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Happy Holidays

Posted by bob.ferrari Dec 20, 2011

I would like to extend to the entire Supply Chain Expert Community sincere best wishes from Supply Chain Matters for the upcoming holidays across the globe. This has been a rather challenging year for supply chain management professionals and many teams of individuals had to rise to task of highly dynamic markets and global supply chain disruption.  The holidays should bring a time for getting together with families to share peace and joy.

 

May you all experience a productive and rewarding New Year.

 

Rest-up and enjoy family, friends and warm friendship.

 

If you are need of a chuckle or two, you are welcomed to view and contribute to our original  2010 Holiday Wish List for Supply Chain Technology

 

It is our spoof on the endless use of technology acronyms.

 

Happy Holidays!

 

Bob Ferrari, Founder and Executive Editor

 

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 Chrysler-Fiat Continues its Journey Towards Synergistic Supply Chain and Manufacturing Vision and Strategy Execution.

 

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.

 

One of the cornerstones of the Supply Chain Matters blog is to track the history of specific supply chain related events involving industries and to help our readers connect the dots in term of strategy and results. In May 2009, we featured a commentary regarding Fiat Group and its unfolding strategy of opportunistic supply chain strategy, specifically its planned acquisition of Chrysler in the U.S..  At the time, this author was impressed with Fiat chairmen Sergio Marchionne and his strategy to make both companies global players in the industry.

 

As we approach the end of 2011, the story of Fiat and Chrysler is much more positive, with an even stronger potential.  We call readers attention to an article published in the December 19 edition of Time, Power Steering- How Chrysler’s Italian boss drives an American auto rival. (paid subscription required) Author Bill Saporito pens a very insightful look at Chrysler, where it was, and what it is becoming, and in particular, the noticeable leadership of its chairmen, Sergio Marchionne. Sergio has a knack for turning around dysfunctional automobile companies along with a keen understanding of operations and value-chain management.

 

The article points out that Fiat’s small-car prowess, engine technology and superior manufacturing capability was a perfect complement to Chrysler’s needs. Fiat which now owns 53.5 percent of Chrysler, has made its impact. Chrysler revenues were up 23 percent in Q3-2011 and could top $55 billion.  Operating profit could reach $5 billion vs. hemorrhaging $1 billion a month in 2009. In May, Chrysler transferred $5.9 billion to the U.S. treasury, paying off its bailout loan six years ahead of schedule.

 

The article goes on to expound on the unique leadership style of Mr. Marchionne, specifically his no-nonsense approach to management, his deep analytical abilities, and attention to the details of all aspects of the business, including manufacturing and value-chain.  He has thus far resized the company, flattened management layers, and overhauled the vehicle line-up in record time. Mr. Marchionne is a strong believer in elimination of management layers and practices promoting people buried in the ranks to higher levels of responsibility, giving such people all that they need to succeed and prove their potential. It is referred to as loose-tight management, a concept which many successful companies have practiced. At the same time, he also holds people accountable for definitive results and is not shy about pulling the plug when results are not forthcoming. The author notes that: “Marchionne has the Steve Jobs gift of absolute focus.” He gets into the details. He also does not choose to have his office within Chrysler’s former executive penthouse, opting instead to locate his office in the engineering department, a visual reinforcement that it is no longer business as usual.

 

As was noted in 2009, Marchionne has a vision that the surviving global automotive OEM’s will need to have sufficient volumes of production to support each of the major world markets, at least one million for each major product platform in order to drive required global production cost efficiency and sustained profitability.  This translates to a combined goal for producing 6 million vehicles among the Fiat and Chrysler brands, with today’s volumes at 4.2 million vehicles. Fiat has become a global leader in efficient, high-volume, robotized production of small displacement engines and there are plans to have a similar focus for V6 engines.  Fiat also excels in small diesel powered engines, and its production facility in Poland recently exceeded a production target of 4 million 1.3 litre, 16 valve MultiJet technology engines. Technology and world class manufacturing knowledge transfer is underway among both companies with a cultural premise that production workers, not engineers, own the quality control process.  A global manufacturing boss has been appointed to oversee both Chrysler and Fiat, and the article points out that Mr. Marchionne has been known to show up from time-to-time at warranty analysis and quality performance meetings. Chrysler itself has not been known to invest in advanced supply chain software technology for planning and business intelligence but that may perhaps change.

 

The first totally new vehicle of the combined Fiat-Chrysler collaboration will debut in 2012 with a C-class Dodge branded vehicle. It will be based on the Fiat platform of the Alfa Romeo Giulietta, adapted for U.S. market requirements. There is a further plan to invest $23 billion to develop new vehicles for Chrysler through 2014, a rather aggressive plan by U.S. automotive industry standards, and all vehicle can be adapted by Fiat for other global sales needs.

 

The Time article concludes with a very characteristic Marchionne quote: “People need to trust you that you’re going to pull them out and that they will follow you when you pull them out.  If they don’t get that comfort, they’re going to drop you. This is true of organizations.  It’s true of countries.

 

We would add that this quote represents a philosophy that is rather important for senior and team focused supply chain management in the coming year and beyond, namely the ability to lead, get into the details, provide people with the means and tools to accomplish their goals, and to foster consistent accountability. 

 

In our 2009 commentary, we closed with the statement that whether the combined force of Fiat and Chrysler was totally successful, we have the opportunity to observe a visionary company with a leader that truly understands the importance of a leveraged global value-chain and integrated supply chain execution.  Two years later, this case study continues to play out with positive potentials. 

 

Time will tell if this will become a definitive case study in vision and consistent execution in supply chain management but the scorecard thus far is rather positive.

 

Bob Ferrari

 

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

 

There is a developing story that should capture community reading interest because of its supply chain related learning.

 

Chevrolet Volt.jpg

 

One of the current day business news headlines concerns the General Motors developed Chevrolet Volt, the company’s premiere entry into the plug-in hybrid automobile market. The Volt has been highly touted as the future of automotive technology, and aggressive production, marketing and sales goals have been established for 2012. The vehicle currently comes with a rather pricey sticker price, namely $41,000, and GM believes that the innovative features of the futurist car will overcome price concerns.

