by Matt Davis | February 22, 2011 | Comments Off
It’s that time of year again… when Q4 earnings announcements have hit full stride and we get insights into complete fiscal year performance. As with any other year, there were some big winners mixed with other big misses. One thing caught my eye in several earnings announcements… CEO’s talking SUPPLY CHAIN. As I read through messages in the earnings statements, supply chain appeared as a key enabler of performance and strategy. Here are a couple examples…
- CEO Michael Dell upon record 2011 results: “Our strategy around the efficient enterprise and flexible supply chain continues. … Client profitability improved notably in the second half of the year driven by solid supply-chain performance, lower input costs and improved product quality.”
- Ecolab after record 4th quarter results: “Major initiatives include … significant realignment of the supply chain, including repositioning of the warehousing networks, better leveraged purchasing capabilities, formula and packaging simplification, manufacturing consolidation and streamlined support functions.”
- On an earnings call with Raytheon’s CEO, Jim Swanson: “From our standpoint we see plenty of opportunities in the company. There’s a lot of effort going on in our supply chain side of the business …. What we’re going to be working on [is giving] our suppliers better visibility into what we’re doing … where they can align up their investments with our investments to make sure we continue to deliver the best value to our customers.”
While a focus on operations to drive efficiency is nothing new, it is both interesting and exciting to see CEO’s saying supply chain is a direct enabler of top level corporate strategy. Just where I think it should be… as well as a key premise of the annual AMR Supply Chain Top 25. As a former employee of a consistent top 5 player in the Top 25, I was quite familiar with the results before joining Gartner. But I’ve learned even more about it as an analyst.
So I thought it would be fun to sit down to informally interview Debra Hofman, who runs the annual research, on the details of how it’s done, how innovation plays a role and what she’s learned over the years. I also asked her what she would like to share with readers of this blog. Here’s a transcript from our chat…
Matt: Can you provide some quick context on the Supply Chain Top 25 for those who may be unfamiliar with it? What is it? How is it used? Etc..
Debra: The Top 25 is AMR’s annual ranking of the best supply chains among manufacturers and retailers in the Fortune Global 500. This is the 7th year of the ranking, and we’ll be publishing the 2011 list at the beginning of June. The basic goal of the ranking is to highlight leadership in something we at AMR call the “Demand-Driven Value Network” – who are the companies that are farthest along toward being demand driven. We’re very transparent about the way we come up with the ranking: every company on the list (224 last year) gets a composite score that‘s made up of 3 financial metrics (ROA, Inventory turns and Revenue Growth) and 2 voting pools – one voting pool is our supply chain analysts, and the other voting pool is a Peer Panel made up of supply chain executives from across a spectrum of industries (last year we had 154 peer voters). The Peer Vote – which represents 25% of each company’s composite score – is a key component in that it reflects the opinion of the supply chain community. It’s open to supply chain professionals at any manufacturer, distributor or retailer. We allow one vote per company, and the vote itself is a simple web form that takes about 15 minutes.
Matt: What do you think about CEO’s talking supply chain at earnings announcements? Is this new?
Debra: It’s an exciting trend that we’re starting to see more and more. Not just the use of the term “supply chain” at the highest levels, but the recognition that being good at it drives shareholder value. A few years ago when we started doing this, we used to get asked all the time for proof of the connection between supply chain and company performance, and we could point to some studies and data that supported it. We don’t get asked that question as much anymore. I think we’ll see that recognition continue to grow – recognition at the highest levels that the combination of operational excellence and innovation excellence is the signal to Wall Street that these are the companies with more robust growth engines and higher earning capacity.
Matt: Is the Top 25 global?
Debra: It is global. The way we compile the list of companies is from the Fortune Global 500, which is a global list of companies – it’s different from the Fortune 500 which is just US companies. But we often hear from supply chain communities around the world that the list looks very US centric, and that’s true. A big part of the reason for that is actually the composition of the voting community – the peer voters have been predominantly based in the US. That’s not our preference. We would love to ratchet up worldwide representation. In fact, we’ve seen increasing excitement and interest in the ranking from the European, Asian and Latin American supply chain communities. So, if you’re a supply chain executive at a manufacturer, retailer or distributor in any of those regions, we welcome your involvement, and encourage you to add your perspective, make your voice heard – register to vote! (just contact carla.elvy@gartner.com)
Matt: So what supply chain innovations caught your eye this year?
