I had the opportunity this past week to catch-up with Gopi Krishnan, Practice Lead, Supply Chain Management at Infosys Technologies.  Gopi is a periodic contributor of guest postings on this blog, and I always look forward to speaking and exchanging insights regarding global supply chain related process and technology developments with him.

The IBM Pulse 2011 conference kicks off today in Las Vegas, and Infosys is one of the designated Gold sponsors.  The Infosys exhibition booth will be # G305. (Disclosure: Infosys is one of other featured sponsors to this blog) .

Gopi will be delivering a talk addressing smarter asset management and was gracious enough to speak with Supply Chain Matters on interesting and important topics related to today’s asset management and supply chain needs.

Question: I noticed that your presentation involves smarter asset management in the energy and utilities industry.  The abstract indicates that traditional asset management is reaching end-of-life, and that the new focus is on interoperability and compliance.  Could you elaborate on what is meant by true enterprise capabilities in EAM?

Gopi noted that technology needs for enterprise asset management (EAM) are changing, and firms need to consider what are the true “enterprise capabilities” needs in asset management.  Today, many asset-intensive firms have profiled asset management technology either as:

• Single best-of-breed application;
• Core ERP module or application;
• Another best-of-breed application at division or business unit level;
• Custom built application.

An important consideration is that many of the older existing implementations are not enterprise capable and provide little standardization in accommodating and integrating enterprise-wide information needs. They may be locally installed with little ability to provide a global or corporate-wide view of assets, or asset-related process needs. This leads to challenges in the ability to assess asset up-time on a global basis.  Gopi observed that while many firms term their EAM implementations as global, by and large, it turns out to be local in capability. While companies note that they currently have 80-85% overall asset utilization today, it may not be enough to satisfy needs to be industry competitive.

A further aspect is that current asset management users primarily utilize work management functions, but today’s EAM applications enable integration to procurement and inventory management needs as well. An enterprise class EAM application allows firms to assess and manage efficiencies along with centralized procurement and inventory management practices.

Question: Could you briefly describe the Infosys SCM consulting resource capabilities specifically focused on EAM?

Gopi noted that Infosys entered the asset management area back in 2001, primarily in a project based focus, as opposed to a practice capability. The project involved a European based telecom provider. It wasn’t until 2005, after a number of significant projects, that Infosys began to evolve a practice capability. When MRO was taken over by IBM in 2006, the relationship with and capabilities involving IBM technology expanded.

In Gopi’s travels, many clients and prospects ask him why is asset management included under the SCM practice umbrella? His answer is that similar to a standard ERP application deployed in an asset-intensive company, if you were to theoretically add functions of financial and human resources management to today’s asset management technology such as IBM’s Maximo, you would have capabilities to manage many supply-chain and operational wide needs for asset, procurement and inventory management. There are aspects for mobility needs, safety stocks and other operational management process needs as well.  He indicated that Infosys supply chain consultants similarly have experience in SCM applications such as Sterling Commerce and JDA Software, which although different, are just as applicable to a successful Maximo implementation. Today, the practice has many business, functional and technical consultants working on upgrades, migrations or full deployments.

Gopi also believes that EAM applications are the most complex to master.  He explains that there are two consulting competencies to consider. The vertical industry uniqueness in business process enablement needs are very strong across different vertical industries. How EAM is deployed in asset intensive manufacturing is very different than utilities or retail based industry.  The processes are different, the asset types are similarly different with different requirements for supporting business process requirements such as mobility.  Secondly, the consultant needs to have depth in the three facets of EAM:

• Core MRO (maintenance, repair and overhaul), as it applies to capital asset management.
• Facilities management which could include aspects of HVAC, mechanical, carpentry and electrical characteristics. A lot of banks and insurance companies utilize these characteristics.
• IT services management.  The reason IBM placed Maximo under the Tivoli management umbrella was the ability to provide for the effective management of all kinds of assets, including IT.  That differentiates Maximo from other applications that may only excel in one of the above areas. The IBM approach is to view any asset as an asset is an asset, and users should be able to remotely manage and account for that asset.

