crafting supply chain strategy - technology considerations

Supply Chain Leaders ForumCrafting Supply Chain Strategy – How Technology Trends influence strategy formulation and execution

Center for Supply Chain Researchhttp://www.smeal.psu.edu/cscr

Presentation Date: 2013 – September - 05

Today’s Speaker:Scott R. Sykes www.linkedin.com/in/scottsykes/

http://www.psu.edu/

Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 2

Agenda

I. Context

II. Supply Chain Technology Market – short summary

III.Two Topics to Share

IV.Your Questions & Feedback


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Context – technology’s impact over the past two decades(just one example from the academic world for today…)

1993 2003 2013

Britannica’s unit volume falls >50% from its peak year (1990)

Technology innovation disrupts business “as usual”

The gift and curse (?) of technology innovation is the pace and frequency of change – both from a business and a personal perspective --

It took two years for Microsoft’s ‘93 innovation to cut in half Britannica’s two-century old business (that lacked a serious competitor in its own industry)

Microsoft’s new business only lived for 15 years itself (and they were not impressive years at that)

While Wikipedia had a shaky beginning, it is now relied upon daily by businesses, students (and even scholars)

Implications for us…


Your company’s business strategy should [1] inform the creation of your supply chain strategy, and [2] the selection & deployment of supporting and enabling technologies to make it happen…

Rollin Ford, CIO, Wal-Mart

• In a business age where in reality “there are very few secrets out there anymore…”

• “…the only differentiating competitive advantage becomes SPEED…”

• “…enhancing SPEED and agility necessitates that organizations embrace innovation and new technology models…”

For Wal-Mart, mapping supply chain strategy to business strategy entailed (at least) two items: SPEED and AGILITY. For the company strategy – the key word is SPEED. For their CIO, he adds the word AGILITY. His “technology footprint” must not only enable cost supremacy and supply chain speed, but also afford the ability to adapt to change quickly.


Today’s topic:

How to enable strategy with technology

Change and uncertainty are the constants we face today.

Technology is both a driver of the challenges brought by change and a source of remedy for managing through it.

Today’s other topic:

How to navigate change (and select technologies for your strategy) against a backdrop of high uncertainty

Strategies must be set against this uncertain technology backdrop, and

Supply chain technology strategies must be “sized” to fit [1] the strategic intent of the business strategy, and [2] be balanced against the expected duration

Technology fuels change in many ways

In degree…

In pace/frequency…

In our business lives…

In our personal lives…

Remember these?

http://www.ariba.com/

http://www.ariba.com/


The best supply chain technology solution you identify for today’s business strategy may very well be a member of one of these “extended families” in the future…

Core Company Technology Acquisitions Summary – Just for fun: How many buys since the turn of the Century?

Source: Wikipedia.org

40+ technology buys since the turn of the century



This market reality has implications for the crafting of your firm’s technology investment strategy (to enable corporate strategy and/or supply chain strategy).


In 2012, roughly half of the SCM Software Market ($8.3B) was concentrated in four companies --

Company 2012 SCM Revenue

2012 Market Share

$ 2,040.4 24.6 %

$ 1,453.3 17.5 %

$ 426.0 5.1 %

$ 160.1 1.9 %

“Rest of Market” $ 4,216.0 50.9 %

Source: Gartner, 2013-May

The consolidation that has occurred in the SCM software market over the past decade places large shippers and their trading partners in a sometimes uncomfortable position –

Either buy from one of the large technology firms (as they currently exist), or choose to do business with one of the much smaller vendors remaining…

To help think this conundrum through, we will review a decision framework that categorizes the criteria that go into a technology decision.

The dimensions are “solution fit” and “duration.”

Pursuing a multi-year strategy with a short-lived partner presents risk


Agenda

I. Context

II. Supply Chain Technology Market – short summary

III. Two Topics to Share

IV. Your Questions & Feedback


Address some key trends that are driving today’s technology space – recognizing that career supply chain professionals lack the “nerd gene” required to keep abreast of all the topics and trends that come out of the tech world.

Share a technology decision framework for assessing and mapping your technology strategy to your business strategy

Three topics to share today --

1

2


Technology decision-making model – Fit & Duration

Most are familiar with fit. Duration is an equally important dimension to assess. Some enterprise technology choices have 10 to 15 year durations (and as we have discussed this morning, a lot can change in that amount of time).

- Solution Duration -

- S

olut

ion

Fit

-

short long

low

high

Just Say No

Explore “free”

1st Gain Confidence,

then Buy

Buy onPrice

No. Self-explanatory.

No truly available solution yet exists to meet your design. If your expected duration is relatively short (3 years or less), consider an innovation partnership where your firm trades future referenceability for a low- to no-cost solution (Note: many software firms begin this way).

