This commentary can also be viewed on the Supply Chain Expert Community web site, upon which the author is a featured guest blogger.

One of the cornerstones of the Supply Chain Matters blog is to track the history of specific supply chain related events involving industries and to help our readers connect the dots in term of strategy and results. In May 2009, we featured a commentary regarding Fiat Group and its unfolding strategy of opportunistic supply chain strategy, specifically its planned acquisition of Chrysler in the U.S..  At the time, this author was impressed with Fiat chairmen Sergio Marchionne and his strategy to make both companies global players in the industry.

As we approach the end of 2011, the story of Fiat and Chrysler is much more positive, with an even stronger potential.  We call readers attention to an article published in the December 19 edition of Time, Power Steering- How Chrysler’s Italian boss drives an American auto rival. (paid subscription required) Author Bill Saporito pens a very insightful look at Chrysler, where it was, and what it is becoming, and in particular, the noticeable leadership of its chairmen, Sergio Marchionne. Sergio has a knack for turning around dysfunctional automobile companies along with a keen understanding of operations and value-chain management.

The article points out that Fiat’s small-car prowess, engine technology and superior manufacturing capability was a perfect complement to Chrysler’s needs. Fiat which now owns 53.5 percent of Chrysler, has made its impact. Chrysler revenues were up 23 percent in Q3-2011 and could top $55 billion.  Operating profit could reach $5 billion vs. hemorrhaging $1 billion a month in 2009. In May, Chrysler transferred $5.9 billion to the U.S. treasury, paying off its bailout loan six years ahead of schedule.

The article goes on to expound on the unique leadership style of Mr. Marchionne, specifically his no-nonsense approach to management, his deep analytical abilities, and attention to the details of all aspects of the business, including manufacturing and value-chain.  He has thus far resized the company, flattened management layers, and overhauled the vehicle line-up in record time. Mr. Marchionne is a strong believer in elimination of management layers and practices promoting people buried in the ranks to higher levels of responsibility, giving such people all that they need to succeed and prove their potential. It is referred to as loose-tight management, a concept which many successful companies have practiced.  At the same time, he also holds people accountable for definitive results and is not shy about pulling the plug when results are not forthcoming. The author notes that: “Marchionne has the Steve Jobs gift of absolute focus.” He gets into the details. He also does not choose to have his office within Chrysler’s former executive penthouse, opting instead to locate his office in the engineering department, a visual reinforcement that it is no longer business as usual.

As was noted in 2009, Marchionne has a vision that the surviving global automotive OEM’s will need to have sufficient volumes of production to support each of the major world markets, at least one million for each major product platform in order to drive required global production cost efficiency and sustained profitability.  This translates to a combined goal for producing 6 million vehicles among the Fiat and Chrysler brands, with today’s volumes at 4.2 million vehicles. Fiat has become a global leader in efficient, high-volume, robotized production of small displacement engines and there are plans to have a similar focus for V6 engines.  Fiat also excels in small diesel powered engines, and its production facility in Poland recently exceeded a production target of 4 million 1.3 litre, 16 valve MultiJet technology engines. Technology and world class manufacturing knowledge transfer is underway among both companies with a cultural premise that production workers, not engineers, own the quality control process.  A global manufacturing boss has been appointed to oversee both Chrysler and Fiat, and the article points out that Mr. Marchionne has been known to show up from time-to-time at warranty analysis and quality performance meetings. Chrysler itself has not been known to invest in advanced supply chain software technology for planning and business intelligence but that may perhaps change.

The first totally new vehicle of the combined Fiat-Chrysler collaboration will debut in 2012 with a C-class Dodge branded vehicle. It will be based on the Fiat platform of the Alfa Romeo Giulietta, adapted for U.S. market requirements. There is a further plan to invest $23 billion to develop new vehicles for Chrysler through 2014, a rather aggressive plan by U.S. automotive industry standards, and all vehicle can be adapted by Fiat for other global sales needs.

The Time article concludes with a very characteristic Marchionne quote: “People need to trust you that you’re going to pull them out and that they will follow you when you pull them out.  If they don’t get that comfort, they’re going to drop you. This is true of organizations.  It’s true of countries.”

We would add that this quote represents a philosophy that is rather important for senior and team focused supply chain management in the coming year and beyond, namely the ability to lead, get into the details, provide people with the means and tools to accomplish their goals, and to foster consistent accountability.

