subscribe: Posts | Comments | Email

Articulating Supply Chain Needs in the Language of the C-Suite

0 comments

Q1 economic data provides some important signposts for industry supply chain teams, especially in their increasing needs to boost agility and responsiveness to overall supply chain capabilities. By our lens, the data reflects that supply chain leaders must more than ever, be able to translate needs and requirements in the language of the C-suite and in the notions of desired business outcomes.  Boardroom 300x200 Articulating Supply Chain Needs in the Language of the C Suite

We have often admired Oracle CEO Mark Hurd’s ability to demonstrate how to effectively communicate in the language of the C-Suite. That includes his observations that in a global economic environment where economies grow 2-3 percent on average, and where investors expect or demand far higher returns, something must give. He describes CEO priorities as concurrently managing for growth as well as cost savings.  Companies must take market-share from competitors or out-innovate the competition in products, added services or business capabilities, or risk the peril of being out-innovated by an industry disruptor. Hurd then provides meaningful evidence of how Cloud-based technology and applications can address the needs of top-line growth with lower overall costs.

Latest Data

Last week, The Wall Street Journal reported (Paid subscription required) that in the first quarter of 2017, the largest U.S. companies have been booking their strongest quarterly profits in five years, mostly from keeping a lid on spending for new projects, plants, and headcount. According to the WSJ, data on capital expenditures suggest that companies remain somewhat cautious on large expenditures. The report observes: “Profits at S&P 500 companies jumped an estimated 13.9 percent in the first quarter, growing nearly twice as fast as revenue.” While there is some notable industry exception such as declining growth and profitability for food and consumer staples providers, business leaders have been generally pleasing investors with attractive returns while being rather stingy on investments other than stock buybacks and added dividends.
As noted in a prior blog commentary, data related to U.S. GDP growth in and PMI activity in the first quarter adds some uncertainties for businesses. The report indicates that some businesses have reluctantly increased select hiring because of overt needs to increase overall productivity as top line revenues grow in environments that are generally lean in their ability to support added business needs.

Turning to hiring, the Labor Department reported that the unemployment rate in the United States dropped to a ten-year low of 4.4 percent while hourly earnings are up a mere 2.5 percent, on average, from a year earlier. Likewise, our view of various global PMI indices among key global regions such as the Eurozone and Asia indicate that manufacturing and supply chain employment is on the rise, albeit a gradual rise.

Thus, the job market is tightening, particularly for skills that are in high demand such as automated manufacturing and analytics based supply-chain decision-making. Supply chain leaders are fully aware of existing cross-functional talent need shortfalls and that challenge is likely to increase in the coming months.

Our sense is that the U.S. economy, and perhaps certain Eurozone economies are once again reaching a tight job market where in-demand people skills will be even more difficult to acquire without boosting compensation and benefits. Skilled employees will quickly understand their added worth in a tightened labor market. For emerging and mid-market manufacturers and services providers who must always operate on lean budgets, the people impacts will be more magnified.

 

Existing Realities

Industry supply chains are literally caught in the middle of these forces.

Pressures to meet the needs of digital process transformation and the online Omni-channel environment remain unabated. The quest for added supply chain cost savings continues across many industry sectors. Those pressures are passed along to suppliers and services providers across multiple tiers of the supply chain with the result that agility or responsiveness to new business opportunities or for product and process innovation are hampered across the product value chain.

In many cases, legacy processes and backbone systems have not changed since the era of client-server computing and point-to-point integration of transactions and data. The result has been more augmented processes and added spreadsheets to support needs for quicker decision-making demanded by the business. IT is now under enormous pressure to reduce infrastructure and data integration costs, because of these same business forces. Supply chain teams are likewise losing resources that were supporting the various patchwork processes.

Something must give and we believe many supply chain leaders know it.

 

Communicating the Language of C-Suite

Communicating in the language of the C-Suite implies advocating plans for the supply chain to support business priorities and desired outcomes, including supporting top-line revenue growth while continuing to reduce costs and improve productivity and timely decision-making.

