IDC Manufacturing Insights Theory & Practice

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Welcome to the December 2011 issue of IDC Manufacturing Insights' newsletter, Theory & Practice. This monthly newsletter examines recent events and offers opinions on key trends in the manufacturing industry, and works in synergy with the IDC Manufacturing Insights Community. This online community features discussions on topics including M2M, Sustainability, Automotive Industry Future, Cloud Computing, and Supply Chain Risk. It is designed to enable technology buyers to engage with IDC Manufacturing Insights analysts, connect with colleagues, and share knowledge and best practices. In addition to insightful articles, Theory & Practice publishes the hottest Community blog topics so you can preview the content generating the most buzz among Community users, and then visit the Community to view the most current discussions – and then join in! You can also follow us (IDCInsights) on Twitter.

SAP Influencer Summit: The Need for Speed!
By Simon Ellis

The theme of speed was prominently displayed at the SAP Influencer's Summit in Boston this week. To the degree that manufacturers are dealing with a more rapid pace of business, a number of technologies seem poised to provide some 'relief'. Indeed, during one of the keynote panel discussions at the summit, a gentleman from Heinz made what I felt to be the defining comment of the day.

Paraphrasing, he observed that his company thinks about speed on two dimensions: the speed of the initial IT implementation and then the speed of decision-making to support the ongoing business. In this context, a couple of examples from the summit come to mind:

In terms of the speed of the initial implantation, SAP has clearly taken to heart the perspective that long, drawn-out software implementations are no longer consistent with their customer's business needs. In today's rapidly evolving marketplace, how can a manufacturer possibly know; for example, what the business requirements will be for their supply chain at the end of a three year technology implementation project. SAP has responded by creating a series of Rapid Deployment Solution (RDS) modules to significantly shrink the duration of deployments. Over time, it does seem likely that some of these capabilities will migrate to the cloud, but for now the growing number of RDS modules is a positive step in the quest for greater speed.
For manufacturers, speed to support the business is both about the ability to process growing amounts of data into useful information, and then to iterate the decision-making process more quickly; SAPs HANA/In-Memory technology represents a potentially game-changing approach to solving both of these problems. For example, the impending release of a fully-functioned, HANA-enabled Sales & Operations Planning (S&OP) module is being met with significant anticipation by the manufacturing community, as a way to expand the influence of the process. Although S&OP is not the most inherently complex business process, at least not today, and the use of HANA may be viewed initially as overkill, there is little question that as the process becomes more closely aligned with demand and supply planning - and the desire to do distributed S&OP - that HANA will become a necessary capability.

Speed and responsiveness are the key priorities, from my perspective, for manufacturing supply chains in 2012 - indeed, that is the central theme of our 2012 Supply Chain predictions - and it seems pretty clear that: SAP gets it!

Click here to join the conversations in the IDC Manufacturing Insights Community.

Next Generation Manufacturing in Practice at GDS' Conference, Austin TX 2011
By Kimberly Knickle and Robert Parker

Bob Parker and I recently took part in the Next Generation Manufacturing conference hosted in Austin, TX. The theme of the conference centered on managing complexity. If this sounds familiar it's because we participated in a similar program earlier in the year in Spain. Once again, we made a distinction early in the proceedings between "complication" -- essentially waste which should be eliminated, and "complexity" -- a fact of life in modern manufacturing given the advanced products, dispersed supply networks, and multiple sales channels. The balance of the keynote and workshop sessions largely focused on how organizations can bring the right mix of people, process, and technology together to wage war on complication and turn complexity into competitive advantage. Overall delegates were optimistic (or at least 'selectively optimistic') about their company's long term prospects, but appreciated the opportunity to share challenges and strategies with their peers because success will not result from "business as usual" approaches.

After the opening session, the conference continued with discussions centered on several major topics highlighted below, including new product introduction, supply network design, sourcing, and the factory of the future.

