B2B cloud-based network provider E2open reached a significant milestone today with the announced availability of E2 Planning and Response version 11.2 which includes enhanced supply chain planning capabilities including “what-if” scenario and simulation planning, network planning visualization and analytics.
Readers will recall that in late July of last year, the supply chain planning technology market was stunned by the announcement that Icon-SCM, a German based private provider of supply chain rapid planning and simulation capabilities, and a preferred partner to SAP at the time, was acquired by E2open. At the time of this announcement, our Supply Chain Matters commentary opined that with the addition of Icon-SCM and its vision of network-wide rapid planning and simulation, the product roadmap for E2open would vastly accelerate in the areas of advanced supply chain planning. Today’s announcement represents a significant step in that direction.
It is further evidence that the technology community is hearing your desire to provide a B2B network that provides support capabilities well beyond supplier connectivity, visibility and basic collaboration. The ability for a cloud-based provider to incorporate responsive planning, what-if and simulation capabilities, coupled with collaborative execution brings customers far closer to the ability to enable supply chain control towers supported by deeper, predictive and more informed supply chain wide decision-making capabilities.
Readers familiar with Icon-SCM will probably recognize the augmented capabilities included in the latest E2open release. That includes in-memory creation and comparison of planning scenarios, the ability to perform multiple what-if simulations of various product demand and supply situations, a configurable planning cockpit with drill-down capabilities to analyze exceptions or alerts. The new release further provides a certified SAP adapter to provide proven connectivity with SAP data sources and hubs.
Our belief is that this latest release is one of others to follow that will add even more supply chain predictive planning and business intelligence support capabilities and it will be interesting to observe the market uptake as E2open begins to compete more directly with existing supply chain planning and execution providers. This will afford manufacturers and brand owners enhanced opportunities to align direct procurement, supplier based management, customer fulfillment and logistics capabilities on a single network, perhaps far sooner than any existing ERP provider.
Disclosure: E2open is a sponsor of the Supply Chain Matters blog.
On the eve of the beginning of the chronological New Year, it is our time to reflect, look back and scorecard our Supply Chain Matters 2013 Predictions for Global Supply Chains which we published nearly a year ago.
Readers are welcomed to review our predictions for 2014 which we outlined previously in a series of detailed commentaries. But now is the time to look back and reflect on what we previously predicted and what actually occurred in 2013.
In our previous Part One posting, we scored our first five predictions for this year. We now move toward the final five of our predictions and how they fared.
As has been our custom, our scoring process will be based on a four point scale. Four will be the highest score, an indicator that we totally nailed the prediction. One is the lowest score, an indicator of, what on earth were we thinking? Ratings in the 2-3 range reflect that we probably had the right intent but events turned out different.
2013 Prediction Six: Supply Chain Organizations Must Either Embrace and Augment Resiliency or Deal with the Consequences of Poor Business Outcomes.
This particular prediction was motivated by the constant volatility in product demand, supply, and other unplanned events impacting industry supply chains. Volatility exposes the vulnerabilities of existing planning, execution or S&OP processes. Throughout 2013, there were increased incidents of supply chain disruption including a major port strike, the threats of port strikes on involving the U.S. west and east coast ports, major factory and warehouse fires along with continued incidents of unprecedented natural disasters. Just this weekend, a fire destroyed the workshop of internal movement parts-making supplier to Swatch Group and other competitive watch suppliers. Swatch supplies roughly 60 percent of movements used in all Swiss watches. As we pen this update, it remains unclear as to the extent of the damage or parts disruption.
Throughout 2013, we observed more and more evidence of manufacturers investing in people, process and technology augmentation that would address resiliency and more predictive decision-making capabilities. This was further reflected in robust software sales from vendors and services providers that concentrated in enabling resiliency, risk-mitigation and more responsive supply chain decision-making capabilities.
We predicted that Supply Chain Control Tower (SCCT) initiatives, beyond those in high tech and consumer electronics supply chains, would come more to the forefront this year. That turned out to be not the case. There were various reasons including the need for further education, organizational readiness to take on such as an initiative and technology vendors themselves who moved away from articulation of SCCT concepts in their product marketing. This area was a missed prediction for us but we continue in our efforts to provide broader market education in this area.
