subscribe: Posts | Comments | Email

Upcoming- Join Us at 7th Annual Supply Chain Management Summit

0 comments

Supply Chain Matters readers residing in the New England region are invited to join me at the 7th Annual Supply Chain Management Summit being held on Thursday, August 21 on the campus of Bryant University in Smithfield Rhode Island.

Over the years, this Summit has grown and matured into a northeast regional event focusing on a new burgeoning supply chain challenges and solutions. I was a featured speaker in the 2013 event which was very well attended and I’m pleased to be invited back to speak at this year’s Summit.

I’ll be joining a distinguished compliment of speakers for this year’s event including a dear former colleague, Dr. Larry Lapide who will be delivering the morning keynote, and Dr. Jim Tompkins who will deliver a very timely luncheon keynote.

My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. This presentation will address:

- How senior industry executives view needs in business-wide decision-making, and what expectations they have for supply chain capabilities.

- The new requirements of Plan-Sense-Adapt- Synchronize and the new levers of information velocity-context- clarity

- A new thinking required to overcome current organizational and supply chain collaboration barriers

- What you should know as operations, planning, procurement or supply chain management professionals in terms of skills readiness and tool adoption

Individual registration for this upcoming conference is $150 with discounts available for organizational table sponsorships. Registration is available at this web link but act quickly since the event is a sure sellout.

If your organization has needs for a dynamic speaker, panelist or roundtable facilitator on compelling topics impacting supply chain management and B2B business networks, you are welcomed to review our Speaking Services page.

Bob Ferrari


Implementing Innovation and the Importance of Addressing Organizational Culture

0 comments

We call Supply Chain Matters reader attention to a very insightful article: Culture Eats Strategy.. and how to deal with it, which was published in the July/August 2014 edition of Supply Chain Management Review. (PLUS subscription required) The authors John D. Hanson, Associate Professor of Supply Chain Management at the University of San Diego, and Steven A. Melnyk, Professor of Operations and Supply Chain Management at Michigan State University, are both noted scholars in our field. This author has personally invited Dr. Melnyk to be a part of previous supply chain influencer panel discussions that I have chaired and audiences have truly enjoyed his supply chain management focused insights.

The article itself is very timely, especially considering the amount of radical change occurring across a number of industry supply chains. There are important reminders that organizational attempts for implementing strategies of radical innovation are often stymied by inherent organizational culture. The authors provide insights as to why “culture eats strategy for breakfast.” Too often, managers or transformation efforts discover that their best outlined plans are nullified by inherent organizational culture, and when strategy and culture provide different paths, they cannot co-exist.   The article reminds us that the management myth of showing teams a better way and they will embrace it is often de-railed by an inherent organizational culture that can and often will resist radical change unless old ways are discredited

The authors point to a number of examples encountered from their research.  Examples of culture and strategy in supply chain relationships where more and more, companies must rely on suppliers for product and process innovation were brought out. The authors remind us that in the past, supplier partners were selected on the basis of cost, capability or capacity considerations without truly recognizing that organizational culture is just as important. The authors’ further note: “In times of strategic change, it is just as necessary to manage the culture change in the supply chain as it is within the firm.

Reading the article and thinking about some of stories previously highlighted on Supply Chain Matters, we could think of a number of current day reminders. For instance, when retailer JC Penny hired the former head of Apple’s retail operations as its new CEO reeled from consecutive revenue shortfalls as consumers failed to respond to the far different boutique store-within-in-store merchandizing strategy being deployed.  A massive change in product merchandising was thwarted by an inherent consumer culture of anticipating coupons and promotions based merchandising. We now know how that story turned out as too much change caused consumers to abandon the retailer.  Similar situations within retail involve the need to drive more timely aspects of online and Omni-commerce capabilities for consumers running into the resistance on inherent organizational cultures that have marketing, merchandising supply chain and customer fulfillment separated by organizational silos with different performance metrics.

The article outlines various actions that teams can take for bringing culture and strategy into re-alignment.  The actions include the importance of displacing existing strategy when a far different one is required along with the importance of peer groups and leadership.  We gained additional insights and benefitted from the article and we believe you will as well.

Bob Ferrari


Where is Apple’s Commitment to U.S. Manufacturing?

0 comments

Our previous Supply Chain Matters commentary noted that Apple is in the process of marshalling its vast supply chain scale in ramping-up for the pending introduction of new iPhone and other products while stoking consumer demand for the upcoming holiday buying surge. Upwards of 110,000 or considerably more additional workers are being marshalled to support production ramp-up while suppliers themselves reap the benefits of orders exceeding 100 million units.

