This author had the opportunity to listen in on two webcasts this week from IDC regarding that industry analyst’s firm’s information technology predictions for the upcoming year. Both webcasts were rather interesting and provided thought provoking predictions, especially when one considers that the bulk of the listening audience consisted of many well-known information technology and service providers.
As I pen this commentary, we are in the process of completing our Supply Chain Matters 2014 Predictions for Global Supply Chains which will be shared in just a couple of days. In the meantime, I did want to share for our reading audience important takeaways from IDC’s IT focused predictions.
Last year’s predictions from IDC were all about the termed 3rd Platform, the combined technologies of cloud, mobile, social and big data computing making a significant presence in overall IT spending. In 2014, IDC now predicts that the battles for IT industry dominance and indeed survival are focused on further investments in 3rd Platform technologies. They go on to declare both an explosion in innovation and industry consolidation, namely a small number of big “winners” in mobile platforms, cloud infrastructure and solution marketplaces as the big vendor players vie for control and long-term revenue growth.
IDC quantifies 3rd Platform momentum as driving 29 percent of forecasted 2014 IT spending and 89 percent of market growth, which is significant momentum. Cloud spending alone is predicted to exceed $100 billion, and skewing toward public cloud services. Of even interest, IDC predicts that in emerging markets such as China, smart connected devices, cloud and big data applications will outpace overall market growth and shape strategies.
If some readers are tending to tune out at this point, thinking that this does not apply to me at all, kindly read on as we share our two most important takeaways from what IDC shared.
The first was IDC’s validation that the IT buyer profile continues to shift to business executives. The firm estimates that 61 percent of technology focused projects will be business funded. The implication is that procurement and supply chain leaders, along with business and sales and operations planning (S&OP) teams have to continue to be far more technology-savvy in their understanding of IT technologies options and available marketplace solutions. It’s now two edged coin with the business holding far more influence on required business process and associated technology investments. On the one hand, business and functional executives now have greater leverage in articulating the need and benefits of systems investments, either behind-the-firewall or cloud-based in scope. Technology and services vendors will accelerate their efforts of directly knocking on your doors knowing this market influence shift. Best that you accommodate those requests and sponge as much information as you need. It further implies that accountability for desired and timely business results comes with this new influence, so the technology decision needs to be sound and well grounded. Gone are the days of fuzzy notions as to who is accountable for the timing and delivery of an end result. President Obama is living that reality right now with the healthcare.gov rollout.
The second important takeaway is one that we have continued to resonate on this blog, namely that decisions related to B2B network platform adoption and expansion are far more critical and need to take on much broader perspectives. That implies functionality and business process support that extends not only in procurement and supplier based management, but deeper dimensions of supply chain response management, supply chain analytics, logistics, supply chain control tower and other supply chain wide decision-support needs. By our view, the B2B backbone, along with its supporting infrastructure and support tools, are the most critical strategic technology decision business and functional executives will make. The good news is that the CIO along with his/her technology team are not going away anytime soon, and can immensely help with the network evaluation from the technology infrastructure and architecture lens. Their new role is to be your partner in innovation, and your expanded role is the bigger-picture view of the supply chain backbone network, translated to manageable tactical steps of desired functionality.
Our readers are already dealing with the effects of more rapid change, skill gaps and other challenges. In your New Year’s resolutions, best you think about adding more IT, cloud and network technology knowledge to your skills base in the coming year. You thank us later.
Bob Ferrari, Executive Editor
Supply Chain Matters Sustaining Sponsor E2open, Inc. announced last week that it is the first dedicated, cloud-based supply chain Software-as-a-Service (SaaS) technology provider to achieve International Organization for Standardization/Electrotechnical Commission (ISO/IEC) 27001:2005 Security Certification.
The internationally recognized ISO 27001 standard certification addresses the protection of information within an individual system. The ISO 27001 standard itself was first published in October 2005 and provides specifics for security management, governance, controls and compliance. The company joins many leading, global businesses that have earned the prestigious ISO 27001 certification, including Amazon, Microsoft, and Salesforce.com. E2open further maintains SSAE16 certification for controls for processes for the past seven years.
Corporate business, functional and IT teams continue to be diligent to the security of data, whether it resides inside or outside the firewall. Supply chain and B2B focused cloud-based systems must therefore protect such data, and achieving this level of ISO certification helps to assure customers that proper measures and controls regarding data have been outlined and are practiced.
