Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams

Most Significant Trends Impacting Supply
Chain and Manufacturing Teams
Bob Ferrari, Executive Editor- Supply Chain Matters Blog
Managing Director- The Ferrari Consulting Group LLC

Presented to: 2013 Prism User Group Meeting
October 20, 2013

1

Disruptive Mega-Trends
The Interplay of Significant
Mega-Trends Over the Next 5 Years
Industry and
Business
Environments
The Third IT
Platform &
Engineered
Systems

Industry
Supply Chain
Shifts
The Third
Industrial
Revolution
Talent
Management

Slide 2

Mega-Trend Convergence
Many Implications for Talent Management

Industry and
Business
Environments
The Third IT
Platform and
Engineered
Systems

Industry
Supply Chain
Shifts

The Third
Industrial
Revolution

Slide 3

Presentation Outline- Implication of
Convergence
Today’s industry and business environments
 The Third Platform of information, IT infrastructure
and engineered system changes
 Industry supply chain business process changes
 The Third Industrial Revolution and the digitization
of manufacturing
 The cited common denominator- impacts to talent
management
 Takeaways and recommendations
 Final thoughts


Copyright 2013 The Ferrari Consulting and Research Group LLC

Slide 4

Introduction
•

•

Multiple years of supply chain
business planning, operational and IT
systems implementation experience

•

Recognized supply chain strategic and
tactical thought leader, technology
market influencer

•
Top Ten SCM Blogs

Independent supply chain and B2B
industry analyst- previous leadership
roles at AMR Research and IDC

Consultant in supply chain strategy,
business process, and information
technology deployment

•

Founder and Executive Editor Supply
Chain Matters blog

Top 25 Most Influential
SCM Blogs

Logistics Degree.net


Slide 5

Industry Environments







More technology-empowered customers and
consumers (The Amazon Effect)
Growth and profitability from newer products,
bundled services and emerging markets
All forms of business conducted 24 by 7
Wall Street relentless focus on short-term
results
Increased awareness as to the critical
importance of the firm’s value-chain strategies
Unprecedented increase in significant risk
events with major business impacts


Slide 6

2010-2012: A Watershed for Disruptive Supply Chains

Earthquakes

Floods

Volcanos
Counterfeit
Products

Product Recalls

Major Supply
Disruptions
Major Accidents
Slide 7

Supply Impacts from 2011 Japan Disaster


Hitachi: 60 percent of global supply of airflow sensors
used in production of cars and trucks
 Renesas Electronics: 30 percent of global supply of
micro-controllers in automotive engines and consumer
electronics
 MGC: 85 percent global supply of BT resin used for
semiconductor substrate attachment
 Shin-Etsu: 50 percent of supply semiconductor silicon
substrate
 Kurreha Corp.: 70 percent of supply of PVDH
Polymer Resin used in production of Apple iPad2


Slide 8

Disaster Loses-2011
$35 Billion

$14 Billion

$8-11 Billion
Estimated Total Loses:
$350 Billion
Estimated Insurance Coverage: $108 Billion
Source: Wall Street Journal and Munich Re December 2011

Slide 9

Highlights Thus Far in 2013
• The ongoing European economic crisis
• The temporary grounding of all operational
Boeing 787 Dreamliner aircraft
• Port of Hong Kong dockworkers strike
• Threat of both a west coast and an east coast
dockworkers strike
• Appearance of horse meat in Europe’s food
supply chains
• Counterfeit cancer and other drugs
• More contaminated milk powder in China
• SK Hynix DRAM production facility fire
• Major fire at sugar warehouse complex
• Continued extraordinary storms and weather
patterns - $56 billion in loses in first half

Slide 10

The New Normal
Risk

Complexity

Unpredictability

Balancing Efficiency – Agility - Responsiveness

In a 7 Day by 24 Continuous Cycle
Slide 11

C-Suite Concerns and Objectives
“ As a group, CEO’s are investing more in customer insights than any
other functional area. They are seeking a better understanding of
individual customer needs and improved responsiveness”
2012 IBM Global Chief Executive Officer Study of over 1700 CEO’s Across 18 industries