 

After some months of initial sales, The National Highway Traffic Safety Administration (NHTSA) in its initial testing of the Volt has discovered instances of battery related fires.  Three NHTSA crash tests caused the car’s batteries to catch fire days or weeks after the test, a somewhat unusual occurrence.  While GM is still investigating root cause, suspicion points to a battery cooling system which may have been damaged as a result of the crashes. GM has been quick and proactive to respond to this situation, has placed retail sales on-hold pending further investigation and has offered concerned owners options for either a free loaner car or the opportunity to return the vehicle.  GM however indicates that it remains highly confident of the safety and ultimate consumer acceptance of the Volt, and on resolving the current issues.

 

There is also a broader supply chain voice perspective to this story, one from which senior executives and cross-functional supply chain teams may benefit.

 

In late August, Bloomberg BusinessWeek featured an article; General Motors CEO Dan Akerson is Not a Car Guy.  We had cited this article in a previous Supply Chain Matters commentary. The article itself reflects on GM’s newly appointed CEO, his lack of direct automotive industry experience, and more importantly his mission to change years of previous in-bred management culture at GM.  With the help of a hefty U.S. government financial subsidy and massive re-organization plan, GM is transforming itself to a leaner company.  Thousands of jobs have been shed and the survivors are being asked to be much more productive, agile and out-of-the-box thinkers. The article provides one management perspective quote from Akerson: “It’s not my role to make people comfortable. I don’t know what it was like five years ago, and really I don’t care. We are in a war.”

 

The article, however unintended, perhaps provides us another perspective relative to the current Volt situation. It cites a December 2010 management meeting when the Volt product development team had developed its plans to initially build 45,000 Volts, and assumed that the plan was “baked and ready to go”. Akerson instead challenged the team to come up with a plan to build 120,000 units, under the assumption that someone informed him (perhaps from sales and marketing) that a vehicle needs to sell at least 100,000 units to be successful.  Volt engineering and product development teams however were keenly aware that it took Toyota and its Prius model about seven years to hit the numbers that Akerson was requesting.  The other looming implication was that contracted suppliers would have to quickly nearly triple the volume of the vehicle’s high tech parts, especially its volume supply of lithium-ion batteries. 

 

While readers can take in the rest of the story, we jump ahead to note that the final decision was to set a build plan for 60,000 units, one-third more than the originally recommended plan, but half the Akerson unconstrained challenge plan of 120,000.

 

A recent Wall Street Journal article (paid subscription or free metered view) reflects on the current Volt situation before the fires.   The article also notes that supply was especially short through July, when only 550 of 2600 interested dealers had a Volt to show off to customers. Toward the article’s end, there are comments from GM legend and former Vice Chairman Bob Lutz, the originator of the Volt concept design.  Lutz notes that the car’s main problem is the high expectations it faces, and that this year’s build plan was far too ambitious and the ramp-up was just too slow. Mr. Lutz affirmed his belief in the success of the Volt and described its ultimate success in  baseball analogy  as a “bases-loaded home run “. While we certainly do not profess to know all of the facts and details surrounding the Volt’s product plans and can only speculate what is being written, there is some learning surrounding this evolving story.

 

The point of view of Supply Chain Matters is that CEO’s and senior management have every right to challenge the status quo and encourage innovative thinking.  That stated, there is also the notion that operational and supply chain experience provides a basis of some understanding of what may be realistic plans, given various realities of ramp-up planning, volume production and testing.  Readers may also recall that other hybrids such as the Prius have experienced other problems along the way, such as braking, engine stalling and software issues, which were all overcome. After all, this is new technology.

 

The most innovative design or coolest product can only succeed when all the links in the supply chain operate together, and, when appropriate, the voice and experience of supply chain should trump the needs for bravado.

 

Bob Ferrari

 

It is time to update our readers on Bombardier and its C-Series aircraft program. 

 

Our last Supply Chain Matters and Supply Chain Expert Community update was in October 2010. We noted that Bombardier was taking a huge strategic gamble on the supply chain deployment and market launch of the new C-Series aircraft scheduled for 2013.  The C-Series is a 100-150 single-aisle passenger aircraft that is the cornerstone of the company’s plan to compete head-on with the likes of Boeing’s 737 and the Airbus A380 for advanced, lightweight commercial aircraft that can deliver compelling fuel efficiencies for airlines. This market segment has dominated aerospace headlines throughout the year.

 

In 2011, airlines were compelled to begin to open their wallets and place large amounts of replacement orders for more fuel efficient, narrow aisle aircraft, and the Airbus Experiences a Spectacular Week of Landing Customer Orders- Lessons of Timing the Market and Value-Chain Collaboration, followed by the 737. At the recent Paris Air Show, Airbus garnered one of the highest order volume rates in its history through customer orders of the planned A380 Neo. Thus far, Bombardier, and its China based rival COMAC, continue to compete for remaining customer orders.

 

In an interview published in the Wall Street Journal on November 21 (paid subscription or free metered view), Bombardier CEO Pierre Beaudoin remained upbeat, indicating that he was not too worried about uptake in new orders for the C-Series.  Thus far, Bombardier has 133 firm orders, which is supposed to place the manufacturer on-track to its target to have 200 to 300 orders between first maiden flight and first delivery in 2013. Mr. Beaudoin’s statement in the interview indicates that he would rather have his company concentrate on delivering the plane on time while maintaining its stated profitability goals than moving to discounting list price at this point. Further he states that the aircraft manufacturer has turned down prices that it did not like, and that its main market is China where anywhere between 20 to 30 percent of the global fleet could eventually be located.

 

Our reaction to the interview was of course, slanted toward a supply chain lens.  As more and more airlines weigh in with the current high rate of firm orders, the aerospace supply chain as a whole becomes committed to long-term capacity, and especially to the two current key players, Airbus and Boeing. Some of Bombardier’s C Series suppliers also cater to these current dominants.

 

Recall that the C series also features an outsourced global supply chain for many of its major components, allowing Bombardier to concentrate solely on innovation, design and final assembly needs.  Major components such as fuselage wings and tail are sourced in China, Ireland, Italy, and other countries.  All of the major components are to be shipped to Bombardier’s final assembly facility outside Montreal’s Mirabel airport for final integration. While profitability is certainly a very important goal, some aspect of volume scale is required to justify overcoming fixed supply chain material and transportation costs. There has always been a debate as to where the break-even point resides with this new outsourced major component and final assembly integration model. A review of Boeing’s 787 Dreamliner’s primarily outsourced supply chain provides ample evidence to this debate.

