As many of our Supply Chain Matters readers are aware, the July 4th holiday in the U.S. is a big one. Not only is it the annual celebration of U.S. liberty and independence, complete with numerous concerts, picnics and fireworks demonstrations, the holiday serves as the symbolic kickoff to summer vacation and other family-based activities.
The first two weeks in July is often a period when firms take the opportunity to shut down or scale-back operations to refit or perform major maintenance on manufacturing and other equipment as well as IT applications and systems.
One high tech and consumer electronics manufacturer that will be very busy this summer is that of Hewlett Packard which is in the key preparation stages of splitting the former company into two equally sized companies on November 1st. One company, Hewlett Packard Enterprise Company will oversee operations of the now HP Enterprise division, A $55 billion dollar entity. The other, HP Inc., will oversee operations of the now HP Printer and PC divisions, of equivalent revenue size.
The HP split involves separating balance sheets, facilities, IT systems and applications, including those related directly to the support of HP’s end-to-end supply chain. Purchase agreements among various suppliers must to recast foe each new company along with various special agreements. HP operations currently span 600 locations in 170 countries.
The split comes in the midst of massive headcount reductions that have already occurred across many business and functional groups.
Supply Chain Matters has featured prior commentaries related to the risks in splitting-up HP’s vast and complex supply chain ecosystem of suppliers and manufacturing partners. Most important was the global buying scale of a singular HP that was constantly leveraged among suppliers.
Management of the upcoming split is being overseen by a 500 person Separation Management Office that includes key executives that will make-up both split companies, including HP’s current CIO.
This week, The Wall Street Journal featured an interview of HP CIO Scott Spradley, who described a complex surgery analogy for separating various IT systems. Keep in-mind that HP is primarily supported by an SAP ERP and Business Suite infrastructure and applications backbone. According to the report, HP is about to initiate a global network of IT command centers designed to keep operations humming amid the combined $1.8 billion restructuring effort. The report cites the closing of 2600 internal computing programs that include those supply chain related.
Another sudden twist to this ongoing story comes from today’s WSJ which reports that the executive tasked with leading the HP Separation Management Office announced his departure from HP this week. According to the report, this was an unanticipated setback in what so far has been a smooth transition process.
Obviously it is going to be a rather busy summer across the many halls of HP, particularly the halls of the company’s combined and soon to be separated supply chain ecosystem of suppliers and supply chain support teams.
In the meantime, we extend best wishes to all of our U.S. based readers for a joyous and safe 4th of July weekend.
Supply Chain Matters has provided previous commentaries citing next generation technology involving smart item-level labeling technology that can be applicable to either supply chain business intelligence, demand sensing or tracking needs. Evolving next-generation labeling utilizes printed electronics and near-field communications (NFC-enabled) smart labels to track products and their various states. This new evolution is the dawning of a new era for item-level tracking, one that will harness the potential of the Internet of Things (IoT) as well as the abilities to bring together the physical and digital aspects of supply chain management the added ability to enhance the brand experience.
A technology provider we have profiled in this area has been Norwegian based Thin Film Electronics ASA. Our last commentary focused on Thinfilm’s joint announcement involving Diageo in the development of a prototype connected smart label for the Johnnie Walker Blue® brand.
This smart-label technology provider has now announced that it has received an additional $22 million in funding in a private placement involving several U.S. funds. According to the announcement, these funds will facilitate expansion of printed logic production needs to meet expected market demand from current and prospective customers, including Diageo.
The latest funding round is described as a significant opportunity to scale operations as well as to attract an additional investor base in the U.S. We would add that it is yet another reflection of investor interest in emerging new IoT based technologies focused on supply chain business process and intelligence needs.
This author recently had the opportunity to interview Kinaxis senior executive Trevor Miles where we explored some important topics related to multi-industry supply chain challenges and the Kinaxis efforts in supporting these challenges. In our conversation, we covered a number of topics related to supply chain business processes and enabling software technology, as well as the current state of predictive analytics.
The following summarizes our questions and dialogue.
Q: Would you describe for our readers, your current role with Kinaxis?
My role at Kinaxis is Vice President, Product Innovation and Thought Leadership, and my activities are focused in three areas. They include overseeing long-term strategic direction for products, working with key customers and prospects on future product direction, and providing an external voice for Kinaxis in areas of brand awareness, social-media dialogue and speaking at major conferences.
Q: What in your view have been some of the major accomplishments for Kinaxis during the past year?
We at Kinaxis are very pleased to see strong demand and continued traction among our key targeted industry verticals. The success of any SaaS company is obviously reflected in customer adoption and we are pleased with our broad market traction and customer adoption rates, highlighted in particularly by record quarterly growth in subscription revenue in Q1 of 2015.
