This author had the opportunity to listen in on two webcasts this week from IDC regarding that industry analyst’s firm’s information technology predictions for the upcoming year. Both webcasts were rather interesting and provided thought provoking predictions, especially when one considers that the bulk of the listening audience consisted of many well-known information technology and service providers.
As I pen this commentary, we are in the process of completing our Supply Chain Matters 2014 Predictions for Global Supply Chains which will be shared in just a couple of days. In the meantime, I did want to share for our reading audience important takeaways from IDC’s IT focused predictions.
Last year’s predictions from IDC were all about the termed 3rd Platform, the combined technologies of cloud, mobile, social and big data computing making a significant presence in overall IT spending. In 2014, IDC now predicts that the battles for IT industry dominance and indeed survival are focused on further investments in 3rd Platform technologies. They go on to declare both an explosion in innovation and industry consolidation, namely a small number of big “winners” in mobile platforms, cloud infrastructure and solution marketplaces as the big vendor players vie for control and long-term revenue growth.
IDC quantifies 3rd Platform momentum as driving 29 percent of forecasted 2014 IT spending and 89 percent of market growth, which is significant momentum. Cloud spending alone is predicted to exceed $100 billion, and skewing toward public cloud services. Of even interest, IDC predicts that in emerging markets such as China, smart connected devices, cloud and big data applications will outpace overall market growth and shape strategies.
If some readers are tending to tune out at this point, thinking that this does not apply to me at all, kindly read on as we share our two most important takeaways from what IDC shared.
The first was IDC’s validation that the IT buyer profile continues to shift to business executives. The firm estimates that 61 percent of technology focused projects will be business funded. The implication is that procurement and supply chain leaders, along with business and sales and operations planning (S&OP) teams have to continue to be far more technology-savvy in their understanding of IT technologies options and available marketplace solutions. It’s now two edged coin with the business holding far more influence on required business process and associated technology investments. On the one hand, business and functional executives now have greater leverage in articulating the need and benefits of systems investments, either behind-the-firewall or cloud-based in scope. Technology and services vendors will accelerate their efforts of directly knocking on your doors knowing this market influence shift. Best that you accommodate those requests and sponge as much information as you need. It further implies that accountability for desired and timely business results comes with this new influence, so the technology decision needs to be sound and well grounded. Gone are the days of fuzzy notions as to who is accountable for the timing and delivery of an end result. President Obama is living that reality right now with the healthcare.gov rollout.
The second important takeaway is one that we have continued to resonate on this blog, namely that decisions related to B2B network platform adoption and expansion are far more critical and need to take on much broader perspectives. That implies functionality and business process support that extends not only in procurement and supplier based management, but deeper dimensions of supply chain response management, supply chain analytics, logistics, supply chain control tower and other supply chain wide decision-support needs. By our view, the B2B backbone, along with its supporting infrastructure and support tools, are the most critical strategic technology decision business and functional executives will make. The good news is that the CIO along with his/her technology team are not going away anytime soon, and can immensely help with the network evaluation from the technology infrastructure and architecture lens. Their new role is to be your partner in innovation, and your expanded role is the bigger-picture view of the supply chain backbone network, translated to manageable tactical steps of desired functionality.
Our readers are already dealing with the effects of more rapid change, skill gaps and other challenges. In your New Year’s resolutions, best you think about adding more IT, cloud and network technology knowledge to your skills base in the coming year. You thank us later.
Bob Ferrari, Executive Editor
Today, November 11 is the celebration of Veterans Day in the United States.
It is a day set aside to honor the many brave armed forces veterans who gave their lives to defend their country. It is also a day to thank all military members serving and their families for their dedicated service and sacrifices.
We at Supply Chain Matters join in thanking all veterans for their service and sacrifice, and trust that our readers will do the same. This author is proud to declare his past service.
When traveling through an airport, train or bus station, when you notice men and women traveling in uniform, take the time to thank them for their service. Acknowledging these men and women’s sacrifice helps them know that their efforts are appreciated.