The buyer centers for each of these three facets are also different notes Gopi, and the consultant needs to be able to understand and translate buyer needs across all of these facets.

This concludes part one of our interview commentary.  In our part two posting, we will share thoughts from Gopi on the changing perspectives of supply chain and IT executives regarding current supply chain technology initiatives, so stay tuned.

In the mean time, please feel free to share in the Comments section, what you feel are your organization’s more difficult challenges related to smarter asset management.

Bob Ferrari

Full Disclosure: Infosys Technologies is one of other paid sponsors of the Supply Chain Matters blog.

There was a rather dramatic but not unexpected announcement today concerning supply chain technology.  IBM has entered into a definitive agreement to acquire Sterling Commerce from its current corporate owner AT&T.  The deal, which is expected to close in the second half of 2010, calls for an all-cash transaction of $1.4 billion, and AT&T anticipates recording a one-time $750 million gain in the quarter in which the transaction closes. SBC Communications, which later became AT&T, originally acquired Sterling in 2000 at the near height of the B2B Internet era for $3.9 billion in stock.

Supply Chain Matters first take at this acquisition is a mixed one, and that is why we chose to utilize the word ‘dramatic’.  Sterling customers gain the deep pockets and reputation of IBM, one of top global IT providers.  But at the same time, certain flexibilities in the use and deployment of B2B integration components surrounding Sterling applications may become more proprietary over time as IBM introduces the complete array of WebSphere integration components.  Sterling integrators, particularly those with broader supply chain advisory services may also be impacted over time, since IBM has its own professional and industry focused business services teams.

Our most recent coverage of Sterling Commerce was a mere few weeks ago attending the Sterling Customer 2010 Customer Connection Conference.  In a summary impressions posting, I noted that thinking out of the box, a more leveraged use of supply chain technology will be rather important in navigating into this next post-recessionary era, and that Sterling and its partner network are listening and responding to customer needs for supply chain agility.  Today’s announcement can either accelerate or detract from that mission.

The history of Sterling Commerce is a rather interesting one and reflects a company built around acquisitions.  The genesis of the company comes from its original EDI and B2B transaction integration business.  Acquisitions of WMS and order fulfillment provider Yantra in 2005, and TMS provider Nistevo in 2006 were added, and as noted, the company has been operating as a subsidiary of AT&T for about ten years.  At its recent customer conference, Sterling announced new cloud computing options in support of its various multichannel order fulfillment applications, an announcement that will no doubt take on a more IBM focus.

IBM’s WebSphere group is the actual acquirer of Sterling.  In a written statement, Craig Haymen, General Manager of the WebSphere unit notes that this acquisition will give IBM new tools to help clients build more dynamic business networks and a more consistent customer experience across channels. IBM stands to gain the more than 18000 current Sterling customers, and as we noted in April, some of the most visible and prominent names within the retail industry.  Following the close, approximately 2500 Sterling employees will be integrated into the WebSphere organization.  Supply Chain Matters readers may also recall that this same IBM division had also acquired the former supply chain technology group of ILOG, providing business rules engine, multi-echelon inventory optimization and supply chain network design functionality of the former Logic-Tools.

Interesting enough, IBM was in the EDI business for many years but chose to divest of its EDI VAN service in 2004. EDI technology has changed somewhat since that time, but in the case of Sterling, IBM seems more interested in the order fulfillment and broader B2B integration application offerings provided by Sterling. An Analyst briefing document also notes that Sterling Commerce applications will augmented by WebSphere offerings, and assume an IBM brand within the first year thus making them available to the IBM global sales teams.

Recently at an annual investor conference, CEO Sam Palmisano outlined a bold plan for IBM to invest $20 billion in acquisitions over the next five years, along with a challenge to have half of the that company’s profit coming from software offerings.  It is rather interesting to note that the first salvo of this campaign involves supply chain and B2B connectivity.

