This weekend, The Financial Times reported (paid subscription required or free metered view) a significant finding, one that probably is not a surprise, but none the less should be of continued keen interest to product management, supply chain and IT functional support teams. The FT article cites findings from the recently released 2013 China Climate Survey Report conducted by the American Chamber of Commerce in China.
The FT headline is that a quarter of U.S. companies conducting business in China indicate that they have had trade secrets stolen or compromised through cyber related attacks on their China operations. The Chamber report cites 34 percent of respondents indicating material damage to China operations, a 12 percentage point increase from the previous annual survey. Once more, 14 percent indicated that these breaches caused material damage to global operations and a majority of these same respondents, 95 percent, indicate that this situation was unlikely to improve. More than 40 percent indicated that risk of a data breach is actually increasing. Almost half of all US companies surveyed indicated that intellectual property (IP) theft had damaged their operations.
The annual Chamber survey recorded a significant deterioration in perception of the investment environment in China, dropping from 43 percent a year ago, to 28 percent in the latest survey. Worries over corporate espionage were cited as a primary reason for the drop in confidence. Over one-third of respondents believe that industrial policies favor state-owned enterprises to the detriment of their own company. De-facto technology transfer as a requirement for China market access was cited by 37 percent of respondents as an increasing requirement, a 10 percentage point increase from the prior year. This is a further indicator of concern related to IP protection.
These findings certainly echo the current public concerns now be openly expressed by many global governmental and legislative leaders regarding the increasing threats of cyber attacks. That included a recent trip to China from newly appointed U.S. Treasury Secretary, Jack Lew.
In response to questions raised by this survey, FT reports that:”… the Chinese foreign ministry described any accusation of Chinese cyber theft as “irresponsible” and urged US officials and companies not to politicize economic and trade issues and to stop hyping the issue of cyber security.”
Supply chain related technology and cloud services providers should take note of the survey finding that more China based companies are considering cloud computing options but the majority distrust China based providers because of data security concerns.
Readers can downloaded the full report at this web link.
Supply chain and IT professionals need to heed these growing concerns. Insure that supply chain risk mitigation plans include special emphasis toward business and information policies for all owned operations within China. Emphasis should also be focused on information transfer and management practices that involve suppliers residing in the region.
China is both a vast growth market for goods and services and the global center of multiple industry manufacturing operations. In the survey, the majority of the respondents continue to cite high profit margins in China. While those facts cannot be overlooked, attention to cyber security and IP protection should continue to be of a high priority.
Research firm Horses for Sources recently introduced its HfS Blueprint methodology for business process outsourcing capabilities which they argue is an assessment methodology that is not reliant on the arbitrary viewpoint of a single analyst. HfS is obviously pitching an alternative to either Gartner’s Magic Quadrant or the Forrester Wave methodology.
Our view is that technology vendors will embrace any and all alternatives to being held hostage to a single industry analyst firm. However, for technology buying teams, while these evaluations can be helpful, they must be placed in a proper balanced context. Assessment of any technology vendor or service provider should be determined by consistency in rating among multiple analyst firms. That would include that a vendor has demonstrated a consistently positive presence over a period of time, for instance two or more assessments. Additional attractiveness will be dependent on a number of other factors, including continual evaluation of more mature technologies and/or services which traditional industry analyst firms tend to de-emphasize, along with consistency in definition of the application and/or service.
Buyer reliance on these methodologies has been waning because there are so many other additional sources of information that selection teams can tap on their own. They would include independent voices. Access to these methodologies also comes with a price that being a subscription to the individual analyst firm’s evaluation services. That is where the win-win proposition plays itself out for vendors and traditional analyst firms. Vendors woe and lobby individual analysts to be rated favorably while the analyst firms garner a steady stream of subscription revenues. Any technology product marketing executive is all too aware of how subjective individual analyst rankings can become, especially when evaluation criteria is constantly in a state of purposeful change.