Debra: Every company in the Top 25 has their own vision and strategy, and is focused on their own set of key initiatives, whether it’s improving their forecasting capabilities, strengthening their sales & operations planning process, or segmenting their supply chains. But there are a few themes that we see consistently across the leaders: outside-in thinking, embedded innovation, the use of metrics to drive tradeoffs and balanced excellence, a focus on building and retaining a killer pool of supply chain talent, and most importantly a culture that is obsessive about always taking it to the next level. Another interesting thing: The consumer and high tech industries have typically gotten a lot of attention, but we’re seeing a lot of companies in the industrial value chains – those more traditional, asset-intensive industries like chemicals and mining and heavy equipment manufacturers — catching up and in some cases moving beyond. Watch our website for highlights of these companies: http://bit.ly/etMIEF
Matt: What’s been the biggest thing you’ve learned over the years working on the Top 25?
Debra: That the definition of “excellence” is a complex topic indeed – there is much more to it than meets the eye. We all feel like we know it when we see it, but generating debate of what it really means to be a leader is what the Top 25 is all about.
Matt: Anything else we should know?
Debra: We hope the Top 25 is a platform that helps highlight best practices, and drives a lively flow of ideas, debate, and innovation across the worldwide supply chain community. We welcome feedback, thoughts and suggestions on the methodology, the ranking and what supply chain leadership is all about.
So my thanks to Debra for spending some time with me. As payback for her time, I promised I would provide some coordination details for this year’s survey… If you’re interested in being a voter, please contact Carla.Elvy@Gartner.com. If you’d like more information about the Top 25, go to: http://bit.ly/etMIEF
Category: AMR Supply Chain Top 25 Demand Sensing and Shaping Tags: AMR Supply Chain Top 25, Debra Hofman, Global Logistics, Logistics, Operations Management
by Matt Davis | February 16, 2011 | 1 Comment
For Jeopardy fans like myself, the last two nights of play have been quite different than the traditional matches. Not just because the all time champs Ken Jennings and Brad Rutter have returned, but more because they are playing against a computer named Watson. Watson can “read” questions, interpret meanings, find natural language relationships and answer questions with a precise confidence interval… all in the form of a question, of course. So what if Watson ran your supply chain?
“Boring.” “What a waste of money.” “No computer will ever be smarter than a person.” These were some of the comments posted under a story I just read about Watson. And, while watching a computer rapidly answer questions with incredible precision while its human competitors stared off in frustration doesn’t make the best television, Watson is far from “boring.” What is so fascinating about Watson’s capability is that it moves way beyond the search capability we’re currently used to. Watson understands analogies, can find relationships in otherwise disparate topics and can rate the likelihood of being correct… all within seconds. The implications for supply chain analytics are HUGE.
We’ve recently published several reports on demand sensing, pattern based strategy and social media for supply chain (http://blogs.gartner.com/matthew-davis/2010/10/04/social-media-to-improve-supply-chain/) that hinge on being able to identify patterns. Patterns in demand, customer preference, macro-economic factors, etc… For example, many companies maintain an active social media presence to open a dialogue with customers on product features, trends in user communities and other “like” products that they’re interested in. The problem with this data is that it comes from many sources, is in written “natural” language and is extremely difficult to group for meaningful analysis.
In theory, Watson’s capabilities could be used to rapidly analyze all of that available data to decipher out meaningful analytics to guide strategy. In addition, it could look for relationships within and across all of these disparate data sources to identify patterns.
As they described Watson’s logic engine, IBM used an analogy of a doctor trying to make a diagnosis to describe Watson’s potential. A doctor might have a hunch as to an expected problem, but has many different factors to consider. Perhaps some even unknown. Add onto that complexity with the reality that most medical records and notes are still hand-written and the ability to compare all of one patient’s data with the massive amount of data online seems impossible. But what if the doctor could load the patient’s data into Watson which would then use its massive relational logic engine to find patterns in the data as a check of the doctor’s hypothesis? Science fiction? Maybe today… but you can clearly see the possibility as Watson fires away at questions that today’s search engine could never handle.
Now think supply chain… Maybe Watson reviews buzz on Facebook about new product launches of certain electronics and is able to tell an accessories provider to expect a huge spike in demand. Or maybe Watson recognizes that when unemployment levels hit 10%, your company’s demand tends to fall by 4%. When you consider the incredible amount of data available online, including all of the active social communities adding content daily, the possibilities are quite exciting.
Now, all of this said, it took so many servers to support Watson that they had to be housed offsite. And Watson did have a couple incredible misses that seemed out of the blue. BUT, the results speak for themselves so far. At the end of the first round of play, Watson leads both players by over $20,000. Watson’s short-term fate on Jeopardy will be decided this evening, but the long-term implications are enthralling.
What do you think? Will computers ever be able to understand all the intricacies of human speech? If so, when? Do you see applications for your supply chain? Or is this all just a publicity stunt?