In our 2009 commentary, we closed with the statement that whether the combined force of Fiat and Chrysler was totally successful, we have the opportunity to observe a visionary company with a leader that truly understands the importance of a leveraged global value-chain and integrated supply chain execution.  Two years later, this case study continues to play out with positive potentials.

Time will tell if this will become a definitive case study in vision and consistent execution in supply chain management but the scorecard thus far is rather positive.

Bob Ferrari

© 2011, The Ferrari Consulting and Research Group LLC and Supply Chain Matters.  All rights reserved.

The following posting can also be viewed and commented on the Supply Chain Expert Community web site.

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Dispatch One and Dispatch Two commentaries  which highlight day one activities.

Day two of Kinexions kicked off with an uncensored presentation from former Gartner Vice President and supply chain sage Kevin O’Marah, who now characterizes himself as an independent thinker.  Kevin reflected on the history of business automation and innovation, the important trends that productivity and talent have brought to businesses large and small and his belief that large ERP vendors are not delivering the innovation required to enable the next era of business and supply chain process capabilities. Kevin referenced multiple survey data that reinforces that demand volatility is driving executives and supply chains literally crazy, and that the community needs to get ahead of these new realities of business. Kevin described the new wave as being led by human intelligence but with technology leverage.  Kevin was also kind enough to acknowledge our working relationship in the earlier days of AMR Research and I sincerely thank Kevin for the mention.

Day two customer presentations featured Lalit Pandit, the CIO of D&M Holdings, and Joe McBeth, Vice President of Global Supply Chain at Jabil, and Erwin Hermans, Vice President of Supply Chain Solutions, Celestica.  One of the extraordinary aspects of attending a Kinexions conference is that the audience can get perspectives from the key players located throughout many tiers of today’s global supply chain. The D&M Holdings story is one of a mid-market company that needed to transform its supply chain utilizing a planning and response management application that users could quickly adopt and leverage.  It is also an example of how a cloud offering is an important option for mid-market companies.

While there were many nuggets of information shared by all of today’s presenters, my personal favorite was Jim McBeth, who vividly expressed what supply chain response management really means for companies, and especially contract manufacturers. Jim reflected on the recent March earthquake involving northern Japan, and more recently, the devastating floods impacting Thailand.  Each had supply chain disruption implications, and as Jim best described it, “the guy who was the best information, wins”. In 48 hours, Jabil was able to provide risk assessments and impact analysis for its OEM customers and key suppliers. Jim noted that most organizations, consultants and pundits speak to constantly keeping inventory down, when the reality may be keeping partners in balance and inventory right-sized to buffer identified areas of component risk. Jim also spoke to the reality of planning at the EMS level, the mid-tier of high tech value chains when the bigger fish OEM’s will get the prime priority for available inventory and capacity. The reality turns out to be the ability to plan with predictive data, to proactively collaborate with OEM’s along with the ability to predict what requirements will be before the bigger players do the same.

This afternoon’s closing event was an interactive influencer’s panel discussion moderated by Trevor Miles of Kinaxis, which I was honored to be invited to participate.  Fellow panelists were Andy Coldrick, one of the original thought leaders in S&OP, Russell Goodman, editor-in-chief, SupplyChainBrain, and Predrang (PJ) Jakovljevic of Technology Evaluation Center.  Our goal was to wrap-up the conference by summarizing what we heard from customers and influencers, how we viewed the current state of  supply chain business process and technology innovation, and the notion of what is the state of collaboration in supply chains. A eureka moment came from an interchange of what comes next for S&OP?  Andy provided the perspective that as the originators of S&OP discussed what would be the next iterations, they also could not agree to terminology.  Andy’s charge to the audience, it doesn’t matter how you term the next iteration, what matters more is the objective your organization is seeking. Wise words from an original thought leader.

Supply Chain Matters will feature two additional Kinexions commentaries, one reflecting on this year’s briefing of key market influencers, and our conference summary impressions.

Bob Ferrari

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

The following posting can also be viewed and commented on the Supply Chain Expert Community web site.

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Day One dispatch which highlighted remarks from Kinaxis President/CEO Doug Colbeth.