2013 Prediction Seven: Chinese based Manufacturing and Service Firms will Markedly Increase Their Presence and Influence within Industry Supply Chains
The essence of this prediction stemmed from China’s leadership which was encouraging more companies to buy assets overseas and to make strategic investments across targeted industry supply chains. Having in excess of $3 trillion of foreign-exchange reserves helped in the bankrolling of such investments. While natural resource and energy continue to be the predominant strategy our belief was that other industry or geographic penetration strategies would play out in 2013, and that indeed turned out to be the case.
Chinese firms indeed turned their attention toward machinery interests across Europe, making select investments in distressed companies. Zoomlion Heavy Industry Science and Technology, a state owned construction equipment producer acquired German equipment maker M-Tec inDecember. Sany Heavy Industries has quietly acquired two German based firms, Putzmeister and Intermix and entered a joint venture with Austria based Palfinger. In the United States, Sany invested in a $60 million office building and adjoining warehouse outside Atlanta in an effort to develop a more significant presence in the U.S. construction equipment market. According to a Wall Street Journal report earlier in the year, Sany has been “scouting for acquisitions and joint ventures to gain a broader product line, more sales and rental outlets.”
Tianjin Pipe has invested in a $1.3 billion manufacturing plant in Texas to produce seamless-steel pipe for the oil and gas industry. That plant is expected to be completed in 2014. Hisense USA, the subsidiary of home-appliance and electronics producer Hisense Electric is branching out to become a stand-alone brand of flat panel TV’s and mobile handsets from a plant in Georgia. A growing number of China based textile producers including Keer Group and JN Fibers have been investing in new production facilities in the U.S. southeast to supply fabric yarn to Central America apparel producers. Energy costs in the U.S. have become far cheaper not to mention transportation cost advantages for shipping yarns and industrial fibers to Central America, an evolving low-cost manufacturing alternative for the Americas market. These strategic investments allow Chinese yarn and fabric producers a means to overcome existing U.S. tariff barriers for fabric composition.
The most visible and noteworthy investment was the acquisition by China’s largest meat producer, Shuanghui Group, of major pork producer Smithfield Foodsfor approximately $4.7 billion. The primary purpose of this acquisition was stated as fostering more export of Smithfield branded pork products towards China’s booming consumer market. The reality however is now the presence of a prominent Chinese based food producer within an important segment of the U.S. pork products supply chain. The deal also won approval from U.S. regulatory bodies. Since the Smithfield acquisition, there has been added speculation about added acquisitions in the dairy sector.
We believe we nailed this prediction and thus provided ourselves a generous rating.
2013 Prediction Eight: The Executive Level Voice and Shared Accountability of Supply Chain will Extend into Three Broader Areas
Rating: 2.0 (see below qualifier)
The basis of this prediction was our belief that evolving needs for product design, customer fulfillment and customer service now umbrella, voluntarily or involuntarily, more accountability for the supply chain leadership executive. Visible incidents of botched new product introductions because of initial quality issues or premature component failures across automotive, aerospace and consumer electronic brands during 2012 led us to this broader prediction. The new era of Service Lifecycle Management where OEM’s or capital equipment manufacturers offer customer pay by use or pay by hour leasing options was yet another motivator for broadening the accountability umbrella of the supply chain organization.
Throughout 2013 there were continued developments of premature quality and component failures among the above mentioned industry groups. While Ford Motor has introduced quite a number of new vehicle models, its quality indicators are slipping precipitously. Business media headlines were consumed with continuous reports of additional component failure incidents involving Boeing’s 787 Dreamliner aircraft. Other incidents that have escaped media visibility continue.
Candidly, our rating of this prediction has been a challenge since we have had difficulty in securing anecdotal or hard evidence of clear increased or broader functional accountabilities among industry supply chain teams. Our intent was to develop a detailed research study to explore this area in 2013 but a lack of time and a specific research sponsor thwarted our efforts. Therefore, we cannot in good conscience provide ourselves an overly positive rating even though our gut belief is that we were on the right track with this prediction. We therefore defer to our readers to add further commentary and perspectives as to whether broader and increased accountability indeed occurred during 2013. Look for flash poll early in the New Year to ascertain if a broader umbrella of accountability is underway.
2013 Prediction Nine: Higher and More Expensive Incidents of Counterfeit Products, Physical and IP Theft or Grey Market Activities Would Motivate Stepped-Up Mitigation Efforts.