Category: Demand Sensing and Shaping Digital Supply Chain Tags: Jeopardy, Pattern Based Strategy, Social Media, Supply Chain, Watson
by Matt Davis | December 21, 2010 | Comments Off
The GoogleTV was supposed to be a feature of the huge Consumer Electronics Show in January, but a “lukewarm reception” of the current product is reportedly causing a delay in it’s release. While this has an impact on Google’s supply chain, many other manufacturer’s will be impacted by the delay as well.
Sony, Toshiba, LG and others all have complementary products and/or accessories that are timed to release with the GoogleTV software. Any delays will directly impact these supply chains. The lead time to procure raw materials, manufacture and ship electronics is several months long and, once set in motion, very difficult and costly to slow down. Manufacturers with products in this space are facing potential excess inventory, manufacturing downtime, additional warehousing costs and even potential product reworks.
This delay signals another complicating factor for demand planning in the high tech market… coopetition. In writing on demand management, I’ve discussed how a manufacturer can collaborate with suppliers, customers and the channel providers to reduce demand signal latency and mitigate supply chain disruptions. Now there is a new player to consider… other manufacturers.
We are experiencing a time of heavy product proliferation in the consumer electronics market, largely driven by tablets and other content providing hardware devices. Much of this proliferation is driven by accessories and complementary products to “big publicity” items. While this has been occurring for a while (iPod accessories, Smartphone cases, laptop skins, etc), the proliferation has hit full speed with the new tablet market and introduction of internet capable televisions. So what does this mean for demand management? Less control.
Even if Sony, Toshiba, LG, etc had planned perfectly for the launch with no internal disruptions, they now have a new issue to manage. Any substantive changes to the GoogleTV software could require a retest of completed units or perhaps a software patch to the products on top of the aforementioned supply chain disruptions. One fact remains, groups of manufacturers in this type of coopetition face the same challenges of historical supply chains… the need to collaborate and integrate demand management practices.
It will be interesting to see how the delay is handled both by Google as well as those with accompanying electronics. I will certainly follow how the contracts are written between these groups as well as look for ways that coopetitors collaborate. What do you think? Do the opportunities of coopetition outweigh the risks? Who is better off in these relationships?
Category: Demand Sensing and Shaping Digital Supply Chain Tags: Consumer Electronics, Google TV, GoogleTV Delay, High Tech, Supply Chain
by Matt Davis | November 24, 2010 | Comments Off
Yesterday, Acer announced a host of new product launches at their global press conference… several of which put them into new product categories including tablets and smartphones. Is Acer trying to marry product innovation with operational efficiency?
Acer’s supply chain is known and benchmarked as a stellar example of end-to-end operational efficiency. It affords them some of the lowest price points in the PC marketplace. They are able to take advantage of a unified strategy around cost reduction by way of a build-to-stock (BTS) manufacturing model, extremely low overhead, 24-48 hour turnaround on strategic buys from suppliers and low cost transportation nodes. This model does bind them into transactional sales as they aren’t structured to support some of the customization and longer buy cycles in the B2B marketplace, but the strategy has landed them in the #2 global market share for PC’s. It is with this knowledge / perception of Acer that I watched the series of product announcements at their press conference and began to wonder… Is Acer moving away from their singular focus on cost?
Acer announced 4 new ventures that grabbed my attention:
- Alive (the App store): Alive will be Acer’s new App store is was marketed as “complet[ing] the circle of services and solutions offered by all Acer group brands.” Acer states that Alive will be different from other app stores as it is “real time” and will get to know you better the more you use it. The idea being it can better recommend content as you provide it with information on your “likes.”
- Smartphone: The yet to be named, yet to be priced smartphone is set to launch in April 2011. Primary features are the 4.8-inch size, Android platform and 1024×480 screen resolution. Given the look and features of the device, it appears to be positioned against the iPhone as well as other PC manufacturer smartphones like Dell’s Streak. Acer seems to be positioning their device as a merger of the smartphone and the tablet, but it’s 4.8 inch size places it more in the mix with smartphones regardless of features.
- Tablets: Acer announed both a 10 inch and 7 inch tablet. The tablets will run on the Honeycomb OS (Google’s 3.0) and come preloaded with Alive. Both will be available in April.
- Iconia: Iconia is an interesting “key board free” dual screen notebook. Imagine two glossy visual displays on your notebook with the second in the place of a traditional keyboard. The concept is to expand touch technology to the notebook, but are consumers ready for no keyboard? Issues with typing seemed to have been one of the primary concerns of iPad users, keeping notebooks as a necessary device for any heavy typing activities.
The new product announcements seem to indicate that Acer has picked up on two key trends for consumer electronics manufacturing.
