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. 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. 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
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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
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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. Introduction
•
•
Multiple years of supply chain
business planning, operational and IT
systems implementation experience
•
Recognized supply chain strategic and
tactical thought leader, technology
market influencer
•
Top Ten SCM Blogs
Independent supply chain and B2B
industry analyst- previous leadership
roles at AMR Research and IDC
Consultant in supply chain strategy,
business process, and information
technology deployment
•
Founder and Executive Editor Supply
Chain Matters blog
Top 25 Most Influential
SCM Blogs
Logistics Degree.net
Copyright 2013 The Ferrari Consulting and Research Group LLC
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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
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7. 2010-2012: A Watershed for Disruptive Supply Chains
Earthquakes
Floods
Volcanos
Counterfeit
Products
Product Recalls
Major Supply
Disruptions
Major Accidents
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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. 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
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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
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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
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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
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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
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15. The Third IT
Platform &
Engineered
Systems
Convergence in Information and IT
Infrastructure Technologies
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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
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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
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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
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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
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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
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. Industry Supply Chains
Navigating Capabilities, Resources and Supply
Chain Response in the New Normal
Overcome Complexity – Respond to Constant Change
Exception Driven – Insure Resiliency
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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
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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. 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. 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
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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
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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
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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. 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
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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
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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
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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
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36. The Third Industrial Revolution
Articulated by The Economist – April 2012
A Potential Revolution in Manufacturing
Online Collaborative Manufacturing Services
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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
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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
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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
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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”
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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
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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
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44. The Profound Gap in Manufacturing Productivity
Source: IDC Manufacturing Insights and Government Data
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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
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. 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. 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. 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. 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. That’s a Wrap- Questions ?
Thank You
Contact Information: Bob Ferrari
Email: bferrari@supply-chain-matters.com
Twitter: @Bob_Ferrari
Web Site: http://www.theferrarigroup.com
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