Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams

1

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

Disruptive Mega-Trends

Slide 2

Industry and

Business

Environments

The Third IT

Platform &

Engineered

Systems

Industry

Supply Chain

Shifts

The Third

Industrial

Revolution

The Interplay of Significant

Mega-Trends Over the Next 5 Years

Talent

Management

Mega-Trend Convergence

Slide 3

Industry and

Business

Environments

The Third IT

Platform and

Engineered

Systems

Industry

Supply Chain

Shifts

The Third

Industrial

Revolution

Many Implications for Talent Management

Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 4

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 5

Introduction

• Independent supply chain and B2B

industry analyst- previous leadership

roles at AMR Research and IDC

• Multiple years of supply chain

business planning, operational and IT

systems implementation experience

• Recognized supply chain strategic and

tactical thought leader, technology

market influencer

• Consultant in supply chain strategy,

business process, and information

technology deployment

• Founder and Executive Editor Supply

Chain Matters blog

Top Ten SCM Blogs Top 25 Most Influential

SCM Blogs

Logistics Degree.net

Copyright 2013 The Ferrari Consulting and Research Group LLC

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

Slide 7

Earthquakes Floods Volcanos

Product Recalls

Counterfeit

Products

Major Supply

Disruptions

Major Accidents


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

Slide 9

$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

Highlights Thus Far in 2013

Slide 10

• 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

The New Normal

Slide 11

Risk Complexity Unpredictability

Balancing Efficiency – Agility - Responsiveness

In a 7 Day by 24 Continuous Cycle

C-Suite Concerns and Objectives

Slide 12

“ 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


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

Convergence in Information and IT

Infrastructure Technologies

Slide 15

The Third IT

Platform &

Engineered

Systems

IDC- The Third IT Platform

Slide 16

Millions

of Users

Thousands

of Apps 1st Platform

Mainframe Terminal

Source: IDC Predictions 2013- Competing on the Third Platform

Hundreds

of Millions

of Users

Tens of

Thousands

of Apps

2nd Platform

The Internet Client/Server PC

Billions

of Users

and

Devices

Millions of…

Apps

Services

Experiences

Content

Information

3rd Platform

Mobile Broadband

Mobile Devices & Apps

Big Data / Analytics

Cloud Services

Social Business

90 Percent of IT Industry Growth 2013 – 2020 by Investment in the 3rd Platform


Hardware and Software Convergence= More

Engineered Systems

Applications define required service

level needed and expected

Virtual pools of CPU-Memory-

Services modularized and on-

demand- the new cloud utility model

New advances: in-memory database,

memory architected systems and

OLAP

Slide 17

Software Defined

• Cloud

• Data Center

• Appliance

• Device


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

Slide 19

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


Engineered Systems and New Opportunities

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

Leverage Current Converging Forces of Advanced Technology

Industry Supply Chain Business

Process Convergence

Slide 21

Industry

Supply Chain

Shifts

22

Supply Chain Business Process Evolution

Supply

Chain

Business

Process

Classic Era

Inside-Out Orientation

Transitional Era

Lean JIT Concepts

Networked Era

Outside-In Orientation

• APICS sequential MPS-

MRP planning processes

• Primarily push-driven

• Historic and transactional

based information flows

• Four walls focused

• Planning & execution

distinctly different

• Reporting/decision-

making driven by historic

data

• Functional stovepipes

• Client-Server ERP

• Enterprise Data Warehouse

• 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 decision-

making

• Connected / informed /

responsive network

• 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

IT

Enablers

• Business Intelligence

• In-memory analytics

• Cloud-based applications

Industry Supply Chains

Slide 23

Navigating Capabilities, Resources and Supply

Chain Response in the New Normal

Overcome Complexity – Respond to Constant Change

Exception Driven – Insure Resiliency

Copyright 2013 The Ferrari Consulting and Research Group LLC 24

End-to-End Supply Chain

24

Supplier Customer Suppliers’

