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What SAP SCM Users Can Expect in 2013 (Q&A with Bob Ferrari)

by Dave Hannon

December 21, 2012

By Dave Hannon

This year was quite an eventful one for SAP in the area of supply chain. From the integration of 3D Right Hemisphere’s 3D visualization technology to the close of the Ariba acquisition, SCM was a hot spot in the ecosystem this year and 2013 looks even hotter.

To get a better handle on what to expect next year in SCM, I recently spoke with Bob Ferrari (@bob_ferrari), Managing Director of the Ferrari Consulting and Research Group LLC and Founder and Executive Editor of the Supply Chain Matters Blog. Following is an edited transcript of our interview.


Overall, what were a few of the SCM highlights you saw in 2012, particularly as it concerns SAP users? Did anything grab your attention in terms of products, functionality, etc.?

From my lens, 2012 for SAP Supply Chain Management was a transition year, a preparation for what may yet come.  We heard announcements related to the potential of SAP HANA technology applied to SAP applications and business intelligence, and SAP has recognized that HANA technology can profoundly leverage existing and future SAP Supply Chain technology. For example, the long anticipated Sales and Operations Planning, Powered by HANA application has huge potential for SAP users, provided SAP can accelerate on a healthy listing of promised functionality.

On our Supply Chain Matters blog in in previous conversations with SAP Supply Chain Management executives, we have urged that SAP prioritize the application of HANA technology across areas of SAP APO, Supply Chain Response Management and Supply Network Collaboration.  With the prior release of Supply Chain Response Management by Icon-SCM, the SAP supply chain user community have the potential to leverage some interesting what-if decision support capabilities, and we’re looking to SAP to broaden the integration to the other existing applications in the suite, especially SAP APO.

In the specific area of supply chain wide business intelligence, SAP’s acquisition of Right Hemisphere is providing enhanced visualization tools and has tremendous potential in helping users quickly analyze large volumes of supply chain planning or execution data and insights. 

Finally, the SAP announced acquisition of B2B procurement services provider Ariba was billed as providing breakthrough benefits in managing information and decision-making across the broader B2B supply chain.  We’ll be looking for SAP to quickly and adroitly rationalize existing functionality across both the existing SCM and SRM suites and provide the SAP Supply Chain Management community a cohesive and well understood articulation of future direction and product roadmapping.

There are signs of the U.S. economy improving, but there’s still a fair amount of economic uncertainty around the globe today. From a supply chain management perspective, what are some of the key challenges coming to SCM professionals in 2013?

This is a very timely question for the global SAP Supply Chain Management user community. In our 2013 Top Ten Predictions for Global Supply Chains, we predict a highly uncertain global economy. Europe and Japan have already been declared recession economies while China deals with the effects of constrained global demand and somewhat lower GDP growth.  While the U.S. economy could be a standout, the current threat of the ‘fiscal cliff’ could change that scenario rather quickly.

The implication is that supply chain teams must be able to both forecast and sense product demand in much more granular dimensions, including geography, country, and even regions within a country.  The same concepts apply to the global supply aspects of industry supply chains. Global commodity costs should contract, but uncertainty caused by unprecedented global climatic events (earthquakes, flooding, storms, drought) and ongoing tensions in the Middle East could once impact industry supply chain costs. 

In our view, supply chain organizations must embrace and augment capabilities surrounding resiliency and responsiveness in 2013, or deal with the consequences. For the SAP SCM community, I believe that implies a greater emphasis on more predictive decision-making in people, process and technology dimensions. Rather than drowning in all types of data, there will need to be a more concerted emphasis on mining supply chain wide intelligence and insights, with an emphasis on capturing more insightful supplier and customer data.

The overall consumer experience is a hot topic, including expectations of faster purchase-to-delivery for online purchases. Did this have major implications for SCM in 2012, and how do you foresee this trend impacting SCM moving forward?

Once again, the empowered online consumer made a significant impact across most all B2C supply chains in 2012.  The notions of what is often described as Omni-Commerce, the ability of consumers to both shop for goods and services and expect delivery across multiple channels continues to disrupt the traditional notions of retailing and online customer fulfillment. The leveraged use of social media for generating product promotional programs and sensing real-time consumer preferences is also having a profound impact this year.