You find a good solution fit, and the expected duration of this need is relatively short (3 years or less). Buy on price and then manage your risk as appropriate for the program in question.

You find a good fit. The duration of your intent is long-term (measured in half-decades or longer). After solution fit is scored, then assess: Prospective vendor’s technical architecture (e.g., Is it a

new solution built to run on SAP HANA?). Prospective vendor’s strategic investors Prospective vendor’s management team’s bios

If the vendor’s “end game” might be with a larger firm you prefer not to do business with, factor that in.

1

2

3

4

43

12


5 Significant Trends in the B2B & Supply Chain SpaceTopic Observations Players Notes

Cloud • OpEx v. CapEx• Faster Deployments, less customization (typically)• More data business opportunities

1. Salesforce2. SAP 3. Oracle4. JDA Software

- 1st profitable - M&A- M&A- Went Private to ∆

Freemium • Alternative economic streams (advertising, data)• Point-of-entry strategic design to ‘land and expand’

1. Tradeshift2. Ariba3. Countless others

- eInvoicing Platform- Apps & B2B Network- (many will fail…)

Big Data • IPO’s happening now • IBM’s smarter planet effort• ERP’s buying in via analytics & cloud

1. Tableau 2. IBM3. SAP & Oracle

- IPO in May, up 50+%- Product & Services Play- Analytics buys (Business Objects

and Hyperion, respectively)Mobile • Leapfrogging infrastructure in emerging markets

(no cord to cut)• App solutions designed for tablets rather than PCs

1. Samsung2. Apple3. Nokia

- Bet placed on Google Android- Innovation play- Microsoft buy, 9/3/13 for $7.2B

Social • Corporate “tribes” via Jive, Yammer, Chatter• Professional default is LinkedIn.com

1. Jive2. Microsoft3. Salesforce

- IPO Dec. 2011, now below IPO- Yammer, 4y/o firm $1.2B cash- Chatter solution gaining wide

adoption in their installed base

Source(s): Wikipedia.org, Yahoo Finance, Kleiner Perkins Caufield Byers, Corporate Websites, and interviews with colleagues at these firms

All of the technological shifts currently underway in the software market are going to have significant and profound application to global supply chains. The forward-thinking firms that figure out the right mix of solutions to apply in their businesses will capture significant competitive advantage.

Summary


USA Productivity Gains

Source(s): Federal Reserve, 2012; Northwestern Univ., Robert Gordon, Economist, 2012;Investors Business Daily, 2013-June-26

A fundamental requirement for the 5 trends that will ultimately take them global…

CloudFreemium

Big DataMobile

Social

Reliable, high-

bandwidth Internet

As more of Earth’s citizens acquire the same access,

entire new waves of economic productivity gains and business value creation

can and will be triggered

= total gain ~ technology impact

2004 - Today

+1.6%+0.54%

Applied to the rest of the world?2012 - 2021

= total gain ~ technology impact

2021 - 2031

? ?+3.1%

+1.5%

1995 - 2004


Global Internet access and reliability of bandwidth is driving a big adoption cycle for business and consumer

Geography 2012 Internet Users (MMs)

Additions from 2008-2012 (MMs)

% Penetration of Total Population

USA 244 +18

(vs. BRIC)

CHINA 564 +264

INDIA 137 +88

RUSSIA 70 +33

BRAZIL 88 +27

GLOBAL 2,406 +902

Sources: United Nations, International Telecommunications Union, internetworldstats.com

78%

42%

11%

49%

45%

39%

As more of the global population comes online and, as more and more businesses become connected at high (and reliable) bandwidth, new business innovations can move from the white board to the marketplace.

Relevant Takeaway:


One additional thought on the current relevance of the Duration assessment criterion -

Question Answer

How many firms in the Fortune 500? 500

How many firms in the Global 2000? 2,000

How much commerce flows annually in G2000 supply chains?

~ $12T

How many years Duration can an enterprise software investment represent?

10 to 15

Holding things constant for ease of discussion then…over the next 10 years, over $120 Trillion in commerce will be conducted in global G2000 supply chains, all of it needing enabling technologies to manage it.

Much of the previous enterprise cycle from Y2K and the subsequent supply chain innovations that came out of the business process re-engineering wave it triggered are reaching their end-of-useful-life dates…

A High-Stakes competition is queuing up – in your backyard

Framework

Market Trends

_

_CloudFreemium

Big DataMobile

Social

Contact:

[email protected]

www.linkedin.com/in/scottsykes/

mailto:[email protected]

http://www.linkedin.com/in/scottsykes/

http://www.linkedin.com/in/scottsykes/

crafting supply chain strategy - technology considerations

Technology

supply chain speed

mapping supply chain

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technology change

technology innovation

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companys business strategy

technology footprint