According to the HfS description of its methodology, vendors and service providers will have their capabilities ranked by two high level criteria, Execution and Innovation. That is somewhat similar to the two axis of Gartner’s MQ.
The differentiators for Blueprint are described as crowdsourced inputs from four major constituencies: an Executive Council of Enterprise Buyers, Service Providers themselves, a body of advisors, consultants and other industry stakeholders, and finally, the HfS analyst team. What seems not to be described is the overall weighting applied to each evaluation body. Perhaps that will be better clarified.
Data is collected from interviews with buyers, vendor briefings, and available information. Again, we cannot determine the overall weighting applied to each of these inputs.
Supply Chain Matters applauds the availability of alternative evaluation methodology for technology selection teams and we wish HfS well in its endeavor.
However, by our view, success of this or any new methodology will be highly dependent on the weighting criteria of major constituency viewpoints, perhaps with a stronger voice for buyers and the body of advisors, consultants and other industry influencers that are described as part of this process. The more weighting that is placed external to the analyst firm, the more such methodologies can be viewed as objective and balanced.
Then again, the existence of a yet another methodology is another reference that can serve as a tie breaker for technology evaluation teams.
Just this week, two announcements have come across the desk of Supply Chain Matters, each involving the highly stressed Aerospace industry and each directed at integrating information and insights across product management, manufacturing and broader supply chain areas.
Manufacturing platform software provider Apriso announced that Bombardier Aerospace will standardize on a common Manufacturing Operations Management (MOM) platform based on Apriso’s FlexNet manufacturing platform software. The technology will be deployed to support the expanded production for both the CSeries and Lear85 aircraft production across facilities in Canada and Mexico. Both companies were already working on a 20 month effort to support the CSeries program, which will now be expanded to support other Bombardier production facilities. Apriso’s FlexNet provides manufacturing business intelligence for use by ERP, Product Lifecycle Management (PLM) and other systems. According to a statement by Apriso industry director, Rick Gallisa, Bombardier has embraced a three platform IT strategy consisting of an integrated PLM, ERP and MOM systems landscape.
Separately, product and service lifecycle technology provider PTC announced this week that Eurocopter, a subsidiary of EADS, is expanding the use of PTC technology to enhance overall business performance. The Franco-German-Spanish Eurocopter Group is a 5.4 billion Euro global helicopter manufacturer with orders for 457 new helicopters for global based customers. There are more than 11,300 Eurocopter aircraft in service among 149 countries. At the corporate level, the EADS parent company has outlined a goal of increasing service revenues to 25 percent of total revenues by 2020.
The EADS relationship with PTC dates back to 2008, with the deployment of its PHENIX Master Product Definition platform that harmonized the PLM environment across the company, followed by a Spares Configuration Data Management (SCDM) system to manage spare parts across a global service network. This newest agreement is described as an expansion of the relationship into the emerging area of Service Lifecycle management (SLM). Readers may recall that PTC recently acquired MCA Solutions, which we believe we form the future basis of SLM enhanced offerings for PTC.
In our 2013 Predictions for Global Supply Chains, Supply Chain Matters predicted both increased business turbulence for the Aerospace industry in 2013 as it deals with a combination of huge order backlogs, the need to dramatically ramp-up supply chain production levels, while managing a new business model of pay by operating performance. A separate prediction outlined a broader umbrella of accountability for supply chain management teams that would extend into the areas of product management, manufacturing operations, after-market service and customer services. Two separate technology investment decisions coming in the same week involving two aerospace industry players would tend to indicate some pent-up demand for leveraging advanced technology to support these more aggressive business goals.
We will certainly keep our eye on the further developments.
The following guest posting contribution comes from Guy F. Curtin, Director of Product Marketing at RSi. We previously published our Supply Chain Matters 2013 Predictions for Global Supply Chains. This posting represents Guy’s thoughts regarding supply chain technology in 2013. Guy has contributed prior guest postings on this blog and is no stranger to the supply chain technology space having contributed in roles of supply chain technology marketing.