Supplier

Source

Internal or External Internal or External

Your Company

Return

Deliver Make Source

Return

Plan

Deliver

Return

Source

Return

Make Source

Return

Plan

Deliver

Return

Deliver Make

Plan

Return Return

Customers

’

Customer

Physical, Information, and Financial Flow

25

Today’s Supply Chains

• Complex, global-based value-chains

• Segmented-Open-Closed-Vertically Integrated-

Outsourced

• Servicing more demanding customers:

• Increased product complexity

• Technology-enabled online consumer

• Shorter product development cycles

• Multiple years of cost-cutting, lean and demand-

driven initiatives

• Explosion in data- drowning in data – need for

smarter data

• Much broader umbrella of influence and

responsibilities associated with products and

services

Balancing Supply Chain Performance Objectives

Customer Service and Responsiveness

Asset Utilization Efficiency

Perfect Order Fulfillment

Fill Rate

Facility Utilization

Outsourcing

Third-party service

Supply Network Costs

Labor Productivity

Integrated Planning

and Execution

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

Top Line Revenue Growth

Cost Reduction, Productivity

and Profitability Growth

Return on Assets (ROA)


A CSCO Perspective

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

Tom Linton, Chief Supply Chain Officer, Flextronics

Responsible for 121 global manufacturing sites and 10K people

Hundreds of OEM customers


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

Standard Reports

Ad Hoc Reports

Query / Drill Down

Alerts

Statistical Analysis

Randomized Testing

Predictive Modeling

Optimization “What’s the best that can happen?”

“What will happen next?”

“What happens if we try this?”

“Why is this happening?”

“What actions are needed?”

“What exactly is the problem?”

“How many, how often, where?”

“What happened?”

Predictive and

Prescriptive

Analytics

Descriptive

Analytics

(the “what”)

Degree of

Intelligence

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

Analytics Defined- Tom Davenport

Supply Chain Analytics- Davenport

Slide 31

What will happen?

(Prediction /

Simulation)

What’s the best

that can happen?

(Optimization)

What

happened?

(Reporting)

How and why

did it happen?

(Modeling)

Information Insight

Content Types Yield

management,

product mix,

scheduling,

routing

optimization

Process

control,

bottleneck

analysis

Product quality,

delivery

performance, asset

utilization

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

Demand

forecasting


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

Slide 33

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

From Cable

Network to

Business of

Forecasting

Consumer

Behavior

The

Weather

Company


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

Slide 34

The Holy Grail of

Supply Chain Insights-Enabled

Execution

The Digitization of Manufacturing

Product and Service Convergence

Slide 35

The Third

Industrial

Revolution

The Third Industrial Revolution

Slide 36

Articulated by The Economist – April 2012

A Potential Revolution in Manufacturing

Online Collaborative Manufacturing Services

The Economist- The Third Industrial

Revolution

Slide 37

Millions of

artisans

brought

together

The Age of

Mechanization First Revolution

Late 18th Century- Mechanization of

the Textile Industry

Source: The Economist magazine, April 21, 2012

Large

factories and

leveraged

economies of

scale

The Age of

Mass

Production

Second Revolution

Early 20th Century- Henry Ford’s moving

assembly line

Leveraging

of Digitally

Connected

Devices

The Age of

Mass

Customization Third Revolution

Sophisticated Software

New Materials

Dexterous Robots

New Processes

The digitisation of manufacturing will transform the ways goods are made


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

Slide 40

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”


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

Slide 42

Talent Management

Augmenting Skills Gap

Sourcing and Retention


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

Slide 44

Source: IDC Manufacturing Insights and Government Data


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

Slide 51

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

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 52

That’s a Wrap- Questions ?

Thank You

Contact Information: Bob Ferrari

Email: [email protected]

Twitter: @Bob_Ferrari

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

mailto:[email protected]





http://www.theferrarigroup.com/

Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams

Business

supply impacts

supply chain strategy

business environments

forms of business

percent worried

research group llcslide

industry environments

years industry