Announcing an Upcoming Webinar: Supply Chain Segmentation- The Key to More Predictable and Profitable Business Outcomes
Supply Chain Matters Lead sponsor JDA Software recently released the results of its first annual JDA Vision 2015 study of supply chains. This study provides a detailed quantitative look at the top supply chain issues facing various industry supply chains today and includes collected responses from executives across a wide range of industries company sizes and geographies.
Within this report’s Executive Summary there are conclusions related to the support of today’s customers. Whereas, not long ago, firms focused on operational efficiencies, today, it is all about the customer and meeting ever more demanding customer expectation and service needs. The summary notes in part: “Saving time and money remains important, but the name of the game now is how to meet customers’ ever changing expectations and keep them coming back.”
From this author’s lens, one of the more important strategies for supply chain and sales and operations teams to consider within today’s unprecedented aspects of supply chain complexity is the continued realization that one size fits all supply chain fulfillment strategies do not add to the need for meeting higher customer expectations while delivering on expected business outcomes. This is why considerations for supply chain segmentation strategies have become more important.
To explore such needs, JDA Software and Supply Chain Matters will be hosting an upcoming webinar: Supply Chain Segmentation – The Key to More Predictable and Profitable Business Outcomes, where this author will provide perspectives on the increasing importance of linking supply chain segmentation and more predictive planning and analytics capabilities. I will further address how elements of supply chain advanced technology that can aide in linking supply chain segmentation efforts.
This complimentary webinar is scheduled for Wednesday, April 1st at 11am Eastern. Joining me in this webinar will be Puneet Saxena, Vice President, Manufacturing Planning at JDA Software.
Readers can register for this webinar at this registration link.
Join us as we discuss today’s process and business requirement needs related to supply chain segmentation.
Today’s front page headline article of The Wall Street Journal, Weaker Euro Ripples Around the World, reflects far deepening foreign currency headwinds for producers whose supply chain costs and operations are weighted in U.S. dollars. For senior supply chain, procurement and sales and operations planning (S&OP) process leaders, it is further compelling evidence that existing supply chain cost and product sourcing strategies will come under enormous scrutiny and pressures in the weeks and months to come.
Supply Chain Matters has already called reader attention to recent corporate quarterly financial results reflecting substantial impacts to earnings as a result of the strengthening U.S. dollar against major foreign currencies. B2C and consumer product goods companies are especially impacted, but so are many other industries as well. The headwinds are strong and concerning.
To cite but a few examples, Procter & Gamble recently reported a 31 percent drop in profit as the stronger U.S. dollar diluted the effects of a modest 2 percent organic sales growth. Foreign exchange pressures had the effect of reducing net sales by a significant 5 percentage points. Mondelez International recently reported that foreign currency headwinds delivered a $149 million hit to its operating income in its prior quarter, in spite of recently rising prices across the board. Conversely, globally diverse CPG firm Nestle was able to sustain a 4 percent organic sales growth in that company’s first-half.
The European Central Bank (ECB) has embarked on its own form of quantitative easing, similar to what the United States embarked on after the severe global economic crisis that began in 2008-2009. The ECB is prepared to print upwards of €1 trillion to buy the bonds or assets of various Eurozone countries to boost their economies and keep European interest rates low. The immediate result is that value of the Euro against the U.S. dollar reportedly has declined by more than a fifth since June, and has now reached its lowest point since 2003. That is obviously good news for European manufacturers and service providers, as well as other foreign based producers not pegged to U.S. dollar costs. This situation is expected to continue for many more months.
Companies whose supply chain and operational costs as well as product pricing is anchored in U.S. dollars now face considerable financial headwinds, motivating some U.S. based firms to quickly raise prices within foreign markets. Many U.S. based manufacturers have upwards of half of existing revenues stemming from export markets.
The compounding effect is added costs and potentially lower export sales as foreign based manufacturers take advantage of a pricing advantage within their export markets. According to the WSJ, business leaders, economists and policy makers are becoming convinced that the Euro’s drop is helping to turn the tide in Europe’s favor. There is further concern that the U.S. Federal Reserve will have to ultimately raise interest rates as well.