- Digital Supply Chain: I have spoken about the convergence of digital and physical supply chains in previous posts (http://blogs.gartner.com/matthew-davis/2010/10/07/googletv-another-spotlight-on-digital-physical-supply-chain-convergence/). With each new product introduction, there is further evidence of hardware manufacturers designing devices focused on content delivery. Acer’s announcement of an app store, smartphone and tablets follows in stride with this trend. The debate on content remains: Who is the gatekeeper? Is it the app store? The OS? The device? or the content itself? It seems as though Acer is wagering that the gatekeeper is a combination of them all. They announced that there app store is built around you with real-time learning, that the content creators are “well-known, local and global” and that they can make devices that consumers will want.
- Supply Chain Segmentation: Acer is the first company that comes to mind when I think of the efficient, end-to-end supply chain. I have discussed how others in the consumer electronics space are segmenting their supply chains into multiple, end-to-end value chains focused on specific customer values (http://blogs.gartner.com/matthew-davis/2010/11/15/supply-chain-segmentation-becoming-a-reality-dell-converse/). The concept being that one company can align supply chains to deliver on cost, cycle time, customization, etc or a combination of those factors. Is Acer moving in this direction? The new product introductions do not provide a definitive answer. It would be short-sighted to think that just because a company focuses on cost that they should not pursue the content market or the tablet space. That said, Acer’s Iconia announcement does confuse me. Why are they pursuing a fundamental shift to notebook design that is ahead of consumer expectations? Even if the product is a success, the demand will be low and likely variable. A highly demand variable, low volume platform? Sounds a lot like customization that will require supply chain agility. So this announcement could be a first step toward supply chain segmentation. The strategic question is if this is the right move in a market where Dell dominates the configure-to-order space and Apple is already established as the innovation provider. Is there a place for Acer? Sounds familiar to questions about grabbing market share for low cost products from Dell and HP in the past…
I am always interested in new product launches and try to figure out what the products are saying about a company’s corporate and supply chain strategy. At first glance, the Acer announcements seem to be a battle cry of “we’re not just well priced PC’s.” But upon further reflection, I do see a connection to some major trends in the consumer electronics space. The recognition of the importance of content is critical. It seems Acer also believes that tablets and smartphones are blurring the lines of mobile devices and PC’s. A strategy to get into this space is a smart move. But what about this Iconia? Is it just another option? Or does it signal an updated supply chain strategy? I’ll reserve further thought here until I see the price points of these products next year. That should be a direct indicator of their strategy as well as the focus of their supply chain.
What do you think? Are these new products the right move for Acer? Do you think these are signs of a shift in strategy? How much of your assessment will depend on the price points of the new products?
Category: Digital Supply Chain Supply Chain Segmentation Tags: Acer, Acer Tablet, Digital Supply Chain, Iconia, New Product Introduction, Supply Chain, Supply Chain Segmentation, Tablet
by Matt Davis | November 15, 2010 | Comments Off
Have you ever heard someone say “Oh I don’t care what kind, just get the cheapest one”… and then in the next moment, “No, I don’t like that one. It’s not me. Let’s look somewhere else.”? We all are constantly making choices and tradeoffs when we’re shopping. Typically, we’re balancing our opinion of ideal cost, product features, speed of delivery and ability to personalize. I might want a lime green computer, but am I willing to pay more for that feature? And, if so, how much more?
Globalization, internet direct sales, new technologies and improved manufacturing productivity have opened a whole new world of possibilities for consumers and businesses in their purchase decisions. This new complexity has challenged the “one-size-fits-all” supply chain for many manufacturers, especially in the High Tech industry. Historically, one might choose Acer for the great price, Apple for its innovation, Dell to customize and HP for a quality product at a retailer. But to compete today, companies are realizing they can’t just live in one world.
This new reality is best highlighted through a hypothetical scenario for a Purchasing Executive who will make several product decisions in her personal and professional life. On Monday, she may be buying computers for all the reception desks at her office and decide to buy a competively priced, high quality product to ship direct. On Tuesday, she is buying a personal system for herself and wants the absolute best product that she can customize regardless of price and lead time. On Wednesday, she is buying a notebook for her daughter and just wants the lowest possible price at a retailer. High Tech companies have recognized that these three decisions are connected and that they must be able to compete across multiple decision criteria to capture all three sales. To do so, however, the end-to-end supply chain must be optimized to achieve the right balance of personalization, speed and cost. As such, many companies are moving from “supply chain” to “supply chains.” Multiple supply chains optimized for different capabilities.
Supply chain segmentation has been of interest for several years now and I am now seeing more and more examples of this strategy in practice. I just completed a case study with Dell on this very subject that is available at http://www.gartner.com/resId=1468717. Dell has been challenged from many different angles in the past few years so it will be interesting to see how their segmentation strategy will (or will not) improve their competitive positioning in the next few years. They are also a particularly interesting segmentation case because they are one of the few companies going from high customization / high responsiveness to creating the efficient (low cost) end-to-end supply chain in which complexity is stripped out across all functions. Most companies attempting segmentation are moving from an efficient supply chain to improve agility and responsiveness.