Big Data or Real Time Data? Big data is everywhere. But is big data right for everyone? Supply chains are hooked on the idea that nirvana is somewhere to be found in that mountain of information. Is nirvana in that big data or could it be captured elsewhere? What about fast data? For example, do transportation companies need big data or fast data? It is more important to rapidly recognize patterns that might indicate a potential problem with a shipment rather than understanding 2 years’ worth of transaction data. While others, such as retailers, look to leverage big data to extract patterns and insights previously not available – who wants to compare historical sales trends with promotions coupled with other data such as weather trends. For 2013, supply chain players will determine what type of data is more important to them…some might come to the conclusion that they need both.
Supply chains will look to business process management – BPM has been well known in process oriented businesses such as insurance and healthcare. Supply chains are recognizing the importance of instituting some BPM to their own ecosystems. Think of all the processes that take place within a supply chain – whether it involves the process associated with moving merchandise to bringing on a new supplier. Both vendors and users within supply chain will begin to seek or develop greater BPM suites and applications to bring some sanity to the myriad of processes needed to run a supply chain.
Who will have a greater role in running your supply chain? Think marketing. Okay I realize that might be blasphemy in some circles. The department that is supposed to create colorful ads and glossies will all of a sudden manage the supply chain? It is already happening at some level – when a CPG supplier runs a promotion it is driven from the marketing side of the business. When you think of what is taught in every marketing class it is about the 4 P’s – product, place, promotion and price. Decisions at this level get pushed back to the supply chain to fulfill a 5th P – produce. Supply chains need to become more integrated with the marketing side of the house. Vendors will continue to find ways to provide solutions that tie together the supply chain and marketing sides of the house.
It is the consumer stupid. Related to the previous prediction, the consumer’s stature within the supply chain will continue to gain importance. A wise sage once said – “behind every B there is a C. There really are no pure B2B or B2C companies, but really B2B2C.” Regardless of what line of business you are in or where you fit in the supply chain, at the end of that chain is a consumer. Companies will strive to get closer to the end consumer – with access to larger amounts of data coupled with more powerful analytics – this will become a reality. Regardless of where you sit in the supply chain, you will have greater access to that end consumer. Those that recognize this and take advantage of the opportunity it affords, will find greater success in 2013.
More vendor consolidation…and more players. One of the big stories of 2012 was the announced merger between JDA and Red Prairie. I suspect other supply chain vendors such as Manhattan will find themselves targeted by the likes of SAP or IBM. (SAP also acquired Ariba in 2013 which also greatly impacted the supply chain space). As more of these “pure” supply chain vendors merge or get gobbled up the landscape looks thinner and thinner when it comes to solution providers. Or does it? While the landscape for pure players is thinning, in 2013 we will see solution providers emerging from unexpected places. For example, as I mentioned above BPM vendors such as Pega could begin to offer solutions that address certain supply chain issues. Or even companies such as Amazon will become players when it comes to certain aspects of the supply chain. Think fulfillment, distribution, warehousing, order management and demand sensing. Firms like Salesforce.com will continue to expand from their CRM stronghold and leverage their cloud acumen to become a player within the supply chain arena. As the players that defined supply chain in the late 1990s – i2 Technologies and Manugistics for example – become buried under the layers of consolidation, look for new players to emerge that will help manage your supply chain. And do not be nervous when they come from unexpected places.
Social remains an enigma but someone will solve that puzzle. Social has been seen as one of supply chains last great frontiers, an ability for companies to get closer to the consumer (because it is all about the consumer!). Social has been seen as a way to get instant demand sensing, detecting issues before they become front page news and even provide customers with better after market assistance. Yet, I have not seen anyone truly take advantage of the social beast. But someone will. Think about the data that could be found from services such as Groupon and LivingSocial as they provide promotions and demand shaping services for local vendors. What about all the social tagging services such as FourSquare, Gowalla and Facebook Places? The data and ability for companies, such as retail and CPG, to access and take advantage of that information could have repercussions throughout their supply chains. As companies look to gain competitive advantages, look for the company or companies within the supply chain that can take the most advantage of social to gain that little extra in market share.