 

The second aspect for consideration is the stated goal competing for China’s aircraft business.  Aerospace is one of the key strategic growth industries identified by China’s political leaders in the current five year economic plan. In our November Supply Chain Matters commentary, China Takes Aim at Aerospace, we observed that China based, state-owned aerospace manufacturer COMAC has embarked on its own program of innovation and cost competitiveness for narrow aisle aircraft, and also features a C Series program. (Coincidental, of-course)  In order to insure strategic options are covered, major component aerospace suppliers such as General Electric and United Technologies have jumped-in with strategic development and relationship programs with COMAC and its other China based supplier partners. COMAC has already garnered orders from several of China’s state-owned airlines because of its unique role for contributing to China’s strategic plan for competiveness in aerospace, and continues its declaration that it will provide a compelling alternative offering for the global market.

 

Bombardier currently faces difficult headwinds with its C Series program, not all of which from its doing.  Aerospace industry events have been dramatic and far-reaching in 2011, and the industry is in both an enviable, and yet challenging situation.  Order volumes have been robust, but supply chains remain even more stressed to deliver capability and commitments for the next 5-10 years. The Bombardier C Series aircraft needs to find its place in this challenging environment, especially while customer buying motivations currently remain biased toward staying competitive in future aircraft operating efficiencies.

 

A highly uncertain global financial climate and industry that has supplier capacity increasingly being committed and internal dynamics within China’s airline operators may alter the widow of opportunity for Bombardier. 

 

We wish Bombardier well and trust we can look forward to the inaugural flight of the C-Series.

 

Bob Ferrari

This is a brief update to our Supply Chain Matters and Expert Community commentary earlier in the week regarding aerospace supply chains remaining stressed, and specifically Airbus’s recently announced setback on its lighter weight and more fuel efficient multi-aisle aircraft, the A350.

 

In an interview which was published in the November 18 printed edition of the Financial Times, (paid subscription or free metered view) Louis Gallois, the chief executive of Airbus’s holding company EADS, expressed his personal apology for the announced delay of the A350. He noted that Airbus made the decision to delay the introduction from late 2013, to the first half of 2014, because “we have to bring mature components to the assembly line and to get mature components we need a bit more time.” The Times reports that Airbus concluded that certain supplier components were not of acceptable quality and it was necessary to “stop and fix” the program.

 

The FT interview coincided with Mr. Gallois’s attendance at the Dubai Air Show event, along with all other major manufacturers..  The big headline of that event has been the announcement from Dubai based airline Emirates of the single largest commercial aircraft order, ever.  The airline ordered 50 of rival Boeing’s 777-300 long range aircraft at an estimated list price book value of $18 billion, with an option for an additional 10 aircraft. Deliveries are planned to begin in 2015. A separate FT published article quotes an aerospace industry analyst as noting that Emirates selected the 777-300 because of the announced delay of the rival Airbus A350-1000, where planned first delivery has slipped from 2015 to 2017.

 

The European focused headline from the show was the perceived public humiliation incurred by Akbar Al Baker, the CEO of Qatar Airways, directed at Airbus, also reflecting on the delay. Qatar is the designated launch customer of the A350.  According to a separate FT article, Qatar accused Airbus of “still learning how to make airplanes.”

 

Tough words indeed, coming from your launch customer.

 

But reports indicate that Qatar, after some last minute negotiation with Airbus senior management, later unveiled an order for 55 aircraft at list value of $6.4 billion, with a provision that Qatar would be the designated launch customer of the highly popular and new to arrive A380 neo aircraft. That obviously equates to maximum leverage of customer power and bargaining chips.  It’s like the analogy of the enterprise software account manager who makes the largest sale of the year on the last calendar day of quarter or fiscal year-end, with a healthy discount and all sorts of added perks for the customer.

 

To our earlier commentaries, airline customers, especially the newly emerging and more powerful global high growth carriers, are aggressively augmenting long-term lift capacity and are highly sensitive to aircraft delivery windows. They also practice high energy, savvy negotiation skills that reflect their current presence as aerospace industry disruptors.

 

Supply Chain Matters offers two follow-up observations, post Dubai Air Show.

 

First, we believe that Airbus should be praised and not chided for its latest actions.  Citing lessons learned from previous public delays of the A380 super jumbo jet and perhaps unstated, Boeing’s current three year delay status with the 787 Dreamliner, Airbus felt it was far more prudent to fix potential supplier quality problems now, rather than later, when the stakes are higher. A public apology coming from the CEO of any company is a bold statement of acknowledgement and commitment to accountability.

 

Second, airline customers have been patient regarding numerous setback announcements, perhaps leaving their gripes behind closed doors. We get the strong sense, however, that this will change during 2012 and beyond.

 

It seems that every very passing week brings fresh reminders of added stress in aerospace supply chains. The transfer of supply chain learning and a renewed emphasis on agility, risk avoidance and operational excellence are now new table takes for all aerospace value-chain participants.

 

Bob Ferrari

 

Supply Chain Matters has noted in previous commentaries that Aerospace supply chains are now under stress. Many factors have led up to this condition. A significant recent uptick in airline customer orders for new and more fuel efficient aircraft is locking-up industry delivery capacity for many years to come. Increased outsourcing of major components to suppliers has precipitated significant program setbacks with major OEM’s Airbus and Boeing both struggling with aircraft programs that have experienced multiple year delays for customers. Boeing’s latest Q3 earnings report provided a specific backdrop to the highly visible 787 Dreamliner program, which just entered operational service, but remains three years overdue in production and customer delivery fulfillment of over 800 aircraft.  Customers and suppliers now seek financial consideration for these delays while Boeing makes plans for a serious supply chain ramp-up in production and final assembly of 787’s.