For procurement, supply chain and sales and operations planning process leaders, the current financial challenge to the business requires that various planning scenarios and subsequent options be developed to ascertain ways and means to reduce costs or mitigate currency impacts in cost of goods sold (COGS) or in back-up sourcing strategies that are anchored in other than the US dollar. Teams need to able to assess various options to meet quickly and considerably changing sales and product margin goals. Without such plans and subsequent supply chain actions, previous cost and productivity savings efforts can be neutralized.
As to how long this current challenge continues it very much an individual industry or corporate decision. One thing is clear, however. This is a period where analytical and data-driven decision-making capabilities will prove to be rather important.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Supply chain technology provider Steelwedge has announced today that it has received $22.5 million in new growth capital in a funding round led by Baltimore based private equity firm Camden Partners. Other participants in this latest round of funding included San Francisco based Mainsail Partners, Shea Ventures and the firm’s CEO, Pervinder Johar.
Founded in 2000, Steelwedge is an integrated business planning and Sales and Operations Planning (S&OP) technology support provider which has gained significant momentum in the supply chain technology arena. Named global customers include Applied Materials, HP, Hospira, Jaguar Land Rover Europe, Monsanto, Lenovo, Nissan, Republic Wireless, among others. Current key partners include Salesforce.com, KPMG and PwC.
Supply Chain Matters has featured a number of prior commentaries related to this provider, and Steelwedge has been a prior Named sponsor of this blog. In December of 2013, we highlighted efforts to extend demand planning with the front-end social aspects of product planning through this provider’s Sales Pipeline Bridge “app”, developed to tap the Salesforce platform.
According to the announcement and the company’s blog, this latest round of funding will be utilized to accelerate product development, expand sales, marketing and customer service. The supply chain planning provider has plans to open a new technology, sales and services hub in Austin Texas. Plans for that facility include an R&D co-innovation lab where product managers and software engineers will work directly with customers on new applications.
From our Supply Chain Matters lens, this announcement from Steelwedge is another indication of the increased interest among investors in the growing supply chain technology segment, especially upon providers offering cloud-based options. This Steelwedge announcement follows the recent successful IPO efforts of Kinaxis which raised $65 million in incremental growth funding, along with the planned private equity acquisition of E2open which was estimated to be $273 million. Each of these funding events involved building market interest for cloud-based supply chain technology offerings and provide continued signs of added activity within this segment.
We extend our congratulations to Steelwedge on this latest milestone.
Disclosure: Kinaxis and E2open are among current sponsors of the Supply Chain Matters blog. Steelwedge was a former sponsor.
In previous Supply Chain Matters commentaries addressing supply chain teams utilizing SAP as their technology backbone, we have observed that utilization of SAP’s supply chain focused applications can serve as both a blessing and a curse. The blessing comes from the structural rigor for integrating enterprise-wide transactional, operational execution and master data with supply and demand planning. This rigor is sometimes cited as a curse; since today’s highly dynamic business processes are expected to respond to ever increasing levels of network-wide complexity and changing business models.
In June 2014, we called reader attention to SAP’s strategic intent to transition its supply chain technology, specifically the need for businesses to transform their supply chains to demand networks – which implies deeper, more agile support capabilities for integrated business planning (IBP). With this shift, SAP is acknowledging that many industries must transform to be more product demand-centric and that demand drives supply chain response. In essence, SAP’s intends to enhance and deploy a broader next-generation supply chain platform, described as a “many to many” supply chain control tower platform, underpinned by IBP and response orchestration. The implication of this strategy change is perhaps the obvious admission that SAP APO, as it was originally designed and modified these past 15 years, will need to be significantly augmented by other technologies.
The conundrum implied with this strategy shift is that the sheer scope of this transition will take many more years, a journey involving incremental phase-ins. The reality is that while SAP transforms its supply chain support, business requirements are constantly changing and require a more immediate timetable.
That is why there are increasing signs that the SAP community has begun to evaluate other alternatives for surrounding SAP APO with augmented, cloud-based and other planning and decision-making capabilities that can enable business needs in a much shorter timetable. Two of these needs are augmenting demand sensing capabilities and enhancing supply chain planner productivity. In this commentary, we briefly explore each of these needs.
