In conjunction with Oracle’s JD Edwards Summit being held this week in Broomfield, Colorado, Oracle has announced a second phase of mobile access applications that are being made available for the specific JD Edwards EnterpriseOne applications suite.  These include:

• Mobile Requisition Self Service Approval – designed to provide real-time transaction processing access for the review, approval or rejection of requisitions.
• Order Approval Mobile Purchase – Helps enable mobile workers to review and approve purchase orders regardless of physical location.
• Mobile Sales Inquiry – Addresses the needs of sales representatives, service technicians and managers by providing access to sales orders, item availability and item base price on-demand.

Each of these applications will now support smartphone enablement to include the Apple, Android and Blackberry specific platforms.

Supply Chain Matters had the opportunity to speak with Oracle JD Edwards Group Vice-President and General Manager Lyle Ekdahl regarding this week’s announcement, and we were especially interested as to why Oracle elected to have its premiere mid-market ERP offering lead the charge for mobile computing enablement, particularly in supply chain related applications.  Ekdahl’s response was that mid-market companies are just as challenged with reduced staffing and doing more with less, forcing many supply chain functional teams to be much more mobile in their day-to-day business activities.  When the JDE customer councils prioritized areas for needed future enhancements, mobile support was at the top of the list. This week’s announcement is the second iteration from a prior announced support of Apple iPad enablement  made at Oracle Open World last Fall. Ekdahl also noted that there will be several waves of JDE mobile enablement over the next 18 months. He also clarified that each of Oracle’s ERP product lines will have separate rollout strategies relative to mobile enablement.

We still find it interesting that that the JDE suite is currently leading Enterprise Business Suite in this area. Meanwhile, SAP and Microsoft continue to be low-key on their respective supply chain applications mobility strategies and support for customers.

The needs for select mobility enablement among certain supply chain business processes is a growing need and it is interesting to observe how the major ERP providers select processes and applications for mobility support.  Security of information however, will continue to remain a rather important requirement for businesses deploying more mobility features.

Bob Ferrari

E2Open has just announced the release of its Multi-Tier Cost Management application which was designed to orchestrate bill-of-material and product cost collaboration among an extended network of brand owners, contract manufacturers and suppliers.

In conjunction with this announcement, Supply Chain Matters viewed a demonstration of this new application several weeks ago.  The application allows supply chain procurement and buying teams the ability to propagate multiple product costing scenarios among an external network and was initially designed for E2Open’s high tech and consumer electronics client base. What impressed us the most was the means to leverage an alternative way of sharing product lifecycle and management data across the extended supply chain, since PLM (product lifecycle management) technology is typically deployed in a single tier of users.  This could pave the way for a more cost-affordable alternative for externally sharing this data rather than paying for extended PLM user licensing. The application potentially opens the door to leveraging PLM beyond just engineering and into more operational tactical utilization such as sourcing landed cost and broader transformational cost management purposes among trading partners.

The user interface for this application is straight-forward and the screens are relatively easy to understand. Cost data is extracted from any resident PLM system, users can elect different forms of cost management analysis, and an audit trail of changes is provided, helping product management teams to garner a perspective of change activities.

The announcement also represents efforts from a relatively new E2Open management steering team to invest more in internal development of network applications vs. reliance on other external partner applications. As an example, last year there were overt signs that E2Open and Kinaxis would build a stronger technology relationship but that effort seems to have subsided in favor of this internal development strategy.

Beyond high-tech industry -focused clients, it remains to be seen whether E2Open will also invest in the more stringent requirements among its Aerospace industry networks.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC and Supply Chain Matters.  All rights reserved.

Last week, SAP announced preliminary results of its 2011 fourth quarter financial performance and the results were impressive, exceeding analyst expectations for revenues and profits.  In Q4, software license revenues increased by 16 percent and total revenues grew by 11 percent.  Operating profit from a year ago is expected to increase by over 200 percent . Similarly, full fiscal 2011 financial performance was equally impressive prompting SAP senior management to declare that SAP delivered “the best year in its 40 year history.”

Upon review of the preliminary earnings release we noted statements indicating that growth in core applications business, increased momentum for analytics and mobile product lines, and accelerated growth of SAP HANA were each cited as growth engines.  SAP had established a 2011 revenue goal of €100 million for HANA, and has indicated that it exceeded that goal by €60 million. The company also exceeded its €100 million goal established for its mobile based applications, reflecting even more interest by customers in engagement type systems, empowering the user wherever he/she may be located.