Many in the U.S. military branches are now winding down from prior deployments and looking to develop careers in the civilian workforce. Please lend a helping hand in consideration of a veteran for an open position, and to help these veterans make their transition.
Thanks to the many large and small employers who have initiated active recruiting programs to hire veterans, and to assist in training and preparing veterans for new careers.
Supply chain management is an ideal career path for many veterans, and we encourage veterans to consider such careers. Your training in logistics, procurement, leadership and team management can lend themselves to a career in the many functional areas of our community. Utilize this blog as a means to understand the various challenges in global supply chain management and industry supply chains.
We also provide a shout-out to the many organizations that help our veterans make a successful transition to industry sectors such as Vets in Tech, a San Francisco based grass-roots organization dedicated to helping veterans and active duty military personnel connect within the high tech community.
If there are other organizations and/or resources available for veterans to utilize, please suggest then in the Comments area related to this posting.
To support the quality of content that Supply Chain Matters provides in our coverage of global supply chain and B2B business process and information technology, we often attend industry, professional and technology focused conferences where executives speak.
This weekend, while attending the 2013 Kinexions conference in Scottsdale Arizona, we had the opportunity to once again observe Jake Barr speak. After a 33 year career at Procter & Gamble contributing to its integrated supply chain initiatives, Jake has now formed his own consultancy, BlueWorld Supply Chain Consulting. If aspiring supply chain executives seek a benchmark on how to effectively speak to an audience and demonstrate executive presence, then take the opportunity to view one of Jake’s talks.
There are many valid motivations for executives to speak at conferences. Communicating to an audience is a conversation, where knowledge, insights and wisdom can be exchanged. It can further be motivated by advocating for a particular viewpoint, or expanding one’s personal visibility in the industry, or within the intimate circles of supply chain management. The latter is especially important since, by our observation, executives seeking to enhance personal visibility can be a tricky challenge since too often of late, we observe executives trying to convince audiences as to their individual smarts and management skills.
I recommend that aspiring executives focus conference presentations on sharing insights and learning, since that is what audiences often seek. Let the audience make its own conclusions as to your leadership skills and executive presence.
A presentation needs to have a compelling opening and closing. It should state a clear purpose, and share the insights and organizational learning the executive and their teams have gained concerning the purpose. PowerPoint content should be highly balanced, less of page after page of bullets, charts and graphs, and more to impact statements, arguments, talking points and/or pictorials that summarize insights.
A clear purpose, succinct observations, learning and a powerful close make for an impactful conference presentation.
We pen this Supply Chain Matters posting in the late afternoon of October 4th, which is deemed Manufacturing Day 2013 in the United States. It is a designated event occurring on the first Friday of October each year and features day consisting of a number grassroots events, open houses and tours creating awareness and celebrating modern manufacturing.
This is fantastic and congratulations to all who either sponsored, planned or participated in the celebrations and events.
Today’s events are sponsored by a number of industry groups including among others:
Fabricators & Manufacturers Association International
Industrial Strength Marketing (ISM)
Manufacturing Institute and the Science Channel
National Association of Manufacturers (NAM) and the Manufacturing Institute (MI)
National Institute of Standards and Technology (NIST)
U.S. Department of Commerce’s Manufacturing Extension Partnership (MEP)
According to an event announcement, this year’s celebration includes over 800 events taking place today and throughout October. Some of these events aim to show that manufacturing no longer involves dirty, back-breaking work but rather a vibrant set of activities that leverage a high-tech driven economy. Much more important, factories will open their doors to busloads of middle, high and technical vocational school students to provide tours and spark interest for a career in the field of manufacturing. That is a rather critical and important objective because numerous industry research and other studies point to a need to overcome a critical shortage of the skilled manufacturing people required to sustain a renaissance of manufacturing across the U.S.
We recently called attention to research conclusions from the Massachusetts Institute of Technology (MIT) Task Force on Production and Innovation research team that addressed Making in America. This author is in the final stages of reading the book that was published in conjunction with this research effort, and the results are thought provoking. Supply Chain Matters will feature a detailed commentary on this book sometime next week.
