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The Times They Are A-Changin'

Come gather 'round people

Wherever you roam

And admit that the waters

Around you have grown

And accept it that soon

You'll be drenched to the bone

If your time to you

Is worth savin'

Then you better start swimmin'

Or you'll sink like a stone

For the times they are a-changing

Bob Dylan, 1963


Remember this song? I sang it with a tambourine in my hand in the '60s while swaying back and forth wearing frayed bell-bottom jeans, well-worn sandals and a flowered t-shirt. As a child of the '60s I joined the chorus to usher in change. Now in my sixties, I want to do it again. My focus in this post is to highlight changes in supply chain analytics, and what this can mean for your business.


Today, if you ask a supply chain leader about analytics their response is all about reporting. If you ask an IT professional about analytics, their response is also usually centered in reporting. The terms supply chain and analytics mean very different things to different constituents within the organization, but my point of view is that investment in analytics can make the difference in supply chain performance. I think that it will define leaders. I also believe supply chain analytics is defined too narrowly by most IT and supply chain professionals. We are at an inflection point: a tipping point of change that I think is significant.


When I use the term analytics, I am using it broadly to define technologies that can sense and drive an intelligent response. I see it as the systematic computational analysis of data. For me it is about much more than traditional statistics and reporting. In my world view, it includes processes like data discovery, test and learn, cognitive learning, visualization and listening through unstructured text mining. While we have built traditional technologies on relational databases and asked smart industrial engineering students to build algorithms using structured data to improve decisions, I think that these times are over. In Table 1, I chart what I see as important market shifts.

Table 1. The Changing World of Supply Chain Analytics

Current State vs. Evolving Technologies


Take time to think about the implications of these shifts. Write a list of the unstructured data that surrounds you that is not used --maps, weather, ratings/reviews, quality data, pictures, customer sentiment data, email, documents--and think of the power of combining structured and unstructured data to drive new outcomes. These impacts are profound.


My predictions:

1) Redefinition of the Market and Business Applications. Today's software taxonomies of SCM, CRM, PLM and SRM are dead. It is no longer about the automation of traditional silos within the organization. Instead, it is about powering digital business outside-in from the customer back. With the traditional software taxonomies in chaos, a new set of innovative vendors is emerging. I find this exciting.

Take-away: Throw away your traditional definitions of software. Define architectures outside-in, from the customer back, and don't limit your thinking using traditional paradigms.

2) Shift in Strategic Partners. In this new world, I think that SAP fails and then succeeds. (I think that this will take 4-5 years.) I also believe that Oracle and IBM fail and move into new business models.


Note that this week SAP announced a major shift in IT architecture; however, I think that it is too little, too late. SAP lacks business visionaries that can apply new technologies to business problems. Hasso and Bill have many of the right words in the launch of SAP Business Suite 4 SAP HANA, but the announcement is about the automation of a more traditional architecture that is dependent on ERP. Because of the gap in functionality, and the failure of the Ariba acquisition and SAP APO to deliver on the business promise for supply chain, supply chain leaders have lost patience.


Companies need solutions that work quickly and are easy to use. This new world is no longer about selling to the CIO. It is about cloud-based deployments to business leaders. I believe that the SAP, Oracle, and IBM of today will become legendary case studies taught in business schools in the books with those of Xerox, Kodak, and Polaroid. A portfolio of stories of failed innovation... I think that the stalwart IT providers from the last decade will struggle to make the shift to embrace digital business. I think the heart of digital business will be decision support cloud-based solutions to sense and adapt value networks. I think this is the new world of supply chain analytics.

Take-away: The belief in a strategic software partner is no longer viable. The traditional strategic vendors have not moved at the speed of technologies or the requirements of the business. The dream of effective decision support as an extension of ERP has failed. I predict in the next five years that Amazon will emerge in strategic importance and SAP will decrease in importance. Traditional maintenance costs are holding many companies hostage.

3) We Are Five Years Away from Supply Chains That Can Learn and Adapt While We Sleep.  Decision support technologies are changing. It is a combination of optimization and artificial intelligence. I feel that it will redefine master data management, supply chain visibility, and value chain workflows. It will also help us to close the gap on finding and training supply chain talent.

Take-away: Build a team to invest time in learning the new approaches outlined in Table 1. Spend time to learn about Hadoop, rules-based ontologies, and listening engines. The good news is that these technologies are small, iterative deployments that can easily be handled by cross-functional teams in the supply chain center of excellence. Set aside funds in the 2015 budget for line-of-business investment to test and trial new technologies. Build a team of naturally curious business leaders to harness insights from new approaches.