 

But alas, Boeing is not the only OEM dealing with setbacks.  Last week, EADS, the parent for Airbus, announced its second delay associated with the new A350 passenger aircraft. Initial delivery will delayed by up to six months because of supplier issues, pushing the time window into 2014. EADS also incurred a 200 million ($271 million)direct charge as an immediate result of this delay. The A350 is made with more lightweight composite materials and is the Airbus competitive alternative to Boeing’s 787.

 

An article published last week in the Financial Times (paid subscription or free metered view) indicates that this latest Airbus delay was attributed to suppliers being late with planned delivery of key components. Of more concern, Airbus warned that some suppliers were struggling to renew bank loans in the midst of the current Eurozone debt crisis, and there are signs of a new credit availability crunch for European small and mid-range manufacturers. The article reports that EADS has started giving financial support to some subcontractors, and has had to acquire a German supplier, PFW Aerospace. At the height of Boeing’s issues with the 787, it was also forced to acquire some key suppliers.

 

In a mid-October commentary, Supply Chain Matters noted that that senior supply chain executives should be contemplating scenario plans and contingencies concerning the ongoing Eurozone crisis and its potential impact on global supply chain processes.  One of the outlined areas was the availability of credit to finance ongoing inventory and working capital needs.  A worsening of bank fragility or outright bank or country specific financial failures could cause an additional credit crisis to cascade across industry supply chains.  The latest Airbus announcement is evidence of this growing risk.  We suspect Boeing and other OEM’s are not immune since each has key suppliers located in Europe.

 

Within the aerospace industry there exists a paradox. On the one hand, order volumes and backlog that stretch well into the next five years and beyond provide the most enviable situation for any industry in the current global economy.  Airbus alone now has an order book rate above 500 billion. Any company or industry would celebrate at having such a situation. On the other hand, supply chain process and program deficiencies, incidents of supply chain risk, and now the potential of financial crisis, are all compounding the ability to deliver the end product to customers in a timely fashion. This should be an industry humming on all engines, but success comes with a burden.

 

For aerospace supply chains, continuous scenario and contingency planning coupled with proactive response management may well be the S&OP agenda for many, many months to come.

 

Bob Ferrari

 

The ongoing devastating monsoon floods that continue to impact Thailand will once again demonstrate the response management capabilities among high tech electronics and automotive supply chain teams.  The word “agility” is often an overused term in the context of supply chain processes, but in the case of the unfolding supply chain disruption, it will have significant meaning.

 

First and foremost, our hearts go out to people of Thailand.  The floods have now claimed over 500 lives, most from drowning, and countless thousands continue to endure the ongoing effects.  Weather forecasts indicate that the heavy rains, which began in July, will continue through the end of the year and we hope that the rains end sooner than that.

 

As with the March massive earthquake and tsunami that struck northern Japan, the cascading global-wide effects are still unfolding across multiple tiers of supply chains.  Flooding in the country has forced the closure of more than 1000 factories.  Thailand itself represents a significant vulnerability for hard disk drive (HDD) and Japanese automotive component production sourcing.  Estimates are that the region represents 70 percent of global HDD production. Western Digital, the global leader in HDD obtains 60 percent of its inventory from its factories in Thailand and the company has already indicated that it will ship less than half of planned supply for the remainder of 2011. Japan’s Nidec Corp., a major supplier of precision disk drive motors had the majority of its production capacity impacted, and news reports point to production workers ferrying available undamaged inventory on boats in an attempt to move the motors out of flood prone areas. Industry observers warn of an outright severe shortage by Q1 of 2012, if alternative production is not found. Unlike what occurred in Japan, HDD and component producers had minimal safety stocks to buffer a major disruption of supply.

 

A posting in Eweek cites industry participants noting that once the rain stops and access to flooded factories can be garnered, it would take 2-4 weeks to pump out flooded buildings and upwards of 60 days thereafter before production levels could resume. Some observers point to a 20 million unit shortfall in supply per month before normal supply levels recover, while more conservative estimates point to a 50 million HDD shortfall over the next two quarters.  Some have stated that the ongoing Thailand floods will have a greater impact on high tech and consumer electronics supply chains than that which occurred in Japan earlier in the year. That impact will surely cascade to global storage and PC manufacturers. The PC industry has already been in turmoil and this incident adds more business challenges. A New York Times blog posting (paid subscription or free metered view) further points to a pending impact for cloud computing and infrastructure providers further up the stream, who rely on continued acquisition of HDD hardware to support the explosion of cloud and data storage needs. 

 

For automotive supply chains, particularly those of certain Japan based manufacturers, Thailand based factories represented considerable sourcing of electronic components, plastic and rubber parts.  Honda and Toyota are the most impacted thus far, and pending parts shortages have already led to production cutbacks at multiple final assembly production plants including Japan, North America, and other geographic regions.  According to a Bloomberg Businessweek article, Honda has been especially hard hit with its two Thailand final assembly plants being totally submerged since October 6. Toyota estimates that since October 10, the floods have already reduced its Thailand based auto output by 69,000 vehicles. Jim Fulcher has provided a Supply Chain Expert Community posting that elaborates further on the cascading impacts for automotive supply chains.

 

Business and industry media this week has rightfully raised questions as to how these recent “black swan” or unprecedented natural disaster events have exposed vulnerabilities among industry supply chains. Has the quest for lowest cost production and hyper lean supply chains overridden and exposed vulnerability to significant business risk?

 

While many in the community can weigh in on that discussion, the immediate crisis at hand is once again, the testing of supply chain response management capabilities among those high tech and automotive companies currently impacted, and those that will be impacted.  After all, would an executive S&OP process ever consider the reality of mid double digit interruptions in critical supply or extraordinary supply price hikes caused from that shortage?  The answer is no!

 

However, during the Japan crisis, some companies such as Nissan, Cisco and Jabil demonstrated that once the disruption occurred, they had the ability to quickly assess overall supply and revenue impacts from multiple layers of their value-chains, and had the response scenario capabilities defined to either re-route supply from alternative sources, allocate limited production to key customers and distributors, specify and qualify alternative parts, or call on existing suppliers to help buffer impacts.  Even the supply chain teams of Honda and Toyota, that were the most impacted, eventually found ways to analyze impact areas and overcome disruption beyond original expectations.

