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“Extended Supply Chain” is the New Supply Chain

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The following Supply Chain Matters guest commentary is contributed by Prashant Mendki, Director Alliances and Business Development for supply chain systems integrator Bristlecone. Prashant is a 15 year experienced industry principal, blogger and social media enthusiast

 In a conventional supply chain process, the focus was always around 5 aspects – Plan, Develop, Make, Deliver and Return. All the applications developed and solutions designed to optimize supply chain processes were expected to run on top of the core ERP systems. You develop a strong demand & supply planning strategy (Plan), Identify the right set of suppliers and source (Develop), Manufacture goods (Make), Transport & store finished goods (Deliver) and accept any returns from customers.

Conventional Supply Chain Graphic

 

Functional units in an organization such as finance, procurement, HR, customers & infrastructure management operated as independent business units, and processes and data flow was integrated between different applications as needed.  This meant applications for Procurement, Travel & Expenditure, CRM, HCM, BI, SCM, Planning, and Execution ran on top of the core ERP system to manage the business.

What has changed in last few years is the way these functions are delivered & consumed. The manner in which they integrate with each other, generate large volumes of data and  enable predictive analysis, all provide  important pointers to measure the impact on business. Factors such as global business expansion, the way materials get sourced, and the risk that geography & global economy face, have direct impact on business operations. Compliance and monitoring have increasingly become a key priority for organizations. On the other hand factors like social media and its impact on consumer behavior, consumer expectation management, the buying pattern coupled with consumption, and change in power center due to global economy expansion – all have made the ’supply chain‘ more significant  strategically and complex at the same time.

All these scenarios are directly impacting the way supply chain processes and applications have been thought through, designed and defined. This calls for a holistic “integrated extended supply chain” rather than independent business processes.

Here is how an ‘integrated extended supply chain’ would look like:

Extended Supply Chain Graphic

The New Order: Extended Supply Chain

The entire ecosystem would be treated as part of the supply chain, where suppliers will have complete visibility into key customer demand and have their response plan ready. This will give them a clarity on how inventory is working and how scheduling needs to happen on its part. Such a system can have tremendous business benefits, for e.g., in the case of a transportation agency that delivers perishable food, a sensor can be installed to submit a report on the food quality to the monitoring system.

As the opportunities & market size are increasing, the challenge to respond to it is getting tougher. Few factors are still in its midst of change. Technology delivery models such as cloud and mobility, new ways of payments such as Apple Pay and Ariba Pay, high end processing systems such as HANA, Big Data and predictive Analytics; all of these are still evolving and will make a large impact on businesses in the coming years. The IoT wave will get devices to communicate with each other and localized cloud computing (Fog ) will reshape the way data is being created and consumed for localized business purposes.

What this means for most the businesses is –

  1. New order will remove complexity that core ERP brings with it.
  2. Customers will have best of the breed solution catered towards enhancing productivity of the specific business process – not necessarily dependent on Core ERP, which may still be there as a transactional system.
  3. The “extended supply chain” will provide extension for business process innovation as its focused towards outcome
  4. Extended solution landscape involving HCM, CRM, Procurement, Executives and different delivery mechanisms – beyond conventional supply chain definitions

Specialized systems integration partners– with niche experience in business process and technology can help customers to keep the holistic view of Extended Supply Chain areas – productive towards business outcomes, independent of their Core ERP applications or just extension to ERP.

Exciting times ahead for sure.

 

The author, Prashant Mendki can be contacted via email: prashant.mendki <at> bcone <dot> com, or Twitter: @pmendki

Disclosure: Bristlecone is a current client of the Ferrari Consulting and Research Group LLC.


Yet Another Acquisition for OpenText

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Last week, Enterprise Information Management technology provider OpenText continued with its track record of acquisitions, this time announcing the completion of its acquisition of Actuate Corporation, a technology provider of personalized embedded analytics and visualization tools for customer facing applications. The announcement indicates that the merger was completed without a vote of Actuate’s stockholders pursuant to Section 251(h) of the Delaware General Corporation Law with Actuate surviving the merger as a wholly owned subsidiary of OpenText. Thus, pinning the overall cost of this acquisition is probably pre-mature at this point.

Supply Chain Matters readers may recall our prior November 2013 commentary related to OpenText’s acquisition of B2B technology platform provider GXS.

According to posting authored by Mark Barrenechea on the OpenText CEO Blog: “Actuate brings powerful analytics to the OpenText portfolio of products that enable customers to analyze and visualize a broad range of structured, semi-structured, and unstructured data.” The posting declares that more than 3.5 million developers and OEM’s currently utilize Actuate to deliver personalized analytics and analytics and further indicates that Actuate will continue to serve the embedded analytics market while being integrated across the entire OpenText EIM product suite.