Improving New Product Introduction Performance
This group advocated for making sure new products were fully vetted before handing over to operations. This review would include an honest assessment of the market opportunity and how well the company was meeting the need through differentiation or value. Beyond the revenue forecast accuracy, best practices were identified around several "design for x" considerations; "x" being things like supply chain, manufacturing, quality, and sustainability. The conclusion of the group was that process discipline around introduction was straightforward but performance wouldn't be substantially enhanced until the "design for x" factors were mastered. Based on the fact that our discussion in Spain was heavily centered on process discipline, it's probably worth noting that although process design may be theoretically straightforward, following through on the process is another story.

Balancing Global Best Practices and Flexibility in Supply Network Design
Similar to our conversations with European manufacturers, U.S. manufacturers are also examining the classic tradeoffs in the supply chain between service levels/availability and network cost/inventory, where decisions should be influenced by the factors that are most relevant to the business models. (See Simon Ellis' blog on this topic – "What Do I Stand For?") Critical considerations include:

Lead times
Inventory constraints
Landed costs
Sustainability
Proximity to inputs or customers
Regulatory framework (government or customer mandates, import/export constraints)
Business continuity
Market Growth
Ability to adjust

Final recommendations came down to the fact that the goal of supply network design should be a resilient and responsive economic model, with global best practices that support the ability to change and enable flexibility when necessary.

Strategic Sourcing – Empowering Sourcing Teams
The group discussed the many elements that create complexity in sourcing today - quality/consistency, talent, risk management, global footprints, and cultural awareness. (Discussions in Spain focused on accurate landed costs, linking procurement to customer demands, and understanding regulatory implications – all of which are also creating complexity in sourcing). In line with the objective of the discussion, the team came up with a prioritized roadmap:

Understand and magnify core competencies, augment where necessary.
Encourage higher levels of supplier collaboration.
Build a supplier management approach that centers on accountability.
Build and share supplier dashboards.
Assure you have well developed make versus buy decision capability.
One size does not fit all - make sure the expectations align with the supply tier.

Looking ahead, we believe manufacturers have the opportunity to improve sourcing performance through applying the traditional fundamentals (commodity management, etc.) and incorporating new, rich information sources to empower sourcing teams.

A Vision for the Factory of the Future
This topic was so popular that there were two groups that took it on. One group enumerated the critical success factors:

Factories will be embedded with (not just supported by) lean manufacturing principles.
Personnel will have real time problem solving capabilities
Change will be flexible and fast.
People development will be crucial. (One of the groups approached this factor from the point that in the plant, equipment will increase and people decrease, resulting in a need for those people to have an even greater range of skill sets).
Advanced technology (and lower cost of that technology) will raise productivity.
The factories will be networked to other factories (both the company's own and those of suppliers) to support collaboration.
Sustainability will be embedded.

These led to three recommended best practices when articulating a vision of the future factory:

Design goal is to provide a global competitive advantage
Integrated supply chain forward and backward (inbound materials, outbound finished goods)
Managed simply so that change is easily managed, with tools that make it easier to understand and interpret information visually

Quality – Creating A Successful Approach
We were pleased to see this topic get some attention, since it continues to figure highly in our field research, and the topic wasn't discussed in our Spain conference. This group of conference delegates in Austin went straight to its recommended practices:

Define and measure quality success in terms of meeting customer requirements.
Integrate and align with a leadership team but provide latitude to global/regional/local quality teams.
Ensure safety goes hand in hand with quality.

Creating Workforce Strategies
The response we witness when manufacturers are discussing workforce management Is universal; hiring, developing, and retaining a qualified workforce is no easy task. Manufacturers in Austin also discussed the use of internships, cross skills training, incentives tied to performance and skills development, and mentoring, including a mix of "reverse mentoring" that allows younger employees to teach your experienced team about those markets (and perhaps other things like using technology) while they are gaining valuable process expertise. Other recommendations included:

Expand responsibility (empowerment)
Expose young talent to work in other geographies
Appeal to and encourage the development of a more diverse workforce (including women and minorities) in all regions.
Develop cooperative arrangements with local educational institutions.
Upgrade labor (skills and capabilities).
Plug into the military pipeline of talent.