There is little question that the new era of online, omni-channel or multi-channel customer fulfillment has driven far more product options, shorter product lifecycles, added SKU’s and demand streams. With the clock speed of business far more volatile, traditional methods of historical based forecasting lack the ability to sense continual changes in product demand. Quarterly or monthly planning cycles can no longer keep-up. SAP APO was originally developed to support a top-down approach to planning and forecasting, often implemented at high-level, aggregated product family level planning. When such high level SAP APO forecasts are subsequently split to item-location levels for inventory resource requirements, crucial item-level product demand information can often be masked. This problem takes on even more significance for supply chains with complex channels, large-scale distribution, or more frequent new product introduction cycles. Today’s business needs further require supply chain segmentation strategies where supply chains key-in on customer product demand and service needs, allowing the supply chain to respond to individual SKU or point-of-sale demand shifts.
All of this implies a more predictive, stochastic based product demand modeling approach that senses individual item-level demand changes at the item, location or channel level. Also, continued pressure on cost control and overall inventory increasingly requires seamless integration with multi-echelon inventory optimization methods to optimize inventory in various demand trends and/or scenarios.
These advanced demand sensing and modeling techniques are now offered by certain best-of-breed supply chain planning providers. The good news for the SAP APO community is that many providers, as well as specialized systems integrator firms, recognize the need for a co-existence strategy, where planning applications with more advanced demand sensing and predictive capabilities augment existing planning processes. Rather than rip and replace, these providers support a surround and augment strategy. For added perspectives on the above, The Innovator’s Solution blog features two commentaries, Supply Chain Innovation: Living with SAP APO and Improving Demand Forecasting and Planning with Machine Learning. Both provide added perspectives and specific examples.
The second challenge is increasing supply chain planner productivity. With the product complexities and rapid clock speed of business noted above, planners need to allocate more time to managing true demand and supply exceptions vs. constantly chasing planning errors and false positives. This problem has added significance for the SAP APO community, since experienced planners remain in high demand because of their system and business knowledge, and attract higher compensation. Planners need augmented tools and capabilities to not only provide more responsive planning and predictability, but to provide greater levels of supply chain business intelligence to sales and operations and overall business planning processes. Thus, augmented planning technology that can provide capabilities such as machine learning, rules-based business modeling, and advanced monitoring and exceptions dashboards predicated on a singular data model.
Supply chain management teams with SAP as their backbone have added options in their journey toward more demand-driven, integrated business planning. These options include both SAP as well as best-of-breed augmentation, depending on line-of-business and supply chain business outcome needs.
Disclosure: ToolsGroup is a current client of Supply Chain Matters parent, the Ferrari Consulting and Research Group LLC.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
This week, IT media publications are running the headline that in the last quarter of 2014, Apple edged out Samsung in smartphone sales. While the Q4 smartphone numbers would indicate such an obvious eye-grapping headline, both of these smartphone producers, along with their respective supply chain ecosystems, should be more concerned with the implications of the total unit sales volumes in 2014.
Media is actually reporting the latest shipment numbers provided by research firm Gartner. While Apple sold 74.8 million smartphones in Q4, vs. the 73 million sold by Samsung, a review of the full 2014 data provided in a Giga posting provides more concerning trending. According to Gartner’s analysis, 1.24 billion smartphones were sold to consumers in 2014. That represents a lot of production, supply chain, LCD and semiconductor component capability.
Both Samsung and Apple lost market share in 2014 by Gartner’s estimates, albeit Samsung took the brunt with a 6.2 point drop in market share. However in overall unit volumes for all of 2014, Samsung sold over 307 million smartphones, far outpacing Apple’s 191 million. From a supply chain scale and volume perspective, Samsung appears to stand tall, and yet, its supply chain does not garner the accolades that Apple garners.
Market share gains came from Lenovo, Huawei and a broad category grouped as “Others”. Readers might recall that Lenovo recently acquired the Motorola brand of smartphones and that Lenovo has strong market share within China. That “Others” category, which supposedly consists of brands such as China based Xiaomi as well as India based producers, gained over 5 points in global market share. These producers are garnering increased consumer attention across emerging and developing markets, offering far more cost affordable features and options. Their momentum is collectively rising.