Speaking of social, what about mobile?? In last year’s predictions I spoke about the rise of mobility and the impact it will have on supply chains. This will only continue in 2013. Of course supply chains need to think of mobile from multiple angles. Mobile is yet another data source. Mobile is also another manner of getting close to the consumer (see how we are tying in some of what was said above?). When a supply chain company mentions mobile, I always wonder what aspect they are speaking of. The smart supply chain players will determine what mobile means to their supply chain. Is it a data source they want to leverage, is a manner to touch their consumer or is it a way to bring greater efficiencies to their processes? In 2013, the smart supply chain players will determine what mobile means to them – data source, customer interaction, unique user interface or something else? But just saying, “we have a mobile strategy” will not fly anymore in 2013.
And when we discuss mobile can we ignore eCommerce? eCommerce has become a part of our everyday transaction and retail experience since the late 1990s. The reality is, the actual percentage of retail that is done via eCommerce remains small. Less than 6% of US retail was via eCommerce in Q3 of this year (numbers from the US Department of Commerce). But the influence that number has on our supply chains is much greater. As companies, such as Amazon, begin to push for same day delivery, there will be a greater pressure on supply chains to meet these demands created by an eCommerce world. The genie is out to the bottle, 2013 will be a year when the logistical headache created by that genie will impact companies from Best Buy to Ryder – all scrambling to figure out how to meet this consumer expectation.
Governments’ role will become vital to supply chain risk management. Much like 2011, we witnessed some large supply chain disruptions in 2012 due to Mother Nature. Think Hurricane Sandy on the East Coast of the United States. We also saw how human events can have an impact on one’s supply chain. Think the Olympics in London or the looming strike that could shut down the United States’ eastern port facilities. Supply chains have become global, complex and sensitive to disruptions…not a news bulletin. But because of this, governments are the only organizations that can truly ensure that the supply chains are kept up and running. Look for governments to begin to address how they can ensure supply chains are given the latitude to function properly. I might even suggest governments such as those of the United States consider cabinet level personnel to take on this task. Are you listening President Obama?
Public perception will drive supply chain decisions. Think about all the headlines that dogged Apple when the work practices at Foxconn were revealed. We all know that the “world is flat.” This flatness has allowed supply chains to find places and ways to gain efficiencies and lower cost. The flip side of the flatness has been greater openness of communication. When your main outsourced manufacturer leverages questionable labor practices to guarantee your margins…that might not be as easy to keep out of the public eye. The companies within the supply chain that have the greatest brand presence will also be the ones most sensitive to these issues. Look for companies such as Apple to turn a more PR savvy eye to some of their supply chain decisions.
Our Supply Chain Matters readers are again welcomed to share their own predictions and thoughts regarding what global supply chains can anticipate in 2013.
Last week Gartner revised its Global IT Spend forecast from that issued in Q3 2012. Gartner views much of the uncertainty surrounding the global economy as nearing resolution and thus the firm’s latest forecasts reflect more optimism. However, the media headlines regarding these changes can be somewhat confusing in terms of expected growth rates.
Gartner now forecasts global IT spending to be $3.7 trillion in 2013, up from the $3.6 trillion predicted for 2012. The confusion, at least for us, lies in the effects of constant currencies. On the basis of constant currency, according to Gartner, global IT spending increased 4.1 percent in 2012, and will increase another 3.9 percent in 2013. That is a reflection of nearly flat line growth and according to quote from a Gartner Managing Vice President published in the Financial Times, reflects that the global IT sector is maturing just a bit.
There are two other takeaways from this recent Gartner IT spend forecast.