In December 2012, Apple CEO Tim Cook conducted a series of orchestrated media interviews that included an announcement that Apple planned to invest upwards of $100 million to build Mac computers in the U.S. Our Supply Chain matters commentary at that time reflected on one interview conducted by NBC News anchor Brain Williams. Below is an excerpt of that commentary:

There were statements by Cook that, in our view, were somewhat on the mark and deserve amplification.  Brian Williams asked in the Rock Center interview- What would be the financial impact to the product if, for example, the production of iPhones were shifted to the U.S.?  Cook’s response was that rather than a price impact, the real issues reflect a skills challenge.  Skills were identified as the existence of talented manufacturing process engineers, as well as experienced manufacturing workers.  Cook pointed to deficiencies in the U.S. educational system, as well as the ongoing challenge of recruiting skilled manufacturing workers in the U.S.  Great answer!  But perhaps, there is much more unstated.  High tech and consumer electronics firms long ago shifted the core of consumer electronics supply chains to Asia. Foxconn alone represents a production workforce of over a million people, not to mention many more of that number spread across Apple’s Asian based suppliers. Add many other consumer electronics companies and the arguments of existing capabilities in people, process, component product innovation and supply chain across Asia remain compelling.

We recall that commentary in light of yet another major ramp-up of Asia based consumer electronics supply chain providers.  Yet, the open question remains, where or what is the status of Apple’s planned $100 million investment in the U.S. let alone a more far reaching commitment toward renewing a U.S. based consumer electronics component supply chain ?

A posting in All Things Digital in May of 2013 indicated that according to testimony from CEO Tim Cook before a Congressional Subcommittee the Mac facility would be located in Austin Texas and rely on components made in Florida and Illinois and equipment produced in Kentucky and Michigan. Soon after, Apple contract manufacturing partner Foxconn announced that it was looking to source more manufacturing in the U.S.

In June of this year, PC World made note that Cook tweeted a photo of his visit to the Austin Texas facility where Macs are being produced. The snafu was the iMac in the background was running Microsoft Windows.

The problem however is that a Google search to find updated information related to Apple’s investment in U.S. supply chain capability yields scant information.  We certainly urge our readers with knowledge of Apple’s U.S. production and supply chain investment efforts to chime in, if they are allowed.

Compare that with the efforts being generated by Wal-Mart in its Made in the U.S.A. initiative, committing upwards of $250 over the next ten years on U.S. produced goods. During the Winter Olympics, Wal-Mart produced a super slick video, I am A Factory, that garnered over a million You Tube views. That has been followed by summit meetings held with would-be suppliers in multiple product categories to encourage U.S. investment and provide assistance in sourcing or skills development training. Wal-Mart is even willing to make multiple year buying commitments to prospective manufacturers to help them invest in U.S. based supply chain resources. Last week, the Wall Street Journal profiled Element Electronics which is currently assembling televisions in a production facility in South Carolina under the Wal-Mart program. Noted is that the Element production line is an exact duplicate of one that exists in China, installed by Chinese engineers. While Element management admits that there are challenges in the sourcing of a U.S. component supply chain, and in required worker skills, it is making efforts to correct that situation over time under the support of Wal-Mart’s longer term buying commitment.

The point is this.  There is no question that Apple has the financial resources and the public relations savvy to make a U.S. production and supply chain sourcing effort far more meaningful, impactful and visible.  Yet one has to dig real deep to find information let alone acquire any sense of active commitment. Instead, business headlines note massive scale-up and flexibility of Asia based resources as being far more important to Apple’s business goals. Yet Apple has no problem in demanding a premium price for its products from U.S. consumers. We will avoid diving into the debate regarding Apple’s offshore cash strategy.

Supply Chain Matters therefore challenges the top rated supply chain to join Wal-Mart and others in a far more active and impactful multi-year commitment to U.S. manufacturing which includes higher volume products and education of required worker skills.

Bob Ferrari

 


Once Again Another Apple New Product Ramp-up of the iPhone Supply Chain

0 comments

On the eve of Apple’s report of quarterly earnings, its supply chain is leaking all sorts of information regarding the upcoming new production ramp-up of Apple’s new iPhone models in preparation for all important the holiday buying surge period that comes later this year.

Our Supply Chain Matters information alerts regarding Apple have been active for the past five weeks but the trigger point arrived today when the Wall Street Journal featured a front-page article regarding ongoing production plans.

According to the WSJ, Apple’s supply chain planners have placed orders for between 70 million and 80 million iPhones in both 4.7 inch and 5.5 inch screen configurations to be completed by the end of this calendar year. That compares to production orders of between 50-60 million phones for the same period last year as Apple ramped-up for the introduction of the iPhone5 model series. That is an obvious indication that Apple is making big-bets on the expected popularity of the new iPhone models. Apple also does not want to encounter a situation of being short on inventory for the most popular iPhone 5s model, as was the case during last year’s holiday season.

