Supply Chain Data and the Cloud

A couple days ago I commented a blog entry titled “Top of Mind – Data in the Cloud”. Unfortunately, the discussion moved into an other direction, focusing on the government data available in the cloud.

I believe however, the debate is much larger. It is one thing to use cloud computing to augment computing capacity, it’s another to put company data in the cloud. Indeed, such data is maintained in systems that are open to the internet, often in a “multi-tenant” database. Rightly or wrongly so, there are security concerns regarding such approach. These security concerns have multiple origins:

• Can an external party get access to the data, either during transfer between my own systems and the cloud service, or when the data is located in the service itself. Most cloud service providers do not document their levels of security so no information is available on how the data is actually protected.

• To provide 99.95% uptime, the cloud service providers need to replicate the data in multiple locations to ensure operations when the original site goes down. This happened to Amazon earlier this week. If I decide to remove the data from the cloud, what guarantee do I have that all instances of the data are removed?

• Where is my data located? I know that question goes straight against the concept of cloud services. Unfortunately legislation such as the US Patriot Act makes my data vulnerable as it gives legal access to US law enforcement. Some countries also force data to reside within their own boundaries.

• I expect my data to be backed up as part of the service I receive. Here again, what happens to that data is unclear.

So, let me be provocative for a moment. Does my data really needs to reside in the cloud, or could I use cloud services to give me the appropriate compute power to analyse data that reside in my own systems. The data would then only reside transiently in the cloud, as part of the execution of my programs, and then be destroyed when my VM machine is released.

I could envisage that partners in a supply chain ecosystem each maintain their portion of the data under their responsibility, and only transfer the necessary data when requested by the cloud. In doing so, I avoid the headaches described above. Let me know what you think.

NCY27SDJYBS3

NCY27SDJYBS3

Supply Chains in the Cloud

I don’t know what my customers have these days, but I spent an exhausting week hopping all across Europe to have discussions around the “cloud” subject. It’s the most overhyped subject I have seen in a long time. And many people are lost. They keep hearing these wonderful benefits, not realizing there are a couple things in the fine prints. So, I spent quite some time pointing out the darker side of things. Not that I’m against cloud, I just believe its not mature yet and should be looked at with some caution.

Let me give you an example. You subscribe a cloud service from acme.com. They deliver this great business process you want to implement, they maintain your data, promise you backup and high availability etc. And all of that for a ridiculously low price. OK, you cannot personalize things, but you know what, for the price you’re OK to use the standard they set up. So, everything is blue sky, isn’t it?

My answer is “maybe, maybe not”. Acme.com tells you they deliver you all that, but are they the ones who deliver, or are they calling on other people to do this for them? That’s the fundamental question to ask. Unfortunately most of the time you will not find that information on their website. This is what I call the Cloud Supply Chain.

In the cloud we should do what we do in the real world, assess the potential risks related with the suppliers that are part of this supply chain. We first have to know who they are. Asking the question is critical, as the answers will not be provided automatically. Once the partners are known, assessing their quality, their business robustness etc. should happen exactly as in the procurement world. These people are suppliers of your suppliers. They should be included in your list and the risk procedures you have in place should apply to them too.

I have the feeling we are trusting cloud providers way too much,. It looks like they cannot do wrong. We actually shouldn’t.

Resistance to Change

We regularly hear about resistance to change and how this limits companies ability to innovate. Rarely we experience it directly. Today, I was confronted to it, and pretty directly.

I was presenting on how Cloud Computing could be used in the Manufacturing industry, giving a pretty balanced view of what cloud could do and what potential pitfalls needed to be avoided. I have been doing these presentations for the last six months, updating them regularly to ensure I am always in synch with the latest status of affairs. It’s actually quite a work as the space keeps moving pretty fast.

After my initial slides describing the problem cloud tries to address, and the description of the US federal government definition I tend to use, I moved on describing what works (elasticity, provisioning, location independence) and where the jury is still out (security, data protection, service availability, SLA). That’s where the questions started to fly. E-mail information is more confidential than ERP, so why would you want tom put it in the cloud? European privacy laws limits the possibility of using Salesforce.com. I did not keep track of all the questions, but, although each of them was very relevant in its own right and worth a discussion, they all went in the same direction.

I got confirmation of my suspicion when, after the meeting, our key sponsor asked us to help him getting the IT management on board.