From a product perspective, continued expansion of the Kinaxis RapidResponse functionality with the addition of multi-tiered inventory optimization, attribute-based planning and supply chain segmentation support continues to generate lots of customer interest.
A key business accomplishment was our very successful initial public offering last June on the Toronto Stock Exchange.
Q: In your travels, speaking at conferences and talking with prospects and customers, what do you sense as being the most dominant business process challenge described by cross-industry supply chain or Sales and Operations teams? In that same vein, what is described as the most significant technology challenge?
A frequent business process challenge often reflected by multi-industry sales and operations planning (S&OP) teams is the need to attack the various cross- functional information and decision-making silos involved in the process. I often hear needs related to having a more detailed understanding of the various tradeoffs of decision-making, especially related to various competing metrics. Today, many S&OP processes are supported by IT architecture that was largely functionally-focused which perpetuated islands of information. Whereas some of our competitors capture and synthesize data between organizations, our focus is to capture all pertinent information related to planning the entire supply chain.
Regarding the most significant technology focused challenge, it often relates to data. Many of our larger customers average upwards of 19 instances of an ERP application running across the supply chain network, some even higher. When considering today’s needs reflected in S&OP and more frequent new product introduction cycles, some information is not even in the existing ERP system but resides elsewhere. The challenge is making sense of the data and providing proper context in making data actionable.
Industry analyst firm Gartner recently modified its technology maturity model to include five stages, instead of the prior four. Stage 3 equates to integration of all data sources, and I find that repeated over and over again. The challenge is making sense of information.
While we are on the topic of technology, we should include elements of talent management. Today, there is a clear need for a more horizontal focus and understanding of the supply chain. Some organizations have a talent pool that remains too focused on vertical functional requirements without full consideration of the various tradeoffs and impacts related to supply chain-wide decision making.
Q: How is Kinaxis preparing to address the challenges described above?
Customers are looking for a solution to two fundamental challenges. They include the constant need for IT resources to mine ERP data in the desired format and the ability to support larger planning models. The Kinaxis Data Integration Server is directed at these data harmonization needs. By feeding raw data into a separate server we can facilitate significant reduction in the memory requirements for the planning server, allowing greater and more responsive performance in planning process needs along with more flexibility in data integration needs.
Kinaxis RapidResponse is architected as a single data model for planning and it associates data to specific people responsible for decision-making. With the introduction of both an integration server for housing and categorizing raw data, the planning server can be even more responsive in generating supply chain wide planning models. If a demand planner changes the future forecast, there is feedback as to how-much of the plan is likely to be met on-time. Planners can be more proactively alerted to unplanned events, as well as the consequences of the event. Additional what-if scenarios can be generated to ascertain most feasible approaches and/or tradeoffs in accomplishing a certain plan.
Q: Kinaxis and its teams have spoken previously about the notions of Supply Chain Control Tower capabilities. What’s your assessment of where this type of capability stands today? In your view, how long would it be before we begin to observe wider deployments of such capability?
There are two distinct approaches to control towers, one being a logistics execution approach, the other being an operations and planning resource approach. Kinaxis has advocated and supports the latter, but there is a role and value for both capabilities. The need to bring together planning and execution in a near real-time control tower perspective remains an important and differentiated capability.
The logistics approach is focused on day-to-day execution, namely “where’s my stuff?” and “Is it on-time?” From a change management lens, many organizations are not ready to get their hands around both execution and planning and there is currently more internal support right now for an execution focus. However, Kinaxis remains committed in support of the planning and operations focused supply chain control tower.
Q: Supply Chain Matters describes how more predictive analytics capabilities will be widely incorporated within supply chain planning, S&OP and response management capabilities? In your view, what’s the reasonable timetable for teams to expect to be able to leverage these capabilities across multi-industry supply chains?
Supply chain planning, in all its forms, has been predictive since its inception, demand forecasting being the perfect example. However we find that the notion of predictive analytics is a squishy term, and not clearly understood by industry supply chain teams. And the value of prescriptive analytics – for example, the ability to determine likely demand satisfaction issues based upon supplier decommits – has not been exploited fully by organizations. Supply chain communities are still trying to absorb the potential impacts of Internet of things and data lakes. These can be exploited by supply chain organizations to know sooner and act faster using prescriptive analytics. For predictive analytics it is more about knowing about the specifics of data being collected, the relevancy and context of the data before making the leap towards more predictive analytics. We do not see the supply chain organization leading the charge for predictive analytics, at least not now.