Gartner revised downward its forecast for spending related to worldwide IT devices, which includes PC’s, tablets, mobile phones and printers. The current 2013 forecast is now $666 billion, representing a 6.2 percent increase from 2012. However, that forecast was reduced by $40 billion and the 7.9 percent forecast issued in Q3. Global spending from 2012-2016 was also significantly reduced. Gartner notes that increased market competition and cheaper Android powered devices have contributed to the reduction in its devices spending forecast. The implication, in our view, is that existing market players should anticipate an increased competitive environment with perhaps more fallout of existing suppliers. The forecast also presents a strategic message for Apple, which implies it must continue to diversify its product line-up into other areas.
The other takeaway reflects the global IT spending forecast related to Enterprise Software, which Gartner believes has the highest category of projected growth in 2013. According to Gartner, Enterprise Software spending is projected to grow from an estimated $278 billion in 2012 to $296 billion in 2013, representing a 6.4 percent increase. Gartner views hot areas as security and CRM. The firm anticipates that markets aligned to “big-data” information management initiatives will not see increased levels of investment until 2014 and beyond.
In the view of Supply Chain Matters, software related to supply chain management and B2C/B2B fulfillment should have another year of robust growth in 2013. C-level management now understands the critical role of supply chain in insuring global market penetration, successful product launches and in facilitating bottom-line business goal fulfillment. The current revolution in online fulfillment will also motivate many retail and supplier teams to increase investments in online fulfillment, advanced inventory management, supply chain wide enhanced visibility, business intelligence and cross-channel fulfillment programs.
Finally, we the enterprise software market remaining robust in 2013, look to increased acquisition activity among the major enterprise software providers as they each position to be the vendor with the broadest categories of offerings with market appeal in the coming years.
Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide a series of predictions for the coming year. We have maintained this tradition since the founding of the blog in 2008.
Readers can view the entire listing by clicking on this web link: 2013 Predictions for Global Supply Chains.
In our Part One posting, we explored our first two predictions for 2013, the overall economic and business challenges, and our prediction of inbound commodity prices.
Part Two posting explored predictions #3 and #4, which noted a continued renaissance in U.S, based manufacturing and the very important challenge of supply chain skills development and retention.
Part Three posting dived into Prediction #5, our industry specific supply chain challenges prediction.
Our Part Four posting address the critical need for supply chain resiliency and responsiveness in 2013 as well an increased penetration of Chinese companies in other industry supply chains.
Part Five predicted broader umbrella supply chain accountability in 2013.
Part Six predicted higher levels of action required in the control and mitigation of broad theft and counterfeit materials among industry supply chains.
In this final deep-dive posting, we explore our prediction related to cloud computing adoption in 2013.
Prediction #10: Cloud computing and managed services options, enabling supply chain business processes, will continue to gain more traction, provided that vendors resolve current lingering customer concerns.
The momentum for adoption of cloud computing technology in both B2B and supply chain business processes accelerated in 2012. The reasons were a perfect storm of business forces. High uncertainty surrounding the global economic climate across multiple industries drove cash preservation strategies and a consequent reluctance to expend high levels of up-front capital. Multiple disruptions and challenges affecting industry supply chains uncovered needs to quickly augment business processes and enhance needs for broader intelligence and quicker decision-making. Cost control initiatives turned more towards aggressive reduction in IT owned infrastructure and consequent annual operating and applications integration costs. Small and medium sized businesses were especially attracted to cloud options because of the factors noted above. All of these business and functional forces made cloud computing a more attractive option.
We expect this trend to continue in 2013 along with augmentation of cloud computing with managed supply chain services. We concur with IDC’s prediction that industry focused Platform-as-a-Service (PaaS) information, collaboration, control and decision-making models, hosted in a cloud environment, will gain more interest and adoption over the coming months and years. The open question remains which cloud model will be preferred, private or public.