Enterprise software companies have a tendency to perform creative allocation among internal revenue segments, thus we have to context SAP’s with some caution.  Also, many of the SAP HANA applications have experienced a delayed market entry and are just reaching customer release visibility and confined to certain non-mission critical application segments.  All that as an aside, the SAP performance is still impressive, especially when placed in context to the ongoing market battle with rival Oracle.  In December, Oracle surprised analysts with a disappointing fiscal Q2 2012 financial performance, indicating only a 2 percent adjusted growth rate in software license revenues.

For readers unfamiliar with HANA, it will become SAP’s answer to leveraging today’s advanced in-memory computing for areas such as advanced planning and predictive analytics.  In our Supply Chain Matters attendance at SAP’s 2011 Sapphire customer conference, we shared our belief that if successful, conversion of SAP applications and software infrastructure to take maximum advantage of in-memory technology would be market game changing.  Last year’s Sapphire customer conference provided a more detailed understanding of how extensive and far-reaching this objective really is, as well as the difficult technical challenges that SAP needed to overcome.  Subsequent SAP influencer focused events have lacked some details related to the future release schedules of HANA powered applications. At face value, the fact that customers are now beginning to buy into the potential of HANA is noteworthy.

From a supply chain and supplier relationship management lens, the real test for HANA focused applications is yet to come.  The initial test will be the long awaited Sales and Operations Planning (S&OP) powered by HANA application that is scheduled for initial customer release this quarter.  Supply Chain Matters has been attempting to secure a detailed briefing on this specific application. During his keynote address at the 2011 Sapphire conference, SAP father and Supervisory Board member Hasso Plattner declared that if he had his way, all of SAP’s business planning applications and specifically the SAP APO application should be the initial targets of further HANA enablement.  We were quick on the keys to “tweet” that statement in belief that SAP’s SCM and SRM customers take note of the implications of that statement.

We continue to believe that in-memory computing will have profound impacts in supporting future supply chain sourcing, planning, fulfillment, collaboration and decision support needs but customers will need vendors like SAP to actively integrate this technology within the existing applications, and not leave that burden on the shoulders of existing customers.

The preliminary uptake of HANA is indeed impressive but the real test will come in SAP operations and mission critical applications such as supply chain and supplier relationship management focused applications.

Bob Ferrari

Every now and then we reach a point when it is time to make a statement about the current challenging business environment, especially when it relates to global supply chains, and this is that time.

Catching-up on last week’s reading, in particular two related articles published in the Financial Times, triggered this commentary.  One article noted that the biggest U.S. companies currently have an estimated $2 trillion in cash balances as a result of healthy earnings in 2011.

Reflect on that number for a moment, TWO TRILLION.

What a problem to have!

Where do you think a good majority of this cash is going to be directed?  If you speculate stock buyback and dividend payout programs, you are absolutely correct.  Amid a perceived uncertain economic environment, and not to mention a presidential election year, companies seem very reluctant to either hire or invest in longer-term capabilities. According to FT, analyzing the most recent figures available, last year, from Q4-2010 thru Q3-2011, U.S. companies diverted $336 billion into share buybacks,  That is the highest volume since 2007. Corporations also raised dividend payouts by 11 percent in 2011.  Some large companies actually issued more debt to finance buybacks of more than $2 billion.

That brought us to recall a January 4^th FT Insight Commentary article penned by John Plender (paid subscription or free metered view).  He observes that corporate profit margins are at all time highs because of savage labor shedding or shifting of labor costs to lower cost regions.  The open question raised by Plender relates to where will this cash be routed in 2012.  Pender opines that the obvious outlet again will be share buybacks.  Why? Because the compensation incentives of many of today’s senior executives is pegged to increased earnings per share measures.  He points out that academic evidence shows that a high proportion of CFO’s admit to a willingness to sacrifice economic value to meet short-term earnings target.  These trends are referred to as financial engineering.

Both articles are cause for considerable concern.  Manufacturers should not be faulted for being cautious given the current uncertain economic environment.  There should be some cushion of cash as a contingency.  However, the upcoming challenges in 2012 point to a significant need to reassess supply chain strategies and invest in longer-term capabilities.

Supply chains have been under enormous stress these past few years.  They have had to respond to relentless pressures to cut costs, reduce overhead and increase productivity.  For well over ten years, a flight to low-cost manufacturing regions was fueled by these pressures for cost reduction. However, the year 2011 offered stark evidence that the era of low-cost sourcing of manufacturing comes with significant risk, especially when supply chains are profiled in the leanest dimensions, or the sourcing of key components is too focused and vulnerable to disruption occurring in a single region.