 

Supply chain teams need to address two looming and significant cross-functional challenges in the days to come.  The first is re-visiting business and supply chain planning capabilities in light of the reality that major disruption, either internal or external related, is a given.  The ability to have scenario plans in-place along with the abilities to quickly assess and proactively respond to disruption are new table stakes. The second and longer-term challenge is a complete re-visit of component and finished-goods sourcing strategies in the light of what both the Japan, and now Thailand disasters have uncovered.  There can be no significant vulnerability to required supply streams, and every major geographic region requires an identified and well-understood business and supply continuity plan.

 

Bob Ferrari

 

Business media is now sensing product demand trends that many supply chain demand planning teams have already sensed- that demand across various tiers of global supply chains is slumping further. An ongoing lack of confidence and uncertainty that has been resonating across consumer-facing businesses is cascading into various tiers of industry value-chains. Many large global manufacturers have invested on a large scale in the growth of emerging markets, in many cases having well over half of total revenues emulating from these regions. The open question is the now whether demand from the emerging market economies is now shifting more toward the negative magnitude and whether the manufacturing economies of the U.S. and Europe have already slid into recession.

 

Last week, the Financial Times noted that two of the largest manufacturers, Cummins and 3M have cut their full-year outlooks, warning of declining demand in both the developed world and emerging markets.  Cummins cited a sharp drop in product demand from emerging markets, and speculated that the U.S. and much of Europe may already be at recessionary levels.

 

This weekend, the Wall Street Journal featured a headline article noting that global appliance sales have tumbled, with both U.S. based Whirlpool and European based Electrolux feeling the effects of continued eroding of consumer confidence with reluctance to spend on big ticket items. Buying activity has been limited to pure replacement of broken, non-repairable appliances.  Whirlpool is moving ahead with a major restructuring plan that involves consolidation of existing U.S. and North American production facilities and reductions in staffing.

 

In the chemicals and basic materials sector, BASF recently reported continued revenue and earnings growth, but also indicated that its customers are planning more cautiously, are reducing inventories, and have partially delayed orders in expectation of falling prices.  Dow Chemical reported robust revenues and earnings driven by a record 20 percent sales growth from emerging economies but once again pointed to soft demand in the U.S. and Europe. Dow chairmen/CEO Andrew Liveris noted: “The new reality is that the world is operating as a two-speed global economy…with the developing world strong, and the developed regions showing slow-to-no growth.”

 

The largest global semiconductor foundry provider TSMC reported a 4.5 percent decline in Q3 revenues over the previous quarter, and noted that the outlook for global economic conditions continues to weaken and is reflected in the lack of strength in Q4 wafer demand. The only exception was continued robust growth in communication related chips destined for smartphone markets.

 

Another, perhaps more troubling aspect of weakening demand stems from two ongoing events.  The first is the continued financial sovereign debt crisis, which despite last week’s more optimistic announcements, could permeate the economic climate for many more months to come.  The U>S. politic climate has also turned more pessimistic with no defined policy to address widespread unemployment and lack of substantial growth.

 

The other is the continued shocks and supply chain disruptions to important growth-oriented value-chains such as automotive, high tech, alternative energy and consumer electronics.  The latest and ongoing shocks are the consequences of the devastating floods impacting Thailand, which will cascade across other supply chain segments, and the likely continuance of severe weather and natural disaster events over the coming winter months.

 

For supply chain management professionals, the orientation must continue to be focused on agility and responsiveness to whatever changes may occur in the coming months, while insuring the strategic agility is maintained in upside/downside capacity, and critical inventory investments are maintained for components of high business disruption risk. Demand planning cannot stem just from past history or casual forecasting, but rather a sensing of current and planned product across all tiers of the industry value-chain. Scenario based planning is again the best prescription for assessing impacts to resources and capacity.

 

Finally, the incidents of Japan and Thailand have once again brought home the reality that surgical, risk-focused inventory planning and management trump across the board inventory cuts.

 

How is your supply chain organization navigating in the current environment?

 

Bob Ferrari

 

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

The following commentary includes Supply Chain Matters blog coverage of the 2011 Kinexions conference held this week.  We are also making this coverage available to the Supply Chain Expert Community.

 

This is our fifth and final posting concerning the Kinaxis Kinexions 2011 conference held last week in Phoenix. Readers can review previous commentaries by clicking on the following links:

 

Dispatch One

 

Dispatch Two

 

Dispatch Three

 

Dispatch Four

 

The persona of Kinaxis events frequently includes three consistent themes, Learn-Laugh-Share, and Kinexions 2011 did not disappoint in terms of an enjoyable experience. We genuinely like to attend Kinaxis events. Attendees once again were treated to the humor of Bill Dubois and the Late Late Show format of speaker interaction. The presentations and conference content were all very informative and the customer appreciation event was a lot of fun. Congratulations to Kirsten Watson and to all of the Kinaxis conference planning team for conducting a great conference.

 

Besides the usual complement of enthusiastic customers, the headline for Kinexions 2011 was the announcement that the company’s core product will be renamed Kinaxis RapidResponse Control Tower. The implication of this announcement is that the existing RapidResponse functionality of supply chain planning and response management along with S&OP process support will be expanded into areas of profitability analysis, workforce and sales force optimization. The concept of supply chain control towers coupled to more predictive analytics is gaining lots of interest in complex, highly outsourced supply chains such as the high tech and consumer electronics industry, and no doubt, Kinaxis management wanted to steer the functionality of RapidResponse toward supporting these needs. One of the thoughts we “tweeted” during the conference is our belief that customer needs and technology developments are aligning toward a new era of supply chain predictive analytics.

 

No doubt, Kinaxis wanted to gain an upper hand in being identified with offering supply chain control tower process support, but more important, to be recognized as the single supply chain decision platform that can best assimilate all supply chain related decision-support information. Kinaxis is currently working with four other development customers on various aspects of deployment, and it will be important to monitor how these deployments impact business results over time. 

 

It will be interesting to also watch one other provider of control tower functionality that Supply Chain Matters has noted. business process management (BPM) provider Progress Software, who has developed a control tower type application to support supply chain process execution and visibility. 