Like in many companies, top management understands IT needs to transform itself. The business people are expecting more from IT. But the IT people are afraid for their job, they fear getting outsourced. I told our sponsor something very simple. If you feel a change is imminent, make sure you are part of the team that plans it, at least you can plan a role for yourself in the new model. If you just keep resisting, you will definitely be part of the team that will be let go, or, to use a venture capitalist term, will be value captured. To me, this sounds like good judgement, I am just astonished it’s not more widely understood. How do you feel about it?

Put yourself in the shoes of your suppliers

In a previous post, I talked about the need increased partnerships with suppliers, particularly in times of recession. I mentioned the difference in approach taken by Japanese and western companies. But how do we change our approach? What do we do differently? Do we just blame the procurement department, or are we ready to do something about it?

Before arguing what we could do, let’s put ourselves in the shoes of our suppliers. I believe we can all quickly summarize what we expect from them. We want assurance of supply, flexibility, and obviously all of this at the best price and with the highest service. And by the way, we want the latest and greatest products, we want innovation and we want them to be predictable. We absolutely hate surprises.

But what‘s in the suppliers mind when they deal with us. Actually many of us know the answers because we also are suppliers to other companies. And what are we asking ourselves in such situations? Well let’s sum up a few:

• Can I make money in this deal?

• Am I in it for the long run?

• What’s the risk of being dumped in the next round of negotiations?

• How much extra discount will I have to give?

• Do I have enough visibility of what the customer is requiring to be able to anticipate the demand?

• Can I trust those guys to understand I also need to be successful?

Those are very good questions any business person should ask. But do we keep them in the back of our minds when we sit at the other end of the table. Are we looking for a “win-win” situation? Maybe we should get our sales teams talking to our procurement guys.

Now, you can argue that the only thing you are interested in is getting the lowest price as you need to make money. You have a point, and as long as everything works fine, you will get the benefits. But in case of shortage, who will first be dumped by the supplier? Is it the customer where he makes good money or the one that doesn’t profit him? Well, you probably know the answer. You also know your frustration if you happen to be that customer.

If you are interested at pursuing your thinking around collaborative sourcing, you might want to read an extract here.

Do you agree with me, do you recognize yourself in what I just wrote? Give us your feedback. By the way, in the next post, I will review how the supplier participates in building a more resilient enterprise.

Copenhagen and the Supply Chain

If you haven’t heard of Copenhagen and the Sustainability Conference over the last months, you were probably not on planet earth. Fiver more days prior to its start.

An interesting article in my local newspaper attracted my attention. If you happen to read French, you might want to take a look here. It’s entitled “The enterprise has everything to gain…”. A good climate plan will create jobs, products and markets. But what is a good climate plan, well, a member of the Belgian Enterprise Federation responds and highlights 10 key points I’d like to share with you today:

1. A level playing field, balancing the efforts between European enterprises and the ones in other parts of the world.

2. A global Carbon Market fixing one price for carbon for all sectors, allowing companies around the globe to develop their activities under similar conditions

3. Innovation is required to progress technology

4. Increased flexibility in accepting and implementing new technologies to reduce greenhouse gasses quickly

5. Industry should not be the only one to contribute, transport, agriculture, households and governments should each do their part

6. Improved energy efficiency has to be seen as one of the key solutions to address the problem

7. An optimal energy mix, including traditional, renewable and nuclear energy, has to be deployed

8. All large GHG emitters have to establish clear and measurable/controllable objectives.

9. All countries, with the exception of the least developed, need to participate in this effort

10. Intellectual Property needs to be protected to allow/facilitate technology transfer

The greenest energy is the energy that is not used, says Jean-Pascal van Ypersele the vice president of the Intergovernmental Panel on Climate Change. I’d take the liberty to add it’s also the cheapest one. So, why do companies not focus more on improving their sustainability, ultimately it will allow them to save money, isn’t it?

However, limiting the approach to the company is not enough, redesigning the supply chain, reducing and optimizing transport, has a tremendous result. What are we waiting for?

H1N1 and its impact on the Supply Chain

If you haven’t heard about H1N1, you probably haven’t been on planet earth the last 6 months. Today, I ran into a blog from Bob Ferrari, titled “H1N1 Vaccine Supplies: Fixing Supply and Demand Imbalances”, and I could not resist commenting. Actually the virus may strike twice.

