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A Sudden CEO Leadership Change at Honda and Another Reinforcement of the New Product and Operations Grounded CEO

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In the wake of continued challenges involving quality glitches and mass product recalls, Honda Motor Company announced today that is current CEO will step-down in June to make way for a new breed of leadership.

Takahiro Hachigo, a trained engineer and currently a managing officer within China, will replace Takanobu Ito as president and CEO in late June. Mr. Ito has led Honda since 2009, at the height of the global recession.

According to reporting from The Wall Street Journal, this executive leadership change comes at a critical juncture for Honda, which is being challenged by Nissan Motor for the number three brand leadership for the U.S. market, and amid continued product recall actions involving airbag inflators produced by supplier Takata Corporation. Honda has been one of the brands most affected by the defective airbag inflator quality crisis, and in October, top executives took on salary cuts to demonstrate responsibility for quality problems.

Reportedly, company insiders were taken by surprise by the timing of this announcement, and the choice of a younger executive promoted over those executives expected to be considered as the next Honda CEO.  The global auto company further indicated that several directors who ranked higher than Mr. Hachingo would retire. In a released statement, Mr. Ito stated: “Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team.”

Mr. Hachigo’s experience includes stints in product design, production operations, and procurement, which provides yet another example of a trend for new senior management appointments involving executives with product and supply chain management prowess. According to Honda’s announcement,  Mr. Hachigo’s previous experience includes roles as a vice-president of Honda Motor Technology- China, representative of development, purchasing and production- China, president and director of R&D in Europe, general manager of the Suzuka manufacturing facility production operations , general manager of purchasing and vice-president of R&D in the Americas.

This resume adds further evidence of the new importance of global-based experience, including operational experience within China.

In December of 2014, BMW appointed new replacement CEO Harold Kruger, with a background in operations, engineering and manufacturing.  A year earlier, General Motors rocked the global automotive industry by appointing the first ever female CEO, Mary Barra, who had risen through the GM ranks in roles in manufacturing, engineering, product design and other leadership positions. Mrs. Barra has since experienced a baptism of fire involved in GM’s massive product recall incidents.

This trend extends beyond the automotive industry, with product management and supply chain experience in the current CEO’s of Apple, Home Depot, McCormack Foods and other firms large and small.

There is an adage that one data point is interesting, two consistent data points are more interesting and three or more consistent data points is obviously a sign of a trend.  For the global automotive industry, the new trend for senior management is showing a common denominator for sensitivity and grounding in product design, operations and global supply chain management leadership.

The year 2015 may well be a watershed year as this new generation of product design and operations background CEO’s continue to take the leadership helm. For global supply chain ecosystems across the automotive industry, these are, by our Supply Chain Matters lens, encouraging signs.

Bob Ferrari

© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.


MIT SCALE Research Expo- Another Great Event

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This author had the opportunity to once again attend the annual MIT Research Expo held on the MIT campus in Cambridge Massachusetts and was once again blown away with the depth and caliper of student research projects focused on timely issues in supply chain management. MIT_SCALE_2015

Every January, master degree candidates from SCALE (MIT Global Supply Chain and Logistics Excellence Network) come together in this event to share their group research projects. Student teams present their projects that deal with current industry supply chain challenges in an electronic poster, along with team-based evidence and conclusions. Attendees can circulate among the various student projects to meet individual students as well as learn about their research projects.  I was especially impressed this year with the number of projects focusing on elements of supply chain risk and risk mitigation.

MIT faculty advisors invite supply chain program alumni as well as coordinate with supply chain focused professional organizations such as local APICS, CSCMP and ISM chapters to attend this Expo and potentially recruit future graduates. Not only is this a great event for students to present their academic and research depth, but also a fabulous networking opportunity to mingle with various industry supply chain professionals. These students indeed represented the future leaders of industry supply chain organizations.

This year’s Research Expo winners were:

Best Overall:

The Perfect Promotion from Asen Kalenderski and Satya Sanivarapu, Master of Engineering in Logistics program, MIT Center for Transportation and Logistics.

Best Posters Each Global Center:

Financial Impact on Demand Forecasting Decisions, Alejandra Acevedo, MIT Graduate Certificate in Logistics and Supply Chain Management, Center for Latin-American Logistics Innovation, Bogota Columbia.

