Tag Archives: Supply chain

Updates from McKinsey

Taking supplier collaboration to the next level
Closer relationships between buyers and suppliers could create significant value and help supply chains become more resilient. New research sheds light on the ingredients for success.
By Agustin Gutierrez, Ashish Kothari, Carolina Mazuera, and Tobias Schoenherr – Companies with advanced procurement functions know that there are limits to the value they can generate by focusing purely on the price of the products and services they buy. These organizations understand that when buyers and suppliers are willing and able to cooperate, they can often find ways to unlock significant new sources of value that benefit them both

Buyers and suppliers can work together to develop innovative new products, for example, boosting revenues and profits for both parties. They can take an integrated approach to supply-chain optimization, redesigning their processes together to reduce waste and redundant effort, or jointly purchasing raw materials. Or they can collaborate in forecasting, planning, and capacity management—thereby improving service levels, mitigating risks, and strengthening the combined supply chain.

Earlier work has shown that supplier collaboration really does move the needle for companies that do it well. In one McKinsey survey of more than 100 large organizations in multiple sectors, companies that regularly collaborated with suppliers demonstrated higher growth, lower operating costs, and greater profitability than their industry peers.

Despite the value at stake, however, the benefits of supplier collaboration have proved difficult to access. While many companies can point to individual examples of successful collaborations with suppliers, executives often tell us that they have struggled to integrate the approach into their overall procurement and supply-chain strategies.

Several factors make supplier collaboration challenging. Projects may require significant time and management effort before they generate value, leading companies to prioritize simpler, faster initiatives, even if they are worth less. Collaboration requires a change in mind-sets among buyers and suppliers, who may be used to more transactional or even adversarial relationships. And most collaborative efforts need intensive, cross-functional involvement from both sides, a marked change to the normal working methods at many companies. This change from a cost-based to a value-based way of thinking requires a paradigm shift that is often difficult to come by. more>

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Updates from GE

Air Blockchain: This App Could Help The Airline Industry Recover Faster
By Brett Nelson – The aviation industry has weathered severe turbulence before — consider the oil crises in the 1970s and 9/11 — but the COVID-19 pandemic has inflicted damage of a different magnitude.

The number of passengers per year, on a steep climb for the last decade, has plummeted so dramatically in recent months that it looks like someone fell asleep plotting the graph: In 2020, the number of worldwide passengers will drop by anywhere from 2.3 billion to 3.1 billion — between 40% and 53% of seats offered by airlines — erasing $300 billion to $400 billion in their revenues, according to estimates in a June 5 report from the International Civil Aviation Organization.

As planes are once again getting ready to taxi down the runway, the industry is enlisting powerful new technologies like blockchain to help passengers feel safe and get to their destinations as soon as possible.

Take, for example, a new mobile application developed by GE Aviation with TE-FOOD, a company that uses blockchain to track goods moving through the food supply chain. The aviation app is using blockchain to help monitor whether planes, crews and passengers have cleared specific health and cleanliness checks before takeoff. The solution, enabled by Microsoft Azure, is available now, and demonstrations are underway with airlines, airports and industry groups.

“GE Aviation’s business model is predicated on airlines flying GE engines,” says David Havera, general manager of GE Aviation’s blockchain solutions. “Therefore we are doing everything we can to get passengers back into the air as soon as possible.”

Blockchain technology is the highly secure, record-keeping framework beneath cryptocurrencies like Bitcoin, but it has myriad other applications, too. With blockchain, companies can store and trace a virtually infinite number of digital records, as if stringing together unique chains of building blocks. more>

Updates from McKinsey

We’re not going back to the ‘normal’ we had before coronavirus
Our global managing partner Kevin Sneader joined Andrew Ross Sorkin on CNBC’s “Squawk Box” Wednesday, March 25, to talk live about the business implications of the coronavirus pandemic. The full interview is available now at CNBC.com. You can read all of our material on the crisis at our coronavirus insights page.
By Kevin Sneader – One thing is clear from all the conversations I’ve had: nothing is going to be the same. This is a new normal, a different way of operating.

I think for our clients, they’re worried about their employees, their customers, and cash—in that order. And they are worried about cash. Even in the health care sector, there are providers who are not getting paid right now, and they’re worried about cash flow just as players in several other sectors are.

Another reality they’re all dealing with is that people keep sending them scenarios as to how this could play out. The message we’re hearing is that the scenarios are helpful, but leaders are wondering what’s going to be true across all these scenarios. Because if it’s not going back to the way it was before, what’s the next normal? What’s the way in which we’re going to have to operate?