Even in Silicon Valley California, an area that was once the mecca for high tech and consumer electronics manufacturing, there were events celebrating Manufacturing Day 2013. Mike Cassidy reporter for the San Jose Mercury News penned a blog commentary in conjunction with today’s celebration: “Manufacturing conjures up images of places like 1950’s Detroit and Pittsburgh and 2013 Shenzhen China. But unknown to many who live here, production work accounts for 17 percent of the jobs in the valley and the manufacturing plants here produce some of the world’s most complex and rapidly evolving products and components.” About two-dozen plants in the Bay Area opened their doors to students today. Cassidy cites last year’s Brookings Institution finding that Silicon Valley had the second highest concentration of manufacturing jobs among the country’s major metro areas. Wichita Kansas was cited first in the Brookings study.
Unfortunately, one company not directly participating in this regional celebration was probably Apple, and our readers are fully aware of where Apple’s high volume manufacturing capabilities reside. Then again the cluster of innovative suppliers and small skilled manufacturers that assist Apple designers and engineers in converting designs into fabricated products most likely were participating. Perhaps in the spirit of Manufacturing Day 2013, the company that designs the coolest and most innovative smartphones and tablets might want to re-double its efforts to bring further manufacturing capability back to the U.S…
Supply Chain Matters applauds all of the efforts surrounding Manufacturing Day and extends our Tip of the Hat recognition for all of the associated industry sponsors, manufacturers and students who participated.
Here’s another idea. What about a Supply Chain Day, a celebration of careers among all facets of today’s modern supply chains?
Professional organizations such as the Council of Supply Chain Management Professionals (CSCMP) or The Institute of Supply Management (ISM), global logistics and transportation leaders, third-party logistics and surface transportation carriers. Are you up to the challenge?
For our part, we will do our part to spread the word wide and far.
Supply Chain Matters Guest Response- Aerospace and Defense Companies Need to Fly in New Formation Called the Extended Enterprise
The following comes from Accenture‘s Aerospace and Defense practice and is contributed by Damien Lasou. It serves as a direct response to our previous Supply Chain Matters commentary, A Premiere Week for Aerospace Industry Supply Chains and a New Challenge and provides views on the aerospace industry’s supply chain challenges in the context of the extended enterprise.
Imagine that a new type of airplane is supposed to be in commercial flight starting this year. But the engine for the plane will not be ready in time. Or the onboard avionics electrical system has software bugs that still need fixing and will be delayed. Or the timing on delivery of the airplane wings has been miscommunicated. The manufacturer thought it was going to arrive in time to be installed so the plane would be ready to go this year. But the wing maker thought the delivery date was some other time.
These types of scenarios are causing major challenges throughout the aerospace and defense industry. Products are usually delivered late to market. The quality and efficiency of information sharing among various suppliers has been unacceptable. Widespread collaboration doesn’t exist. Independent business remains the norm. Yet the industry – like so many others — has become so interdependent that what affects one group affects several others.
A coordinated system of collaboration that would make this system work more smoothly remains elusive. These challenges have resulted in several well-publicized delays in deliveries of major aerospace and defense programs to market, costing the industry in revenues and credibility.
Considering this state of the industry, fundamental systemic changes are needed now. A shift to a new and collaborative business model, known as the “extended enterprise,” should be one such change.
Accenture defines the extended enterprise as a network of firms, ranging from customers to suppliers and third parties. These companies collaborate to design, develop, produce, deliver and support a product. The extended enterprise encompasses all facets of collaboration such as processes, people and technologies needed to efficiently manage network inter¬dependencies. At its core, an extended enterprise is intended to improve operational efficiency and potential revenue growth, strengthen relationships with customers and suppliers, and accelerate product deliveries.
My colleagues at Accenture recently interviewed a select group of industry executives about how and why the extended enterprise movement is already starting to transform the industry. The executives based in eight countries–Brazil, Canada, France, Germany, Italy, Spain, the United Kingdom and the United States–work for the largest manufacturers of aircrafts, aircraft engines, and components in engineering, service and support operations, and procurement. A summary of the findings and analysis can be found in a new report titled Defining the Extended Enterprise.