This concludes this executive interview with Kinaxis executive Trevor Miles. For further information, please click on the Kinaxis logo located in our Supply Chain Matters sponsorship panel.
Bob Ferrari, Executive Editor
Disclosure: Kinaxis is one of other current sponsors of the Supply Chain Matters blog.
Commercial aircraft industry eyeballs were focused on this week’s Paris Air Show, a biannual event with enormous significance to major aircraft manufacturers and their respective supply chain partners. Each event is a competition as to which manufacturer walks away with bragging rights to the most landed customer orders or most buzz regarding a new aircraft model. Beyond the headline buzz as to whether Airbus or Boeing landed the most orders, the global supply chain takeaway is an additional $100 billion plus in customer orders and another obvious extension of multi-year backlogs. The overall pressures on aerospace focused supply chain have clearly and unquestionably turned toward fulfillment execution.
Reports indicate that Airbus booked $57 billion for 421 new aircraft orders at list prices while Boeing landed $50 billion worth of orders representing 331 new aircraft. Combined, it represents nearly another 6 to 9 months of customer order backlog at current monthly production volumes.
Aircraft engine providers also shared in the order bonanza with consortium based CFM International reporting a combined $19 billion in orders related to its LEAP family of engines, and other models, while General Electric Aerospace reported orders valued at $5.4 billion for its new GE9X engine. Interesting enough, as a literal follow-up to our previous Supply Chain Matters commentary related to CFM International, the CEO of that engine supplier publically warned the two major OEM’s not to request additional production volume beyond aircraft currently scheduled for delivery through 2020, and that the consortium is currently stretched to capacity in fulfilling what has already been booked in orders. Likewise, the President of Rolls Royce’s aircraft engine business indicated that supplier was booked out to 2021 and the current industry message is about production and supply chain ramp-up.
On the topic of engines, Airbus had previously planned to feature its new A320neo aircraft at this week’s show but a component problem within the new model Pratt and Whitney engine grounded the aircraft.
A further industry implication is that more and more of added industry orders are originating from new and up and coming discount based carriers. Indonesia based Garuda was reported to be one of the most active buyers this week, placing orders for both Airbus and Boeing aircraft. Many are opting for termed “power by the hour” or included service management contracts where manufacturers guarantee a specified level of operational up-time and assume annualized aircraft maintenance costs. The longer the industry backlog continues, the less likely that OEM’s and engine suppliers can take advantage and leverage these incremental recurring revenue streams.
On the product design front, the reported buzz centered on a potential new Boeing model termed “Mom”, billed as a likely replacement of current discontinued Boeing 757 fleets. The aircraft does not exist and is more in the pitching stage, but talk of the new model was enough to reportedly generate a lot of interest and a lot of differing views. Postings by Business Insider and Bloomberg provided added color to Boeing’s potential new model. Industry participants are quoted as indicating that Boeing has no choice but to pitch such an aircraft because of current functional advantages offered by arch rival Airbus with its new A320neo aircraft. According to these postings, Boeing is indicating a “clean sheet” design. However, the current realities of the current highly capacity constrained industry are already adding to the discussion as to the time-to-market timetable for such a new model. Once more, the current operational 757 fleet is noted as more than two decades old and will need replacement rather soon. This author alone is rather frustrated in having to fly coast-to-coast across the United States in aging and dull United Airlines 757’s. It is akin to driving a station wagon with 200,000 miles on the odometer with seats and upholstery worn out. The notion of “Mom” will undoubtedly place enormous pressure on Boeing’s design engineering and program management teams at a crucial time when other new aircraft need to meet delivery and volume milestones.
Obviously, the industry question centers on whether both Airbus and Boeing have learned from past supply chain snafu’s with prior models and can effectively instill added agility, cadence and responsiveness to global-based supply chains. Supplier resiliency and contingency planning will be crucial as will supply chain risk mitigation. Advanced technology is already playing a crucial role in areas of additive manufacturing, RFID, IoT and more extensive end-to-end supply chain visibility. Both OEM’s, along with key suppliers, would be wise to increase their investments in more predictive planning and supply chain wide business and operational intelligence.
As Supply Chain Matters has noted often, an industry with engineering based culture having upwards of a current ten year order fulfillment backlog while enviable, has unprecedented challenges and requires more innovative approaches by all its players. The focus is now flawless and synchronized execution.
In a number of our previous blog commentaries, and in our presentations at industry and supply chain management conferences, Supply Chain Matters has raised awareness to the critical importance of establishing end-to-end connectivity and visibility across the end-to-end supply chain network. More importantly, the end-to-end business network technology must be adaptable to today’s rapid clock speed of business that presents constant change and added line-of-business opportunities.