Workshops
The workshops did an excellent job of connecting to the themes of complication and complexity. In addressing complication, we saw that Lean Sigma approaches are still critical. Presentations on the program successes at Pentair, Kraft, Lenovo, and Boise Cascade reinforced this notion, but also illustrated that the approaches can be very different and should be tailored to the individual need. For example, Pentair attacked material flow while Boise Cascade took a "constraint busting" approach relative to critical operating assets.

On the complexity side, we heard from a manufacturing company that is doing as good a job mastering and capitalizing on complexity as anyone, Caterpillar. The Cat presentation really set the tone for understanding the challenges of global competitiveness and how people, process, and technology must come together to achieve strategic objectives. The people topic was a thread through all of the workshops to the point where we noticed the phrase "war for talent" was used more than once or twice. Process transformation was discussed in the opening keynote panel by both J&J and P&G - two companies that are considered leaders in mastering complexity. On the technology side, technology firms like AT&T and Cisco discussed how collaboration and mobility are improving operational performance.

Finally, we'd like to refer back to the three major conclusions we presented earlier in October:

There is a direct connection between managing complexity for competitive advantage and the use of collaboration for better decision making
Manufacturers need new models for leadership and learning, as well as finding and developing talent (influential versus hierarchical leadership, how to foster collaboration among those not in reporting line).
Manufacturers are placing a renewed emphasis on the customer and customer service and understanding what the customer wants as key to economic growth and manufacturing growth.

You'll also find some of these issues and themes woven into our Predictions for Manufacturers in 2012. To listen to the replay of our Predictions webcast, you can register here.

Let us know how you're approaching these issues. Please share your thoughts with us at our IDC Insights Community.

Click here to join the conversations in the IDC Manufacturing Insights Community.

Lifelike Progress at Dassault
By Robert Parker

One of the most challenging things a software company can do is re-platform its underpinning technology. It is a thankless job, most customers don't appreciate the long term benefits and certainly don't want the near term sacrifices of less incremental functionality. Similarly, prospective customers worry that they are getting in at the first iteration of a product which is often associated with performance risk.

History justifies the trepidation. Remember SSA and their re-platform efforts in the 1990's? Their BPCS product was the market leader in ERP and poised to flourish in the Y2K buying spree. The company's technical leadership, however, became enamored with object oriented programming and object databases, still very nascent at the time. The motives were good - the promise, nirvana really, of giving customers tremendous flexibility in customizing the applications while maintaining the ability to take regular upgrades. The actual product, several years late, was a performance nightmare and SSA lost their market lead to the likes of SAP and Oracle.

A decade later those two eventual leaders each went through their own platform pain - one in an attempt to modernize its monolithic code base onto a service oriented architecture (SAP, NetWeaver) and the other in order to bring an acquired portfolio together (Oracle, Fusion). While not without scars, these efforts were far more successful than the SSA debacle.

A hardware company that certainly knows how to take product risk is Apple. The recent passing of Steve Jobs has led to a flood of articles about his history and legacy. One thing that seems to be repeated in these articles is the notion that Mr. Jobs' evangelical leadership style created what Apple insiders called a "reality distortion field" - a culture inside of the company that tended to distort some of the market facts under the guiding principle that it's CEO could not be wrong. Fortunately, the leadership team at Apple seems to have developed some coping mechanisms that prevented this phenomenon from effecting market success.

The Dassault Context
I was thinking of these two concepts - the difficulty of platform change and reality distortion - while I attended the recent Dassault Systemes user conference.

The company's big platform bet has been V6 with Enovia as the platform center. Both specific design tools - Catia, Delmia, and Simulia - and broad collaboration tools - 3DVia, Exalead, and 3DSwYm - are connected to that platform. Enovia product management presented data showing 800 customers committed to V6 although they did not share how many were live. Although not confirmed by DS, the adoption of V6 has been slower than originally planned. And there were certainly several high profile PLM selections in traditional industry segments that did not go Dassault's way and anecdotal evidence suggests that concerns over V6 performance factored into the decisions.