Supply chain professionals had to perform yeomen activities and work countless hours to respond to assess and respond to major supply disruptions. Interestingly enough, the companies who managed the disruptions best were those who had healthy inventory safety stock levels.

We heard one senior supply chain manager express it best- we are perhaps in an era of the one quarter supply chain, configured for short-term measures and financial results.

Thus, the purpose of this commentary is to send a wake-up call to corporate boardrooms.

There is ample and proven evidence that companies who invest for the long-term, whether in people, process or technology, will reap the rewards of long-term industry competiveness.  Even in times of uncertainty, those that invested where far more able to leverage market opportunities when opportunities presented themselves in the market.

We all, as stockholders, whether direct or through our long-term retirement savings, need to send a clear and loud message to CEO’s that while languishing in earnings in cash is great and leads to healthy bonus compensation, the tradeoff can well be more financially damaging to the economy and to the corporation..

How about channeling some of that cash into investments in people, process, and in longer-term supply chain capabilities. Executives need only review our 2012 Predictions for Global Supply Chains to understand that challenges remain and investment in a longer-term window is way overdue.

Bob Ferrari

This continues our series of commentaries outlining our 2012 Predictions for Global Supply Chains. These predictions are provided in the spirit of advising supply chain organizations in setting management agenda for the year ahead, and in helping our readers and clients to prepare their supply chain management teams in establishing programs, initiatives and educational agendas for the New Year.

Readers are welcomed to review our previous series of postings.  These include:

The full listing of 2012 predictions

Predictions One and Two.

Prediction Three

Prediction Four

Predictions Five and Six

Predictions Seven and Eight

Prediction Nine

Prediction Ten: The leveraged use of systems of engagement, namely mobile and social media applications within select supply chain business process areas will gain additional momentum in select areas of supply chain, PLM and manufacturing process.

The year 2011 provided increased evidence of increasing interest and initial deployment of means to engage people or virtually orchestrate self-forming teams. The leveraging of mobility based tools has had increased popularity and many supply chain related technology providers have been augmenting applications for mobility use. Leveraged use of mobile and social media based applications such as Twitter and Facebook to enhance areas of supply chain management or enhance communications is also gaining increased interest.  While social media remains an emerging area, primarily because broader use of social media remains blocked in many corporate settings, supply chain management teams remain excited about the longer-term potential to enhance communication and team collaboration, and we anticipate more momentum in 2012.

Much of the efforts in 2011 were focused on the product demand side and included gaining immediate feedback on new or current product offerings, enhancing product promotional programs, or incorporating the voice of the customer in product development and customer service programs. Interest in mobility based applications came in the areas of product demand planning, procurement, replenishment and basic business intelligence.

There was also selective use of social media tools in helping to manage major supply chain disruption, including the tsunami that occurred in northern Japan.  Companies are discovering that social media applications can augment supply chain management in time critical or time sensitive needs, or when traditional means of communication will not suffice, such as the assessment of employee safety or status of supplier teams in times of severe natural disaster.

In our conference travels during 2011, we noticed more educational sessions dedicated to social media use within supply chain.  At the CSCMP (Council of Supply Chain Management Professionals) Annual Conference this year, a social media workshop session was packed with attendees and panelists represented initiatives underway at Con-Way, Wal-Mart and Volkswagen.

We predict that the momentum for systems of engagement will continue, especially as more tech savvy professionals take on further responsibilities. We anticipate leading-edge organizations to leverage further use of social media technologies on the supply side of global supply chains along with broader use on the demand side. The power and potential of social media in establishing communication links, forming virtual ad-hoc teams in time of need and discovering information is not a passing fad, but is here to stay.

This concludes our series of Supply Chain Matters 2012 Predictions.

In our discussions and consideration, there were certainly other Predictions that almost made our Top Ten, and merit a listing. They were:

Honorable Mentions:

• A capacity blow-up among global ocean container and vessel operators that could dramatically impact the landscape of carriers.
• A continued shortage of cross-functionally experienced supply chain management professionals, particularly in middle management areas across the globe.
• Turmoil among global currencies impact supplier contracts.
• Rising labor and manufacturing costs in China and other parts of Asia.
• Continued cross-industry pollination of supply chain management professionals across industry boundaries. (CPG and High Tech, High Tech and CPG in Pharmaceutical, ….) This will lead to continued diversity of thought and process innovation.