Although these executives cited numerous potential barriers to making such models operate effectively, they acknowledged the urgent need to pursue extended enterprise opportunities. Most have started such initiatives in the past year or two. To remain competitive, they understand they have to invest and focus more on building and participating in extended enterprise business models. But they said it is going to be a complicated and difficult challenge.
Multiple benefits are possible
According to the report, interviewees shared what they believe to be numerous extended enterprise benefits such as:
• Increasing efficiency and reducing costs;
• Stabilizing the supply chain;
• Facilitating control of key information;
• Gaining new capabilities;
• Leveraging innovative technologies;
• Mitigating financial and commercial risks;
• Managing resources and skills;
• Strengthening relationships with customers and suppliers;
• Improving consistency and coherence across enterprise groups; and,
• Leveraging deeper and more updated experience about international trade regulations.
Counterbalancing these benefits, the executives indicated they grapple with challenges ranging from cost pressures to scarcity of talent, to more viable competitors in emerging economies. They realize they have to ease pressures between familiar and new ways of working such as security versus openness; intellectual property protection versus shared innovation; and pooling of skills versus fierce competition for talent. Balancing all this effectively to create a high performance extended enterprise requires a major departure, new thinking and different behavior. Interviewees told us they are finding it difficult to structure their specific extended enterprise objectives within a collaborative context to gain business and operational benefits.
Gap between theory and practice
In pursuit of pervasive industry collaboration, our interviews uncovered the gap between theory and practice. Although respondents acknowledged the importance of collaboration with shared objectives and a common organization, few have progressed to practical steps and delivering broader relationships to achieve this. Concerns prevail about appropriate collaborative levels of collaboration and definitions of roles.
Interviewees expressed concern about how to define the right extended enterprise performance indicators, develop common standards, and comply with regulations. Confidentiality and data security are of particular importance. These two factors create tension between demands of openness and transparency and the need to protect intellectual property and data.
These interviews revealed that companies are exchanging talents and skills. But the more strategic approaches tend to be restricted to larger suppliers and integrators sharing talent more willingly, especially to address complex work. Significant tension exists regarding the need to retain competitive advantage versus requirements to add skills to drive innovation and adapt to changing customer requirements. Achieving this balance is difficult. While aerospace and defense companies recognize that exchanging personnel delivers major benefits, among them are lower costs and increased profitability for both parties, they remain wary of undermining their sources of competitive advantage.
Key factors that will drive growth
As a result of this work, we have identified and defined five building blocks to an extended enterprise organization:
•Collaboration and governance: working together to achieve a common goal with mutual understanding of needs and objectives; developing team-oriented or contractual relationships depending on closeness of collaboration.
•Talent and competencies: developing and sharing skills and competencies needed across the extended enterprise for mutual benefits while managing and retaining the best talents for competitive advantage.
•Agile operations: the ability to flex and adapt to changing needs across the extended enterprise; defined in terms of agility in new or existing relationships as well as adapting to changes across the ecosystem that impact processes or product deliveries.
•Data sensitivity and regulations: ability to execute business in compliance with aviation authorities’ rules, legal and contractual requirements, and government requirements; and to demonstrate at any time conformity the responsiveness of the extended enterprise to those requirements.
•Innovation: the ability to capture and integrate innovations across suppliers and technology collaborators, creating barriers to competition while maintaining control of the company’s intellectual property.
Of these five, allow me to delve deeper into two of particular note: collaboration and governance, and talent and competencies.
Collaboration and governance
Governance embodies one of the fundamental building block of the extended enterprise. The effectiveness of such an enterprise rests on the foundation of trust. Trust requires transparency. In this highly competitive industry, however, trust is elusive. Any omissions or allowances made in the information provided between collaborators will cascade through the entire ecosystem with the likely result the extended enterprise model will not work. For this business model to flourish, aerospace and defense companies would need a common vision of objectives, the roles of each party involved, decision-making processes, a common framework, IT governance and security rules.