 

An obvious open question remains as to whether prospects and customers will embrace a “cloud” deployment of this functionality, given the mission-critical and security sensitive nature of global supply chain related information. While not a lot of cloud deployment information was openly shared during the conference, we suspect that Kinaxis management will continue to provide flexibility in customer deployment options. Our hallway conversations with some select Kinaxis customers noted some concerns in gaining access to non-core supply chain information sources such as financial planning, product management and CRM. The implication is that Kinaxis sales teams will have to target more education to the IT audiences of prospects.

 

Supply Chain Matters often looks forward to hearing the customer presentations delivered at Kinexions, as well as the hallway conversations. The primary reason is that the Kinaxis customer base represents many tiers of global supply chains, from the most innovative OEM’s and product innovators such as Amgen, Cisco, and others, to large-scale contract manufacturers and mid-market companies. You often find that the mid and lower tier supply chain players that have to manage single-digit gross margins are often the most innovative in finding methods to innovate planning, response and customer service process needs. These players are often tasked by larger, more dominant supply chain partners to provide broader visibility and more responsive response to changing business needs, and as Jabil astutely pointed out, they must also be able to out maneuver large OEM’s in terms of periods of short supply or supply chain disruptive events. 

 

Make no mistake, innovation occurs at all levels of global supply chains.

 

As we noted in our detailed commentary, the Kinaxis team also decided to invite a broader group of well recognized industry analysts, systems integrators and bloggers to this year’s conference in order to broaden the visibility of the company.  Kinaxis is a privately owned company and this overt step to broaden the company’s visibility in the market may be a prelude to other options down the road, perhaps taking the company public.

 

The influencer track provided a great opportunity for invited guests to gain a broader understanding of RapidResponse capabilities, including its current scalability among customer deployments.  Some scalability numbers shared were 20 million plus input records processed per second and 20,000 planned orders or 300,000 dependent demands processed per second in MRP calculations. We have noted in past commentaries that this application is unique in that it spans well beyond just supply chain planning utilization support and includes aspects of supply-chain wide visibility, S&OP process support, and other uses.  It is not uncommon to hear that some RapidResponse customers have end-user counts in the hundreds and thousands. A persistent layer of broad-based supply chain planning information, business scenario related data modeling, and most importantly, the business rules surrounding the data are all housed within the RapidResponse engine. This lends itself to a viable interactive decision-support platform for planning and managing the supply chain. It is no surprise that many of Kinaxis’s newest customers have been attracted by support for their respective S&OP and other broad based decision oriented processes. 

 

It was also rather important for Kinaxis management to clarify that RapidResponse does not exist without the existence of current backbone ERP or legacy systems. Rather, it enhances the need for supply chain and business planning decision-making without having to rip-out existing ERP systems or endure disruptive upgrading of applications and ERP vendor technology stacks.

 

In summary, we believe that Kinaxis remains as a technology provider with lots of momentum in the market, with the potential to provide further innovation in predictive analytics and supply-chain decision support. We believe that next year’s Kinexions may well provide more customer evidence of these evolving capabilities.

 

Bob Ferrari

 

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

 

 

 

The following commentary includes Supply Chain Matters blog coverage of the 2011 Kinexions conference held this week.  We are also making this coverage available to the Supply Chain Expert Community for those unable to attend.

 

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Dispatch One , Dispatch Two and Dispatch Three commentaries.

 

One of the new twists to this year’s Kinexions conference was an invitation for a broader group of industry analysts / partners / bloggers to not only partake of the conference but also attend a separate afternoon briefing session hosted by Kinaxis senior management and select customers. Seldom have I found software vendors willing to allow this grouping open access, and we compliment Kinaxis for this effort.  As COO John Sicard explained to me, the company has reached a point where it requires broader market awareness of its capabilities.

 

The influencer briefing kicked-off with CEO Doug Colbeth and COO John Sicard jointly providing a history of the company both in its fabric and its technology development. Emphasis was placed on the current demonstrated scalability of RapidResponse and an acknowledgement that the application works best when in coexistence of existing ERP or legacy systems among its customers. Nearly 60 percent of Kinaxis existing customer base operate with an SAP ERP backbone system.  Also explained was that when users interact with RapidResponse they declare their work area responsibility, which the application then utilizes to tailor respective planning views. The application not only manages and processes large amounts of data, but also the business rules that exist regarding that data.  In our view, that characterizes RapidResponse as akin to a business process management (BPM) type of application, which the application accomplishes in its S&OP functionality. We were also briefed on why the new announced re-naming to Kinaxis RapidResponse Supply Chain Control Tower was a natural extension of the company’s current growth plans.  Although there was a day one on-stage demo, not a lot of information was shared in this session regarding the detailed functionality that is being planned for this extension of RapidResponse capabilities.

 

The remainder of the influencer briefing session focused on interaction and presentations from invited customers. Elisabeth Kaszas, Director of Supply Chain for Amgen, provided an update on that company’s multi-year transformational efforts towards more responsive supply chain business processes. A benefit mentioned, that was rather difficult to do in the existing ERP backbone system,was the need to provide various product costing structures beyond just standard cost data. 

 

Chalam Kalahasti, Director of Global Planning and Fulfillment for Cisco Systems, described the unique challenges for planning a highly outsourced, globally extended supply chain.  Cisco has a very active S&OP process tied to RapidResponse, and a plan-of-record is created weekly. What is also noteworthy is that Cisco’s direction in more response-oriented planning has been motivated by previous incidents of supply chain disruption, such as earthquakes in Taiwan and China and the tsunami in northern Japan.  Cisco’s supply chain planning process is predicated on the ability to assess a definitive impact from an unplanned event and to provide different options and scenarios for responding to the exception.

 

Paul Lindblom, a member of the senior IT staff at Qualcomm QCT, provided a detailed perspective of how RapidResponse integrates with various other Qualcomm systems, along with the unique needs for planning in a combination push-pull, semiconductor supply chain.  Semiconductor wafers are long lead-time items subject to fab capacity considerations, and in the case of Qualcomm, multiple fabs are utilized to supply product.  Conversely, wafer packaging and testing are driven by customer buying and lead-time requirement cycles. Semiconductor planning needs which requires the unique ability to be supported for by-product and co-product production are supported in RapidResponse.