Needless to state, 2012 will no doubt be a very challenging and invigorating year for global supply chain management.

Our complete research report which outlines all ten predictions in a single document is now available for no obligation free download in our Research Center.  (Listed as We only request that you provide some basic registration data including name, email, role and phone contact.  All information remains confidential and no salesperson will call. We also do not sell our registration lists to any third parties.

Readers are encouraged to share observations and added predictions from your industry and functional lenses.

As we formally enter the end-of-year holiday season of celebrations, we take this opportunity to wish all of our Supply Chain Matters readers a peaceful holiday and rewarding New Year.

Bob Ferrari, Executive Editor

© 2011 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters, All rights reserved.

The following commentary is also featured on the Supply Chain Expert Community web site where the author is a featured guest contributor.

Much has been stated and written noting the fact that global enterprises compete not only on the differentiation of offered products and services, but also on the differentiated capabilities of individual supply chains.  There are many industry case studies, but one that continues to evolve is the global automotive industry.

The global automotive industry has experienced a post-recessionary comeback from the depths of the 2008-2009 global financial crises. Growth markets have been in Eastern Europe, China, Latin and North America. There is, however, a strong possibility that the top three players including Toyota, will shift in ranking status because of a series of quality, supply chain disruption and economic setbacks.  Some industry watchers are predicting that Volkswagen will surpass both Toyota and General Motors for the top global spot.

The Financial Times (paid subscription or free metered view) has been featuring a series of running commentaries related to Volkswagen.  This auto maker is current on-track to sell 8 million vehicles on a global basis in 2011, and deploys a supply chain presence involving more than 90 manufacturing plants, over $80 billion in procurement activities supporting the building of 200 different vehicle models.  Revenues have increased 26 percent in the latest quarter with profits surpassing 13.6 billion euros. More importantly, the Times points out that industry competitors view VW as the benchmark for manufacturing efficiency and profitability, a competency that was once the sole purview of Toyota. VW was one of the first auto makers to invest in China, choosing a partnership strategy with existing Chinese producers SAIC and FAW.  Today, VW brands have the number one market status within China, followed by GM and Hyundai.

What is important to keep in mind relative to VW is its diversity of 10 car and truck brands, from low-cost to ultra- premium, its emphasis on integrating product engineering with production and global supply strategy needs, and a ruthless focus of product quality that stems from senior management. While various brands adhere to autonomy in vehicle design and pricing, areas of procurement and production focus on global supply chain leverage.  The more expensive Audi  and lower-cost VW brands are often produced with the same underlying platforms sharing similar supply components. Of late, various brands have customized vehicle features to accommodate local market needs and desires.

The competitive strategy among global automotive players is having the ability to leverage large volumes of vehicle production leveraging just a few vehicle platforms. We recently penned a Supply Chain Expert Community commentary reflecting on Fiat and Chrysler’s efforts to deploy a global supply chain strategy.

Another evolving strategy has been a renewed emphasis on vertical integration of supply, for instance, the ability to customize specialty steel designs.  Supply Chain Matters recently penned a commentary on Hyundai’s efforts in this area.

VW has been hard at work consolidating underlying product platforms to just two basic architectures, engine in transverse position, and engine in a longitudinal position. Engine and drivetrain production is shared among brands, and each Volkswagen-owned factory features the same processes and controls across the globe. VW is in the process of rolling out a “modular toolbox” manufacturing system that allows for platform sharing on a global-wide scale.

VW also believes in leveraged investment in IT technologies to streamline information flows, increase productivity among procurement and supply chain teams as well as enabling sense and respond capabilities to enhance local and global-wide decision-making.

But as the FT article rightfully points out, vast scale and commonality in procurement of components can lead to increased exposure to risk, as Toyota and other Japanese car makers discovered with the effects of the 2011 Japan tsunami and Thailand monsoon related floods. This places a renewed emphasis on risk mitigation and response management as important supply chain capability differentiators.  Recent reports indicate that Nissan may overtake Honda in global ranking, primarily because it was able to overcome recent natural disaster impacts more quickly.  For its part, VW management is reported to have been closely observing the effects that supply chain disruption can have to the overall business, along with the need for geographical redundancy of parts and production capability.

The global automotive industry ranking may well be different in the coming months and years, and the differentiators in our view, will be the seamless integration of product platform design, procurement sourcing, consistency in manufacturing and agility in global supply chain response capabilities.

Bob Ferrari

©2011, The Ferrari Consulting and Research Group LLC and Supply Chain Matters, All rights reserved.