Want to know more? Join us for our big data and analytics webinar next week on February 12th at 11:00 a.m. to hear a panel of experts--Dave Shuman from Cloudera to discuss Hadoop and non-relational architectures; Steve De'Angelis from Enterra Solutions to discuss combinatorial math and cognitive learning; and Sean Riley from Software AG to speak about streaming data and platforms to support the Internet of Things. We also look forward to seeing you at the Supply Chain Insights Global Summit where we will showcase case studies to help companies internalize these shifts and power new results.


What do you think? I would love to hear from you.

Many companies talk about Supply Chain Excellence, but most leaders struggle to define it. As a goal, it is easier to say than to define. One supply chain leader, in a discussion last week, likened supply chain excellence to fitness. His reasoning? He saw fitness as a goal to work for, and he acknowledged that you can get fitter; but he believed that the state of fitness is elusive. His belief was that fitness as a goal that it is hard to reach. He felt that supply chain excellence was analogous. We agree.


We want to help. One of our goals is to capture and share the stories of supply chain leaders. Our first step was to define the leaders. How? In our work on the Supply Chains to Admire report, we tracked the progress of manufacturing, retailing and distribution companies for the period of 2006 to 2013 and 2009-2013. We then rated companies on their ability to manage and improve a portfolio of metrics: operating margin, inventory turns and Return on Invested Capital (ROIC). Based on the analysis of supply chain improvement (as measured by the Supply Chain Index) and supply chain performance, we ranked the supply chain leaders by industry. The results for the high tech and electronics industry is shown in Figure 1.

Figure 1. Performance of High Tech and Electronics Supply Chains for the Periods of 2006-2013 and 2009-2013



To make the Supply Chains to Admire list, a company had to score above average of their peer group for supply chain improvement as measured by the Index, and drive performance above average in the portfolio of metrics for operating margin, inventory turns and Return on Invested Capital (ROIC). While we often see companies performing well in one of the three metrics, we believe that supply chain excellence defined by ability to drive improvement on the portfolio—all three metrics together.


It is a story of when the going gets tough, the tough get going. In the period of 2006-2013, the high tech and electronics supply chains had more demand and supply volatility than process supply chains; yet, the number of companies making the cut for the Supply Chains to Admire list is higher in the high-tech industries than in the process industries of chemical, consumer packaged goods and food and beverage manufacturers. Apple, Cisco Systems, EMC and Seagate make the list in high tech and electronics while Intel and TSMC make the list in the semiconductor industries.

Figure 2. 2015 Supply Chains to Admire

supply chains to admire


To understand Seagate’s journey, we interviewed Joan  Motsinger, Vice President of Global Operations Strategy at Seagate Technology. Before taking her current position, she served in several capacities including Seagate’s product design and manufacturing facilities in the U.S. and Singapore. Specific responsibilities have included Product Modeling and Design, Component Process Engineering, Offshore Product and Subassembly Operations, Product Line Management, and Supply Chain Development and Operations. Joan holds Bachelors of Science degrees in Mathematics and Mathematics/Computer Science and is a graduate of Harvard’s Program for Senior Executives.



The questions are in bold and Joan’s answers are underneath each question:


How have you defined Supply Chain Excellence?

Our journey for supply chain excellence has changed and evolved over time. We have gone through many stages. When I think back, at the beginning of the decade, it was about designing the product for manufacturing. Prior to that, the priority has chasing lower cost labor in manufacturing and supply chain.  Those had a finite length of improvement.

First Phase: 2002-2006


The focus then shifted to matching demand and supply. We were an early adopter of the E2open technology and we experimented on building B2B networks early in 2004.  In our value chain, our supply chain is the buffer or the flex-point of the industry. Our first strategy was to align our suppliers by giving them visibility (through technology) to understand the demand signal directly and respond with JIT levels in support of our factories.  What emerged was a complex set of supply partners that together with Seagate could meet the changing and growing demand.

Second Phase: 2006-2014


In 2006, with increasing price and commodity pressures, to remain competitive, we needed to prioritized simplifying our supply chain through less SKUs, less complexity, and fewer components.  When you are complex, you must have a lot of parts to keep up with demand variation. As we focused on complexity reduction, we developed strong analytical approach to not only cost, but also cost-to-serve and landed cost. The focus on costs had three chapters:

  • The first chapter in our journey was reducing the cost of complexity.
  • The second chapter was reducing the cost of non-Bill of Material (BOM) costs.
  • The third chapter was reducing the cost of direct or bill of material costs.


In each chapter, we asked questions including:

  • What is the gross spend and cost per unit, the factors driving it?
  • What cost can just be eliminated?
  • What design specific costs exist?
  • What manufacturing demands are on cost (inspection, automation,....)?
  • What suppliers need help with cost (LEAN, labor, freight,...)?
  • What are competitive best practices?