 

Due to time constraints, our final session featured Kerry Zuber of Kinaxis who provided an overview of the latest 10.0 release of RapidResponse, which includes a significant investment in demand management and product forecasting functionality.

 

Our briefing turned out to be a jam-packed session with a literal fire-hose of information.  Luckily, the customer appreciation event held on a reservation in the hills outside of Phoenix allowed ample opportunity to unwind and have great conversations with fellow attendees.

 

In a final posting, Supply Chain Matters will provide some final summary comments and observations regarding the Kinexions 2011 conference.

 

Bob Ferrari

 

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

 

 

 

The following commentary includes Supply Chain Matters blog coverage of the 2011 Kinexions conference held this week.  We are also making this coverage available to the Supply Chain Expert Community for those unable to attend.

 

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Dispatch One and Dispatch Two commentaries  which highlight day one activities.

 

Day two of Kinexions kicked off with an uncensored presentation from former Gartner Vice President and supply chain sage Kevin O’Marah, who now characterizes himself as an independent thinker.  Kevin reflected on the history of business automation and innovation, the important trends that productivity and talent have brought to businesses large and small and his belief that large ERP vendors are not delivering the innovation required to enable the next era of business and supply chain process capabilities. Kevin referenced multiple survey data that reinforces that demand volatility is driving executives and supply chains literally crazy, and that the community needs to get ahead of these new realities of business. Kevin described the new wave as being led by human intelligence but with technology leverage.  Kevin was also kind enough to acknowledge our working relationship in the earlier days of AMR Research and I sincerely thank Kevin for the mention.

 

Day two customer presentations featured Lalit Pandit, the CIO of D&M Holdings, and Joe McBeth, Vice President of Global Supply Chain at Jabil, and Erwin Hermans, Vice President of Supply Chain Solutions, Celestica.  One of the extraordinary aspects of attending a Kinexions conference is that the audience can get perspectives from the key players located throughout many tiers of today’s global supply chain. The D&M Holdings story is one of a mid-market company that needed to transform its supply chain utilizing a planning and response management application that users could quickly adopt and leverage.  It is also an example of how a cloud offering is an important option for mid-market companies.

 

While there were many nuggets of information shared by all of today’s presenters, my personal favorite was Jim McBeth, who vividly expressed what supply chain response management really means for companies, and especially contract manufacturers. Jim reflected on the recent March earthquake involving northern Japan, and more recently, the devastating floods impacting Thailand.  Each had supply chain disruption implications, and as Jim best described it, “the guy who has the best information, wins”. In 48 hours, Jabil was able to provide risk assessments and impact analysis for its OEM customers and key suppliers. Jim noted that most organizations, consultants and pundits speak to constantly keeping inventory down, when the reality may be keeping partners in balance and inventory right-sized to buffer identified areas of component risk. Jim also spoke to the reality of planning at the EMS level, the mid-tier of high tech value chains when the bigger fish OEM’s will get the prime priority for available inventory and capacity. The reality turns out to be the ability to plan with predictive data, to proactively collaborate with OEM’s along with the ability to predict what requirements will be before the bigger players do the same.

 

This afternoon’s closing event was an interactive influencer’s panel discussion moderated by Trevor Miles of Kinaxis, which I was invited to participate.  Fellow panelists were Andy Coldrick, one of the original thought leaders in S&OP, Russell Goodman, editor-in-chief, SupplyChainBrain, and Predrang (PJ) Jakavljievic of TEC.  Our goal was to wrap-up the conference by summarizing what we heard from customers and influencers, how we viewed the current state of  supply chain business process and technology innovation, and the notion of what is the state of collaboration in supply chains. A eureka moment came from an interchange of what comes next for S&OP?  Andy provided the perspective that as the originators of S&OP discussed what would be the next iterations, they also could not agree to terminology.  Andy’s charge to the audience, it doesn’t matter how you term the next iteration, what matters more is the objective your organization is seeking. Wise words from an original thought leader.

 

Supply Chain Matters will feature two additional Kinexions commentaries, one reflecting on this year’s briefing of key market influencers, and our conference summary impressions.

 

Bob Ferrari

 

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

 

 

 

The following commentary includes Supply Chain Matters blog coverage of the 2011 Kinexions conference held this week.  We are also making this coverage available to the Supply Chain Expert Community for those unable to attend.

 

This posting continues highlights of the Kinexions 2011 conference being held this week in Scottsdale Arizona.  Readers can also reference our prior Day One dispatch which highlighted remarks from Kinaxis President/CEO Doug Colbeth.

 

Day one featured a full agenda of customer and partner presentations along with the first ever briefing session for industry analysts, partners and key market influencers.  Customer presentations included Barnes and Noble, specifically the Nook Division, who’s implementation pioneers a an entirely new area of support for Kinaxis RapidResponse, namely the incorporation of actual point-of-sales demand data into overall supply chain planning and visibility.  When implemented, this effort has the potential to be the largest deployment in terms of scope and user count of RapidResponse to date.  Matthew Red, Vice President, Supply and Demand Planning, took leave of the upcoming planned go-live to share his organization’s goal to have product demand visibility among 13,000 point-of-sales outlets implemented to support the upcoming 2011 holiday buying season. The clear focus for B&N is to focus on “sell-through”, namely where customers are buying and how the supply chain should best respond to outlet level demand.  Even though the go-live will occur in the coming weeks, Matthew was able to share lessons learned, which identified access to data as the biggest challenge along with the need to scale-back on original project scope because of implementation timing needs.

 

Another customer presentation included a one by Lockheed Martin on managing its supply chain performance-based logistics need by utilization of RapidResponse.  The morning concluded with a presentation and demonstration of the new RapidResponse Control Tower from Kinaxis’s new vice-president of marketing, Kirk Munroe.  One of the highlights of this presentation was the articulation of the three design pillars for control tower functionality:

 

  • Supply and demand balancing to responsive and predictable customer fulfillment.
  • Planning, monitoring and responding only works if they are performed from one platform.
  • Business problems are complex, but your IT system need not be as complex.

 

The pillars are simply stated but the meanings are all too important.  We would hasten to add that business rule context is another very important consideration for any decision platform.