The forces of digital transformation are twofold. First, transformation leads to meeting changing customer needs and expectations as well as added areas to support top-line revenue growth. Second, digital transformation provides supply chains the ability to leverage advanced Cloud-based computing and technologies that avoid needs for major legacy system upgrades that risk major business disruption. Cloud adoption places the burden of any added or changed IT infrastructure, data security and systems growth needs on the Cloud services provider.  The result can be a more predictable recurring operational cost line on the budget with the ability to leverage needs for digital transformation along with needs to support required people productivity needs.

The IMF recently increased its forecast of global growth to 3.5 percent citing building momentum for the Eurozone, China, and the United States. If that occurs, businesses will be under the gun to again boost shareholder returns, take maximum advantage of added growth opportunities while continuing to boost productivity and cost savings.

Now is the time to advocate supply chain process, technology and people needs in the vernacular of the C-Suite. It requires a twofold agenda for helping the business to increase revenue and customer growth while better controlling costs and worker productivity. It is also about enabling smarter, more informed, and timely decision-making prediacted on anticipating market and customer needs.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


Describing an Exponential Organizational and Supply Chain Capability

0 comments

In February, this supply chain industry analyst attended the Oracle Modern Supply Chain Experience Conference held in San Jose California.  Through Supply Chain Matters, I have shared several prior observations and takeaways from this conference. We noted the extraordinary attendance, upwards of 2800 attendees at a supply chain management information technology focused conference. We further highlighted the momentum of Cloud-based technology deployments in the many different business process areas that today come under the umbrella of supply chain management along with the building interest levels surrounding Internet of Things (IoT) technology being applied to future supply chain management processes.

There was one keynote that I initially did not share in prior conference highlights, principally because I needed time to absorb the many compelling messages that were delivered. The title was Exponential Organizations and the presenter was Yuri van Geest, Co-Founder of Singularity University. Yuri Exponential Organizations sized 207x300 Describing an Exponential Organizational and Supply Chain Capabilityhas a background in organizational design and is noted as a keen observer of exponential technologies and trends.  He is a co-author of the book- Exponential Organizations- Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it).

The keynote opened with van Geest recounting the dizzying exponential developments that have occurred in artificial intelligence, alternative energy, biotechnology and medicine, robotics, additive manufacturing, sensors, and drones. His primary message was that most of these exponential technology developments will eventually impact supply chains and the organizations and people that makeup this community. His takeaway message was that the best vision of the future is happening at the peripherals of such technology development.

My initial presumption was that many of the conference attendees would have a difficult time absorbing the stark nature of the messages or would dismiss this talk as that of a technology genius speaking far above an ability to absorb the real implications.  Frankly, the conference organizers should have allowed additional time to accommodate all the content as well as to allow for further audience interaction.

Since the conference, I have had the opportunity to read the book and revisit my notes from the keynote. My goal in this blog is help distill what I perceive to be some other key takeaway messages related to future supply chain management organizational purpose, design, and work activities, at least from my perspective after having time to really absorb the content.

Geest did a suberb job of translating today’s far more exponential technology trends to what he viewed as direct impacts on industry supply chains. As an example, he stated that over the next ten years, the exponential developments in 3D printing capabilities will foster the ability to print nearly everything in materials including molecular assembly. The implication is the ability for products to be produced within primary areas of consumption, with the model of contract manufacturing being one of virtual capabilities to receive electronic design information and print on-demand products. A further implication is a more localized supply chain or regional network.

The notions of machine learning or cognitive acquired deep learning technology capabilities will at some point in the future lead to autonomous supply chain planning and customer fulfillment, where algorithms and physical sensing manage supply chain needs. While on the subject of planning, the book declares traditional five-year planning as obsolete, and that in exponential organizations, there should never be more than a one-year planning cycle supplemented by continuous just-in-time learning and events.

Regarding the physical, Geest further spoke to the compelling impacts that IoT focused developments would have on supply chains.  In the book, there is a passage that is worth sharing:

In the same way that today we can no longer handle the complexities of air traffic control or supply chain management without algorithms, almost all the business insights and decisions of tomorrow will be data-driven.”