 Bob Ferrari

IBM recently announced its Green Sigma Coalition, an industry alliance among technology oriented companies, which I believe should be applauded by our community. 

Charter members of this coalition are Johnson Controls, Honeywell Building Solutions, ABB, Eaton, Cisco Systems, Siemens Building Technologies Division, Schneider Electric and SAP, and each has indicated its willingness to work with IBM to integrate their products and services under the umbrella of a “Green Sigma” product offering. The program is further described as helping IBM Business Partners validate market and sell their offerings with an assurance that the product or service has been evaluated and demonstrated to reduce environmental impact based on customer use.

Green Sigma is an IBM approach that applies Lean Six Sigma principles and practices to energy, water, waste and GHG emissions throughout a company’s operations, which include transportation, manufacturing and distribution center operations that make-up a product’s value chain. A validation process calls for products and services to meet stringent criteria that address the reduction or use of resources such as energy, water or paper materials.  Submissions are to be reviewed by an IBM Energy and Environment Review Board.

IBM’s commitment to a sustainable supply chain includes its own internal operations.  As a founding member of the Electronic Industry Citizenship Coalition (EICC), the company accepts the EICC Code of Conduct as an equivalent and alternate to its existing Supplier Conduct Principles. IBM is also actively involved with two initiatives to analyze greenhouse gas emissions associated with its supply chain through its membership in the EICC and as a member of the Carbon Disclosure Project’s (CDP) Supply Chain Leadership Collaboration.

What I especially like is an approach that brings together real-time metering and monitoring with advanced analytics that can facilitate more-informed decisions regarding improved energy efficiencies and reduced environmental impact.

Well known and respected companies such as IBM, Hewlett Packard, and lately SAP continue to provide an active executive commitment toward more environmental sensitive products, and are now taking the lead in bringing together more environmentally sensitive technology from multiple companies. This can help in facilitating more green initiatives that involve many aspects of a company’s supply chain.  Surely other companies will follow in these efforts.  It just makes good business sense for both prospective customers as well as the companies themselves.

Bob Ferrari

IBM Global Services sponsored a recent research titled The Smarter Supply Chain of the Future- Global Chief Supply Chain Officer Study.  In my Part One post, I offered some of my reactions to the data reflecting how today’s global senior supply chain executives view their current challenges.  They included survey results that indicated that tremendous shifts in cost-related and other fundamental operational initiatives appear to be occurring faster than the many organizations can keep-up, which should be a rally call for tools that can overcome latency.  Supply chain risk management has dramatically risen in gaining executive attention, but these same executives sense a lack of consistent organizational approaches, or link to performance objectives.  Supply-chain wide visibility remains a top concern, but seems to be losing executive-level commitment because of frustrations with cross-organizational process obstacles or lack of firm management objectives.

Deeper within the detailed report the authors point out that the role of Chief Supply Chain Officer is emerging as a cross-line-of-business position reporting directly to the CEO.  That statement had better catch your attention since some years back it was IBM that was first to coin the term of Chief Information Officer (CIO) as a direct report to the CEO.  At first, there was some skepticism as to the viability of such a role, but look around today and the role and title of CIO is a cross-industry standard.

Chief Supply Chain Officer (SCCO) may well be a future role, but pay close attention to how the authors describe the required management skills.  “Since supply chain networks are rarely the responsibility of a single entity or decision maker, the Chief Supply Chain Officer will also need to be chief collaborator. He or she will need to be an expert at bringing together stakeholders and facilitating joint planning and risk mitigation”. The authors later go on to state: “Supply chain leaders must be capable of optimizing global networks of assets and talents….. must have an end-to-end understanding of the business, a broad view of external risks and the ability to manage holistically to produce optimal outcomes”. That to me is the conundrum, since most of the current responses in the SCCO survey (coomented on in the Part One post) reflect that while senior managers may have some of these competencies, they are clearly not exhibiting all of these skills.