Costs and Benefits of Order Flexibility, Arun Param and Da Chin Lim, MIT Malaysia Master of Science in Supply Chain Management, Malaysia Institute of Supply Chain Innovation, Shah Alam Malaysia.

Strategic Sourcing in Uncertain Environments, Hugo Hotte and Sharad Vaish, MIT Zaragoza Master of Engineering in Logistics and Supply Chain Management, Zaragoza Logistics Center, Zaragoza Spain.

We at Supply Chain Matters extend our best wishes and well-done to all of the student participants in the 2015 Research Expo event.

Bob Ferrari, Executive Editor


Yet Another Indication that Acquired Supply Chain Skills Do Matter in Senior Leadership

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In the previous Supply Chain Matters commentary, we called attention to Procter & Gamble’s latest challenges related to strong currency headwinds and the need for more agile business and supply chain strategies. Today, the Wall Street Journal published an added byline article related to P&G’s ongoing challenges, specifically David Taylor, the reported senior executive who has emerged as the top contender for the ultimate CEO position at P&G. As we have pointed out in other commentaries, this path to the CEO role includes a background of supply chain operational experience.

According to the article, Taylor began his 34 year career at P&G as a production manager that produced diapers and sanitary napkins. By his early thirties, he was a plant manager. Then there was a career twist. Sensing the P&G corporate culture, Taylor ascertained that the road to broader P&G leadership responsibilities needed to include sales and marketing experience. Taylor elected to abandon his plant manager role, and opted to an entry-level assistant brand manager for the Pampers brand.

The rest is obviously a stellar executive track record rising in the ranks of marketing. In 1998, Taylor departed for China to oversee haircare, tissue and paper towel business along with antic-counterfeiting initiatives. In 2001, he assumed a Vice President role in Geneva overseeing P&G’s family care brands. In 2003, he returned as Vice President of family care for North America and by 2005 was running the global business. Taylor is credited with making the rather difficult decision to shed P&G’s pet food business.

On February 1, Taylor will assume leadership for P&G’s overall beauty businesses and according to the WSJ, will become responsible for 43 percent of P&G’s overall sales and nearly half of its profits.

We however want to highlight for our readers, the most revealing portion of this WSJ article:

Current and former colleagues say the complicated balancing act of managing the machinery and employees inside manufacturing plants has given Mr. Taylor superior leadership and interpersonal skills

The takeaway for our readers, especially young aspiring students, is that even if a corporate culture values the path toward senior leadership primarily from a background in sales, marketing or even engineering, operational and supply chain focused leadership skills do indeed provide important competencies.  If Mr. Taylor ultimately is chosen as P&G’s next CEO, he will bring such skills and understanding of supply chain to that leadership role.

We have noted such supply chain experience in the current or soon to be CEO’s of Apple, BMW, Home Depot, McCormack Foods and other firms large and small. Supply chain experience can indeed provide a path to top. Skills developed either in baseline leadership, cross-functional and cross-business leadership, operations, supplier or product management lend themselves to broader management skillsets, particularly when such experience spans multiple global assignments.

Thus, for our student readers, take comfort in the continual evidence that skills acquired in supply chain focused roles do matter for career progression.

Bob Ferrari

 


BMW Announces New CEO with Engineering, Manufacturing and Operations Background

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Supply Chain Matters has previously called attention to executives with supply chain focused leadership experience ascending to higher levels of senior management.  Our last commentary of this nature focused on the ascendancy of Mary Barra as CEO of General Motors.

Now, BMW joins such ranks with the announcement that Harald Kruger will take over as CEO in May 2015. BMW’s current CEO Dr. Norbert Reithofer will step down from the CEO slot a year earlier than planned, because of upcoming changes in German law related to the composition of Supervisory Boards.

According to a BMW Blog posting, Kruger stood out as the most likely board member to step-  up and take the reigns for the next era of leadership at BMW. In its announcement, BMW indicates that Reithofer would move to head the supervisory board of the auto maker, while production executive Harald Krüger would become the BMW’s new chairman.

Similar to the prior background of Mary Barra, Krüger is an engineer by training, and his  previous background within BMW includes roles within manufacturing, product planning and management as well as human resources. A review of his CV of indicates that he began his career in the Technical Planning and Production division and from 1993-1995, worked as a project engineer for plant assembly at the Spartanburg South Carolina production facility. From 1997-2000, Krüger was the head of the Strategic Production Planning department in Munich, and served later positions as Director of Engine Production in the UK and Director of Technical Integration. He he was also responsible for brand management of the MINI, BMW Motorrad and Rolls-Royce brands. Since April of 2013, Krüger has served as Director of BMW Global Production.