Obviously, the messages are profound and perhaps threatening to many. None the less, van Geest’s message is that we cannot ignore compelling events and individually, people need to be trained and prepared with new individual and team-based skills.

To better understand the implications, I turned back to book to ascertain what were described as the key competencies of the future Chief Operating Officer, Chief Human Resources Officer and either Chief Data or Chief Innovation Officers.

Here are just a few excerpts to ponder:

  • Digital based production and the unbundling of production steps will free the company to focus on its core competencies (customer relationships, R&D, design, and marketing)
  • The notion of a recycled materials supply chain where production materials recycled and reused multiple times.
  • Internet of Things sensors used to monitor the entire supply chain.
  • The need for long-distance transport to drop over time due to the rise of localized production and a closed-loop material supply chain.
  • Universal Cloud access to social technologies, data, and services, independent of physical location.
  • Data management systems that use methodologies, processes, architectures, and technologies to transform raw data into meaningful and useful business information, available to all teams.
  • The need for Big Data security practices.
  • The hiring of employees based on overall potential, not just past record of accomplishment, and on the premise of who can ask the right questions.
  • New notions of peer-based and continuous learning.
  • Reputation measured by contributions in communities and work teams.

 

The book addresses the obvious question regarding the impact on future jobs. The premise is that the democratization of technology will allow individuals and teams to follow their passions and create new economic opportunities and businesses, far different than work being performed today.

These are heady messages, and will cause some pause or skeptics. We applaud Oracle’s supply chain management  conference organizers for hosting such a thought-provoking presentation.

From our lens, there is no denying that the exponential changes occurring in technology and business will eventually impact how supply chains are manifested and managed. The question is in what time frames.

The other obvious question, will teams and individuals be prepared?

We encourage readers to share further thoughts and comments.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Tesla Reports Q1 2017 Vehicle Production and Delivery Performance

0 comments

Global electric auto and solar power producer Tesla reported Q1-2017 automobile production and delivery performance this weekend, and the numbers provide both good, or concerning news, depending on perspective. Tesla ModelX Live 300x210 Tesla Reports Q1 2017 Vehicle Production and Delivery Performance

The automaker reported that it had delivered just over 25,000 vehicles for the March-ending quarter, establishing a quarterly record. Total deliveries consisted of 13,450 Model S and approximately 11, 550 Model X vehicles. These numbers were characterized as a 69 percent increase over the year-ago quarter. However, the year ago, quarter is perhaps not a meaningful benchmark, given Tesla’s strategic objectives.

As noted in our last Tesla operational and business performance focused commentary, the company still has a long way to go to meet its milestone of producing upwards of 500,000 vehicles across all model lines on an annual basis by 2018.

There are many areas all along the supply chain that could prove to be weak links, not to mention the steep ramp-up needs for both the battery gigafactory and the Fremont facility. We called attention to a published San Jose Mercury Times expose commentary in February indicating that long hours and reported unsafe working conditions was causing disgruntled workers to seek out potential external labor union assistance. The report indicates that during November and December, employees worked a minimum of 6-day workweeks to keep-up with production needs, as well as a supply chain disruption involving auto pilot technology, that skewed production output into December.

Included in Tesla’s Q4 production report was a notation that 2750 vehicles missed the production cutoff at the end of December, while a total of 6450 vehicles were classified as in-transit to customers.  Thus, the recent Q1 2017 performance numbers had a total Q4 carryover of 9200 vehicles at the start of the quarter.  Thus, net production could be interpreted to be 20,450 vehicles when one nets out the 9200 vehicle Q4 carryover and the 4650 vehicles that were still in-transit to customers at the end of the quarter.

A broader historic to the vehicles in-transit carryover numbers would be the following:

Q1-2016: 2615 vehicles in-transit

Q2-2016: 5150 vehicles in-transit

Q3-2016: 5500 vehicles in-transit

Q4-2016: 6450 vehicles in-transit

Q1-2017: 4650 vehicles in-transit

As Supply Chain Matters has previously observed, the above in-transit trending points to a building vehicle transportation and customer last-mile fulfillment challenge, that continues to weigh on overall operational performance. To reach its 500,000-annual performance goal in just under two years, both production, distribution and customer delivery processes must scale at a much higher rate.