As to reality distortion - it would be unfair to compare any CEO to Steve Jobs, but I am always impressed by the courage of (Dassault CEO) Bernard Charles' vision as well as his enthusiasm and energy. These attributes were in full display at the conference in Mr. Charles' address to the audience and in his willingness to walk the exhibit floor and engage the DS partner community. However, I do get the sense that his sheer will creates some reality distortion amongst his senior management when they have to come to grips with market activity and the coping mechanisms that Apple developed are not evident at Dassault.

The Dassault Future
There is no shortage of irony when a company has a reality distortion issue and their vision is around 'lifelike experiences'. All that said, Mr. Charles's belief that the geometric model is at the center of better decision making, collaboration, and product management is one that buyers should listen to. This concept is why PLM specialists will remain ahead of the ERP vendors wanting a piece of their historic markets. Bernard Charles gets this completely and is willing to commit resources to achieving the long term product objectives represented in delivering lifelike experiences.

As to the platform issue, all evidence points to situation that has fully stabilized. Early adopters presenting at the conference provided case studies that were both reassuring as to system performance and encouraging as to harvesting the benefits of a unified platform. IDC Manufacturing Insights believes there a still a number of questions to be answered including:

Will the pursuit of industry segments outside of heavy manufacturing be well conceived? At the conference we heard too many examples that involved having to 'uncomplicate' the existing product. You can't give an Aerospace interface to a fashion retailer. Despite the challenge, those same customers were very happy with the result which is promising.
Can Dassault play in broader collaboration and information management markets? 3DVia makes sense, but big data and social business products may be outside of their core competency. Not only are the products very different, they are sold to different buyers by very different account managers at very different prices. We might suggest that they incorporate keynote presenting partner Microsoft in their thinking, working some of these products within the confines of SharePoint.
Will the company forget its roots in heavy industry? Despite the attractiveness of new segments and some tough losses in automotive, DS still has a very compelling system engineering story and traditional PLM buyers understand and appreciate the value of lifelike capabilities more than others.

These are addressable questions and IDC Manufacturing Insights is confident Dassault will tackle them positively.

Essential Guidance
If you are a company looking for a modern PLM platform, Dassault has made the investments and endured the pain of platform transition that makes it a default short list candidate. If you are an existing Dassault customer, it is safe to wade into the V6 waters and likely to be productive based on the case studies we saw at the conference. One note, most the reference customers used DS services in a lead integrator position and that continues to be a recommended approach until implementations become more normalized and external consulting partners more experienced.

Overall, Dassault has shown good progress against a compelling vision and continues to deserve its status as a PLM leader.

Click here to join the conversations in the IDC Manufacturing Insights Community.

NEWS

Special Announcements:

Click here to view all of IDC Insights' Predictions 2012 Web Conferences: www.idc.com/IDCInsightsPredictionsWebcasts.

IDC Insights Predictions 2012: CIO Agenda
January 10, 2012 - 11:00 a.m. U.S. Eastern time; 16:00 GMT
The CIO Agenda Top 10 Predictions web conference was developed for CIOs and IT executives responsible for the strategies, best practices, and framework of running the business around IT. IT Executive Advisor, David McNally, will discuss the impact of trends across industries, including cloud computing, mobile device policies, social media strategies, and IT sourcing, as well as IT governance, risk and compliance. This one-hour, complimentary web conference, focused on strategies that drive innovation, will contain valuable insight for CIOs, CTOs, IT Strategists, Chief Architects and other senior IT Executives.