Congratulations to the E2open technical teams for this important achievement and milestone.
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters Blog.
This morning, Enterprise Information Management (EIM) technology provider OpenText announced that it has entered into an agreement and plan of merger to acquire B2B platform vendor GXS. The purchase price is reported to be approximately $1.2 billion, roughly 2.4 times GXS Fiscal 2012 revenues, and includes a financing commitment of $265 million cash, $800 million debt and $100 million of equity. This transaction is targeted to close in 90 days and to be accretive to adjusted earnings for fiscal year 2014. The combination of both of these cloud technology providers will provide a company with upwards of $2 billion in revenues supporting over 80,000 existing customers in 140 countries. This is another “big deal” in the B2B platform market.
The roots of GXS stem back to the late sixties with its initial founding as General Electric Information Services (GEIS) providing computer time-sharing to general users, migrating to support value-added network (VAN) services such as EDI for both GE and external clients. By 1998, GEIS’s global electronic trading community exceeded 100,000 trading partners, and in 2002, the renamed GXS was spun out as an independent technology services provider purchased by venture capital firms Francisco Partners and Norwest Venture Partners. In June of 2012, Supply Chain Matters declared that GXS was a hidden gem in the B2B information services and application support arena.
The company has built the GXS Trading Grid, a global platform to support e-business and supply chain information integration that currently supports 550,000 trading partners. GXS customer names include the likes of General Electric, General Motors, Siemens and Toyota in Manufacturing, Henkel, Procter and Gamble and Unilever in Consumer Goods and Best Buy, Macy’s and Tesco in Retail and FedEx and DHL in Transportation. However, GXS has been challenged of late in generating any consistent profitability, as a number of previous acquisitions have added additional debt and expense burdens. Fiscal 2012 revenues were $487.5 million.
OpenText itself has displayed a hefty record of acquisitions in the Enterprise Content Management, Business Process Management and Information Exchange areas that includes the adsorption of different former 20 brands. According to the investor briefing and other press materials, the goal of this acquisition is to combine OpenText’s Information Exchange capabilities with GXS’s portfolio of B2B managed and integration services. According to the joint press release: “Upon closing of the transaction, OpenText and GXS together expect to serve more than 80,000 customers and support approximately 16 billion annual transactions in the cloud.” A briefing presentation further outlines the strategic rationale in the ability of OpenText to cross-sell GXS customers on broader information and content management tools while OpenText customers gain access to a broader B2B integration gateway including supply chain connectivity. The current plan calls for onboarding GXS to the OpenText operating model within two years.
Candidly, Supply Chain Matters was not surprised at today’s announced acquisition of GXS, given our previous impressions. As we noted in 2012, many of the large ERP and enterprise technology providers have been on a shopping spree of acquisitions in the B2B platform area. That included IBM’s former acquisition of the Sterling Commerce B2B platform, and SAP’s acquisition of Ariba and its Ariba Network. What was surprising, however, was the context of an EIM provider merging and acquiring a manufacturing, retail and logistics focused B2B platform provider. That is not to preclude the possibilities for building a broader combined platform of services, but more to understanding and appreciating the differences in mission critical business and supply chain transactional and order fulfillment needs with the parallel needs of secure enterprise information management flows. The need for clear vertical industry focused strategies seems fairly obvious.
By our lens, the real opportunity with the infusion of the added financial resources of OpenText is the opportunity to build out the GXS Trading Grid into broader value-chain planning, execution, content management and information integration services. That target alone requires bold vision and detailed strategic, tactical and development planning. It will be rather interesting for our supply chain management and B2B community to observe how today’s announcement may lead to this broader opportunity.
For the time being, both GXS and OpenText customers will have to wait and see what really transpires from today’s milestone announcement. For our part, Supply Chain Matters will periodically monitor progress.
The debacle that has consumed the implementation and rollout of the U.S. government’s Affordable Care Act and its website, healthcare.gov is not directly associated with supply chain business processes but then again, we can certainly extract the learning when one considers large-scale ERP or online fulfillment systems implementations.
Perhaps our readers, especially our IT audience have been keeping-up with the saga of the information-technology development and service providers pointing the finger at one another as to the initial dismal response of the healthcare.gov web site. This author can certainly relate to this saga and our IT focused readers can relate all too well. Upon following the events, this author questions the original plan for cross-vendor program management as well as the overall system’s scalability and operational testing. However, what really caught our eye yesterday was a report from Bloomberg that indicates that the U.S. government has now drafted the external assistance of some tech heavyweights.