As consumer electronics and telecommunications focused supply chains know very well, the most important trend to focus on is overall scale, namely how many installed smartphones exist to generate more profitable and recurring electronic content sales. The 1.2 billion added smartphones in 2014 provides ample evidence of that potential.
From our lens, the most staggering statistical trend for global product development and supply chain teams to dwell on is that according to Gartner, Google’s Andriod operating system now powers upwards of a billion phones, up from 761 million recorded in 2013.
The takeaway is one that many a supply chain or product management planner should know all too well. Rather than a shorter-term focus on the latest quarter, the more meaningful analysis is to focus on bigger picture market insights and individual geographic country data reflecting on market shifting.
The desired business outcome for smartphone focused supply chains is not so much the profitability and margin of the hardware, but rather the time-to-market and scale of installed devices.
Breaking Tech News- Kinaxis Reports Significant Deal as Part of Fiscal Q4 and Full Year 2014 Results
Supply chain planning and response management technology provider Kinaxis today formally reported fiscal Q4 and full year 2014 financial results. Beyond the rather positive growth and financial performance results, the most significant news was the landing of a $20 million five-year supply chain planning deal.
On the financial side, full fiscal year 2014 revenues were reported as $70.1 million, up 15 percent from the year earlier. Gross profit was $49.3 million, also up 15 percent and adjusted earnings before interest and taxes (EBITDA) totaled $16.1 million, up 7 percent. Kinaxis reported nearly $57 million in its end of December cash balance, mainly from the proceeds of its recent IPO activity.
For its fiscal fourth quarter, Kinaxis reported total revenues of $18.8 million including $13.9 million of subscription revenues. Gross profit was $13.4 million while adjusted EBITDA totaled $3.8 million.
However on the Kinaxis earnings briefing call, many equity analysts wanted to hone-in on the reported $20 million “mega-deal” booked in Q4.
Kinaxis executives were very careful to respect customer confidentiality and hence had measured responses to analyst queries. However, Supply Chain Matters was able to garner from the Q&A back and forth that this was a five-year, cloud-based deal involving a new customer described as a large global enterprise. The customer elected to pre-pay the $20 million up-front, and that number will be reflected in Kinaxis fiscal Q1-2015 performance. The deal was brought to Kinaxis from an unnamed large systems integrator. We suspect the deal involves one of the existing vertical industries that Kinaxis currently supports.
Upon further probing, it was disclosed that the customer had an existing backbone systems footprint involving a combination of Oracle and SAP systems, and apparently elected to pursue a Kinaxis strategy for various supply chain planning technology needs. Kinaxis executives hinted that the customer had “given-up” on both the timetable and future promises of the incumbent vendors.
Supply Chain Matters highlights the reporting of this “mega-deal” because, by this author’s recollection, it represents one of the largest deals involving supply chain planning, and further, it appears to be totally cloud-based.
A trend that we continue to pick-up from other supply chain planning vendors is that their pipelines increasingly include both large and emerging enterprises that are becoming more and more impatient with the overall commitment of larger ERP and enterprise vendors to support today’s line-of-business and supply chain needs for added predictability, responsiveness and more informed decision-making. Time-to-benefit, quicker implementation and industry track record have become very important criteria. With the option of cloud applications, such enterprises are exploring methods to surround existing ERP based supply chain systems with more advanced, outside-in facing technology. From our lens, such a deal is an endorsement for needs and desires for fusing supply chain planning, execution and customer fulfillment processes as much as possible toward a single data model approach.
While it is not likely that the broader market will garner more specifics regarding this significant deal until later within its implementation phases, it will serve as an important milestone of continued market shifting favoring more nimble, cloud-based technology approaches.
In full disclosure, we share with readers that Kinaxis has been a prior sponsor of this blog, and we are in the final stages for having Kinaxis as a Named sponsor for 2015. That aside, this is a significant watershed development for the supply chain planning market, and should be referenced as such.
Congratulations to all involved.