In late June of 2014, this author penned his impressions from being invited to a one day OpenText Industry Analyst summit hosted by senior executives. We noted that OpenText’s vertical industry support strategy is broad ranging from manufacturing and retail to financial services, government, public utilities and other industries. This provider primarily targets CIO’s and internal IT groups, but with continual acquisitions, will have to include more line-of-business and cross-functional business teams. In its previous acquisition of B2B platform provider GXS, it was unclear, by this author’s lens, as to the longer-term strategic emphasis on the needs of supporting B2B business network and business process management challenges beyond electronic content or document exchange. This latest acquisition of Actuate frankly causes us more confusion as to what specific industry support areas will be emphasized in short and longer term internal integration planning.  While on the subject of integration, OpenText has added quite a few, and that alone raises questions on the provider’s abilities to digest this level while shielding customers from added burdens of multiple user interfaces, data integration or other needs for increased user productivity.

Thus, we will defer from other insights pending updated briefings with OpenText.

The takeaway for existing GXS platform customers is to ascertain if Actuate technology will be included in future releases, and if so, what specific areas and what specific cost.  This is especially pertinent to GXS customers with an SAP ERP backbone, since OpenText has placed a rather large emphasis on its strategic partnership with SAP which is offering its own HANA based embedded analytics offerings. The impact of Actuate could therefore provide an alternative, but more strategy, pricing and timetable information is obviously required.

Bob Ferrari

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


Alarms for Data and Information Security for Internet of Things Initiatives

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Prediction Four of our Supply Chain Matters 2014 Predictions for Industry and Global Supply Chains predicts that the current momentum surrounding Internet of Things (IoT) could be side railed if vendors do not step-up and address certain challenges.  Such challenges include sensitivity to data security and information privacy.

This week, the Financial Times provided a specific B2C focused example of the meaning of data security challenges. The article, BMW sounds the alarm over tech companies seeking connected car data (paid subscription or metered complimentary view) indicates that indeed technology companies and advertisers are putting pressure on carmakers to share the data collected by more connected cars. German automaker BMW has sounded the alarm over such demands emanating from Silicon Valley tech companies and advertising interests and is reportedly indicating a firm “no thank you” to such demands.

We say, thank you, BMW.

The German luxury automaker indicated to FT that “it had a firewall in place to protect crucial data about the internal running of the car. But any transmission of data raises concerns about who might access that information- and what they might do with it” Apparently, BMW is not alone among automakers in taking such a stance.

Of course, the more significant benefits of connected machines communicating their operating status or needs for servicing or replacement parts is thwarted by these other more questionable or controversial approaches to mine data for other purposes.

This week, this author had the opportunity to speak with Mark O’Neill, Vice President of Innovation at B2B integration technology provider Axway. We talked about IoT’s current honeymoon period and the various issues of data and information security. We discussed parallels to prior RFID, item bar code, point-of-sale and other data collection initiatives that raised similar concerns about data security and data use.  The notions of the value of such data tended to take on added revenue considerations and spawned the growth of information brokers.

O’Neill articulated that the biggest challenge being raised for IoT among various B2C and B2B environments is exactly, who owns all of this potential data? Information integration and broker providers are caught in the middle of such dynamics and currently work with customers to insure data is protected, encrypted or reside within architectures that provide adequate protections.

According to O’Neill, initiatives and subsequent benefits of IoT initiatives will prove more successful when established industry best practices addressing information security and privacy are brought forward to IoT business initiatives.

In the coming weeks and months, we will feature more commentaries concerning IoT benefits along with the challenges that may affect current interest and momentum.

Stay tuned.

Bob Ferrari


Supply Chain Matters Book Review: SAP Nation- Runaway Software Economy

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As Supply Chain Matters readers are aware, from time to time we feature book reviews which we believe would be of value to our extended global supply chain management and IT community of readers. In this particular posting, we review a new and perhaps controversial book focused on ERP and cloud technology provider SAP.  SAP Nation Cvr 350

We begin this book commentary with an up-front disclosure.  Vinnie Mirchandani is an independent blogger whom this author has come to know and respect for some time because of his numerous years of experience within the enterprise tech arena. Vinnie and I often run into each other at certain enterprise focused IT conferences and we sometimes think alike in terms of independent voices for the state of technology vendors. This author has also previously provided a guest commentary on Vinne’s Deal Architect blog.

Vinnie provided me a complimentary copy of his latest book: SAP Nation- Runaway Software Economy to seek my opinion with no strings or obligations.