The reality is that consumer behavior is changing fundamentally, and so much else is changing, and the question is, “will it go back?” I think the answer in many cases is “no.”

If you think about a lot of what’s happened in the last few years, some of it’s going to be reinforced. The shift [to working] online has now been given a boost, and it’s hard to see that being taken back to where it was before.

At the same time, I think one of the biggest shifts will be the way that products reach us. For many years, we and others have been focused on efficiency: how efficiently can I run my supply chain? I think now there’s going to be a lot of conversation about, how resilient is my supply chain? more>

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The New Era of Sustainable Supply Chains

By Mary Page Bailey – To improve sustainability, materials manufacturers are welcoming new digital technologies and process innovations into their global supply chains

From palm oil to plastics, the global supply chains of many critical raw materials are evolving as consumers and manufacturers increasingly seek sustainable and renewable options. Digital technologies, including blockchain, Internet of Things (IoT) sensors and modeling tools, are facilitating these supply-chain transitions by enabling unprecedented data visibility and analyses. At the same time, chemical manufacturers are turning toward process and chemistry innovations to improve the sustainability of their raw materials.

Blockchain, in particular, provides many specific capabilities that are helping manufacturers realize more sustainable sourcing practices. In the plastics sector, for instance, DOMO Chemicals (Ghent-Zwijnaarde, Belgium; www.domochemicals.com) and Covestro AG (Leverkusen, Germany; www.covestro.com), along with the Circularise initiative (www.circularise.com/plastics), are partnering to implement blockchain technology to improve traceability and transparency in plastics manufacturing.

“Blockchain can be applied to many challenges in the plastics value chain, such as complex record keeping and tracking of products. Blockchain serves as a less corruptible and better automated alternative to centralized databases,” says Jordi de Vos, founder of Circularise. Blockchain provides encoded information storage on a network-to-network chain, which validates data to protect business dealings and prevents the theft or manipulation of documents – a unique combination of transparency and security.

The Circularise platform creates a digital twin of a material, component or product to build end-to-end traceability by integrating audit reports, certifications, material parameters and more. In addition to making materials traceable, Circularise aims to protect stakeholders’ privacy – the protocol is specifically developed to enable the disclosure of relevant supply-chain information without having to share sensitive data. more>

Technology For A Smarter Food Supply Chain

By Diane PalmquistInternet based solutions and cloud technology have erased many of the communications barriers that once existed in the food supply chain. The ability to track and monitor orders, inventory and shipments can be done in real-time. More importantly, the ability to shift or react to changes is greatly enhanced.

If an early cold season arrives that impacts a regional produce crop, cloud technology makes it easier and less costly to shift orders to another producer in another region of the world.

Likewise, if consumer demand spikes for corn or a particular grain, companies have the ability to react faster and order more from other suppliers by connecting through the web or the cloud.

When suppliers can simply log on and connect, the food supply chain becomes a faster, more transparent place. more> http://tinyurl.com/nd2gb3k

9 Issues Face Today’s Semiconductor Supply Chain

JB’s Circuit – While the GSA report focuses on China, the challenges apply to the global IC supply chain market.

The GSA recently released its “State of China IC Design Industry 2012” report. While primarily focused on China, the report characterizes global challenges facing the semiconductor industry.

The GSA report lists nine major changes facing the supply chain process: more> http://tinyurl.com/ap2rlac

Without A Trace

Acsis – “We are in an age when consumers are too savvy to rely on brand loyalty anymore,” said John DiPalo, Chief Technology Officer for Acsis, Inc. “People want more than just reassurances that their medicine and food products are safe.”

With more companies outsourcing for raw materials and distribution, having end-to-end visibility in a supply chain is an absolute necessity in order to ensure public safety, as well as brand protection. While branding is the proven means of gaining consumer loyalty, there is downside — the stronger the brand, the greater the risk. A global brand’s strength can become a liability overnight if tainted with a product quality issue such as a food or medication scandal. more> http://tinyurl.com/abp7pxv

What I Learned at the Cloud Computing Revolution

English: Cloud Computing

English: Cloud Computing
(Photo credit: Wikipedia)

By Alan S Cohen – The current computing model was pretty simple: your business bought the hardware and software required to run key applications, the storage devices to maintain your data, and the networks to allowed it all to flow. Today, however, there is a range of new choices, which including renting some or all of the IT supply chain.