The incidents and challenges surrounding the continued existence of counterfeit products, physical and intellectual property theft, and grey market activities unquestionably continued across multiple industry fronts throughout 2013. In 2012, U.S. Customs and Border Protection alone seized over $178 million in counterfeit goods coming into the United States. Among pharmaceutical and healthcare supply chains, the U.S. Food and Drug Administration (FDA) had to once again alert physicians and healthcare providers to yet another batch of the cancer fighting drug Avastin early in 2013. In March, U.S. Customs officials seized $3.6 million in counterfeit Viagra and Cialis in a warehouse in South Carolina. That same raid also uncovered a large quantity of counterfeit golf clubs within the same warehouse. Counterfeit drugs were not just in proprietary but generic versions of drugs as well. Generic manufacturer Teva Pharmaceutical had to step-up quality inspections of its off-patent heartburn drugs across Europe after healthcare providers and patients noticed miss-spellings in the drug labels. The World Health Organization (WHO) disclosed that there is still no accurate estimate of the global scale of counterfeit medicines. Reports by others groups suggest that the size of the global counterfeit drugs industry could run into hundreds of billions of dollars.
The United Nations Office on Drugs and Crime concluded in an April report that counterfeit goods, mainly originating from China, have become as profitable as illegal drug trafficking for Asia based criminal gangs. The UN agency concluded that counterfeit goods traced to China are the direct source of about two-thirds of the world’s counterfeit goods. Many watchdog agencies have concluded that counterfeiters have become far more sophisticated in their methods of production and distribution. China is also the primary area of the most concern regarding intellectual property (IP) protection, and has become a primary motivator for current decisions to near source design and manufacturing to other consuming regions such as the United States.
Despite all the above evidence and incidents, industry supply chains such as the pharmaceutical industry continue to battle a rising tide. While many firms have specific compliance leadership and staff resources, efforts generally were directed at certain controls within current budgetary parameters. They include early detection, audit and product packaging techniques to make it more difficult for counterfeiters to distribute fake goods. Calls from governmental agencies for stricter or mandated tracking, inspections and controls remain muted and subject to political lobbying. Private industry must step-up and come up with enhanced solutions.
Meanwhile, consumers, patients and services providers continue to remain the victims. While we correctly predicted the wide-scale scope of the ongoing problem, stepped-up mitigation efforts apparently lagged.
2013 Prediction Ten: Cloud Computing and Managed Services Options Continue to Gain More Traction Provided that Vendors Resolve Lingering Customer Concerns.
The year 2013 featured the ongoing shift of influence and the ultimate decision in technology buying moving away from IT and towards the business side, with the continued counsel of the CIO and IT teams. The fate of technology investments to enable expected and more timely business outcomes is quickly shifting into the hands of business and supply chain teams. At the same time, huge multi-year technology transformation initiatives were shunned in favor of targeted, tactical business process change initiatives of average 3-6 months duration that phase-in capabilities toward a desired multi-phased end-goal. This fostered a greater attraction toward cloud computing, managed services or best-of-breed selection options that
provided teams managed scope and much quicker time-to-benefit.
During the year, industry analyst and other published surveys pointed to less resistance for certain supply chain mission critical processes moving toward hybrid or public clouds, provided that vendors could ensure strict security standards, less onerous contract language and quicker implementation methodologies. However, the November-December incident involving the security breach of retailer Target’s point-of-sale systems will most likely significantly re-ignite security concerns again in 2014.
In 2013, many supply chain technology vendors continued their wholesale shifts at providing customers broad cloud-based options in planning, B2B collaboration and execution management. Thus far, customers seem to be comfortable with adopting such options, but again, in managed scope. Tight budgets for technology adoption also contributed to the attractiveness for cloud-based options since technology investments can be funded within business operating budgets.
This concludes our 2013 Predictions scorecard. We trust that you, our readers, secured benefit from these predictions as they transpired this year. While we did not hit a home run on every prediction, we were certainly in the game.
Readers are invited to add their observations in the Comments area regarding our predictions for this year and our self-rating.
Sincere thanks for your continued loyal readership throughout 2013 and we extend our wishes for a productive and rewarding 2014.