Day one featured a full agenda of customer and partner presentations along with the first ever briefing session for industry analysts, partners and key market influencers.  Customer presentations included Barnes and Noble, specifically the Nook Division, who’s implementation pioneers a an entirely new area of support for Kinaxis RapidResponse, namely the incorporation of actual point-of-sales demand data into overall supply chain planning and visibility.  When implemented, this effort has the potential to be the largest deployment in terms of scope and user count of RapidResponse to date.  Matthew Red, Vice President, Supply and Demand Planning, took leave of the upcoming planned go-live to share his organization’s goal to have product demand visibility among 13,000 point-of-sales outlets implemented to support the upcoming 2011 holiday buying season. The clear focus for B&N is to focus on “sell-through”, namely where customers are buying and how the supply chain should best respond to outlet level demand.  Even though the go-live will occur in the coming weeks, Matthew was able to share lessons learned, which identified access to data as the biggest challenge along with the need to scale-back on original project scope because of implementation timing needs.

Another customer presentation included one by Lockheed Martin on managing its supply chain performance-based logistics need by utilization of RapidResponse.  The morning concluded with a presentation and demonstration of the new RapidResponse Control Tower from Kinaxis’s new vice-president of marketing, Kirk Munroe.  One of the highlights of this presentation was the articulation of the three design pillars for control tower functionality:

• Supply and demand balancing to responsive and predictable customer fulfillment.
• Planning, monitoring and responding only works if they are performed from one platform.
• Business problems are complex, but IT systems need not be as complex.

The pillars are simply stated but the meanings are all important.  We would hasten to add that business rule context is another very important consideration for any decision platform.

For Supply Chain Matters, and for others, one of the most talked about presentations during day one was delivered by McKinsey partner Paul Carbonneau. Readers should note that McKinsey’s reputation lies in consulting on C-level corporate strategy, direction and problem-solving, and to have a McKinsey partner talk to the importance of supply chain capabilities is a significant affirmation of how important global supply chain capabilities have become in C-level perspectives and concerns.  In that light, Paul communicated that the most expensive problems for McKinsey clients often are reflected in supply chain capabilities. Another significant reinforcement came from Paul’s comments relative to the March earthquake that occurred in Japan and the high-level awareness of the impacts of supply chain disruption and risk that has occurred across the C-suite right now.  My hallway conversations reinforced the fact that many manufacturers are re-visiting or initiating supply chain risk identification and mitigation.  An added takeaway shared by Paul was that McKinsey is advising clients to re-visit previous thinking and specifically three myths surrounding business process and technology implementation efforts. These include:

• Rather than linear rollouts of functional initiatives, pilot initiatives with the required cross-functional behaviors needed to sustain the new process.
• Rather than people first, process next, and technology last, with the implication of multi-year technology implementation calendars, frame the initiative with a defined narrower scope but with all three components required in the new or changed business process.
• Rather than getting the CEO on-board first, and risking a perceived colossal waste of time by that executive, bring C-level sponsorship on-board when definite pilot steps indicate meaningful benefits.

McKinsey further advocates starting with small ecosystem initiatives that include all required capabilities. Rather than spending enormous amounts of time getting organizational-wide consensus on a theoretical future end-state, launch “live-fire” exercises and iterative pilots that emulate what end-state could be. Accept the notion and provide support mechanisms that anticipate frequent failures, with constant learning and forward movement.  Finally, once pilots have provided valid benefits, scale quickly with serious investments in talent, disciplines, and required tools.

A final message reflected on future supply chain challenges that lie ahead and the need for, what Paul described as,  ‘maestros’ of supply chain planning and decision-making.  These are people who can think cross-functionally and cross-organizationalyl, who know where the right information resides, and how to leverage that information into various predictive options and scenarios to which  that the supply chain needs to respond.

It was a rather thought-provoking presentation and well slotted to kickoff a supply chain response management oriented conference. Supply Chain Matters will provide additional context and commentary in our summary impressions of this year’s Kinexions.

In our subsequent dispatches, we will provide highlights of day two of Kinexions 2011, along with summary impressions, so stay tuned.

Bob Ferrari

Added Note: Kinaxis is one of other named sponsors of the the Supply Chain Matters blog and the author provides services to this vendor.

