Crafting Supply Chain Strategy - Technology Considerations

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Penn State Center for Supply Chain Research - Fall Conference gathering of the Supply Chain Leaders Forum. Main session presentation shared with leading global supply chain executives. Provides guidance and insights to leaders crafting supply chain strategy with respect to enabling technologies and software solutions.

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  • 1. Supply Chain Leaders Forum Crafting Supply Chain Strategy How Technology Trends influence strategy formulation and execution Center for Supply Chain Research http://www.smeal.psu.edu/cscr Presentation Date: 2013 September - 05 Todays Speaker: Scott R. Sykes www.linkedin.com/in/scottsykes/

2. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 1 Agenda I. Context II. Supply Chain Technology Market short summary III.Two Topics to Share IV.Your Questions & Feedback 3. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 2 10 08 01 $0 $99 95 Context technologys impact over the past two decades (just one example from the academic world for today) 1993 2003 2013 Britannicas 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 Microsofts 93 innovation to cut in half Britannicas two-century old business (that lacked a serious competitor in its own industry) Microsofts 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 4. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 3 Your companys 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. 5. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 4 Todays 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. Todays 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? 6. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 5 The best supply chain technology solution you identify for todays 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 100+ technology buys since the turn of the century 80+ technology buys since the turn of the century This market reality has implications for the crafting of your firms technology investment strategy (to enable corporate strategy and/or supply chain strategy). 7. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 6 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 8. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 7 Agenda I. Context II. Supply Chain Technology Market short summary III. Two Topics to Share IV. Your Questions & Feedback 9. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 8 Address some key trends that are driving todays 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 10. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 9 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 - -SolutionFit- short long low high Just Say No Explore free 1st Gain Confidence, then Buy Buy on Price 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 vendors technical architecture (e.g., Is it a new solution built to run on SAP HANA?). Prospective vendors strategic investors Prospective vendors management teams bios If the vendors end game might be with a larger firm you prefer not to do business with, factor that in. 1 2 3 4 43 12 11. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 10 5 Significant Trends in the B2B & Supply Chain Space Topic Observations Players Notes Cloud OpEx v. CapEx Faster Deployments, less customization (typically) More data business opportunities 1. Salesforce 2. SAP 3. Oracle 4. 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. Tradeshift 2. Ariba 3. Countless others - eInvoicing Platform - Apps & B2B Network - (many will fail) Big Data IPOs happening now IBMs smarter planet effort ERPs buying in via analytics & cloud 1. Tableau 2. IBM 3. 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. Samsung 2. Apple 3. 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. Jive 2. Microsoft 3. 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 12. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 11 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 Cloud Freemium Big Data Mobile Social Reliable, high- bandwidth Internet As more of Earths 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 13. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 12 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: 14. Prepared for Penn State Center for Supply Chain Research Supply Chain Leaders Forum, 2013 September. 13 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 thenover 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 15. Framework Market Trends _ _ Cloud Freemium Big Data Mobile Social 16. Contact: scott@scottsykes.com www.linkedin.com/in/scottsykes/

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