Bob Ferrari, Executive Editor and Managing Director
© 2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Integrated Business Planning and cloud-based Sales & Operations Planning (S&OP) software provider, Steelwedge, made a recent significant announcement, one that adds more credence toward the benefits for connecting supply chain demand planning with the front-end social aspects of product planning.
The software provider is testing a new extension of its planning capabilities termed Sales Pipeline Bridge. This “app” is being built to interface with Salesforce.com’s Force platform and is a sign of other supply chain planning and management applications integrating to the cloud-based Salesforce platform for broader intelligence to social and collaborative –based planning needs. The new extension has the potential to allow planners to tap into sales pipeline data and over time, weigh early consumer sentiment factors regarding newly released or existing products. Another potential benefit is the ability to reconcile pipeline-based forecast data with order history, causal data and other data sources to provide the S&OP process another layer of overall product demand intelligence.
Sales Pipeline Bridge is currently scheduled for availability on the Saleforce AppExchange in early 2014.
Anyone involved in the S&OP consensus process has often encountered where sales and marketing teams can be overly optimistic about product planning or forecasting needs. What better way to engage with sales & marketing by reflecting that team’s very own forecast data. The ability to actually incorporate sales pipeline data can provided added intelligence, gap-analysis and better informed confidence measures to coming closer to a realistic consensus forecast.
Supply Chain Matters feels that readers can anticipate other enterprise, B2B network and supply chain technology vendors leveraging the Salesforce platform in the coming months, particularly to accommodate mid-market manufacturer or retailer needs. We could perhaps someday observe Salesforce itself deploying its own version of supply chain management support.
This week, the Institute of Supply Management (ISM) released its December 2013 Semiannual Economic Forecast, which serves as an outlook for U.S. manufacturing and supply chain activity in the first-half of 2014. This is ISM’s supplemental reporting to its monthly PMI reporting, which is very closely watched by Wall Street and business media. The report provided some noteworthy indications of what manufacturers are planning for in the New Year.
Expectations for 2014 are positive as 69 percent of survey respondents expect revenues to be greater in 2014 than in 2013. Respondents are planning for manufacturing revenues to increase 4.4 percent in 2014, almost a percentage point higher than consensus economic forecasts of global growth of 3.5 percent.
ISM reports that manufacturing employment is expected to increase by 2.4 percent which is a sign of continued confidence. Respondents report operating at 80.3 percent of their normal capacity, up slightly from 80.2 percent reported in April 2013. Capital expenditures are expected to increase by 8 percent in 2014 over 2013.
Of most interest were responses to a special question focused on expected supply chain improvements planned for 2014. Supply chain and B2B technology and services providers, please take note.
The report indicates that 69 percent of respondents are planning improvements to supply chain processes, which is a rather strong indication of aggressive investment and renewal plans. Areas of investments were described as strategic sourcing, supply base rationalization and supplier relationship management on the procurement side of supply chain. Other areas of cited investment were inventory management and control, which we presume is supply-chain and multi-tiered in scope, along with improved cross-functional planning and scheduling. It would appear that manufacturers have internalized the need for supply chain to have a more outside-in focus, with emphasis on proactively identifying risk, while deepening relationships with key suppliers. Enhancing cross-functional planning is a sign of more closely aligning both planning and fulfillment execution processes into a singular management control process.
Thus, from the lens of U.S. manufacturers, optimism is running high for a banner year and renewed investment in 2014.
Supply Chain Matters Sustaining Sponsor E2open, Inc. announced last week that it is the first dedicated, cloud-based supply chain Software-as-a-Service (SaaS) technology provider to achieve International Organization for Standardization/Electrotechnical Commission (ISO/IEC) 27001:2005 Security Certification.
The internationally recognized ISO 27001 standard certification addresses the protection of information within an individual system. The ISO 27001 standard itself was first published in October 2005 and provides specifics for security management, governance, controls and compliance. The company joins many leading, global businesses that have earned the prestigious ISO 27001 certification, including Amazon, Microsoft, and Salesforce.com. E2open further maintains SSAE16 certification for controls for processes for the past seven years.
Corporate business, functional and IT teams continue to be diligent to the security of data, whether it resides inside or outside the firewall. Supply chain and B2B focused cloud-based systems must therefore protect such data, and achieving this level of ISO certification helps to assure customers that proper measures and controls regarding data have been outlined and are practiced.