The major implications for B2C supply chains came in dimensions of SKU proliferation and rolling demand windows that tested available and capable-to-promise as well as a new mandate, the ability to optimize the right level inventory investment across various fulfillment channels.  As an example, in the 2012 holiday buying surge, many major brick and mortar retailers have unveiled online fulfillment programs that can utilize certain physical stores as fulfillment or customer pick-up sites. In order to differentiate themselves, traditional retailers demanded unique stocked products, which forced suppliers to once again deal with the effects of SKU proliferation.  Both Amazon and Wal-Mart deployed premium, same day fulfillment options to entice consumers and Amazon has been rolling out same day pick-up lockers located in retail, convenience and other outlets. FedEx and UPS have invested in extraordinary efforts to insure that the ‘last mile’ delivery of online purchases presents consumers with enhanced visibility and residential delivery options. While all of this was occurring, super storm Sandy slammed into the U.S. east coast and provided significant inbound supply disruption for retailers.

The implication of these trends is that SCM teams can no longer afford to treat planning and execution processes as different, and that these two processes must come together as a synchronized set of resource planning and customer fulfillment capabilities.  Integrating information across the extended supply chain and driving deeper levels of supplier and logistics trading part ner collaboration are also new table stakes in the world of Omni-Commerce. 

Eight years ago, when I was a member of SAP Supply Chain Management, we articulated the vision of “The Adaptive Supply Chain” the ability to sense and respond to supply chain unplanned events or disruptions. That vision is now the visible challenge across many industry supply chains, and IT developers must respond by providing the operational technologies to make supply chains more adaptive and responsive.

Looking back on SAP’s acquisition of Ariba, have you seen any unexpected developments in the months since the deal was signed? And with 2013 Ariba’s first full year as an SAP company, what can SAP users expect in 2013?

That’s a difficult question to respond to right now, since the details of the Ariba acquisition and an integrated SAP roadmap have yet to come to full light. On the one hand, SAP moved rather quickly to close on this acquisition in the fall. SAP, in our view, made a wise decision to maintain Ariba as an independent entity, allowing both SAP and non-SAP users the flexibility to evaluate the use of Ariba technology and B2B marketplace services independently and in a context of a future set of more SAP centric offerings.

At this point, we think SAP users are looking for a product roadmap that provides both a context of combined B2B and SRM capabilities and manageable options for later selection.

SAP customers continued to make investments in cloud and mobile solutions in 2012. What will this mean it the SCM space for 2013 and beyond?

The SAP community is making investments in cloud and mobile solutions because they are compelled to do so by existing business needs. Our supply chain world is very much global, and supply chain teams find themselves to and from many geographic regions. Thus, the ability to have access to supply chain business process information or the capability to make decisions or provide approvals on the go are now an essential requirement. In the current environment of high economic uncertainty, cloud computing options provide additional options for controlling costs or avoiding high up-front capital investments in additional IT infrastructure.

In 2013, technology vendors like SAP will have to address specific concerns about security of data in the cloud as well as the language of service agreements that do not provide clear responsibility related to whom owns the security of data in the cloud, as well as service commitments for any unplanned outages. For the SCM space itself, look for even more options in cloud based buying options.

Is there anything we should be on the lookout for in the SCM space in 2013 that we haven’t discussed?

In my view, one other development to look out for in 2013 is the need for stepped-up efforts in mitigating the current existence of counterfeit or ‘grey’ market products across industry supply chains.  This area has been an ongoing challenge for many industries and in 2012, incidents became ever more visible and costly, particularly in the pharmaceutical industry. We witnessed highly visible incidents of counterfeit life-saving drugs transported across global supply chains while legislative bodies across the globe are voicing increased concerns and calling for stepped-up efforts to stop the flow of counterfeit products in regulated and other supply chains.  U.S. and other enforcement agencies have been escalating efforts to combat illegal trafficking involving prescription drug abuse, which has ensnarled legitimate supply chain players up and down the pharmaceutical supply chain. In 2013, pharmaceutical supply chains must also begin active efforts to prepare for mandatory genealogy or item tracking mandates among various co untries and state governments.

Another area of building concern is increased incidents of food contamination, which has led to the granting of governmental oversight agencies the ability to mandate product recalls if there is a discernible health risk for consumers.

These developments lead to a renewed emphasis on the ability to track and account for goods throughout the supply chain as well as renew efforts to achieve cost-effective item-tracking.

SAP has provided many product initiatives addressing the support of item level or other product genealogy tracking and these capabilities will be important for many SAP users to evaluate in 2013 initiatives.

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