 

For Supply Chain Matters, and for others, one of the most talked about presentations during day one was delivered by McKinsey partner Paul Carbonneau. Readers should note that McKinsey’s reputation lies in consulting on C-level corporate strategy, direction and problem-solving, and to have a McKinsey partner talk to the importance of supply chain capabilities is a significant affirmation of how important global supply chain capabilities have become in C-level perspectives and concerns.  In that light, Paul communicated that the most expensive problems for McKinsey clients often are reflected in supply chain capabilities. Another significant reinforcement came from Paul’s comments relative to the March earthquake that occurred in Japan and the high-level awareness of the impacts of supply chain disruption and risk that has occurred across the C-suite right now.  My hallway conversations reinforced the fact that many manufacturers are re-visiting or initiating supply chain risk identification and mitigation.  Another important takeaway shared by Paul was that McKinsey is advising clients to re-visit previous thinking and specifically three myths surrounding business process and technology implementation efforts. These include:

 

  • Rather than linear rollouts of functional initiatives, pilot initiatives with the required cross-functional behaviors needed to sustain the new process.
  • Rather than people first, process next, and technology last, with the implication of multi-year technology implementation calendars, frame the initiative with a defined narrower scope but with all three components required in the new or changed business process.
  • Rather than getting the CEO on-board first, and risking a perceived colossal waste of time by that executive, bring C-level sponsorship on-board when definite pilot steps indicate meaningful benefits.

 

 

McKinsey further advocates starting with small ecosystem initiatives that include all required capabilities. Rather than spending enormous amounts of time getting organizational-wide consensus on a theoretical future end-state, launch “live-fire” exercises and iterative pilots that emulate what end-state could be. Accept the notion and provide the support mechanisms that anticipate frequent failures, with constant learning and forward movement.  Finally, once pilots have provided valid benefits, scale quickly with serious investments in talent, disciplines, and required tools.

 

A final message reflected on future supply chain challenges that lie ahead and the need for, what Paul described as ‘maestros’ of supply chain planning and decision-making.  These are people who can think cross-functionally and cross-organizationally, who know where the right information resides, and how to leverage that information into various predictive options and scenarios to which the supply chain needs to respond.

 

It was a rather thought-provoking presentation and well slotted to kickoff a supply chain response management oriented conference. Supply Chain Matters will provide additional context and commentary in our summary impressions of this year’s Kinexions.

 

In our subsequent dispatches, we will provide highlights of day two of Kinexions 2011, along with summary impressions, so stay tuned.

 

Bob Ferrari

 

Added Note: Kinaxis is one of other named sponsors of the Supply Chain Matters blog and the author provides services to this vendor.

 

The following commentary includes Supply Chain Matters blog coverage of the 2011 Kinexions conference held this week.  We are also making this coverage available to the Supply Chain Expert Community for those unable to attend.

 

Day one of the Kinexions 2011 kicked off with a full agenda of customer and partner presentations along with a significant announcement regarding the renaming and product direction for the Kinaxis software suite.  The conference kicked off with a rousing rock music video featuring many of the employees of Kinaxis welcoming this year’s attendees to the conference.  This author has attended many, many software conferences and this is the first time we have witnessed an opening video that actually features the people behind the scenes and thanks customers for their business.  It was great.

 

Doug Colbeth, Kinaxis President and CEO opened the conference by summarizing three themes that he has consistently heard from his many conversations with C-level executives. The first was represented by a person jumping out of a building, namely that in today’s volatile business environment, executives often have the feeling that they have jumped into a free-fall zone, waiting for the bungee cord that will stop the free fall. That bungee cord is often the supply chain responding to a significant event. The second major theme was the funnel cloud of demand volatility, with the implication that the need to effectively respond to constant market demand change is ever more important.  The third theme was visualized as a junkyard, representing a reflection of the current frustration among C-level executives of the lack of flexibility and business responsiveness to the current climate of business among the current IT applications landscape that populates many large firms today. That frustration is often reflected toward corporate ERP and legacy systems that were designed with far different assumptions related to the speed of business change, and the realities of highly outsourced and complex global supply chains.

 

Colbeth noted that these recent conversations have reflected the need by customers to have a unified information portal of the entire supply chain that could serve as a control point for more predictive decisions and actions. In many industry settings, the umbrella of supply chain business processes and related decision-making have broadened to include new product introduction, supplier management, risk management, sales, operations and financial planning as well as customer services management. The analogy of need is often drawn to having a control tower of the supply chain, a single point of command and control. Colbeth noted that rather than providing multiple applications and platforms, Kinaxis will continue to focus on a single platform that supports multiple supply chain related decision-support needs. He reaffirmed that Kinaxis will always have a built-in bias that the supply chain is the company’s center of the universe.  With that came the announcement that the company is renaming its product to Kinaxis RapidResponse Control Tower, which will continue to support broader supply chain business process decision-making needs. Kinaxis has four customers that are deploying various aspects of supply chain control, and over the course of the conference, customers, prospects and market influencers will be provided additional perspectives as to planned functionality.

 

Needless to state, this is a rather bold and dramatic direction for Kinaxis, one that promises to provide added dynamics to the supply chain technology provider landscape.

 

In our subsequent dispatches, we will provide some additional highlights of day one of Kinexions 2011, so stay tuned.

 

Bob Ferrari

 

Next week we are off to Scottsdale to attend the Kinaxis annual customer conference which is termed Kinexions.  Readers will note that Kinaxis has been one of our original Supply Chain Matters blog sponsors, and we are thrilled to have them as a partner.  More importantly, the Kinexions event brings together an impressive collection of multi-industry customers that are practicing supply chain response management across their planning and customer fulfillment business processes.  This year also features some new and interesting speakers and events.

 

In our summary impressions from last year's conference we observed the acknowledgement by those in high tech, pharmaceutical and other industry supply chains that events are moving at an incredible rapid rate of external and internal business change and the need for informed decision-making and business scenario analysis has become ever more apparent.  Likewise in supporting ongoing S&OP business processes.  We expect to hear more in these dimensions and possibly new product directions for Kinaxis in the coming months.

 

For community members unable to attend, stay tuned to our daily conference commentaries which will be featured on both Supply Chain Matters and the Supply Chain Expert Community.

 

Bob Ferrari