As I learned in working with Dell on this case study, much of the supply chain segmentation occurred in steps in which certain capabilities were enabled. For example, the ability to ship direct in 24-48 hours on specific products that is available today started with small pilots to prove out the logistics, product and order management capability. It seems that I now have an active eye for such pilots and was pleasantly surprised in a Converse store this weekend.
Supply chain segmentation for apparel seems particularly difficult. How much can people really customize apparel? How much SHOULD they customize? Especially if it has your company name on the tag. There is clearly a demand for this ability in other markets and it seems to be spreading. Just look at what people do to personalize their phones, cars and homes. Its not a stretch to think that this same demand exists in apparel, especially for the next generation who has been touted as demanding both personalized products as well as instant gratification.
Which brings me back to Converse. I went in to their new store (and first ever retail store) here in Boston and found that in addition to their regular assortment of shoes, clothes and accessories, they also have a “customization bar.” Equipped with shoes in a rainbow of colors, many spools of shoe laces, a silk screening press, a computer for graphic designing and a giant television visual display, they are able to personalize shoes, t-shirts and bags.
So is this supply chain segmentation? Not by a strict definition of end-to-end segmentation. More of postponement and customization. That said, it is a big first step… a piloting of a new capability if you will. Remember the whole idea of paying a little more for the ability to customize? The “bar” shown above is an interesting example of that personalization. So if you want pink shoes with a flamingo on the heel and purple, glitter laces… it’s now possible. Congratulations! Or perhaps you want to design a t-shirt or have a photo silk-screened onto your new Converse bag… again, congrats. It’s possible. And all while you wait.
Several apparel companies have customization available online. Nike and Vans among a couple others. But there is an interesting take here with Converse because their customization bar enables instant gratification. They have brought in a new factor. Speed.
So will this personalization with instant gratification catch on? It works for Build-a-Bear… What do you think? Is Converse ahead of the game? Will we see this in other apparel outlets? What about technology? We’ve seen some pushes to delay software download to the store. Will we see a similar trend with hardware? Accessories?
Category: Supply Chain Segmentation Tags: Converse, Customization, Dell, New Product, Supply Chain, Supply Chain Segmentation
by Matt Davis | November 9, 2010 | Comments Off
On Tuesday, GE announced a plan to invest over $2B in China through 2012. $500M for R&D and customer innovation centers and $1.5B for joint partnerships with state-owned enterprises. A closer look at the joint partnerships shows a clear focus on infrastructure investment, primarily on electric grids and rail transportation.
This announcement has huge implications for supply chain. We have all seen staggering statistics on the the growth potential for BRIC countries (Brazil, Russia, India and China)… as well as VISTA (Vietnam, Indonesia, South Africa, Turkey and Argentina) with China being the panacea of growth potential. Several companies have made forays into the Chinese market only to learn rough lessons that potential demand (population) doesn’t mean automatic success. Wal-Mart has had many issues in their push into China because both the products and the store experience itself is not tailored to the Chinese demand. Others find it difficult to get products into cities or through the complex maze of distribution networks in the region.
The gating factor for success in China often comes down to having the right products for the market and the ability to manage product through distribution channels. GE’s announcement hits at both of these factors. The innovation centers will be focused on product development, application engineering, sourcing and delivery. Key focus areas include rural health care, renewable and clean energy, smart grid, energy-efficient lighting, rail and aviation. One of the root causes of failure in emerging markets has been the “copy exact” model in which US companies simply set up the logistics infrastructure into emerging markets without changing products. This method leads to mismatched product for the demand… often with products that are over-spec’d for the market. GE is signaling that they will embed themselves in the region to better sense demand and design the right products for China.
The idea of designing products for a specific market demand is nothing new. What is new, however, is what some are calling “reverse innovation” in which products that are widely successful in the US and Europe are simplified to meet the price points required in emerging markets. A recent example of this reverse innovation was the $.13 men’s razor for India. By focusing the entire design, sourcing and make processes on getting the lowest possible price, a leading CP company was able to hit the market with a product that has had huge success. And I thought my vibrating razor with 4 blades that cost $16.95 was innovative.
The second piece of this story that will have broad implications for many companies and supply chains is the investment in infrastructure. The lack of rail and poor condition of country (and city) roads has been a major issue for logistics into the region. Most of the production materials for export are in locations that are near a seaport or airport. Improved rail infrastructure could vastly change access to interior China as well as more rural areas. Could success here be a precursor for a high speed railroad from China into Western Europe? That’s quite a leap, but one that has been long pondered by those in sending shipping vessels on their long trek from China to European ports.