Pharmaceutical companies are frantically working at making and delivering more vaccine. According to the World Health Organization, the vaccine is still in short supply. In the mean time, in many countries, the peak of infection is over. But obviously, a second one may arrive in the new year, so we are heading for an interesting winter. Delivering the available vaccine to the countries in greatest danger, is what any supply chain team would do. Unfortunately this is not what’s happening in the current circumstances, resulting in plenty of vaccines available in some countries where its safety and effectiveness is put in question, while other countries, greatly affected by the virus, are unable to respond to demand. When will we be open for a fair distribution?

But that’s not the only effect. Let’s assume the virus comes back and hits a large population. Has anybody thought about what effect this will have on production and supply chain? Factories will have to reduce their capacity, and supply will not be able to address demand. In the current, globalized world, we will have to explain to customers in country A they cannot buy their favourite products due to an outburst of the virus at the other end of the planet.

They will probably ask why we have not planned for that, and they actually may be right. How many companies are planning for such events? I have not heard many.

Now is the time to rethink about this method, called Scenario Planning, originally invented by Shell. Apply it to the current situation and imagine 20, 30 or 40% of the workforce employed in your current supply chain is home with H1N1. What are you going to do, how will you supply your customers, and how can you prepare for this?

If the scenario ever happens, you will be able to continue deliver, and I’m sure potential customers will spot that. They may even come over to you. A disruption always provides opportunities. So, H1N1 may be one, and Scenario Planning may help you benefit from it.

Operate a Global Supply Chain during a Recession

For nearly one year, we keep hearing the term recession. The fundamental question is whether it’s over or not. Not many of us are looking how to manage our supply chains during this period, trying to do the best under these circumstances.

Last week I was in Kuala Lumpur and Singapore and had the opportunity to discuss this subject with several Asian CIO’s. Most of them had gone through a rough year where budgets have been cut due to reduced business. Top of their agenda were three objectives, reduce costs, increase revenues (which in a downturn means taking market share away from the competition) and mitigate risk.

As Martin Christopher from Cranfield pointed out a number of years ago, “Companies are no longer competing with companies, but supply chains with supply chains”. Looking at the end-to-end supply chain is critical to address those three objectives. I argued companies need four key elements to truly operate an effective supply chain: visibility, responsiveness, collaboration, and risk management. I’d like to address these points in a series of blogs I hope to post over the next couple weeks, but before that I’d like to emphasis the importance of operating as an integrated supply chain.

Let me take a practical example. The Japanese invented the concept of “lean”, and worked a lot at making their factories and operations lean. But in their traditional, collaborative manner, they worked at the same time to help their suppliers and partners to also become lean. While having the end-to-end supply chain in mind, they also look at developing a collaborative relationship with their partners. The whole supply chain quickly became lean, despite the fact each company was focused on its own operations. I believe this to be one of the key reasons of the success of companies such as Toyota and others.

European and American companies have taken a different approach. Yes they have been working hard at making their factories and operations lean. They learned all about it from the book “The Machine that changed the World”,  but they often became lean through pushing the “waste” up and down the supply chain. Unfortunately, we, as the end consumer have to pay for the waste, regardless of where that waste is along the supply chain. The lack of close relationships with their suppliers, and of visibility of what happens across the supply chain, did not allow them to spot the problem. They keep asking themselves why they cannot make a given product at the same price point as their Japanese counterparts. To solve the problem, they outsource manufacturing to Asia, to take advantage of the lower labour costs, but do not realize they have not solved the real problem. As manufacturing costs increase in Asia, they will be confronted with the same issue, except if they take notice, and change their approach.

I used this argument in the discussion and was actually surprised how much agreement I got from the audience. To me this sounds obvious, but it seems many companies have not thought about it, nor have they looked at how they could address the issue and improve their competitiveness.

In the next post I will discuss the importance of a win-win collaboration for the success of the relationship.

Using IT to make the Supply Chain Green

In one of my previous posts, I referred to the WWF report “The potential global CO2 reductions from ICT use”. Last week I had the opportunity to talk to one of my colleagues who collaborated with the WWF in this report, and we started a very interesting discussion on the use of IT to reduce companies’ effect on the environment.

IT consumes 2% of the world energy, and although it is important to reduce that one, there are the other 98% and according to the report, 37% comes directly or indirectly from the industry. Our topic of discussion turned around how we could use IT to help reduce this amount. There are three clear areas that we came up with, first, the manufacturing process itself, second transportation and third the use and recycling of the product.