What role in today’s global organizations comes closest to being able to fulfill these skills?  Is a CIO, who has had to balance internal and external objectives, foster collaboration among conflicting stakeholders, as well as mitigate internal and external risks?  Is it the senior strategic sourcing or procurement professional, who’s role is externally focused toward insuring supply, but may have not have complete exposure to internal stakeholder collaboration.  Similarly, is it the senior logistics or transportation leader?

Whats your view?  Which of these constituencies is on the faster track to CSSO?  I certainly have my own views but the notion of the blogsphere is to generate discussion.  Let’s see if we can get a constructive dialogue started.

Bob Ferrari

It seems that the biggest buzz this week is the just released research study titled The Smarter Supply Chain of the Future-Global Chief Supply Chain Officer Study which was sponsored by IBM Global Services.  You can download the executive summary at the following link, and download the full report with your registration. I’ll be providing my own reactions to this survey over a couple of posts.

The survey is somewhat unique in the fact that the authors indicate they spoke at length with 393 executives, located in 25 countries, spanning 29 different industries. Most surveys I’ve reviewed tend to be the shorter quantitative type, involving a limited set of participants, industry and geographic involvement.  Thus, this was a survey that peaked my interest, and should certainly peak yours as well.  Also, the comparison of the responses to 17 defined leading or top supply chains provides readers another interesting perspective in terms of benchmarking.

Not surprisingly, the top five concerns reported as significant for executive level supply chain leaders were noted as:

Supply chain visibility- 70 percent

Risk management- 60 percent

Cost containment- 58 percent

Increasing customer demands- 58 percent

Globalization- 43 percent

My initial reaction is that the five are inter-related.  Continuous cost pressures and need to increase revenues through access to emerging markets, has resulted in increased risks, and the need for more extended visibility.  Senior supply chain executives are, in essence,  starting to connect the dots.

Three survey trends further captured my interest, and should capture yours as well.

1. While supply chain executives rank cost containment as their number one responsibility to the business, executives find themselves reacting to whatever the cost issue of the day happens to be.  The last two years have been tumultuous for industry supply chains. Unprecedented changes in commodity and transportation costs, the suddenness of the impact from the global recession on inventories and cost, and the need to increase revenue and preserve cash challenge many of these executives.  “Shifts in costs and other operational fundamentals are happening so quickly that conventional supply chain strategies and design techniques can’t keep up.  New designs are outdated before executives can implement them” report the authors.  That should be a cause for concern for all of our community, and should be a rally call for more advanced tools.

2. Senior supply chain executives ranked risk management as their second largest challenge, but lack consensus of approach.  The authors point out that this was a subject often relegated to the office of the CFO, but mounting supply chain risks now has leaders on edge.  The fact that supply chain executives must now share in this responsibility is something I and others have been advocating for months.  I’ve been tracking surveys on this issue for over a year, and risk management identification and mitigation has escalated much further in executive level awareness than it was a mere year ago. More of interest, 69 percent of respondents indicated that their organizations monitor risk, but only 31 percent link performance and risk together.  I tend to believe that the 31 percent performance link is really far lower.  Yet, supply chain professionals indicate that they just can’t seem to get the attention of their executives about this subject.  The times are changing rather quickly

3. Despite being a top concern noted by 70 percent of these executives, supply chain visibility and the collaboration required to get information and make decisions is not attracting much attention in terms of activities and programs.  Yet, as I dug into some supporting detail data, a comparison of visibility type programs among the respondents vs. the designated top supply chains established measurable performance gaps. The abilities of the top supply chains to foster programs such as Customer VMI, CPFR, continuous replenishment and joint planning with suppliers is evident and measurable.  Perhaps these same executives are not grasping the overall tenets of these programs, or not willing to invest the overall commitment, time and resources. The technology tools supporting extended visibility and collaboration have been proven, but management practices seem to be lagging.

So what’s your view?  Does your organization track to these concerns? Are these objectives interrelated or stovepipes in your organization?

Bob Ferrari