Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams


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Within the next five years, five converging mega-trends will impact global supply chain and manufacturing teams. This presentation reviews these trends and offers conclusions as to their impact.

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Most Significant Trends Impacting Global Supply Chain and Manufacturing Teams

  1. 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 1
  2. 2. 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
  3. 3. 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
  4. 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 4
  5. 5. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 5
  6. 6. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 6
  7. 7. 2010-2012: A Watershed for Disruptive Supply Chains Earthquakes Floods Volcanos Counterfeit Products Product Recalls Major Supply Disruptions Major Accidents Slide 7
  8. 8. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 8
  9. 9. 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
  10. 10. 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
  11. 11. The New Normal Risk Complexity Unpredictability Balancing Efficiency – Agility - Responsiveness In a 7 Day by 24 Continuous Cycle Slide 11
  12. 12. 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
  13. 13. 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) Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 13
  14. 14. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 14
  15. 15. The Third IT Platform & Engineered Systems Convergence in Information and IT Infrastructure Technologies Slide 15
  16. 16. 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
  17. 17. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 17
  18. 18. 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) Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 18
  19. 19. 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
  20. 20. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 20
  21. 21. Industry Supply Chain Shifts Industry Supply Chain Business Process Convergence Slide 21
  22. 22. 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
  23. 23. 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
  24. 24. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC 24 24
  25. 25. 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
  26. 26. 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
  27. 27. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 27
  28. 28. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 28
  29. 29. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 29
  30. 30. 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”)
  31. 31. 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
  32. 32. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 32
  33. 33. 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
  34. 34. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 34
  35. 35. The Third Industrial Revolution The Digitization of Manufacturing Product and Service Convergence Slide 35
  36. 36. The Third Industrial Revolution Articulated by The Economist – April 2012 A Potential Revolution in Manufacturing Online Collaborative Manufacturing Services Slide 36
  37. 37. 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
  38. 38. 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” Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 38
  39. 39. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 39
  40. 40. 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
  41. 41. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 41
  42. 42. Consistently Identified Impact is Talent Talent Management Augmenting Skills Gap Sourcing and Retention Slide 42
  43. 43. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 43
  44. 44. The Profound Gap in Manufacturing Productivity Source: IDC Manufacturing Insights and Government Data Slide 44
  45. 45. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 45
  46. 46. Takeaways and Recommendations Slide 46
  47. 47. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 47
  48. 48. 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. Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 48
  49. 49. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 49
  50. 50. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 50
  51. 51. 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 Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 51
  52. 52. That’s a Wrap- Questions ? Thank You Contact Information: Bob Ferrari Email: Twitter: @Bob_Ferrari Web Site: Slide 52