Third Phase: 2013-future


Today, we go further, we focus on designing for total landed cost in balance with throughput and service level. This is more holistic and requires a higher level of modeling, analytics and cross-functional coordination. Our factors spans all those prior priorities, but expands into a higher level of analytics on design cost (simplicity, leverage, supplier input), manufacturing cost (sites, labor, automation,....) ,service costs (freight,...).


Our journey is also maturing. The goal is to become demand driven versus supply driven. In one of the first steps of becoming demand driven, you realize that you have to redesign the relationships with not only with suppliers, but also with customers. In 2009, we took the work that we did with E2open on suppliers and built customer networks to see channel sales and demand signals daily. We are on the journey. We are targeting much improved end-to-end planning in response to multiple demand sources. We are also working on Sales and Inventory Operations Planning (S&IOP). But, I must tell you, when it comes to the management of demand, our work on the demand signal is still evolving. Our current focus is moving through co-planning in the network with suppliers and deploying new forms of analytics.


Make no mistake, cost is always important to us, but we are striving for balance. We want to understand demand drivers. Historically, electricity, water and the BOM decisions drove the costs. Chasing low-cost labor made sense in 80s and 90s, but now we are understanding what makes up total landed costs matters and evaluating alternatives. It is a much more balanced approach.


Another challenge on the horizon is security. Supply chain security is emerging and growing in importance. Today, our customers want proof that we have high integrity products. Securing our inventory are emerging as risks and opportunities. And as we see, the new force shaping supply chain excellence is geopolitical risk and security.


Today, talent is at a premium. We want our supply chain professionals to bring a strong balance of knowledge relative to financials, international business, analytical knowhow, and a sense risk management.  Supply chain strategic thinkers are tougher to find.


What does the future look like?


When I think of the future, I think of a thin broad line across design, plan, source, make and deliver. Functional excellence needs to be a focus, but you need the power cross-functional execution excellence. We have also identified and mature the strength of a strategic team to focus end-to-end across functional boundaries and beyond the tactical. The value is in having  operations leadership team capable of strong tactical execution muscle and yet balanced by a longer term strategic set of decisions.


Ash clouds, tsunamis and floods create the need for a strong, flexible, sustainable supply chain.  We have come a long ways since the late 80's and our initial supply chain priorities.  We are balancing cost, market requirements, human talent and supplier relationships through a longer term lens while meeting the needs of our customers, investors each quarter.

What do you measure?


We strive toward operational excellence.  We measure:

  • Cost: Cost of Goods Sold, Opex, Capex
  • Quality:  Both integration quality and long-term reliability
  • Flexibility:  Utilization of Capacity
  • Delivery Metrics: Perfect order delivery although good to continually refine
  • Sustainability:  Doing the right action for our people, our planet (EICC, Lifecycle analysis of materials, no hazardous materials)
  • Technology:  Portfolio of technology bets to serve our  future demands


We define goals and keep them in place for a couple of years maturing the specific metric more m . The goal is to always measure and evolve. We have strong empirical processes, a strong base of analytics and management controls.  Our teams actively use some strong software tools spanning analytics, communications and optimization; accountability emerges through transparency and quantitative understanding of performance.

I know that you endorse principle-based leadership. How have you defined it?

Our tenets are customers, suppliers, cost, risk; and people. The focused metrics are cost, quality, delivery performance, flexibility, sustainability, and technology/strategy. I don’t know that this is much different than what other people do, but we have learned a lot about balance and alignment.

What lessons have you learned?

I can summarize this into three statements:

  1. Do the right thing (Solving Customers' problems with the right solutions in the storage industry)
  2. Do the thing right (Make vs. Buy, Cost, Quality/Reliability, Flexibility, ....)
  3. Do right for our investors, customers, employees (Electronic Industry Citizenship Coalition (EICC), Green Product/Process, talent development,....)


As a leader, it is important, to continuously look from the outside with a lens of continuous learning, continuous improvement. I am always listening to what other companies are doing. I try to continuously learn. As supply chain leaders, we have to get good at sensing demand and making the right decisions in advance of the order, in advance of the market. It requires an external sense of where you at to guide your value chain. This is my journey, my responsibility.


Thanks Joan. We love your insights! We look forward to hearing more on you and your story at the Supply Chain Insights Global Summit. We look forward to listening to your presentation. In our countdown to the event, we will be showcasing other stories of other supply chain leader's to Admire stories on this blog.  We expect 150 attendees and limit the number of technologists--consulting and software--to 15% of the total attendees. So, when you attend the Supply Chain Insights Global Summit, expect an innovative program and sharing by supply chain leaders without any worries of being accosted by technology vendors trying to sell you products. While other analyst events showcase analysts, this agenda is designed with you in mind.  We want to help you IMAGINE the Supply Chain of the Future.


We are also busy cooking up some great research. If you have a supply chain center of excellence or are thinking about starting one, consider participating in our supply chain center of excellence research and joining our roundtable discussion.