According to Bloomberg, the U.S. government has enlisted computer engineers and programmers from Google, Red Hat, Oracle and other information technology companies to assist in remediation efforts. It’s a literal, all hands on deck effort, and is being directed by a newly appointed overall project director. Reports indicate that overall project management has been realigned with UnitedHealthcare Group’s Quality Software Services unit now overseeing the entire operation.
Bloomberg cites names such as Michael Dickerson, a site reliability engineer on leave from Google who is working on improving the stability of the web site, Greg Gershman, innovation director at Moborno is assisting on improving agility of the development process. Even Larry Ellison of Oracle has offered his company’s technical and database engineering resources to aide in remediation efforts.
Here’s the learning, at least thus far.
When a major systems implementation is in trouble, stop hiding the reality. This is the era of social and the Internet, and news travels rather quickly, in spite of any efforts to spin-up a different story.
Next, bring in the real experts, those that have demonstrated proven skills in large-scale systems development and implementation, and bring them in when the obvious is concluded- the system has a major problem. If you’re the President of the United States, and your signature program is in trouble, you have the opportunity to call on the best tech minds, engineers and developers to assist, and that seems to now be happening.
By our view, healthcare.gov will get fixed, the question is when, at what cost, and at what political fallout. This is somewhat akin to a large-scale ERP implementation or online commerce systems implementation, only far more visible.
Supply Chain Matters Sustaining Sponsor E2open recently contacted us regarding a research report they recently commissioned that was focused on vendor managed inventory (VMI) strategies. The study results present interesting supply chain related business process and information technology insights for many industry supply chains that we will share in the commentary.
In terms of background, VMI programs are often predicated on the management principle of a vendor or supplier managing appropriate inventory levels of products based on either a product demand forecast or an actual order flows. The goal of many VMI programs is to drive more efficient and responsive inventory management. Many programs are triggered by replenishment based systems triggered from EDI messaging. Depending on the terms of the program, inventory ownership may transfer to the buyer either upon receipt of the product or when the buyer sells the inventory. (consignment based program).
A September study, conducted by Gatepoint Research, included 200 responses from senior IT, supply chain, finance and logistics executives from manufacturing, retail and telecommunications industry sectors. The majority of the respondents (98 percent) held CxO, Vice President or Director titles, thus the opinions were weighted from an executive viewpoint. Respondents overwhelmingly worked at large firms which included revenues in excess of $1.5 billion (67 percent).
The report authors draw some of the following observations based on the survey responses:
- Nearly half of responders employ VMI programs with buy-side suppliers. The utilization of both buy and sell side VMI fulfillment programs (partners, distributors, retailers, etc.) was cited by 30 percent of respondents. Nearly a half (49 percent) use consigned inventory at their buyer’s VMI location. Surprisingly, 22 percent indicated no plans to implement any VMI program.
- 28 percent of respondents indicate the sharing of inventory information manually (email, fax, etc.) while 20 percent indicate direct use of the resident ERP system, and 15 percent utilizing B2B integration among inventory systems.
- Most responders indicate a lack of access to real-time information. A majority (63 percent) indicate that they do not always have adequate visibility into their current inventory levels, while more than three quarters of respondents rely on batch reporting for inventory and order information.
- A stunning 69 percent rate themselves without differentiation from competitors regarding inventory turns. About one-third of respondents feel partner collaboration is adequate. Our supposition is that the other two-thirds feel partner collaboration is inadequate.
Reviewing this survey data, Supply Chain Matters can add other observations and insights. The data implies a high utilization of VMI among large enterprises, yet most responders indicating a lack of access to real-time order, inventory and order forecast information. (see below chart extracts) There should be little surprise that nearly 69 percent of responses indicate too much cash tied up in inventory, or too much excess inventory. Only 20 percent of responders felt that their inventory turns were better than the industry average.
How timely are the Forecast, Inventory, and Order information that you and your partners share?
Copyright 2013, Gatepoint Research, Used with permission.
Assess your ability to manage inventory levels.
Copyright 2013, Gatepoint Research, Used with permission.