IDC Manufacturing Insights Predictions 2012: EMEA Manufacturing
January 19, 2012 - 9:00 a.m. U.S. Eastern time; 14:00 GMT
This EMEA-focused IDC Manufacturing Insights web conference will discuss the Top 10 Predictions in the manufacturing industry that will impact technology spending and the use of information technology in key process areas in Europe, Middle East and Africa. Web conference attendees will benefit through our latest findings and learn about EMEA IT investment trends for 2012 and urgent business initiatives impacting the budget dynamics during this one-hour, complimentary event. Our coverage includes supply chain, demand management, product lifecycle management, operations technology and sustainability in the EMEA region. Further insights will be provided into near-term issues and innovation, as well as longer-term and emerging trends. IDC Manufacturing Insights' Head for EMEA, Pierfrancesco Manenti, will be joined by analysts Craig Simpson and Lorenzo Veronesi.

IDC Manufacturing Insights Predictions 2012: Manufacturing Operations Technologies
January 31, 2012 - 10:00 a.m. U.S. Eastern time; 15:00 GMT
This IDC Manufacturing Insights Top 10 Predictions web conference promises to be an informative session discussing the impact of economic uncertainty, demand volatility, and business complexity within manufacturing operations management. This complimentary, one-hour session will outline technology trends in the areas of operations management, while providing recommendations on how operational technology can support manufacturing organizations globally to shape the plant floor IT strategies, align plant floor technology investments with business goals, optimize resources and drive critical business investments in 2012 and beyond. Pierfrancesco Manenti, Head of Europe, Middle East & Africa, IDC Manufacturing Insights will be joined by analysts Sanjeev Pal and William Lee during the web conference.

Exclusive Series of IT Executive Programs

IDC’s IT Executive Programs consist of a family of research programs intended to help today’s time-constrained IT executives make more effective technology decisions. The goal of IDC’s IT Executive Programs is to offer accurate and timely research that will assist IT executives in mitigating technology risks, maximizing the effectiveness of IT investments, identifying and capitalizing on new opportunities, and bringing forth solutions that are aligned with the organization's business objectives. The flagship offering of the series, the Executive Technology Advantage Program, includes a strategic partnership with IDG's CIO Executive Council, a global peer advisory community of 750 global enterprises and more than 1400 IT leaders.

IDC's IT Executive Programs' offerings include:

IDC's Executive Technology Advantage Program (ETAP)
IDC's senior IT advisors will partner with CIOs throughout the year to work through the most pressing agenda items. This program includes customized research as well as a personal advisor and a knowledgeable and experienced sounding board for decision making by connecting clients with IDC's 1000+ analysts and the CIO Executive Council's member CIOs for inquiries and discussions.

IDC's Industry Technology Advantage Program (ITAP)
This program helps IT executives bring forth technology solutions that are aligned with the organization's business objectives by combining industry-specific and technology-specific research together in one offering.

IDC's Global Technology Advantage Program (GTAP)
This program empowers IT executives to make better technology decisions by providing access to IDC's community of global analysts and their associated research.

For more information on IDC’s IT Executive Programs, visit www.idc.com/iep.

News Mentions

Industry Week 12/14/11
The Next Generation of Plant Mobility
Joe Barkai

Automation World 12/8/11
Collaborative Manufacturing Technologies Assessed
Catherine White

Spend Matters 12/6/11
Asian Supply Chain Intelligence From UPS and IDC: Risk and New Regions on the Rise (Part 1)
IDC Manufacturing Insights

Outlook Series 11/29/11
Asia's Manufacturers to Rely on Predictive Analytics to Counter Supply Chain Risk in 2012
Christopher Holmes

MobilityTechzone 11/29/11
Autodesk Introduces Cloud-based Product Lifecycle Management
IDC Manufacturing Insights

CIO-Asia 11/29/11
Asian manufacturers mitigate supply chain risks
Christopher Holmes

Industry Week 11/21/11
Clock-Speed Mismatches in the Modern Supply Chain
Simon Ellis

Journal Of Commerce Online 11/18/11
High-Tech Executives Expect Intra-Asia Trade Growth
William Lee

TMCnet.com 11/18/11
Oracle Debuts Agile Product Lifecycle Management (PLM) for Process v6.1
IDC Manufacturing Insights

LATEST RESEARCH

Research reports may be found by entering the Document #
in the Search box at the top of any page of our web site. Clients may download full reports after logging in.

