameworks and the pressure to change is somewhat more compelling.
For emerging businesses, a Cloud based adoption strategy that can avoid being locked into a cost intensive IT infrastructure or acquiring software that will receive little daily use makes more practical sense. The analogy is why buy an automobile and pay for daily operation and maintenance when you can rent by the hour or day.
The takeaway for supply chain and line-of-business teams is to not dismiss Cloud based technology adoption as just more technology vendor hype. That may be short-sighted; Cloud is rather a response to growing industry frustrations related to today’s IT technology cost and service challenges.
Another takeaway is to view a Cloud based technology strategy from the perspective of a broader focus on an engineered suite of pre-integrated software applications that are continually updated to reflect changing business needs. Why settle for business application innovation every 1-2 years when every 6 months is an option, and with lower capital and overhead costs.
It is a compelling argument and one that from this author’s lens, will permanently change the technology landscape sooner rather than later.
Copyright 2016. The Supply Chain Matters® blog and The Ferrari Consulting and Research Group. All rights reserved.
This past April, this Editor attended JDA Software’s annual Focus customer conference. Among the notable impressions we walked away with was the announcement of a new partnership with Google and the Google Cloud Platform as a cloud services platform to leverage technology innovation.
Today, as a prelude to next week’s National Retail Federation (NRF) annual conference, JDA announced another step in its relationship and collaboration with Google, one that should capture the interest of retailers.
My takeaway from Focus 2015 held in April was that JDA was investing heavily in “true cloud” technology, something one could not report from previous Focus events. I walked away with a distinct impression that the Google partnership had the potential to lead to exciting new applications of information discovery and leveraged use of more predictive analytics across the end-to-end supply chain.
Google’s strengths are in the indexing of large volumes of data and information, in large scale parallel processing and in infinite scale computing. One could consider Google to be a late entrant to the cloud platform environment with the likes of Amazon Web Services (AWS), IBM, Microsoft and Oracle already having a market presence. But then again, late entrants have the benefit of learning from others and have the zeal to want to make a market statement, which Google has never shied away from. To this author’s knowledge, this is also Google’s first presence in retail and supply chain business process needs.
Today’s announcement is that JDA’s retail planning application “Retail me” will be the first application jointly developed by JDA Labs and Google. Initial functionality is focused in retail assortment planning across all selling channels. JDA’s describes the data design principle as more focused on product and customer as contrasted with a traditional planning focus on individual stores.
Retail assortment planning has often been anchored in the principle that the retailer plans and decides on the specific merchandise that consumers will buy, while merchandising and supply chain teams insure that inventory is populated at the right stores. Omni-channel fulfillment changes this planning approach dramatically since the consumer interacts with a retailer from multiple channels and in multiple ways, and the primary information is online.
Leveraging Google’s data algorithms has the potential to analyze significant volumes of point-of-sale (POS) transactional data as well as product search query data to determine specific customer profile and buying patterns. Leveraging data on where and when the customer interacts with the retailer coupled with customer profile data adds more meaningful customer-centric predictive intelligence. The leveraging of JDA’s application knowledge and experience accumulated across its various Retail and supply chain management applications adds the other dimension to this new approach.
Later this year, more applications functionality is planned for Retail.me in areas of merchandise financial planning, promotion management, inventory placement and other forms of distribution and supply chain planning.
It is an interesting approach that brings together strengths in data analysis and predictive technologies with expertise in retail and supply chain management, surely one that retailers should pay attention to over the coming weeks.
Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters blog.
This week, The Wall Street Journal validated what those in Apple supply chain ecosystem had already suspected, that the global consumer electronics icon has scaled back supply chain requirements for iPhones.
Citing three informed sources familiar with the Apple supply chain, the report indicates that order forecasts to iPhone suppliers have been pared back in the past several months. According to this report (Paid subscription required): “Component suppliers that rode the iPhone’s boom are now bracing for lower sales.”
Further noted was that iPhone factories had some idle capacity in the final two months of the calendar year when they typically would be all-out. That situation surprised this author since Apple has consistently been good at product demand forecasting.
Major contract manufacturer Foxconn Technology reportedly began dismissing some employees earlier than usual from its Zhengzhou China facility that employs upwards of 200,000 workers. The Provincial government reportedly promised Foxconn $12 million in subsidies to minimize layoffs.
In late June-early July, the WSJ indicated that Apple was planning for a larger initial production run of the next iteration of iPhones, requesting suppliers to support between 85 million and 95 million iPhones for the all-important end-of-year holiday buying season. In 2014, Apple planned its supply chain output for a range of 70-80 million phones, and actually shipped 74.5 million smartphones during the holiday quarter. What was unusual for the forecast numbers related to iPhone6S models were the lack of any significant hardware changes it its release, thus the larger numbers would have indicated expectations for increased global demand or additional customer upgrades this past holiday season. In October, Digitimes reported that integrated circuit suppliers were indicating concern for iPhone chip orders.
Based on this latest WSJ report, we logically assumed that Apple’s supply chain planners and Sales and Operations team members are dynamically managing product demand and supply alignment. As readers participating in S&OP process know quite well, sometimes sales and marketing can have rather exuberant expectations regarding product sales volumes for a key quarter, only to change such expectations when actual order volume patterns are known.
With so many global investor eyes on Apple, and with so many supplier fortunes pegged to business volume concerning Apple, the stakes are obviously high and far reaching. This is especially pertinent to newer iPhone suppliers brought in to diversify supply sources and balance supply risk. As we have concluded in many prior Supply Chain Matters commentaries, there are few supply chains that garner wide visibility as that of Apple. So much so that information leaks are actively nutured.
Apple’s upcoming report of financial results related to this past holiday quarter are therefore a rather important indication of the consequences of iPhone focused supply chain activity in the first-half of 2016.