Our other observation reflects on how respondents rate their inventory management collaboration with partners. Nearly two-thirds indicate high collaboration with partners while about a third feel partner collaboration needs improvement. We therefore conclude that while partner collaboration is rated high, other indicators point to a lack of adequate technology tools to actually leverage the meaningful business outcome benefits of the VMI program. Notice that collectively. 58 percent of respondents rely on either a daily batch, less than daily batch, or ad-hoc order based information. Similarly, 66 percent collectively rely on these same tools for inventory status while 80 percent collectively rely on these tools for inventory forecast data. That implies a lot of information latency, especially when readers consider current industry challenges to conduct business 24 by 7, as well as the massive movement toward online and multi-channel commerce.
By our lens, the most important takeaway from this study is the need for a leveraged use of an online B2B platform that not only serves as the basis of electronic data exchange, but more importantly, near real-time information related to the trending of orders and inventory. An online network or platform can serve many purposes. Besides connectivity, content and the on-boarding of suppliers, it can also serve as the basis of integrating more real-time information related to the status of orders, forecasts and inventory.
The path toward expanded supply chain business process capabilities is not as important as the all-important B2B network platform that forms the foundation of end-to-end connectivity, visibility and decision making capabilities. Why not take advantage of that platform?
What’s your view? Are your VMI programs being stymied by latency of information? Does this current research data surprise you in its conclusions?
The study itself can be downloaded at this E2open supported web link.
Disclosure: E2open is one of other named sponsors of the Supply Chain Matters blog and no additional compensation was rendered to highlight the above study.
This Supply Chain Matters commentary is our third update concerning our attendance at Kinexions 13, the annual customer event sponsored by Kinaxis, Inc. held last week in Scottsdale Arizona.
Readers can view our previous two commentaries by clicking on either of the two web links below:
The focus of this commentary reflects on the product strategy side of Kinaxis.
At the conclusion of last year’s 2012 Kinexions event, this author concluded that Kinaxis stood at an important crossroads. With the 2013 Kinexions checkpoint, the transition continues from both a product and organizational -wide perspective. At this year’s event, CEO Doug Colbeth again stressed Kinaxis’s ability to consistently grow its revenues 30 percent each year, while continually to delight customers. Yet that growth path, by our view, continues to present challenges of scale and cadence. Kinaxis is a company that has successfully anticipated market needs for supply chain responsive planning and simulation capabilities across multi-industry supply chain environments. Each year, Kinaxis RapidResponse, the application, matures to support these needs, while the Kinaxis product development and solutions teams continue to address even more complex customer challenges along with other opportunities for market growth.
This year’s product presentations identified 3 released RapidResponse product updates in 2013, with another 2-3 product updates planned for 2014. Functionality breadth includes the addition of attributes-based planning support including shelf-life and expiry based planning which are highly important considerations for life sciences and pharmaceutical focused supply chains. Support for feature-based bill of materials has been added specifically for automotive industry needs, while both single and multi-echelon inventory optimization support is being introduced. The cadence of product functionality releases is dramatically accelerating, along with added opportunities. . In one session, we heard customer banter related to losing track of what are now major vs. other releases and keeping-up with the cadence.
After viewing four product strategy sessions focused on product development we tend to summarize current RapidResponse development efforts in the following buckets:
- Enhanced functionality requested by specific industry customers
- Added scalability, reliability and speed
- More simplified RapidResponse configuration tools
- Enhanced data and systems integration including master data management interfaces with external systems, and out of the box SAP iDoc interface support.
- Increased support for mobile devices
- New opportunities for growth beyond supply chain planning and response management
A scan of this listing will indicate a company responding to multiple needs for breadth, depth and coverage of functionality. They are classic signs of the growing pains of a technology company responding to increased opportunities for market growth while attempting to preserve a high-touch customer culture. That in itself is not an easily achievable objective without increased scale, industry partnerships and laser-like focus on product development and support activities.
In his keynote session, Kinaxis Chief Products Officer, John Sicard, showed a slide that traced the current history of the company from its origins as Web Plan, the “fast MRP company” to today’s far different Kinaxis that is tackling multiple dimensions of more predicative supply chain planning and decision support. We believe that this specific slide, along with the associated messages and implications to the future path of company growth is the most important takeaway from 2013 Kinexions.
The Robert Frost poem, The Road Not Taken, is sometimes cited as an analogy to a crossroads. Frost cites his conflict as to which road to take in the forest and decides to take the trail path less trodden as the chosen path:
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood and I—
I took the one less traveled by,
And that has made all the difference.
That is the current analogy for Kinaxis,- which road to take. The one less traveled or the path often traveled.