Tesla is now completing an additional round of equity and debt supplemental funding to launch the scale-up of the new Model 3, designed to appeal to a broader consumer audience, and with higher pent-up demand for production output.

Which each passing quarter, there will be far more scrutiny surrounding Tesla’s operational performance as well as the underlying supply chain processes and management systems. While this week’s financial headline is that Tesla may be a more valuable company than perhaps Ford Motor Company or General Motors, we submit the broader determinant is overall consistent supply chain performance and scalability.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Another Sobering Warning for Retail Industry- This Time from a Major Industry Supply Chain Influencer

0 comments

In a 2013 article, the New York Times had described Li & Fung as follows:

Li& Fung– the most important company that most American shoppers have never heard of- has long been on the forefront of globalization, chasing cheap labor to garment factories first in China, then elsewhere in Asia including Bangladesh.”

A lot has changed in four years but indeed, Supply Chain Matters has often referenced Li & Fung as the most influential player among global-based apparel supply chains and in supporting many major branded retailers in their apparel and other goods sourcing, merchandise selection and inventory procurement needs.

This week, the Asian based company reported a 47 percent decline in 2016 net profits, coupled with an 11 percent decline in annual total revenues. Further communicated was an indication that ongoing challenging conditions across the global retail industry would place additional challenges on its own business operations.

What caught our eye was these statements from the firm’s CEO as reported by Reuters:

I expect an unprecedented number of bankruptcies and store closures in the years to come. I remain cautious as (the) operating environment is deteriorating.

Li & Fung, being the largest influencer of apparel sourcing offering retailers access to tens of thousands of global suppliers in over 60 countries implies a large purview of business intelligence as to retailer buying practices, supplier payments and order volumes.

This is what makes the above Li & Fung statement so significant and rather sobering.

Our specific 2017 predictions and other research advisories specifically focused on the global retail industry continues to echo the unprecedented business challenges confronting retailers, driven from the implications of permanent consumer shifts to online shopping practices. These permanent forces will continue to present ongoing challenges, and retailers, and their respective supply chains, must adapt or suffer the consequences.

The casualties of retailers that have succumbed is building and so are the reports of bankruptcies and significant reorganizations in this year alone. Wal-Mart, one of the largest global retailers recently enacted job cuts and executive realignment directed at integrated online and physical store customer fulfillment. Last week, a sobering warning from Sears Holdings evoked added concerns and actions among retail suppliers and partners.

Now, one of the most influential players in merchandise and supply chain sourcing is communicating a similar sobering message.

The industry is already experiencing higher turnover and shorter tenures of CEO’s and C-suite executives, all trying to sort out different strategies to compete in an online and Omni-channel driven retail industry environment. The changes impacting retail continue to be described as unprecedented.

Supply chain leaders must get on board with fostering integrated online and physical store planning and customer fulfillment. Once again, the retail supply chain is not a collection of cost center activities to essentially support inventory procurement, warehousing and store replenishment. In today’s online fulfillment-driven retail model, the supply chain is a collection of capabilities directed at Omni-channel customer fulfillment and customer services capabilities. In 2017 and beyond, the alternatives are in-house, outsourced or hybrid supply chains.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Supply Chain Matters Attendance at Oracle Modern Supply Chain Experience Conference- Part Four

Comments Off on Supply Chain Matters Attendance at Oracle Modern Supply Chain Experience Conference- Part Four

This week, Supply Chain Matters has been attending the Oracle Modern Supply Chain Experience conference being held in San Jose California, drawing over 2800 attendees. Oracle MSCE Jan 16 178x300 Supply Chain Matters Attendance at Oracle Modern Supply Chain Experience Conference  Part Four

In our Part One posting, we provided some highlights from the first’s day’s keynotes.

On our Part Two posting, we shared impressions of the Oracle S&OP Cloud application currently in-development.

Our Part Three posting provided highlights of the second day’s keynotes that were focused on future dimensions of transformation.