Top CFO and Finance priorities over next 2-3 years:
73 percent cite lowering costs and increasing productivity
61 percent cite investing in analytics, planning, budgeting/forecasting
44 percent cite needs for upgrading organizational skills
2013 Accenture CFO Survey of 1250 Senior Finance Executives from Multiple Industries

Top Cited Concerns:
• Our inability to predict future performance in the new normal of
permanent market volatility (70 percent)
• Worried about the resilience of their supply chains (80 percent)
March 2012 Accenture Outlook: Preparing for the Unpredictable

Slide 12

Implications











Accepting risk as the norm with emphasis on:
Business Agility- Responsiveness-Resilience
Rethink historic-based business planning and
execution in favor of more predictive
capabilities to improve responsiveness
Deeper business intelligence
Constant innovation in multiple dimensions
Continue to do more with less
Continue to breakdown organizational silos
Revisit value-chain strategies in the light of
customer responsiveness, innovation and risk
(vs. cost)


Slide 13

Analytics and Big Data
An Analytically-Driven Process

“Big-Data” term often over-hyped and used to convey
all sorts of concepts
Organizations are literally drowning in data but lack
meaningful insights
Analytics is essentially how to process, analyze and
visualize vast arrays of information in more
innovative ways
Analytics-enabled decision-making in speed, quality
and proper context
Both a qualitative and quantitative mindset:













What do we know vs. what do we think we know

Requirement of augmented or new skills


Slide 14

The Third IT
Platform &
Engineered
Systems

Convergence in Information and IT
Infrastructure Technologies

Slide 15

IDC- The Third IT Platform
90 Percent of IT Industry Growth 2013 – 2020 by Investment in the 3rd Platform
Billions
of Users
and
Devices

3rd

Platform

Big Data / Analytics
Mobile Broadband
Cloud Services
Mobile Devices & Apps
Social Business

Hundreds
of Millions
of Users

Millions
of Users

Tens of
Thousands
of Apps

2nd Platform
The Internet Client/Server

PC

1st Platform
Mainframe

Millions of…
Apps
Services
Experiences
Content
Information

Thousands
of Apps

Terminal

Source: IDC Predictions 2013- Competing on the Third Platform
Slide 16

Hardware and Software Convergence= More
Engineered Systems




Software Defined
• Cloud
• Data Center
• Appliance
• Device



Applications define required service
level needed and expected
Virtual pools of CPU-MemoryServices modularized and ondemand- the new cloud utility model
New advances: in-memory database,
memory architected systems and
OLAP


Slide 17

Moore’s Law of Innovation Continues


Advances in more predictive analytics and data
visualization applications and tools
 Explosion of smarter mobile computing platforms
and the ability to leverage more real-time mobile data
 Incorporation of structured and unstructured data in
decision-support needs
 Advances in item tracking and sensor technologies
(application logic on a miniature chip)


Slide 18

Just Last Week

Demonstration of First Stand Alone
Sensor in Printed Electronics
Announced October 17, 2013 by
ThinFilm Associates ASA

Low power Smart Sensor Label built from printed
and organic electronics with potential application to:
• Assuring temperature-sensitive pharmaceutical
products are safe and effective while preventing
unnecessary destruction of usable products
• Instant insight on both shelf-life, temperature
and other status factors of perishable food
products

Slide 19

Engineered Systems and New Opportunities
Leverage Current Converging Forces of Advanced Technology
o Data attached to an application to de-coupled
streaming planning and execution data feeding
an information utility
o OLTP central data warehouse to in-memory,
highly engineered, OLAP “apps”
o Data aligned to business constraints, insights and
predictive decision-support capabilities
o More emphasis on data visualization / simulation
and planning scenario tools
o Augmenting existing IT investments with more
predictive and business intelligence capabilities
o Mobile and social based information and
applications addressing the mobile professional