According to reporting by The Wall Street Journal, Krüger at 49 years old would become the youngest CEO of any major car maker and signals a “generational change” for BMW leadership. That was obviously another criteria.

Once again it is great to observe that those who served under the umbrella of supply chain, manufacturing or product management operations can have a path for becoming CEO.

These are executives who know that supply chains do matter.

Bob Ferrari

 


Report Card on Supply Chain Matters 2014 Predictions for Industry and Global Supply Chains- Part Two

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We continue with our series of postings reflecting on our 2014 Predictions for Global Supply Chains that we published in December of last year.

Our research arm, The Ferrari Consulting and Research Group has published annual predictions since our founding in 2008.  We not only publish our annualized ten predictions, but scorecard the projections as this point every year.  After we conclude the scorecard process, we will then unveil our 2015 annual projections for industry supply chains.

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. Admittedly, our self-rating is subjective and readers are welcomed to add their own assessment of our predictions concerning this year.

In our previous Part One posting, we score carded 2014 Projections One and Two.

 

2014 Prediction Three- Continued momentum associated with U.S. and North America based manufacturing.

Self-Rating: 4.0

A year ago, U.S. manufacturing activity as depicted by the Institute of Supply Management (ISM) PMI Index was recorded as 4.2 percentage points higher than the beginning of the year, and 6.2 points higher than the June reading, representing both the highest reading since June of 2011 and increased momentum from other geographic areas. As of this writing, the ISM PMI reading of 59 percent for October represented a 7.7 percentage point increase from the reading reported for January.  Throughout 2014, U.S. supply chain related activity has continued on a steady state.  As of October, 16 of the total 18 tracked industries were reporting growth momentum.

As noted in our original prediction, the continued growth of U.S. manufacturing comes from a number of factors not the least of which have been the ongoing double-digit increases of labor costs in China, increased positive momentum of the U.S. economy and more attractive energy costs throughout North America. . In mid-August, the Boston Consulting Group noted in its report, Shifting Economics of Global Manufacturing, that in some cases, the shifts in relative costs of manufacturing among China and North America are now startling placing Mexico as cheaper low-cost manufacturing alternative.

Specific efforts by Wal-Mart and other retailers and manufacturers concerning significant long-term commitments for sourcing products in the region have helped as well. The most significant development in 2014 concerned hefty manufacturing investments in Mexico, both in supporting North America product demand and as a strategic base of North America based exports to other global regions, particularly for the automotive industry.  Automotive OEM’s BMW, Honda, Mazda, Volkswagen’s Audi Group, and a partnership among Nissan and Daimler had each announced Mexican production sourcing decisions that amounted to billions of dollars of investment.

However, continued U.S. sourcing of U.S. and North America manufacturing continues to uncover gaps in globally competitive component supply chain networks, many of which still reside in Asia or China. This is especially the case in high tech and consumer electronics, footwear, apparel and other industries. Continued momentum is thus increasingly dependent on further re-building of North America based supply ecosystems among multi-industry supply chains.

 

 

2014 Prediction Four- Supply Chain and Manufacturing Talent Management Would Remain a Continual Challenge.

Self-Rating: 3.5

Our prediction declared that supply chain and manufacturing talent acquisition and retention would remain a challenge with considerable joint industry, government, academic, and indeed individual supply chain organizational work to be accomplished. We further predicted that some progress will be made with more innovative approaches and efforts and we had hoped to highlight these throughout the year so other teams can benefit.

In the 2014 Chief Supply Chain Officer survey report conducted by SCM World, supply chain leader respondents pointed to ever more challenges in building and managing supply chain teams over the past two years, nearly double the frustration expressed in 2011. SCM World points to raw recruitment as the most cited problem despite rising interest in supply chain among universities and significant investment in supply chain focused professional organizations. The need for well-rounded generalists possessing broader supply chain functional, business and team collaboration skills seems to remain an important need, with implications for significant job rotation across business areas.  Other executive and industry surveys conducted during 2014 further reinforce building concerns and frustrations regarding talent selection and retention. In August, we highlighted for readers and clients what executive recruiter Hiedrick & Struggles described as the white hot demand for supply chain executives in pharmaceutical industry settings.