My goal in this update is to share my updated impressions related to current needs for supply chain related transformation.

As our Supply Chain Matters readers are probably aware, this industry analyst and Editor has be afforded the opportunity to attend many supply chain management focused conferences, either industry or technology focused. This week’s Oracle Modern Supply Chain Experience conference is no exception.

At many of such conferences, supply chain team leaders often describe various key learning derived from transformation or business change initiatives. Many exhibit very consistent and all-important themes such as insuring top-management sponsorship, a strong emphasis on change management or addressing process and data before layering advanced technology.

Of late, I have noticed a further learning, one that I can best describe as external or outside-in forces that compel the need for change at a far different pace of change.

Let me further explain.

A number of supply chain industry analysts often communicate the notions of supply chain transformation from people-process-technology dimensions at various levels of defined maturity. The so-termed phases of supply chain maturity charts are what I reference. Four or five phased, they all have common purpose. They often serve as a meaningful way for helping industry supply chain teams chart their transformation end-goal visions as well as benchmark a current state of organizational maturity. While such maturity charting can serve as a tool for change, it can sometimes transmit a message that continuous improvement is ok, or that taking pause at a given phase is acceptable. I worry aloud about such notions since some analysts, are not addressing the building external pressures within many industry settings that are now being communicated.

What’s different about today’s needs for transformation?

Read any business journal of late and the words economic and business uncertainty are stark and all too common. The global economy struggles to grow 3 percent annually, the U.S. and Europe a mere 2 percent. The Economist recently questioned whether global wide market presence and consequent global stretched supply chains may be faltering due to increased complexities and cost.

Individual businesses have shareholders demanding near-term returns and profitability for their investment and it seems that no business is immune from the force of activist investors. CEO’s have no choice but to prioritize efforts at growing top-line revenue growth, adopting new, more profitable digitally based business models while continuing to reduce business costs.  Growth is often translated to acquisition. Oracle senior executive Mark Hurd has been masterful in communicating such trends to CEO audiences.

Cost reduction motivates needs for restructuring or the flattening of organizational layers. If readers have had the opportunity to review our 2017 Predictions for Industry and Global Supply Chains, you are now aware that a whole new dimension of geopolitical uncertainty and business risk are prominent in the coming months.

What I hear of late is a new consistent theme of an external force for change. Our business has a new CEO with a mandate for transformation. Our business executed a merger and acquisition that introduced even more supply chain process and technology complexity. Regarding the latter, complexity is leading to more inefficiency and added costs. We are lacking the right data and information and our S&OP and operational decision-making processes are not keeping up with the current pace of business change.

The bottom-line is that the pace of transformation may no longer be as optional as it once was. Organizations may have little choice but to increase the pace of transformational change and supply chain leaders are expected to lead such efforts at a quicker cadence, albeit sometimes at an uncomfortable pace. That is why the notions of Cloud based applications and more leveraged use of digital advanced technologies such as analytics and IoT are gaining increased interest and senior management sponsorship. Consider that 2800 attendees are gathering at this supply chain management technology focused conference, often with needs to gain more learning and education as to new software and information management technologies.

We as analysts need to communicate supply chain transformative process maturity measures in dimensions of internal or external forces of change. The former having some timing discretion, the latter not so much. We need to remind teams that crisis is often the best motivator and mandate for an organization’s need for change. Industry supply chain teams face a building talent crisis yet beg for training resources. Our supply chain leaders of tomorrow are less tolerant for complexity and far more-savvy in the leveraged use of technology in their everyday lives and in conducting work. They embrace teamwork and team based problem solving. If your organization is laggard in talent development, your industry competitor will seize the opportunity with trained talent.

Finally, a message to technology providers. Some our communicating that now is the time for fostering innovation and new business models.  Some, such as Oracle, communicate the implications of millennial workers in their interaction with technology and decision-making. All of this is fine, but do not at all, dilute the reality that industry supply chains must continue efforts in reducing costs and complexity while increasing productivity.

External forces of change surround, and supply chain teams are now communicating those forces of external change.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 

 


« Previous Entries