GE is getting some flack for outsourcing jobs to China, but I see this more as a strategic play to be a major player in China. What do you think? Is this a good move for GE? Will investment in infrastructure provide more opportunities for other companies in that region?
Category: Emerging Markets Tags: China, Emerging Markets, GE, General Electric, Global Logistics, Globalization
by Matt Davis | October 25, 2010 | 2 Comments
For those of you who use manual razors, how many times have you declared this time as the last time you’re paying $25 for a pack of replacement razors? And yet, four weeks later, we all do it again. It’s commonly known as the “razor blade model.” Give away the razor at cost and make margin on the continued revenue stream from blade sales. The same principle applies to ink cartridges for printers.
And so it seems, Google is now applying this model to content. The Android OS for smartphones is open-sourced and Google is giving it out for free. Like a razor or a printer. So why is it free? Google isn’t out to win a smartphone battle, they are out to win the content war.
Many consumers make their product decisions based on the the physical features of that product, but content is changing all of that. Consumer electronics are on their march to becoming no more than content delivery mechanisms. And they’re not the only products on this journey. Cars, household appliances, buildings and even road signs are headed down this path. As I’ve said before, whoever owns access to the content will drive the market and the supply chains into those markets. Which brings us full circle back to Google.
The Android OS has been designed to run across multiple products. By end of year, the Android platform will have ~17% of the market at the number 2 smartphone OS. Now that tablets are hitting the market, expect that number to continue to climb. The GoogleTV takes another step in that direction by bringing content directly into homes. The point is that Google is laying a clear stake in the ground that access to content is the battle ground for both hardware and software providers.
The implications for high tech supply chains are huge. Many supply chain leaders now recognize supply chain as an end-to-end enabler of business strategy. A key element of this enablement is the connection of product innovation to demand and supply processes. Today, much of the focus on product connection to demand and supply is on the physical device. In the very near future, supply chain design and planning will have to incorporate content delivery as part of their planning processes.
The ability to sense demand will have to include how consumers are accessing content. What OS is driving adoption? What are the suite of products and accessories that surround content download? These are new questions not currently a mainstay in high tech supply chain planning. This trend is yet another sign that the digital and physical supply chains are converging.
Today’s hardware manufacturers will need to understand the Digital Supply Chain as well as how and where to connect to it. It will require an outside-in perspective that extends competitive benchmarking beyond the typical players. 5 years ago, would Dell or HP have considered Google a serious threat? What about RIM? And would an LG refrigerator manufacturer have considered Google a strategic partner? Not likely.
It all seems very “1990-ish” when Microsoft released Windows 3 and began to encroach on Mac sales. It was the Windows platform that drove PC sales, not necessarily the devices. At that juncture, the switch occurred because of cost and ease of use. Sound familiar? Is Google a threat to consumer electronics hardware manufacturers? What new skills are needed in supply chain organizations to manage through this period of change?
Category: Demand Sensing and Shaping Digital Supply Chain Tags: Android, Digital Supply Chain, Google, Smartphone
by Matt Davis | October 21, 2010 | Comments Off
After a whirlwind of conversation at Symposium, I am both reflecting on those conversations as well as getting back to speed with current events. The theme from both is a concern about social software and internet rights to privacy.
Applications of social media platforms for supply chain demand management and the ability to tap into the digital consumer via mobile devices were both frequent topics of conversation at Symposium. And at the end of each conversation, the chat turned to concerns about security and privacy. How secure is the data? Are customers open to these platforms for collecting data? Even B2B customers? Will mobile device promotions just irritate consumers? The answer to all of these questions is “it depends.”
One conversation in particular sticks out in my mind. I sat down on the shuttle to Symposium and struck up a conversation with a senior IT executive from a major US retailer. As we discussed the digital consumer, I said that it wouldn’t be long before I would be driving near one of his stores and he would text me with a great one day deal based on my previous purchases. His response highlighted a key privacy issue. He said that they discussed that capability internally already. Promotions targeted to the digital consumer will happen… but the ability to get personal is, well, personal. What if I shared a credit card with a partner? And what if that partner had made some purchases I wasn’t aware of… dubious or otherwise? A text to me with “like” items could open an entire can of worms and he didn’t want his stores caught in the middle of it. These new capabilities will have to balance customer knowledge with privacy. As customer data becomes more intimate, it also needs more hands-on management of its usage. And this conversation seemed to repeat itself with many of the senior leaders I spoke to about social software for supply chain.