The WSJ report generally correlates with reports from Taiwan media several weeks ago. Where the reports differ is when volume production is scheduled to start.  Media outlets in Taiwan reported that the 4.7 inch model would begin volume production this month, while the 5.5 inch would begin production in mid-August.  Today’s WSJ report indicates the larger screen version production would begin in September. Previous Taiwan and Chinese reports indicated that contract manufacturer Foxconn was in the process of hiring an additional 100,000 workers to accommodate the cyclical production increase while secondary contract manufacturer Pegatron was in the process of hiring an incremental 10,000 workers. All of this data provides a sense of the sheer scale and flexibility that Apple requires from its supply chain partners.

What is remarkable is that a reading of today’s report gives a true sense of the complexity and variability challenges that Apple’s supply chain planners must manage.  The new larger screen is again, as in prior years, presenting production ramp-up and yield challenges due to more advanced in-call technology and a rumored sapphire based screen. The WSJ report indicates that orders for upwards of 120 million displays have been placed to compensate for yield challenges. If that number is accurate, it would imply that planners are factoring a 60 percent yield factor. The report further validates that Apple planners will make production adjustments based on early demand history, which was again demonstrated last year when production volumes for the iPhone 5c were scaled-back based on initial demand from consumers. Last month, China Times reported that global semiconductor chip producer TSMC was expected to produce 120 million touch ID fingerprint sensors for Apple, which is three times the volume produced last year, and a further indication of production yield factors and ramp-up scale.

Then there is the celebration of the Lunar New Year, which next year, arrives in February, when most production grinds to a halt as workers take time to return to their families. Apple planners must insure that adequate inventories remain to compensate for a lull in production, or that contract manufacturers make assurances that some production will continue during the period of the Lunar New Year celebration. Multi-tiered inventory visibility is an obvious necessity.

As was the case last year, Apple’s upcoming new product launches will place its supply chain with even more challenges. The competitive stakes for Apple are far higher this year as market dynamics and overall competition in emerging markets intensifies. Rival Samsung has already felt the effects of intensified competition from lower-price producers Lenovo and Xiaomi in China and Micromax and Karbonn in India. 

Pricing strategy will be critical and some reports indicate that Apple is seeking higher list prices from carriers for its upcoming new models.  The government of China recently raised media-wide concerns regarding the overall security of Apple smartphones in the midst of ongoing global spying scandals, which could place additional pressures on China Mobile to feature other brands. Android powered phones continue to gain more overall market share while Microsoft and other tech players are providing more incentives for lower-cost providers to adopt Windows based phones.

These are all variables that will drive Apple’s supply chain planning in the coming weeks, one that will again have to demonstrate responsiveness to increased market dynamics, synchronization of NPI and ramp-up plans and resiliency to unplanned disruptions or material shortages.

Then again, Apple continues to be rated by Gartner as the number one supply chain.

Bob Ferrari


Another Aerospace Trade Show and More Orders: Is This a Cause for Additional Concern?

0 comments

As we have noted in prior Supply Chain Matters commentaries related to aerospace industry supply chains, air shows have customarily become the preferred trade show venue for the announcement of customer orders.  Last week, the biennial Farnborough Air Show wrapped-up with its flurry of customer order activity not only for aircraft OEM’s but for engine providers as well.  Farnborough Air Show 2014

Various business media reports indicate that Airbus landed the bulk of order activity booking a reported $75 billion of orders at list prices, involving 496 aircraft.  Boeing snagged a little over $40 billion worth of orders involving over 200 aircraft orders. In its reporting, the Wall Street Journal crowned Airbus as beating rival Boeing for air show bragging rights but the more important headline is the growing backlog of orders that industry supply chains must respond to. Neither of the dominant OEM’s came to this air show featuring brand-new aircraft, instead they showcased newer versions of previous new model aircraft including Airbus’s A330 and Boeing’s Dreamliner787 series.

Aircraft engine providers were further big winners at last week’s event. The consortium of General Electric and CFM International booked over $36 billion in new aircraft orders that involved over 1100 engines along with contracts for maintenance, overhaul and repair. Rolls Royce had its share of new order announcements including being the exclusive engine power plant for the newly announced Airbus A330neo, along with new engine orders related to various other Airbus and Boeing wide-body aircraft.

Another important development related to Farnborough related to the aircraft models that were unable to make a presence because of program difficulties. Bombardier elected not to feature its C-Series after test flights were suspended following a major engine incident.  That incident occurred at the end of May when a newly designed geared fan engine produced by Pratt & Whitney incurred an uncontained engine failure during a ground test.

The highlight of the military aircraft aspects of the air show was supposed to be the F-35Joint Fighter being developed by Lockheed Martin for the U.S. Air Force. That aircraft was restricted from flying to the United Kingdom after it suffered an engine failure in late June.  The aircraft was also powered by a Pratt engine.