Slide 20

Industry
Supply Chain
Shifts

Industry Supply Chain Business
Process Convergence

Slide 21

Supply Chain Business Process Evolution
Classic Era
Inside-Out Orientation
• APICS sequential MPSMRP planning processes
• Primarily push-driven

Supply
Chain
Business
Process

• Historic and transactional
based information flows
• Four walls focused
• Planning & execution
distinctly different
• Reporting/decisionmaking driven by historic
data
• Functional stovepipes

IT
Enablers

• Client-Server ERP
• Enterprise Data Warehouse

Transitional Era
Lean JIT Concepts
• Major emphasis on cost
reduction and control
• Outsourced production
and component supply
• Lean/JIT/Six Sigma /
continuous improvement
• Pull-driven supply chain
orientation
• Transition to demand
focused planning and
decision-making concepts
• Breaking down of
functional stovepipes
• ERP coupled to Specialty
Best-of-Breed Applications
• Collaborative Applications

Networked Era
Outside-In Orientation
• Demand drives the
networked supply chain
• Combination push-pull
supply chain network
• More dynamic business
cycles/events
• Planning and execution
cycles merge together
• Forward-looking
analytics and decisionmaking
• Connected / informed /
responsive network

• Business Intelligence
• In-memory analytics
• Cloud-based applications

22

Industry Supply Chains
Navigating Capabilities, Resources and Supply
Chain Response in the New Normal

Overcome Complexity – Respond to Constant Change
Exception Driven – Insure Resiliency
Slide 23

End-to-End Supply Chain
Plan

Plan
Deliver Source
Return

Suppliers’
Supplier

Return

Make Deliver

Source

Return

Return

Supplier
Internal or External

Make

Deliver
Return

Your Company

Plan
Source

Make Deliver

Source

Return

Return

Return

Customer
Internal or External

Customers
’
Customer

Physical, Information, and Financial Flow


24 24

Today’s Supply Chains
• Complex, global-based value-chains
• Segmented-Open-Closed-Vertically IntegratedOutsourced
• Servicing more demanding customers:
• Increased product complexity
• Technology-enabled online consumer
• Shorter product development cycles
• Multiple years of cost-cutting, lean and demanddriven initiatives
• Explosion in data- drowning in data – need for
smarter data

• Much broader umbrella of influence and
responsibilities associated with products and
services
25

Balancing Supply Chain Performance Objectives
Customer Service and Responsiveness
Top Line Revenue Growth

Perfect Order Fulfillment
Fill Rate

Return on Assets (ROA)

Efficiency
Supply Network Costs
Labor Productivity
Integrated Planning
and Execution

Asset Utilization
Cost Reduction, Productivity
and Profitability Growth

Facility Utilization
Outsourcing
Third-party service

Source: MIT Supply Chain 2020 Program, Adapted by Ferrari Research Group

A CSCO Perspective
Tom Linton, Chief Supply Chain Officer, Flextronics
Responsible for 121 global manufacturing sites and 10K people
Hundreds of OEM customers


His articulation for the supply chain winners of tomorrow:
 Speed Rules – Fast Wins
 Predictability becomes the competitive advantage
 Customer responsiveness becomes fundamental
 Supply chain ecosystems focus on balance for success
 End-to-end solutions create new value for customers


Slide 27

Implications Translated to CSCO Objectives





Align supply chain strategies to required product,
customer service and financial outcomes
Supply chain response and segmentation strategies
Global sourcing no longer one-dimensional
Invest in augmented capabilities:






Deeper supply chain wide visibility (vertical and horizontal)
Harnessing smarter data, process and business intelligence
Predicting events or possible outcomes via deeper analytics,
continuous planning, what-if and simulation based planning

Finding and retaining required talent


Slide 28

Advanced Technology Offers Enhanced Tools


The ability to extract insights at sophistication levels not
easily achieved in the past:
 From historic sequential to more predictive and near real-time
planning and fulfillment information insights
 Leverage advancements in in-memory computing, data
visualization to support simulation and what-if needs
 Mobile and social enabled applications to accommodate
virtual mobility, deeper collaboration and time-critical needs
 Analysis of both structured and unstructured data
 Broader horizontal and vertical visibility to physical,
operational and most optimal needs of the supply chain
 Relate external information and market conditions to
anticipated product demand or areas of potential risk


Slide 29

Analytics Defined- Tom Davenport

Optimization

“What’s the best that can happen?”