This week, Supply Chain Matters attended the CSCMP’s Annual Global Conference 2011 in Philadelphia. Today, the last day of the conference, we attended a very informative and interactive session discussing the current and future use of social media across supply chains.  Because the session was so interesting, we decided to dedicate a separate blog commentary.

The panelists represented a cross-section of industry and academia, and included Con-way Inc., Trendset Information Systems, Wal-Mart and Volkswagen.  Professor Terri Griffith of Santa Clara University, author of a soon to be released book, The Plugged-In Manager, kicked off the session with some observations on the state of social media use in business, professional and supply chains settings, along with the explosive potential of these tools.  Adrian Gonzalez, principal contributor on the Logistics Viewpoint blog served as moderator and did a great job of facilitating discussion on a number of important topics related to current and future social media use.

Topics discussed included the reality of how social media use remains blocked by policy in many corporate settings but those companies that are effectively leveraging these applications are finding benefits. Social media overcomes barriers of time and can empower people to view a broader picture of trends and events.  Many of the panelists spoke of the enormous business potential for social based systems and much of the discussion focused on the front-end product demand aspects for social media use such as monitoring customer reactions to products, promotions or service.  Wal-Mart utilizes social media tools to anticipate future sales as well as to gain more knowledge about customers.  Also noted was that communications among internal Wal-Mart operational teams are facilitated by an internally deployed social media mechanism. Volkswagen has just experienced the power of social media in the pre-launch of the very popular Passat super bowl ad featuring the Darth Fader child, which has exceeded over 80 million views.

Panelists also discussed the potential of social media on the supply side of value-chains including status of suppliers, sharing of best practices, or assessment of employee safety in times of natural disaster. Our point-of-view is that benefits on the supply side will continue to increase with further adoption, and will bring with it the means to connect the entire end-to-end value chain.

Some helpful guidelines shared by the panelists included:

• Focusing ‘tweets” (use of Twitter) on subject-based vs. social topics.
• Focus on the work enablement opportunities rather than use of social tools. What aspect of work can be improved by leveraging social media?
• Social media is by nature, a data-rich environment, perhaps too rich.  Plan accordingly with tools for filtering and channeling.
• These tools bring a natural fear of the unknown and many companies rely on skilled specialists to help with planning, deployment and guidelines for effective use.
• Always have a social media use policy.
• When considering that an audience may reside in an emerging economy, ascertain the current state technology profile and plan accordingly.  In some countries, mobile texting tools may predominate.
• Don’t forget that you have your “day job”.

Overall, it was an informative session and we would like to encourage more of these types of discussions at future educational and professional conferences.

Bob Ferrari

This posting is our second day commentary regarding the Council of Supply Chain Management Professionals (CSCMP) 2011 Annual Conference being held this week in Philadelphia. Readers can view our day one highlights commentary.

Today was jam packed with sessions, many of the most interesting occurring at similar times.  We found ourselves jumping from one presentation to another to get a sense of content and takeaways.  We did attend a couple of sessions related to leadership skills for supply chain management professionals.  One session candidly turned out to be a session reflecting on too many regulatory issues impacting the trucking industry.  While the speaker framed this in the context of leadership skills required for those responsible for transportation management, it seemed to be more about rallying support for less regulation from government.

Another session was much more impactful, featuring a panel of three senior supply chain executives who were queried by an experienced management coach.  The panel consisted of:

Charles Armstrong, Vice President, Supply Chain/Distribution, The Home Depot

Robert Collins, Vice President, Global Strategic Sourcing, R.R. Donnelley

Rebecca Lyons, Vice President , Strategy and Supply Chain Services, Johnson and Johnson.

The panel facilitator, Timothy Stratman, President of Stratman Partners Executive Partners did a superb job of facilitating panel discussion of the key team leadership and management skills required in today’s dynamic environment of global supply chain management. One of the most insightful discussions, in our view, involved a discussion and exchange on what executive presence equates to in today’s networked organization. It comes down to being a good communicator and follow-through on the message.  A gem of a takeaway came from a discussion on making timely decisions. Charles Armstrong shared with the audience the following: “Show me a person who makes consistently good decisions and that person is probably someone who has never implemented anything.” The takeaway was that decisions have to be made and the key is always having a dynamic back-up plan in the cases where the decision did not result in an expected outcome.