Congratulations to the E2open technical teams for this important achievement and milestone.
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters Blog.
Supply Chain Matters Sustaining Sponsor E2open recently contacted us regarding a research report they recently commissioned that was focused on vendor managed inventory (VMI) strategies. The study results present interesting supply chain related business process and information technology insights for many industry supply chains that we will share in the commentary.
In terms of background, VMI programs are often predicated on the management principle of a vendor or supplier managing appropriate inventory levels of products based on either a product demand forecast or an actual order flows. The goal of many VMI programs is to drive more efficient and responsive inventory management. Many programs are triggered by replenishment based systems triggered from EDI messaging. Depending on the terms of the program, inventory ownership may transfer to the buyer either upon receipt of the product or when the buyer sells the inventory. (consignment based program).
A September study, conducted by Gatepoint Research, included 200 responses from senior IT, supply chain, finance and logistics executives from manufacturing, retail and telecommunications industry sectors. The majority of the respondents (98 percent) held CxO, Vice President or Director titles, thus the opinions were weighted from an executive viewpoint. Respondents overwhelmingly worked at large firms which included revenues in excess of $1.5 billion (67 percent).
The report authors draw some of the following observations based on the survey responses:
- Nearly half of responders employ VMI programs with buy-side suppliers. The utilization of both buy and sell side VMI fulfillment programs (partners, distributors, retailers, etc.) was cited by 30 percent of respondents. Nearly a half (49 percent) use consigned inventory at their buyer’s VMI location. Surprisingly, 22 percent indicated no plans to implement any VMI program.
- 28 percent of respondents indicate the sharing of inventory information manually (email, fax, etc.) while 20 percent indicate direct use of the resident ERP system, and 15 percent utilizing B2B integration among inventory systems.
- Most responders indicate a lack of access to real-time information. A majority (63 percent) indicate that they do not always have adequate visibility into their current inventory levels, while more than three quarters of respondents rely on batch reporting for inventory and order information.
- A stunning 69 percent rate themselves without differentiation from competitors regarding inventory turns. About one-third of respondents feel partner collaboration is adequate. Our supposition is that the other two-thirds feel partner collaboration is inadequate.
Reviewing this survey data, Supply Chain Matters can add other observations and insights. The data implies a high utilization of VMI among large enterprises, yet most responders indicating a lack of access to real-time order, inventory and order forecast information. (see below chart extracts) There should be little surprise that nearly 69 percent of responses indicate too much cash tied up in inventory, or too much excess inventory. Only 20 percent of responders felt that their inventory turns were better than the industry average.
How timely are the Forecast, Inventory, and Order information that you and your partners share?
Copyright 2013, Gatepoint Research, Used with permission.
Assess your ability to manage inventory levels.
Copyright 2013, Gatepoint Research, Used with permission.
Our other observation reflects on how respondents rate their inventory management collaboration with partners. Nearly two-thirds indicate high collaboration with partners while about a third feel partner collaboration needs improvement. We therefore conclude that while partner collaboration is rated high, other indicators point to a lack of adequate technology tools to actually leverage the meaningful business outcome benefits of the VMI program. Notice that collectively. 58 percent of respondents rely on either a daily batch, less than daily batch, or ad-hoc order based information. Similarly, 66 percent collectively rely on these same tools for inventory status while 80 percent collectively rely on these tools for inventory forecast data. That implies a lot of information latency, especially when readers consider current industry challenges to conduct business 24 by 7, as well as the massive movement toward online and multi-channel commerce.
By our lens, the most important takeaway from this study is the need for a leveraged use of an online B2B platform that not only serves as the basis of electronic data exchange, but more importantly, near real-time information related to the trending of orders and inventory. An online network or platform can serve many purposes. Besides connectivity, content and the on-boarding of suppliers, it can also serve as the basis of integrating more real-time information related to the status of orders, forecasts and inventory.
The path toward expanded supply chain business process capabilities is not as important as the all-important B2B network platform that forms the foundation of end-to-end connectivity, visibility and decision making capabilities. Why not take advantage of that platform?
What’s your view? Are your VMI programs being stymied by latency of information? Does this current research data surprise you in its conclusions?
The study itself can be downloaded at this E2open supported web link.
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters blog and no additional compensation was rendered to highlight the above study.