We are sharing this review of SAP Nation because by this author’s lens, this is an absolute must-read for supply chain and B2B business network functional and IT decision-makers who exist in the SAP universe.  Literally, once into the book, I had to continue, because it both grabbed my interest and resonated with some of my own observations of the SAP universe these past 15 years.

Overall, this book will be controversial because it does not paint the most flattering descriptors of SAP, particularly its ecosystem of partners. However, by our lens, the book’s observations are for the most part objective, insightful and written in a context for what SAP needs to do address to make its customers successful in their business and technology deployment goals.  As Vinnie states rather clearly, readers will often not find such insights from traditional top-tier industry analyst firms or certain SAP compensated market influencers because they are too beholden on current and future revenues.

Among the various chapters, the book provides a ten year perspective on SAP, summarizing conversations, observations and case studies among the ecosystem that makes up the “SAP Nation”, including customers, partners, market observers and others. The book quantifies an astounding $1 trillion ecosystem beholden to SAP’s success. Included are 25 case studies outlining various customer strategies for balancing business support challenges within their SAP and broader IT applications landscape. Customer executives further describe certain pain, anger and frustration. One of the most powerful customer analogies is described as follows:

You can see why many customers are pivoting away from SAP and its partners. Many have concluded they bought a shiny car, but did not realize it would also need premium fuel, deliver low mileage, need $100 oil changes and $1000 tires and more and more.”

There are observations on why other cloud-based competitors have been able to gain attraction among the existing SAP customer base because of the building business pressures and frustrations over elongated development timelines, burdensome software and ongoing support costs. The consequence is described as a ring fence of applications that more and more, are surrounding SAP applications. As the adoption of cloud computing continues to increase, Vinnie opines that SAP runs the risk of becoming even more distant in understanding its customer business needs.

Vinnie further outlines SAP’s ongoing efforts at strategic pivoting, efforts to become more nimble, more cloud-focused and more-simple for customers to do business with. Three major consequences of these efforts are described related to existing customers, ongoing R&D efforts and control over SAP’s ecosystem of partners.

Whether you totally agree with all the insights presented in SAP Nation, it provides some objective analysis of the state of SAP’s ecosystem and business strategies. The one issue that this author had with statements regarding an overall bloated systems integrator community surrounding SAP is that we have found that certain smaller, more focused integrators that concentrate solely on specific dimensions of SAP’s supply chain management, procurement and B2B applications do appear to be adding customer value because they recognize the areas where complexity, cost and more rapid time-to-value need to be buffered for customers, and where third-party applications can add significant value.  These smaller integrators tend to staff more with seasoned and experienced technical specialists rather than armies of inexperienced business process consultants that the book describes.

The promotional marketing for SAP Nation declares that readers will benefit from the observations, strategies and insights described in the book.  Supply Chain Matters tends to agree and we will henceforth utilize this book as a reference.

Bob Ferrari


NeoGrid: An Up and Coming Industry Specific B2B Supply Chain Business Network Technology Provider

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In December, this author had the opportunity to speak with NeoGrid, a cloud-based global provider of B2B network based supply chain applications.  Many of our readers might not be familiar with this provider and I must confess that I was one of them.  That has obviously changed. The origins of NeoGrid stem from Latin America.  However, after receiving an initial briefing, I believe our community, especially North American based, will continue to become more familiar with this provider in the months to come.

This B2B provider began operations within Brazil in 1999, focusing on the needs of retailers requiring broader supply chain information visibility. Since that time, the firm has grown through a series of acquisitions of other technology and services firms, including xPlan, Mercador and Agentrics. Today, the provider has a growing global presence including North America.  Our briefing was with Paulo Viola, NeoGrid’s CEO of North America, struck this author as being very much aware of current supply chain technology challenges.

B2B business processes supported include electronic transactions based exchange via EDI services, distribution planning and replenishment, supply chain wide inventory and other visibility. NeoGrid’s branded applications include:

NeoGrid Planning and Replenishment

NeoGrid Logistics and Financial Services

NeoGrid Retail and Distribution Intelligence

NeoGrid Strategic Sourcing

 

The cloud-based provider boasts that’s its network currently supports over 350,000 customers and includes the 10 largest retailers across Brazil along with 9 of the 10 most recognizable worldwide retail brands. We actually viewed an extensive listing of existing customer names and can attest to some very prominent and well recognized branded consumer goods manufacturers, retailers and logistics providers. It also includes prominent high tech and pharmaceutical manufacturers. The technology supporting the NeoGrid multi-tenant platform includes elements of SQL Server and Java.