Enterprise vendor SAP, in its Sales and Operations Planning, powered by SAP HANA application, is a cloud based offering that manages one of the most critical business decision processes for any firm. Similarly, Oracle has long-term plans to offer a full supply chain management support capability via private or public cloud platforms. IBM has been building-out a broad offering of cloud-based, B2B support applications that address mission critical processes of customer fulfillment and supply chain resource management.
However, the growth of these options in cloud computing will be dependent on the ability of technology vendors to resolve fundamental and lingering customer concerns surrounding cloud computing. Many vendors have shown a bit of arrogance in constructing legal agreements surrounding cloud computing contracts. They insert clauses in contracts that absolve the cloud provider from any and all liabilities, and in some cases, state that the client will hold ultimate responsibility for anything that goes wrong, including data loss. Prospective customers are compelled to seek legal advice, only to discover that the customer’s maximum recovery is capped, or would have to initiate an expensive and time-consuming lawsuit to recover any business interruption or data breach damages. In an article published in December 2012, Legal concerns curb corporate cloud adoption, ComputerWorld magazine quotes prospective customer attorneys as describing certain technology vendor contract terms are “offensive”. Since cloud computing is a recent phenomenon, legal precedents are lacking relative to liability and recovery.
Up to now, cloud computing options directed at point applications or non-mission-critical processes may have caused procurement and supply chain functional management teams to overlook or dismiss such provisions. But, as cloud computing options involve much broader, mission critical supply chain processes, the need for legal checks and sign-off are evident, and ComputerWorld points to increased discussion and some confrontation among legal counsel, IT and functional executives, which could slowdown cloud adoption.
Another significant and related concern is that of information security. The year 2012 featured more troubling headlines of hackers penetrating critical industry systems. Some of the world’s most prestigious banks were collectively targeted in attacks by sophisticated and organized hacking groups, as were hydrocarbon production facilities in Saudi Arabia where a virus attack almost took down production of 10 percent of global oil supply. Experts are unsure if latent time-bombs remain in these systems, set to activate a data breach at a certain date.
Higher visibility to interruption of mission critical business services also came to light in 2012. In late December, Netflix suffered an overnight suspension of all of its video streaming services because of a technical problem at its hosted IT infrastructure provider, Amazon Web Services (AWS). This was the third major reported AWS service interruption in 2012, the others involving customer services for Foursquare, Pinterest and Instagram.
As noted, supply chain planning and customer fulfillment systems often fall into the category of a mission-critical business process, subject to internal control and reporting processes. Many of these increased security developments fuel lingering concerns among executives regarding information that may be stored and accessed in a public or hosted cloud. Developments such as these motivate senior executives to continue to favor private based cloud options relative to B2B and supply chain needs.
While larger enterprise type vendors have the financial clout and other global resources to address such concerns, smaller vendors may be at a disadvantage. Vendors often utilize third-party IT infrastructure service providers to host their cloud offerings, which again raises questions as to which parties have ultimate accountability and liability, and how that may relate to the customer’s declared internal control processes.
A continued highly uncertain economic environment and a need for more responsive implementation of automation directed at global supply chain responsiveness and resiliency will continue to fuel cloud computing interest in 2013, provided that vendors respond to security, control and contractual related customer concerns.
This concludes our series of deep dives concerning 2013 Predictions for Global Supply Chains.
We extend a loud shout-out to all global supply chain professionals for their incredible achievements and responsive actions during 2012. Another challenging year has passed and yet another is forthcoming. Then again, supply chain is never boring.
We trust that our ten 2013 predictions help you and your supply chain teams to think about objectives and resource plans and be adequately prepared in 2013.
The full complete copy of our 2013 Predictions for Global Supply Chains, which includes even more detail, will be shortly made available in a no cost research report available for download in our Research Center. We will advise when the final report is ready.
Throughout 2013, Supply Chain Matters will be providing additional insights related to each of our ten prediction areas, including both an interim and end-of-year report card.
As always, readers are encouraged to comment on these predictions as well as add additional thoughts as to what to expect in 2013.
© 2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.