Predictive Modeling

“What will happen next?”

Randomized Testing

Predictive and
Prescriptive
Analytics

“What happens if we try this?”

Degree of
Intelligence Statistical Analysis

Alerts

“Why is this happening?”
“What actions are needed?”

Query / Drill Down

“What exactly is the problem?”

Ad Hoc Reports

“How many, how often, where?”

Standard Reports

“What happened?”

Source: Analytics At Work, Thomas H. Davenport, Babson College

Descriptive
Analytics
(the “what”)

Supply Chain Analytics- Davenport
Content Types
Demand
forecasting

Information
What will happen?
(Prediction /
Simulation)
What
happened?
(Reporting)

Insight
What’s the best
that can happen?
(Optimization)

Yield
management,
product mix,
scheduling,
routing
optimization

How and why
did it happen?
(Modeling)

Product quality,
delivery
performance, asset
utilization

Process
control,
bottleneck
analysis

Source: Analytics At Work, Thomas H. Davenport, Babson College, 2011
Slide 31

Analytics Within Supply Chain Processes


Deployed in supply chain process for
quite some time








Supply chain planning and optimization
Transportation scheduling and routing
Factory and production process scheduling
Multi-echelon inventory optimization/ network
design

New advances in information technology
now open opportunities and awareness


Slide 32

Example- Anticipate and Exploit

From Cable
Network to
Business of
Forecasting
Consumer
Behavior

The
Weather
Company

Source: Weather Channel Now Forecasts What You’ll Buy, The Wall Street Journal, August 14, 2013

Slide 33

Supply Chain Process Convergence


A re-look at sequential planning and execution
processes in favor of:








Converging planning with execution processes and shift the
focus toward response management
Augment planning with predictive analytics and shift
emphasis toward: predict – sense – intelligent response
More real-time sensing of the demand for products in
context to physical items, assets, resources, suppliers
True decision support fueled by embedded intelligence
Insights-Enabled
Execution

The Holy Grail of
Supply Chain


Slide 34

The Third
Industrial
Revolution

The Digitization of Manufacturing
Product and Service Convergence

Slide 35

The Third Industrial Revolution
Articulated by The Economist – April 2012
A Potential Revolution in Manufacturing

Online Collaborative Manufacturing Services

Slide 36

The Economist- The Third Industrial
Revolution
The digitisation of manufacturing will transform the ways goods are made
Leveraging
of Digitally
Connected
Devices

Large
factories and
leveraged
economies of
scale

Millions of
artisans
brought
together

Third Revolution
Sophisticated Software
New Materials

The Age of
Mass
Customization

Dexterous Robots
New Processes

Second Revolution
Early 20th Century- Henry Ford’s moving
assembly line

First Revolution

The Age of
Mass
Production

The Age of
Mechanization

Late 18th Century- Mechanization of
the Textile Industry

Source: The Economist magazine, April 21, 2012
Slide 37

Continued Technology Breakthroughs


Additive Manufacturing and 3D Printing techniques
 Faster and more sophisticated 3D based production
simulation (virtual reality)
 Next generation of smarter, cheaper, more
dexterous robots addressing human assembly
applications and needs
 Item level tracking, mobile computing and the
“Internet of Things”


Slide 38

Advanced or Substitute Materials


Lighter, Stronger, More Durable…








Steel or aluminum to carbon based fiber
Steel castings to lighter weight aluminum
Gorilla Glass to Sapphire
Ceramics in high temperature applications