That led us to probe on current expressed customer pain points and business challenges that retailers and CPG manufacturers are addressing. The indicators communicated were the need for having a single end-to-end platform for sharing supply chain planning and execution information as well as the desire to have accelerated time-to-value for technology investment.  In some of the customer cases communicated, firms became frustrated with existing supply chain applications in terms of cost to scale to broader aspects of the end-to-end supply chain.  In another communicated customer profile, a rather prominent pharmaceutical manufacturer elected to support a global-wide S&OP process leveraging the NeoGrid cloud-based platform.

We have heard similar updates from other cloud-based B2B providers and that led us to include in our Supply Chain Matters 2015 Predictions for Industry Supply Chains that certain industry S&OP processes we seek to initiate broader scope information, planning and execution connectivity and synchronization through utilization of cloud-based B2B platforms. The other clear trend is that supply chain technology decision-makers are clearly focused on more affordable technology options that will deliver more timely benefits.

The firm admittedly had not done a good job for investing in marketing and brand identity, but that effort is on the rise of late. We were certainly pleased to be contacted and made aware of capabilities.

We anticipate hearing more about NeoGrid in the months to come.

Bob Ferrari

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


An Enhanced Looking Glass on Pharmaceutical and Drug Supply Chains in 2015

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As we enter 2015, all signs point to an enhanced looking glass across pharmaceutical and drug industry supply chains.  The most prominent issues fueling industry supply chain scrutiny right now are media-driven headlines focused on price inflation related to the increasing cost of generic drugs.  However, other issues related to electronic tracking and tracing of drug items will also come to light.

In the latter part of 2014, business and social media headlines buzzed with stories related to the exploding costs of generic drugs, which were supposed to be the more cost-affordable alternative to branded, proprietary drugs. Governmental driven health initiates such as the Affordable Health Care Act were legislated to control the spiraling cost of drugs and healthcare.

Price inflation among generic drugs was not a new phenomenon in 2014. This author reviewed a BloombergBusinessWeek article published in December 2013 that had already outlined the problem with certain drug prices skyrocketing overnight even then. That article cited one industry observer as indicating that prices for more than a dozen generics had sourced ten-fold in 2013, and included generic drugs for treating breast cancer, heart and other diseases. A likely culprit reported by Bloomberg was a frenzy of merger and acquisition activities that led to three companies controlling 44 percent of global generics revenues. That was in 2013, and the trend continued throughout 2014.

The largest processor of prescriptions in the United States is Express Scripts Holdings. Last week, this provider published an advisory: The Reality Behind Generic Drug Inflation. The advisory indicates that: “… since 2008, the average price of brand drugs has almost doubled while the average price of generic drugs has been cut roughly in half.”

It further states: “Just four medications have accounted for the most significant generic price increases in 2014: digoxin for congestive hear failure, ursodiol for gallstones, hydrocortisone acetate for inflammation and clobetasol propionate for eczema and psoriasis. Digoxin had the largest 2014 price increase- 1127%- because for a while only, two manufacturers were producing this widely used medication.”

While all the above statements attempt to provide clarity, they are not going to appease the hundreds and thousands of patients who are enduring such price steep increases, beyond the capabilities of reimbursement from health plans.  Once more, legislators are once again being compelled to get involved through a series of Congressional hearings. Again, all eyes will turn towards the supply and demand dynamics of lack thereof across individual drug supply chains.

Supply Chain Wide Track and Trace

The other important issue involves new supply-chain-wide track and trace capabilities that go into effect within the United States during 2015 as a result of the Drug Supply Chain Security Act.  As of January 1, manufacturers, repackagers and wholesale distributors of pharmaceutical drugs must provide lot-level product tracing information, and by July 1, pharmacies themselves, both community and hospital focused, must be able to provide lot-level transactional tracing and history for 6 years. Also on January 1, pharmacies must have established processes and systems for verification and handling of any suspect fraudulent products. These are to include quarantine and investigative procedures of suspected fraudulent drugs with notification to the U.S. FDA and primary trading partner if a suspected fraudulent drug is found.  A recent posting on PharmacyToday outlines these requirements and their potential impact for pharmacy operators. It notes that conformance to these new requirements has a strong dependence on electronic information transfer and that smaller, independent pharmacies may find themselves at a disadvantage because of the need to move current paper based transactions to electronic record keeping and portal access.

The largest wholesale distributors of pharmaceuticals will obviously play a very large role in helping to track and disseminate such information. Meanwhile, the National Community Pharmacists Association is calling for various supply chain industry partners to work together in coming up with cohesive electronic information gathering strategies.

 

For our part, throughout the coming weeks, Supply Chain Matters will provide added focus and commentary related to both the supply and demand dynamics affecting inflated pricing of generic drugs as well as implementation of the new track and trace requirements.

The looking glass up and down the pharmaceutical supply chain is indeed becoming an important headline and motivation for learning in the coming year.

Bob Ferrari

 


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