So it seemed like kismet when I opened my Inbox folder with my daily news RSS feeds and found this recent press:
- Google: 244,000 Germans Say ‘No’ To Street View
- U.S. Pushes To Ease Technical Obstacles To Wiretapping
- Congress to Question Facebook after Recent Privacy Breach
- Google Broke Privacy Laws, Canada Finds
- Rapleaf is Selling Your Identity
- The Business of Burying Internet Search Results
- Carla Franklin Wins: Google Must Reveal Identity Of Online Harasser
I get ~10 stories a day on my RSS feeds, so when 7 come through on the same subject in a week, it usually highlights a trend that many are thinking about. I would imagine that many High Tech supply chain leaders are reading these same stories. My key takeaways from the week are as follows:
- Social software and digital consumer capabilities have reached a big portion of the early majority in the adoption lifecycle. As such, we will continue to see more and more press on the subject as a large group is now following the storyline to see if they will jump on the bandwagon.
- Companies who use social software digital marketing must consider global perceptions and laws for privacy. Attitudes and acceptance will vary across regions as well as within demographics in those regions. Use of the data should be managed appropriately for the targeted customers.
- Governments are continually intervening in management of internet and social software issues. A couple major penalties levied on non-internet based companies using social software could slow or even derail progress to integrating social software business processes.
- Privacy is stuck in limbo. Social software users are quite willing to share extensive information about themselves online, but still have expectations that others will not use that information without consent. On the surface, the selling of this data and use by marketers is very negatively received by consumers. That said, companies who are able to tap into this data without appearing to trample on privacy rights or irritating customers will have huge gains in demand shaping and promotional effectiveness.
There is little doubt that the vast sources of customer data available online will continue to be used by companies to better understand customer preferences as well as to shape customer buying behaviors. Several companies, especially in the High Tech space, have methods to use these learnings in supply chain as they manage demand. Wider adoption will continue to drive wider press coverage, both positive and negative. So what do you think? Will companies ever fully integrate social media as part of their demand planning processes? If so, when? How will you react when you get your first promotion sent directly to your mobile device?
Category: Demand Sensing and Shaping Digital Supply Chain Tags: Demand Sensing and Shaping, Digital Consumer, Digital Supply Chain, Social Media, Supply Chain, Symposium
by Matt Davis | October 7, 2010 | 2 Comments
I was watching Back to the Future II last week (the one where Michael J. Fox travels to 2015 to keep his son from going to jail) and caught myself laughing at 1989′s version of 2015 technology. There is a scene in which future Marty McFly (2015 Michael J.) is talking on the “phone” - which is a giant projector screen with a grainy image of his buddy - and his boss cuts in on the screen and fires him… at which point the screen flashes “YOU’RE FIRED!” repeatedly and a dot-matrix print out of those words come through the fax machine in their home. 1989 = pretty cool, 2010 = pretty hilarious.
And yet, the first thing I thought of as I read about the GoogleTV was that very scene. While the electronics used in the scene were all wrong, the way they interacted is spot-on for what is happening in High Tech right now. There has been much discussion on the impact of content digitization. We’ve already seen what MP3′s did to CD’s and the music industry. Now the Kindle, iPad and other digital readers are targeting written content. Devices are now content delivery mechanisms… and it is the Digital Supply Chain that is bringing the content and applications to the devices. But what I found most interesting with the GoogleTV (as well as what made me think of McFly) is the interconnected nature of all of the devices as they bring content to users.
A television, the GoogleTV, your smartphone, an internet connection, your webcam, a satellite dish, your remote control… all working together as you master a world of content in your living room. Here are some of the highlighted features:
- Remote control apps for your smartphone or iPad so that you can control the TV from those devices
- Direct content from Netflix, Pandora and others
- A “TV cam” that attaches to create the largest picture phone you’ve ever used
- Ability to toggle between the TV and web (…we should all be masters of Jeopardy!)
- Connection to Dish Network including the ability to record programs… right off your onscreen search bar
- Lest we forget… YouTube, FaceBook, Twitter… and on and on
So let’s recreate the Back to the Future scene… with a GoogleTV Marty McFly could have hooked up his “TV cam” and called his buddy via Skype. While doing so, he Twitters news of the illegal business deal he just made… which his boss reads in real time. His boss cuts in via Skype and is live on McFly’s TV to fire him face-to-face. To make sure the message is loud and clear, McFly’s boss sends an email, pushes a Twitter feed and posts a message on his FaceBook wall. And everyone involved never left their TV’s. PS: it’s only 2010… we’ve got five more years before we need to invent the floating Hoverboard.
What’s interesting to me in that list of capabilities is that almost all of the products come from different companies. From a supply chain perspective, this fact means that High Tech companies will have to figure out where content is driving partnership opportunities as well as what key products will drive the rest of the market. A balance of driving innovation and quickly responding to the innovation of others. The GoogleTV is just one product on a very long list of new content-based devices hitting the market… not to mention the several items on that list from Apple (including the AppleTV) that have or will revolutionize how we use technology.