The other interesting theme within commercial aviation from last week’s air show was increased nervousness about current backlogs as well as more evidence towards the emergence of a preferred supplier strategy.

There are fears for an industry downturn or cancellations as global airlines adjust to a changing global and industry economics.  Current multi-year backlogs for new aircraft delivery are not meeting the business challenges for airlines to have more fuel efficient aircraft operating on a more-timely basis, especially when competing with lower-cost budget airlines.  These lower-cost rivals are now taking delivery of the newer aircraft and extending their route coverage, flying longer distances and charging lower fares than existing long distance carriers. Intense competition has raised concerns for overcapacity, especially if marginal airlines start to succumb to faster growing operators. Carriers operating across Asia are responding to pressures to sustain 30 to 40 percent growth rates while having to deploy new aircraft on newer routes. Terminals, runways and air traffic control systems are reportedly not keeping pace with current demands for airline expansion across Asia. Euphoria is making way to the realities of hyper-growth.

Airlines and leasing operators also want to have negotiating flexibility in the all-important selection of engine providers.  Increasingly, as OEM’s continue to tune product designs among airframe and engine, such options are beginning to whittle. They are no longer inclined to spend development dollars across multiple engine power plant options.

As we continually point-out, aerospace industry supply chains are dealing with an extraordinary unique set of challenges. There are the blessings of multiple years of order backlogs with the challenges among OEM’s for ramped-up production and delivery of new aircraft under a shared risk and revenue arrangement. Rather, dynamic and responsive capacity management, end-to-end value chain intelligence, enhanced supplier collaboration and goal-sharing will all come into play as aerospace supply chains continue to adjust to extraordinary and constantly changing industry dynamics.

While other industry supply chains will envy such circumstances, the ongoing situation in aerospace continues to provide a rather interesting set of circumstances that will no doubt, provide business case content for many years to come.

Bob Ferrari

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


More Straight Talk and Action Related to Developing Needed Talent

0 comments

There is no question that talent management and a shortage of critical needed skills is a fundamental challenge for manufacturing, supply chain, product management and procurement disciplines. Industry environments are changing constantly and change brings new and different needs. This challenge is consistently identified or amplified in industry forums, industry analyst quantitative surveys or roundtables. 

However, by our view, what seems to be missing from the ongoing dialogue is some straight talk regarding how to best address this challenge, especially in the light of an economy that has ample numbers of people seeking challenging and rewarding careers.

Reading the Wall Street Journal this morning, this author read the article: Just Whose Job Is It to Train Workers? (Paid subscription required or free metered view) By far, it was one of the more insightful articles that traditional business media has produced thus far concerning some root causes of current worker shortages.  This is the takeaway quote within the article: “Companies complain that they can’t find skilled hires, but they aren’t doing much to impart those skills, economists and workforce experts say. That is straight talk.

The article cites sources that indicate that today’s hiring processes take the form of a transaction matching exercise where employers expect highly skilled people to walk through the door. They are unwilling to evaluate candidates based on skill potential or invest in on-the-job training efforts.  Instead, there is a high reliance on colleges and universities, trade schools and government programs to be able to train people for desired skills. To add further credence, the WSJ cites studies including one from MIT labor economist Paul Osterman which concluded that manufacturer’s spending on training has essentially been flat for the last five years. A Deloitte research study is further cited as indicating that from 2006 to 2013, the percentage of staffers dedicated to training and development has fallen by about a half.

While Supply Chain Matters acknowledges that there are leading-edge organizations that are willing to truly invest in development of people for unique skill requirements, they are being outnumbered by those that are not so inclined. The WSJ profiles dental instruments provider Hu-Friedly which is investing in skills development. Small and mid-sized firms may not necessarily have the complete financial resources to develop people but that is where industry and government subsidized training programs can pay benefits. In April, Supply Chain Matters highlighted summary conclusions from the landmark MIT Study on Manufacturing Competitiveness that also concluded that skill shortages have more to do with training and development.

The prevailing attitude seems to be that of inventory fulfillment- there are lots of people seeking employment and we should be able to snag someone. That is not a formula for building and sustaining world-class supply chain teams. Global competitiveness not only hinges on product and service innovation, but on the collective skills and problem-solving abilities of the workforce.

The purpose of this rant is to motivate more straight talk concerning skills development. Invest in the potential of people able to perform required responsibilities. Evaluate candidates on both hard and soft skills, stop filtering on age or other criteria, and compensate people for the skills that they demonstrate as opposed to managing a cost center expense.

The time is way overdue for straight talk on skills shortages and the notion of investing in talent.  Let us all commit to stop looking at hiring statistics and more to meaningful talent development planning.

Bob Ferrari

 


« Previous Entries