Computing is not just important because it is a big industry — $3.8 Trillion annually worldwide. Everything else in our economy is dependent on it. Computing is inside every steak, potato and glass of red wine you eat. It’s in your car, your iPad delivered Netflix, and it’s your money. So there is a lot at stake.

Let me share 3 observations:

  • Shadow IT is Going Mainstream
  • IT Wants to Go Fast
  • It’s About the Developers

more> http://tinyurl.com/8cmcpvn

2012 Industrials Industry Perspective

FUTURE WATCH

Strategy& [www.strategyand.pwc.com] – We would like to offer our thoughts on the current business environment for industrial companies, what the future holds, and the best course forward.

Where We Stand
Call it the age of uncertainty-this post-Great Recession environment when a weak recovery and any number of troubling signs globally cast shadows on relatively strong recent profit results. The future for industrial companies is a somewhat confusing blend.

On the plus side, industrial revenues (unadjusted for inflation) in the first nine months of 2011 topped levels last seen in the peak year of 2008, and earnings in this period were up 25 percent compared to January through September 2010. Average net profit margins at industrial firms are relatively robust again: about 6 percent now, a 6 percent improvement over last year. Emerging economies drove most of this growth, as real GDP gains in developed nations slowed to a meager 1.5 percent in 2011. In addition, the Dow Jones Industrials Index was down only 5.7 percent compared to an 11.4 percent drop in the overall stock market during that period.

The bad news, though, is that there is bad news-and it can’t be easily ignored. For one thing, consumers and companies are still hesitant to spend their money-the Purchasing Managers Index tumbled in the first nine months of 2011, to 51 from 61-and unemployment remains stubbornly high. Concerns persist that a second global recession-a double dip-is increasingly possible. Perhaps even more disconcerting, no matter what happens in the developed economies, GDP growth is already slowing in the most important emerging nations.

Given this uneven blend of trends and forecasts, it’s little surprise that industrial companies have been conservative strategically. This can be seen, for example, in the pace of mergers and acquisitions. Although at the end of 2010, industrial outfits were relatively flush-cash on hand surpassed 14 percent of revenue compared to an average of about 9.5 percent during much of the past decade-the popularity of M&A has flagged recently. In the first nine months of 2011, the number of deals fell by at least 25 percent.

Instead of acquisitions, most successful industrial companies have been content to cut costs, prune their product and business unit portfolios, deleverage, and hoard cash. While that approach has perhaps put these companies in a position to navigate uncertainty, it is nonetheless a questionable tactic. Simply put, if industrial firms sit on the sidelines with their cash for too long, they may end up under-investing in their businesses and innovation-and minimizing their growth prospects.

Over the next few years, we believe, industrial companies should view the glass as mostly half-full. They should have enough cash on hand to weather a crisis or two, but more important, they should use this time to put their money to work, particularly when many of their rivals will likely be reluctant to make bold moves. In other words, this is a perfect moment for smart industrial companies to invest in developing the capabilities, assets, and strategic intelligence that allow them to achieve and sustain competitive advantage and that prepare them to take a leading position in their industrial sectors when opportunities for growth emerge.

A Capabilities Strategy
We define capabilities as the three to six distinctive strengths your company has (or should develop) to set it apart from competitors. Each capability is built on a combination of processes, tools, knowledge, skills, talent, and organization.

The following capabilities stand out as the most essential for industrial companies to develop and align:

  • Agile Product Development and Strong-Form Product Management
    Product life cycles are decreasing as the pressure of competition and technology breakthroughs drive frequent product upgrades, if not entirely new offerings.
  • Cost Fitness
    Through top-down, across-the-board budget cuts of, say, 5 percent or more a year, operational expenses may be trimmed to the bone, but to what end?

Supply Chains
Decades of relentless focus on cost cutting have left industrial supply chains vulnerable to disruptions like the earthquake.

Information Technology
In the industrial sector, IT has typically been viewed as a cost to be managed and minimized. But that’s not viable anymore.

Digitization Strategies
Rapid advances in new digital technologies offer industrial companies a wide swath of tools that can be used to take advantage of new opportunities ranging from improving equipment productivity to customer data management and analysis.

Winning the Talent War
Despite high unemployment rates in developed countries, the supply of skilled workers who can engineer, design, sell, and service industrial products is meager at best.

Developing the BRIC Markets
The BRIC economies may be slowing a bit, with less than 7 percent GDP growth forecast through the end of 2012, but for many industrial companies they represent the best opportunities for growth.

We would welcome the opportunity to hear your thoughts about the year ahead. ™¦

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