Too often, supply chain and line-of-business teams find themselves laggard in accomplishing time-to-market business milestones because of existing systems constraints. Once more, the gap among laggards and those with more agile end-to-end B2B process capabilities continues to grow rather than shrink. This should be a key concern for functional supply chain as well as supporting IT teams.
Interoperability of information flow is especially critical for manufacturers supporting direct materials and product value-chain needs across a global network. We believe it has become nearly a necessity. The longer-term requirement is often the ability to seamlessly support not only purchase-to-pay (P2P) but also broader business-to-business (B2B) processes.
The B2B network must be seamless, non-disruptive, and further have the ability to support not just two-way electronic transactional flows but more interactive forms of business process collaboration and business intelligence.
But here is the caveat.
Procurement and S&OP teams are well aware that one of the biggest pain points surrounding consideration of the deployment of an end-to-end network is the onboarding of existing or new suppliers. Too often, rapidly changing business needs that require added and/or modified supplier and/or partner information can become the frustrating bottleneck because the maintenance of B2B system information is too time-consuming and cumbersome.
Interoperability and business process simplicity is a two-way lens that some procurement and supply chain teams discover too late in the process.
Having observed and participated as an industry analyst in the broad history of B2B networks or trading exchanges, many of which did not survive, this author had the opportunity to monitor and report on the key obstacles. Very often, network viability is predicated on the value that suppliers can obtain from a network in relation to the overall effort and cost involved in supporting a single or a multitude of key customers.
The reality of numerous and often expensive IT resources tied-up to sustain a B2B network is not only expensive but draws important resources away from more strategic needs. The onboarding of suppliers needs to be as simple as possible, not requiring armies of technical consultants and dedicated IT directed at customizations, data mapping, or connectivity to existing systems.
Suppliers, in-turn, should have the option to choose a range of no-cost or low-cost options that allow them to not only connect to your end-to-end supply chain network, but to others as well. The added value for suppliers is the ability to not only electronically receive purchase orders and forecasts but to be able to communicate order changes, shipments, invoices and other important information in a more-timely manner.
This author recently had the opportunity to speak with and be briefed by Nipendo, a cloud-based global provider of B2B network based supply chain technology. Many of our readers might not be familiar with this provider. The origins of Nipendo stem from Israel, where the provider supports the end-to-end supply chain connectivity needs of a who’s-who of prominent firms in the region. Nipendo has since broadened its market presence and now has its sights turned to North America. Industries supported by Nipendo Cloud include Manufacturing, Aerospace and Defense, Healthcare, and Pharmaceuticals. This technology vendor considers its strong point to be seamless interoperability as well as a compelling value proposition in terms of speed of implementation and more attractive overall support costs.
This author noted other rather interesting aspects of Nipendo Cloud, including rather interesting application of machine-learning applied to business network information. In subsequent postings, we will provide additional observations regarding Nipendo’s machine learning capabilities applied to supplier on-boarding and information maintenance as well as capabilities to support deeper supplier collaboration.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved.
Disclosure: Nipendo is a current client of the Ferrari Consulting and Research Group LLC
During our recent attendance at the JDA Software’s 2015 Focus customer event, Supply Chain Matters highlighted some important shifts in the company’s cloud based development strategies. This supply chain planning technology provider recently formed JDA Labs, an R&D group tasked with delivering more innovative products. Included in Focus customer and industry analyst communications was an announcement of a new strategic partnership that has significant implications.
This week, the company formally announced its new collaboration with Google, and specifically the Google Cloud Platform. Like other software providers JDA had cloud platform choices to consider, and the eventual entry of the Google Cloud Platform into the supply chain and B2B business network technology arena is a noteworthy and watershed development.
Google Cloud is by our lens, a late entrant into this arena, and thus has the opportunity to play out as an industry disruptor. Readers should pay close attention to the quote provided by Google executive Dan Powers. The statement that the supply chain and Omni-channel industry is ripe for innovation in public cloud attests to a future direction.
Today in an event being held in New York, JDA executives will be featured speakers at a Google Next event. Expect more joint presentations and joint strategy in the coming months. This is an area to watch, and we make that statement objectively, despite the fact that we have a business relationship with JDA.
As we noted in our previous Focus related observations, JDA finally has the opportunity to take true advantage of cloud-based technology deployment, the same application that can run in either behind the firewall, private or public cloud-based platforms. With the depth of its planning, customer fulfillment and supply chain execution based applications footprint, we could well foresee a new identity to JDA, and one more related to B2B end-to-end, cloud-based, multi-tiered applications provider.
Disclosure: JDA Software is one of other current sponsors of the Supply Chain Matters blog.