Next Generation Technology Advancements




Nanoscale engineered compounds and components
Virus or bacteria based energy generation
Sustainably-focused compounds and materials derived
from recycled plastics or re-engineered waste systems


Slide 39

GE Invests in Industrial Internet
By next year, almost all new equipment made by General
Electric will include sensors and Big Data software
“The ideas of speed, of information velocity, is what will
differentiate the winners from the losers”

Slide 40

Resurgence of Social Collaborative Manufacturing



Communities or highly specialized
manufacturing clusters offering local and
global design and production services
 Online collaborative design and
manufacturing services firms

Slide 41

Consistently Identified Impact is Talent

Talent Management
Augmenting Skills Gap
Sourcing and Retention

Slide 42

Consider


43 Percent of Baby Boomers Will Retire in the Next
Five Years
 The talent management challenge has global wide
dimensions especially in emerging markets
 Next Year’s Average Bachelor’s Degree Candidates
were Born in 1990
 Have paralleled explosions in technology
 Always lived in a tech-based and gaming culture
 Experienced smaller-faster-better
 Communicate through social networks and buy
exclusively online

Slide 43

The Profound Gap in Manufacturing Productivity

Source: IDC Manufacturing Insights and Government Data
Slide 44

Various Skill Gaps Articulated


Supply Chain










End-to-end process knowledge- broad based functional and
business knowledge
Deep analytical and information analysis- complimented by a
qualitative mindset
Ability to build strong internal/external relationships
Comfortable in rapidly-changing ad-hoc environment
Constructively challenge the status-quo

Manufacturing (The above plus)




Advanced math, reading, writing, computer skills
Hands-on training and experience
Ability to manage face-to-face and distant relationships

Slide 45

Takeaways and
Recommendations

Slide 46

In Summary










Change is a given in today’s rapid clock speed of business
Global supply chains constantly challenged with complexity /
variability / volatility and risk
Teams drowning in data but lacking important insights
Senior management converging on need for improved business
responsiveness and more predictive decision-making
Business, technology and supply chain process convergence will
open new opportunities in more predictive capabilities
Manufacturing and services are converging as the best means
to remain globally competitive
Talent management has become the critical determinant and
challenge for desired new capabilities


Slide 47

Today’s Key Takeaways





Every organization needs to have a cohesive roadmap that
can leverage these converging mega-trends:
 Business and C-level Objectives
 Information Technology Convergence
 Industry Supply Chain Process Convergence
 Digitization & Convergence of Manufacturing with Services
Every individual needs to consider how these trends will
impact your personal and organizational team skills
More than ever, the planets are aligning and timing is right for
active management support for both of the above objectives.


Slide 48

Plan for Impact on Existing People and Process


Recognize the growing awareness of the
power of a predictive analytics driven process



Be cognizant that many of these new
capabilities are still evolving but will occur



Begin the re-skilling process individually and
within your teams



Encourage academic institutions, internal
training and other groups to develop
curriculum that provides students broader
analytical,, functional and business skills


Slide 49

Other Recommendations










The primary goal remains enhancing process capabilities;
secondary goal is to leverage new advances in IT
Supply chain and manufacturing leaders must consistently
foster strategic and collaborative relationships with internal /
external business, product management and supplier teams
Begin transformation in small, managed scope and expand
Tailor predictive analytics tools to support specified
opportunities based on business priorities
Include the change management and skills impacts in your
milestones. Consider centralization of capability
Critical to strive for high data quality and well understood
information taxonomy
Not a rip and replace of existing systems but rather an insertion
of augmented capability

Slide 50

Final Thoughts
Seize the opportunity for the alignment
of business, supply chain and IT
planets within the next five years
Even the most sophisticated products
and technology still require a human to
look out the windshield and make
exception-based decisions and required
course corrections


Slide 51

That’s a Wrap- Questions ?

Thank You
Contact Information: Bob Ferrari
Email: bferrari@supply-chain-matters.com
Twitter: @Bob_Ferrari

Web Site: http://www.theferrarigroup.com

Slide 52

Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams

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