The second theme here is that the Digital and Physical Supply Chains are continuing to converge. Hardware manufacturers have to know where and how in the supply chain software is going to get downloaded. Software providers have to know hardware product roadmaps and new features that may shift demand. It will often be a symbiotic relationship with shared gain. Well, sometimes. HP’s most recent CEO selection shows a bit more carnivorous view of the relationship. The point is, High Tech supply chains are only getting more complex and that an understanding of the connections to, capabilities of and benefits from the Digital Supply Chain only get more important with each passing new product introduction.
What do you think? Are either hardware or software producers better positioned in this convergence? How big of a role will supply chain play? What impacts will this have on other industries?
Category: Digital Supply Chain Tags: Apple, Digital Supply Chain, Google, GoogleTV, iPad, Social Media, Software Applications, Supply Chain
by Matt Davis | October 4, 2010 | Comments Off
Lucy Lu was in “Charlie’s Angels” with Drew Barrymore who was in “Donny Darko” with Jake Gyllenhaal who was in “Bubble Boy” with Verne Troyer who was in “Run for the Money” with Christian Slater who was in “Murder in the First” with KEVIN BACON! The “Six Degrees of Kevin Bacon” (the playful play off of “the six degrees of separation”) is based on the idea that we are all connected through a system of networks. And that, by understanding that network, one can both better navigate the system as well as identify cause and effect relationships. Nothing new, right? Well social media and the social network analysis has changed that. But how does it apply to supply chain? And… is anyone using social media to manage their supply chain?
In short… kind of. It all depends on how you define a supply chain. For me, supply chain is far more than just an operations team or even several functional organizations. Supply chains are networks of highly interdependent processes that bring products and services to customers by matching demand and supply. Social media is clearly used by marketing organizations to message out… so, heavily in the demand side. And in many cases, data on product usage, likes / dislikes and requirements is fed back into design. Again, kind of. But is social media to manage your supply chain likely? practical? possible?
Back to the six degrees networks. A couple weeks ago, I was reading an article in The Economist on that very subject. It describes how network analysis of chauffeur drivers was used to narrow in on the location of Saddam Hussein in his 2003 capture. Terrorists organizations can be widely decentralized and difficult to track down, but certain members in the network have identifiable patterns. In this case, the chauffeurs were a limited resource and frequently interacting with many parts of the network. By tracking their movements, the intelligence agencies were able to hone in on a select few potential locations of Hussein… ultimately resulting in his capture. In theory, the same rules apply for supply chain. If the network is a system of demand influencers, such as price, features, channel, color, etc, then one could use the wisdom of the masses to understand what combination of those factors would sell best. Sensing demand. And social media platforms provide the forum, technology and populations to do this.
That same article described another benefit of network analysis in the important role of network influencers. Super users, early adopters, experts… the popular kids. What if you capture their demand first? It could lead to a waterfall of follow-on demand from others. Social network analysis can help you identify these people and, apparently, telecoms companies are already leveraging the power of these select few. Give them the newest technology first and they’ll naturally bring along others, exponentially. Shaping demand.
So the question remains, can companies use social media to sense and shape demand to improve supply chain? The key to doing so would be to find areas where social media provides demand insights that can be used to improve performance as well as areas where companies can influence purchase decisions. I’ve seen some creative forays in this realm. And in the best cases, users don’t even notice the sensing and shaping actions. For example, a YouTube contest I saw… The idea was that whoever could make the best commercial would win a prize. A mild product connection was obviously required… but this was secondary. Supply chain implications: based on the submissions, a company could have insights into how the product was perceived, the demographics of those who submitted and general interest in the product. Then, based on their selection of the winners, the company could shape the perception of the product and, essentially, influence sales. All for a minor cost of the prize.
But so far, these examples are all, shall we say, supply chain adjacent. Supply chain leaders will use demand insights to orchestrate their environment. Both into the sales channel as well as back to their suppliers. Examples of this capability are still few and far between in traditional supply chain, let alone through social media. Will companies ever use a social media platform to manage factory capacity or expedite raw material shipments? That remains to be seen. But I am seeing where social media helps bridge the functional divide between the demand drivers (sales and marketing) and supply chain responders. As demand requirements from customers are better understood, the first question asked is often, “how are we going to do this?” And that connects the demand sensing to the supply chain execution.
So what do you think? Is social media in supply chain science fiction? Is it a fad? Or is there some definitive value for supply chain and demand management?
Category: Demand Sensing and Shaping Digital Supply Chain Tags: Demand Sensing and Shaping, Digital Suppy Chain, Social Media, Social Network Analysis, Supply Chain