Perspective: Lifelike Progress at Dassault - Dec 2011 - Doc # MI232005
Supply Chain World South East Asia 2011: Complexity, Cost, and Risk - Dec 2011 - Doc # AP9397223T
Perspective: Smart Technology Investments by Manufacturing Value Chain - Dec 2011 - Doc # MI231815
Perspective: Putting Applications in the Hands of Manufacturing Employees via Mobile Technology - Dec 2011 - Doc # MI231811
Best Practices: Cloud Strategies in Practice — Jaguar Land Rover Moves to Gmail - Dec 2011 - Doc # MI231758
Perspective: The Application of Cloud Computing in Manufacturing - Dec 2011 - Doc # MI231673
Asia/Pacific Manufacturing 2012 Top 10 Predictions - Dec 2011 - Doc # MI231473
Perspective: Rockwell Automation's Chicago Automation Fair 2011 - Dec 2011 - Doc # MI231752
Asia/Pacific Automotive Quaterly Update: July–September 2011 - Nov 2011 - Doc # AP9397120T
Western Europe Consumer Products Manufacturing IT Spending Forecast, 2011–2015 - Nov 2011 - Doc # MIVC69T
More IDC Manufacturing Insights Research

EVENTS

Complimentary Web Conference

For more information, visit our Events page.

Click here to view all of IDC Insights' Predictions 2012 Web Conferences: www.idc.com/IDCInsightsPredictionsWebcasts.

IDC Insights Predictions 2012: CIO Agenda
January 10, 2012 - 11:00 a.m. U.S. Eastern time; 16:00 GMT
IT Executive Advisor, David McNally, will discuss the impact of trends across industries, including cloud computing, mobile device policies, social media strategies, and IT sourcing, as well as IT governance, risk and compliance.

IDC Manufacturing Insights Predictions 2012: EMEA Manufacturing
January 19, 2012 - 9:00 a.m. U.S. Eastern time; 14:00 GMT
IDC Manufacturing Insights' Head for EMEA, Pierfrancesco Manenti, will be joined by analysts Craig Simpson and Lorenzo Veronesi.

IDC Manufacturing Insights Predictions 2012: Manufacturing Operations Technologies
January 31, 2012 - 10:00 a.m. U.S. Eastern time; 15:00 GMT
Pierfrancesco Manenti, Head of Europe, Middle East & Africa, IDC Manufacturing Insights will be joined by analysts Sanjeev Pal and William Lee during the web conference.

Meet Our Analysts at Upcoming Industry Events

For more information, visit our Events page.

Warranty Chain Management Conference 2012
March 6-8, 2012 - Orlando, Florida
Joe Barkai and Sheila Brennan will provide a keynote presentation.

Complimentary Resources

To access recordings and slides from these web conferences, visit our Archived Events page.

Balancing Demand-Side Forecasting with Supply-Side Responsiveness in the Modern Supply Chain
Major IT Trends in Western European Manufacturing Sector: Results of 2011 IDC Manufacturers' Survey
The Impact of New Vehicle Technology on Service Technicians' Safety
Exploiting the Opportunities of Manufacturing in Eastern Europe, Middle-East and Africa
2011 U.S. IT Spending Outlook by Vertical: Latest Trends and Key Priorities

To access presentations and other complimentary resources, become a member of our Community.

IDC Manufacturing Insights assists manufacturing businesses and IT leaders, as well as the suppliers who serve them in making more effective technology decisions by providing accurate, timely, and insightful fact-based research and consulting services. Staffed by senior analysts with decades of industry experience, our global research analyzes and advises on business and technology issues facing asset intensive, brand oriented, technology oriented, and engineering oriented manufacturing industries. International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world’s leading technology, media, research, and events company. For more information, please visit www.idc-mi.com, email info@idc-mi.com, or call 508-988-7900. Visit the IDC Manufacturing Insights Community at http://idc-insights-community.com/manufacturing.