On the eve of the Thanksgiving Holiday here in the U.S., a holiday to look back and reflect on the blessings of family and life, it is also our time to reflect and scorecard our Supply Chain Matters 2012 Predictions for Global Supply Chains which we published nearly a year ago. Our annual process is to first scorecard the current year’s predictions before publishing our upcoming 2013 predictions during December.
Our scoring process this year will be on a four point scale. Four will be the highest score, an indicator that we totally nailed the prediction. One is the lowest score, an indicator of; what were we thinking?
In our Part One posting, we reflected on the initial three predictions issued nearly a year ago.
Our Part Two posting scored Prediction Four, focused on specific industry supply chain challenges in 2012.
In this commentary we will look back and score Predictions Five through Seven.
2012 Prediction Five: The concept for “supply chain control tower’ coupled with more leveraged use of predictive analytics will come to the forefront, but in 2012 there will be a need for vendors and consultants to focus on market education and early adoption support.
We feel very good about this particular prediction since the subject matter of supply chain control towers is gaining increased interest among supply chain and IT teams. The control tower concept originates primarily from OEM’s in the high tech and consumer electronics industry that are deeply involved in supply chain planning and fulfillment execution in a highly extended and complex network. They have come to understand that constant volatility in product demand, supply, and other unplanned events are exposing the vulnerabilities of cadence or process driven planning, execution or S&OP decision-making processes. The term itself is not one that was primarily conceived by technology vendors, but rather industry visionaries who now acutely understand that there is need to have both extended supply chain visibility and decision control of all that is occurring across the multiple tiers of supply chain and partner relationships. A control tower can become a single utility view for tracking information related to supply chain wide events, decisions and information flow. In essence, it can provide an information hub that supports two-way decision-making, interaction and extended collaboration for what is occurring and what needs to occur.
We still believe, and 2012 reinforced that supply chain control tower remains of increasing interest but the market is still in early adoption phase, with needs for continued education. This author has conducted some specific webinars and presentations directed at market education, which have reinforced the need for more emphasis on the business process and change management enablement aspects of control towers vs. the pure technology. These messages have since been reinforced by other industry analyst firms. Results of interactive surveys and customer interviews continue to reinforce high interest levels. Our prediction that technology vendors would approach this capability from four perspectives played out in 2012, with the bulk of momentum coming from the supply chain planning, response management and B2B segment. We will have more comment as we look toward our 2013 prediction in this area.
2012 Prediction Six: Cloud computing and managed services options directed at enabling supply chain business processes will continue to gain more traction.
The momentum for cloud computing technology adoption did accelerate in 2012. The reasons were a perfect storm of business forces. High business uncertainties and concerns for a global economic downturn across multiple industries have driven a reluctance to expend high levels of up-front capital. Increased vulnerabilities to major incidents of supply chain disruption have uncovered needs to quickly fix holes in extended visibility, enhanced business intelligence and more informed decision making. Cost control efforts in 2012 have turned more towards aggressive reduction in IT owned infrastructure and consequent annual operating and applications integration costs.
Technology vendors have also stepped-up and provided additional private and public-based cloud computing options across broader footprints of applications. Supply chain and IT teams have additionally come to understand that cloud computing options provide more compelling options for faster implementation and user adoption, while at the same time, eliminating needs for added up-front IT hardware while providing more options for potential applications dis-investment later, if business conditions warrant.
The acknowledgement signs to the increased market attraction of cloud computing again fueled major acquisition efforts among enterprise and ERP vendors to augment additional options for customers. The most visible was SAP’s May 2012 announcement of the intent to acquire B2B supplier management provider Ariba for $4.5 billion, which includes the real nugget, the Ariba Business Network. There were many other acquisitions focused on broader cloud computing options, too numerous to mention in this commentary.
We also heard reports from vendors and consultants that more managed services options directed at select supply chain process areas gained more attractiveness and customer interest in 2012, not only in areas such as third party logistics, order fulfillment and aftermarket services, but in some cases, mission critical defined processes such as supply chain planning and business intelligence. Again, service providers have stepped-up with broader process and deeper technology support options.
The bottom-line in 2012 was a marked increase in cloud computing and managed services market activity.
2012 Prediction Seven: Expect additional M&A and strategic partnership activity among supply chain technology, consulting services and ERP providers as vendors shore up application areas with the best prospects for sustained future growth.
This prediction was positioned as the natural follow-on to predictions five and six. As concepts of supply chain control tower, more leveraged deployment of predictive analytics, multi-channel supply chain operations management and cloud computing options gain more traction and interest among technology buyers, the vendor community would make additional market moves in either acquisition or strategic partnerships to shore up overall product offerings for buyers.
We actually went so far as to predict two smaller vendors in the planning area, and perhaps one or two players in the B2B procurement area were likely targets in 2012. We already made mention of SAP’s acquisition of B2B procurement vendor Ariba, so it looks like we got that one right. In the supply chain planning space, rather than one of the smaller, more innovative players being acquired, it actually turned out to be the largest best-of-breed SCP provider. The October surprise was the announcement that JDA Software and RedPrarie intend to merge together into a private company focused on combined planning and execution technology support. Candidly, that was not what we had in mind, but it is certainly noteworthy.
In other areas, Amazon acquired warehouse automation and advanced robotics vendor Kiva Systems, which by our point of view was a strategy to enhance Amazon’s same or next day delivery capabilities as well as lock out Kiva technology from the remainder of the market. While we speculated on significant supply chain or B2B related acquisition activity from players such as IBM, Google, Microsoft or Salesforce.com, they did not come to pass, at least in 2012. In the case of IBM, we speculate that they are continuing with integration efforts of previous acquisitions.
Thus, we will not give ourselves an overly stellar rating on this particular area of prediction. One out of four isn’t that bad.
Readers are again encouraged to share their observations regarding general predictions and what actually occurred among industry supply chains in 2012.