We also attended two sessions providing insights on global and regional supply chains, including a presentation on global supply chain network design delivered by Jun Villoria, Vice President of Supply Chain Solutions for Li And Fung Logistics, and a session on China and Vietnam challenges delivered by Joseph Hsu, Chairmen, China Outsource World.  Each was very informative and we were somewhat surprised at the sparse attendance given all of the supply chain activity occurring across Asia.

Tomorrow, the conference concludes with a keynote and some morning educational sessions.  In our final commentary, Supply Chain Matters will provide our summarized observations and insights we discovered from this year’s conference, so stay tuned.

Bob Ferrari

The following commentary can also be viewed and commented upon on the Supply Chain Expert Community web site.

We call reader attention to a rather insightful article, Closed encounters with suppliers, published in the July 7 print edition of the Financial Times (paid subscription required).  In the article, author Peter Marsh articulates the differences between closed and open supply chains, along with their implications for corporate and supply chain strategy.

March defines the differences of closed vs. open as follows:

“A closed supply chain is a highly integrated set of networks in which many of the technologies being applied are developed at least partially by the company orchestrating the system.”

“In open supply chains- common in industries such as automotive, aerospace and many areas of consumer electronics- the emphasis is on standardized components that fit together in a modular fashion. In these systems, suppliers are generally encouraged to be the main innovators and sell the same components to a range of customers.”

Open supply chains came about from the efforts of lean and just-in-time initiatives where efficiency, cost control and overall return on assets was the overall corporate objective.  Later, quicker and more timely response to customer and market trends also became a motivator. Differentiation in products are governed by time-to-market and global volume and scale considerations, where common components can be shared across various product families or design platforms. The article makes an argument that rather than simplicity, the pendulum may be swinging back to complexity.  Of course, industry and corporate strategy are other considerations.

The article cites examples of closed supply chains as being Apple’s consumer electronics offerings, the Nestle Nespresso coffee maker and Corning’s flat screen glass. Supply Chain Matters would add Boeing’s 787 Dreamliner supply chain to the category of closed. The article points out that closed supply chains have come to the forefront as a result of corporate strategy needs to develop more innovative products that provide an industry edge or cannot be easily copied by competitors. Also noted is that in a closed supply chain, the hub company often requires supplier facilities to be closely situated to orchestrate design and coordinated supply needs. A closed supply chain often requires a more “tops-down” approach for supply chain business processes.  The article also points out that closed supply chains are far more exposed to the risk of greater disruption caused by external events. The March devastating earthquake and tsunami that occurred in Japan was the most recent example of the effects of this disruption on certain closed supply chains.  A recent news posting in Procurement Leaders notes that Boeing is considering a new supplier sourcing strategy to reduce the impact of certain disruptions, such as the recent Japan earthquake had on the 787 Dreamliner supply chain. Similarly, other closed supply chains have had a wake-up call to risk mitigation.

Supply Chain Matters would add other considerations, not covered in the FT article.  Organizations considering a shift more towards closed supply chains need to especially focus on the people skill, risk and systems implications of managing a closed supply chain.  From our observations, closed supply chains are managed by a more centralized supply chain organizational structure where critical functions of product management, supply chain planning, strategic sourcing and procurement are better coordinated.  The people skill requirements are also higher.  For instance, sourcing and procurement needs to have skills in understanding product technology and individual vendor capabilities.  As noted by FT, there is also a need for a coordinated strategy and focus related to identification and mitigation of potential supply chain risks.

Information systems are another important consideration.  Many closed supply chains tend to shy away from “generic” backbone software applications, in favor of those that provide broader and deeper supply-chain wide visibility and control.  Flexibility to adapt and quickly respond to constantly changing business needs as well as broader supply chain wide collaboration and business intelligence capabilities tend to be the requirements of choice.  Larger enterprises may consider adoption of more agile and less burdensome applications to support innovation required from smaller subsidiaries operating in growing emerging markets. Incorporating social media strategies to gain real-time customer insights and response to newer or updated products is also something to consider.

A closed supply chain may or may not be appropriate for every enterprise or mid-sized business. However, if it is a consideration, insure that your supply chain team evaluates the organizational skill, risk and IT requirements of this model.

Readers who have experience in closed supply chains are invited to add their observations related to organizational skills, risk and IT requirements to this commentary.

Bob Ferrari