Throughout 2014, we searched for continued insights and learning regarding successful ways to approach talent management. We were able to highlight some learning regarding the management of millennials. We noted how professional organizations such as APICS and CSCMP were adding young professional mentorship and global-wide student completion programs to boost career interest in supply chain management.

Although we feel we made good on a relative no-brainer prediction, we did not meet our expectation to provide added industry-wide learning in successful talent management. For this reason, we lowered our self-rating for this prediction and commit to re-double our efforts in 2015.

This concludes Part Two of our report card on our Supply Chain Matters 2014 Global Supply Chain PredictionsStay tuned as we assess the remainder of our 2014 predictions in follow-on postings.

Bob Ferrari

©2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.

 


A New Value Towards CEO Operational Leadership Experience for Retail Industry

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In a May 2014 Supply Chain Matters commentary, Recruiting the New Era of Retail and Online Fulfillment Leaders, this Editor made the following statement:

“In this era of online retailing and Omni-commerce, there are two leadership competencies that will differentiate tomorrow’s executive leaders in retail.  They are a deep understanding of social-media fueled marketing and Internet focused retailing, and a deep awareness, understanding and appreciation of end-to-end supply chain inventory deployment and fulfillment capabilities.  From our lens, recruiting for retail C-level executives has been too focused on classic merchandising, finance or traditional brand marketing.”

Our commentary at that time reflected on business media reports indicating that major retailers such as JC Penny, Target and others were finding it difficult to recruit a qualified CEO. 

Now, more than seven months later, it is important to reflect on what is occurring, namely that some retail industry CEO selection teams now weigh operations leadership experience over that of pure merchandizing.

In late- July, Target, for the first-time in its history, brought in former PepsiCo executive Brian Cornell as its CEO.  Before accepting the Penny CEO role, Cornell had prior experience in leading PepsiCo’s Americas Food business unit and the Sam’s Club warehouse business for Wal-Mart stores.  Cornell is now in the process of re-evaluating all of Target’s operations and supporting processes.

Also in late July, Tesco recruited Dave Lewis, a 28 year executive veteran of Unilever as its new CEO after first-half profit trailed the grocer’s expectations. Lewis previously led the expansion of one of Unilever’s fastest-growing businesses, and was the first outsider CEO hired by the UK retailer. Lewis’s leadership experience included the chairmanship of U.K. and Ireland business and president of the Americas operating units at Unilever. When the Chairmen of Tesco was asked why that retailer sought with Lewis, he stated:

If you look at what Dave Lewis brings, David is absolutely the leader in brand management and brand identity, communication, customer development, customer management. Tesco is not short of retail skills.”

Last week, JC Penny finally selected its new CEO designate. In its reporting, The Wall Street Journal lead-in to the announcement noted that Penny elected to go with strength in nuts and bolts retailing rather than flashy merchandising. Former Home Depot and Target operations executive Marvin Ellison will ramp into the CEO position by August of 2015 after a several month transitional period as President. After the disastrous episode when former Apple retail executive Ron Johnson brought the retailer to near financial disaster with a $4 billion hit in revenues, Penny’s directors are opting for a longer ramp-in for its new CEO designee. Ellison will serve under the stewardship of Myron Ullman, who was brought back to save Penny in April of 2013.

Ellison’s accomplishments include 15 years at Target before joining Home Depot, where he held roles in global logistics and vice president of U.S. stores.  Ellison was reported to have helped to integrate Home Depot’s e-commerce operations with brick-and-mortar stores, namely implementing the buy online and pick-up in store initiative.

Regarding the JC Penny CEO selection, the WSJ provided the following commentary:

The appointment also reflects a broader shift in retail in which some big companies have favored detail-oriented operators over executives mainly lauded for brilliance in merchandising, as the industry faces giant new challenges in managing its supply chains and keeping customers from defecting to the web.”

Certainly, each retailer requires different leadership skills at a point in time, and operations experience may or may not be favored.  However, the evidence from above indicates that for those retailers who have especially struggled with the impacts and ramifications of today’s Omni-channel retail environment and permanent structural shifts in retailing are opting for proven operations leadership.

Sales and operations, supply chain and customer fulfillment professionals in retail industry environments should take note that this now building evidence of value in operations leadership will hopefully continue for selecting next generation retail leaders. 

Keep that in-mind as the next several weeks bring the usual doses of operational realities.

Bob Ferrari


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