I remembered a conversation a couple years ago where somebody told me a CPU chip would go two or three times around the world prior to being delivered as part of a computer at your doorstep. Frankly, is that really needed? Could we use simulation software to optimize the manufacturing process, ensuring that, while maintaining the lowest possible cost, we can reduce the CO2 emissions. To do this however, we would need information from the players in our Supply Chain to understand why things are done the way they are. We will probably realize that many of the situations are historically grown and that there is no real rational for them. We will encounter the “we’ve always done it that way” syndrome. Analysing things, understand what makes sense and what not, not only reduces the environmental impact but often also cost. So two reasons for taking the time to gather the data, analyse it and improve.

 Many of our factories are automated today, and they use MES (Manufacturing Execution Systems) to understand and optimize their operations. But those systems do not take environmental concerns into account as they exist today. This is another area we should work on.

As part of research for a greener IT, HPLabs has focused on effective cooling methods for computers and racks. In doing so, they managed to reduce the energy usage by up to 40%.  Now, many manufacturing processes require to be cooled. Could some of the approaches developed by HPLabs being used for those processes? Although there is no clear answer today, it’s worth asking the question and looking at potential opportunities for piloting. Now, you may argue this has little to do with IT directly, and you are right. However, if it helps, that’s the most important isn’t it.

At HP we are using a design for the environment (DFE) approach in product development, identifying the actual implications of the product under development to the environment. Simulations during the process allow us to anticipate future consumption and other key data items. Here again, IT can help understand what is required to develop a loc carbon product.

I realize I have only scratched the surface here, but am looking at your inputs and ideas. This subject will be core and center in conversations between manufacturers in the near future, so let’s prepare ourselves.

The Price of Oil changes Behavior

Last year, the price of oil was discussed every day in the news, these days it’s all about the A H1N1 flew, there is barely a word being said about the cost of the barril. Have we for good forgotten about it, or will it come back? Well, if we look at this figure, we may be confronted by the same issues in the near future. I found a text I wrote a while ago back, and would like to share it with you as it reflects interesting implications of oil price increases.

About one year ago I was traveling through Asia, which gave me ample time to look at CNN. One morning the TV in my hotel room was providing background noise as usual, when I got attracted by an interesting piece of information. There was a Thai farmer plowing his land using buffalos and explaining to the camera he had to do this because of the price of oil. He could no longer afford the cost of running his tractor as this would make his whole operation unprofitable. I remembered two other pieces of data I heard a couple weeks before. One morning on a local radio, the commentator was reporting that French monks were getting a lot of publicity because they used the fermentation gasses from their cheese factory to heat the water for their abbey. This simple fact was receiving national and international publicity.

It also reminded me of a discussion I had with a friend who spent his whole active life working for a petroleum company. He was pointing out to me how much petroleum based products were at the center of our lives and told me that our hospitals would be empty if we did not have petroleum any more. Syringes, tubes, Baxter bags, and many other consumables used by hospitals are using plastics from the petrochemical industry. That also applies to clothing, and too many other areas of our life.

The question I am asking myself, thinking about all of this, is what we are doing today to replace the petroleum industry with other sources. Yes many people are discussing about energy, using biofuel, wind, solar etc. to generate electricity, and far from me to say this is not important, but there is a completely different area in all of this, and that is the use of petroleum to make substances that are going into our products.

Do we actually know how much our products are dependent on petrol? It is actually getting important to gain that understanding and knowledge as the price of petrol will sooner or later affect the cost of our product. As oil reserves get smaller, which may not be tomorrow, companies will increasingly look at other types of substances and sources of energy. Yes, we may still have time, but developing new technologies takes a long time, so we better get started quickly. Up to a certain extent, the high price of the barrel of oil is a wake-up call for our industry. Let’s borrow a page out of the history of Brazil, who after the 1973 oil crisis developed alternative sources of energy, in their particular case biofuel. It took them nearly 20 years to get the technology fully mature and price competitive. But they were ready well in time for the present crisis.

Not only did this allow them to be prepared, it also fueled their industry, as there is currently a lot of interest in these “new” technologies. Similarly, Denmark has become an expert in wind turbines. Let’s hope the current oil price is the trigger of more innovation, to fuel our economies moving forward.