If all members of the extended enterprise, for example, build an unstated contingency for their own delivery schedules, a program probably won’t deliver on time. To avoid this, corporate cultures need to profoundly shift. An authentic extended enterprise consists of an interdependent network of organizations in which no single organization has ultimate operational control. Governance needs to encompass all parties involved ranging from multiple suppliers to clients. These extended enterprises need to operate as a single virtual entity while maintaining their independence. Because each relies on the others and information they provide, the fundamental ingredient for success boils down to trust.
Talent and competencies
Talent remains in short supply in this industry. Strict regulations limit the extent to which talent can be easily imported from elsewhere. Maintaining intellectual property and assets, especially in the defense market, inhibits talent strategies that could be executed in a more open market. Talent scarcity drives more intense industry competition and raises a particular challenge for the talent pool available to small and medium-sized companies, which are essential to an extended enterprise operating effectively.
Aerospace and defense companies need to have the right people to operate with a mentality of taking risks. Developing local talent in the ecosystem has become more important. Building talent across the extended enterprise is critical. This requires that organizations sponsor relevant university faculties as well as share resources across the enterprise to drive teamwork and trust.
Developing a high performance extended enterprise depends on the ability to share skills, experience and knowledge throughout the network, and this sharing has to benefit the entire network rather than isolated groups. There must also be trust, which is a long-term process dependent on intangible factors. Trust is precarious because it can be destroyed quickly.
The goal of the extended enterprise is to be organized in a way that intends to benefit all stakeholders. The model should be project or program oriented whereby companies will join forces and be organized in a network structure to develop, for instance, an aircraft or engine. Because of confidentiality and competition, the model cannot work otherwise.
There is no turning away from the extended enterprise momentum. Companies need to face it and embrace it to achieve high performance.
Damien Lasou is the Global Managing Director of Accenture’s Aerospace and Defense practice. He can be reached at Damien.email@example.com.
An important news item coming from our attendance at this week’s 2013 Smarter Commerce Summit, was the release of IBM”s first Chief Procurement Officer (CPO) study. Readers familiar with IBM will note that the IBM Institute of Business Value has conducted ongoing high-profile surveys of various C-Suite executives which include the CEO, CFO and CMO. Readers can download this study at this web link.
This new CPO study surveyed over 1100 executives in 22 countries, thus it has important global scope. The primary headline from the survey findings is that companies defined as top-performing procurement organizations reported 13 percent higher profit and 22 percent higher product margins than lower performing organizations.
That conclusion should not be a surprise to other functional supply chain or product management teams. CPO’s are well noted for their relentless focus and organizational zeal on corporate spend savings.
What Supply Chain Matters found of interest are the findings related to internal collaboration and leveraged use of analytics. According to the IBM CPO study findings, the majority, over 80 percent of high-performing companies report that collaboration among internal departments such as IT, marketing, sales, and presumably product management and supply chain, is a reported key strength and an investment priority. Again, not a complete surprise since other studies related to top-performing supply chains continually point to high rates of internal and external focused collaboration.
However, in our travels, procurement teams do not on the whole tend to gain high marks concerning internal collaboration. Too often, leaning on executive mandates for cost savings tends to rule the conversation and indeed the opportunity for team synergies. This study points to the fact that greater gains are garnered by two-way collaboration. Readers are invited to weigh-in on your own observations, but there is an obvious sign posts for CPO’s.
Another important finding in this survey noted that 73 percent of top performing procurement organizations are effective in gathering insights from the supplier base, compared with 16 percent for lower performing counterparts. Effective mining of information and supply insights are the obvious tools being unleashed by these top performing teams.
Other separate studies that we have reviewed and discussed with clients reinforce that procurement leaders remained concerned about gaining broader leadership skills, and at the same time, perceive skill gaps within their organizations regarding the comprehension and leveraged use of todays more sophisticated analytical and decision support skills.
Thus, survey data is reinforcing similar insights. Procurement teams benefit more from enhanced internal communication, collaboration and cross-functional leadership. They must also address the need to further skill their team members in awareness of the power of analytics and the mining of supplier and product insights.