Written by 11:25 am Big data supply chains, Risk management, Social supply chains

Thoughts on a Rainy Afternoon

Rain is slowly pelting on my window. It is late on Friday afternoon.  Too late….

I have writer’s block.  I have been working on the same paragraph of the fifth chapter of Bricks Matter for an hour.  It is a muddle in my mind and it is due to the publisher on March 1st.  The tail lights of commuters stuck in traffic are an endless chain of lights.  No TGIF for them.  No TGIF for me.

Like the rain pelting on my window, the news on supply chain has been a constant stream this week.  The news is diverse, but the headlines pool together–like the puddle on my porch right now–to say supply chain excellence matters.  These are the headlines that caught my attention:

An Apple on a Bad Day? 

Reporters are having a field day with the Apple/FoxConn stories.  My point of view is that Apple should take a page from Kathy Lee Gifford’s book.  In 1996, the National Labor Committee, a human rights group, reported that sweatshop labor was used to make clothing for the Kathie Lee line, sold at Wal-Mart.  At the time, Kathie Lee Gifford was a well-known television celebrity.  Her first reaction was to challenge the Labor Committee. In a tearful and angry reaction on her  show Live with Regis and Kathie Lee, she claimed that the accusations were false.

After one of Kathy Lee’s factory workers was paraded around the United States Capitol to testify about her experience working in the factory, Kathie Lee and her then husband Frank Gifford retraced their steps and tried to make amends. As sales of their products
plunged, they brought paychecks to the Hill in an attempt to pay the workers a fair wage and pledged to eliminate child labor through activism in Washington

Twenty-six years later, we have a similar story.  It is about Apple and contract manufacturing at FoxConn in China.  The story aired on Nightline’s special edition on Tuesday, February 21st.  The story has downplayed the 4 deaths and 77 injuries from metal explosions.  It also spoke too little about the 9 suicides with nineteen attempts to jump from the FoxConn building(s), but the pictures of the SUICIDE NETS will be an ever-lasting symbol.

The first reaction by Apple was to push back.  At a recent investor meeting, Tim Cook, the CEO, said:

“As a company and as individuals, we are defined by our values. Unfortunately some people are questioning Apple’s values today, and I’d like to address this with you directly. We care about every worker in our worldwide supply chain. Any accident is deeply troubling, and any issue with working conditions is cause for concern. Any suggestion that we don’t care is patently false and offensive to us. As you know better than anyone, accusations like these are contrary to our values. It’s not who we are. For the many hundreds of you who are based at our suppliers’ manufacturing sites around the world, or spend long stretches working there away from your families, I know you are as outraged by this as I am. For the people who aren’t as close to the supply chain, you have a right to know the facts.

The lesson that Kathi Lee learned in the 80s is the same lesson that Nike learned in the 1990s and it is the lesson that Apple should be learning NOW!  What is the lesson?  Apple needs to take responsibility for their supply chain. You can outsource the supply chain, but you cannot outsource the responsibility.

Social Commerce is more than a F-Word

Last week JC Penney closed their Facebook site.  They are the third retailer to publicly dismiss the importance of a commercial presence on Facebook.  The issue is that most plopped a shopping cart on a a Facebook newsfeed without understanding the basics of social commerce.  While eCommerce is about clicks, views and shopping carts, social commerce is about the intersection of the open and interest graphs, the ability to tell compelling stories and the offering of new forms of value.  Unfortunately, the extreme hype makes it difficult for companies to wade through the offerings to get to value.  However, I am excited about Payvent‘s announcement of a Klout-like score for social shopping today, I continue to be excited by 8thBridge‘s work on social platforms and I am excited to see the work that Digital Folio is doing on the “list” take shape in customer pilots. For consumer products companies this is all taking shape in Digital Path to Purchase projects. In these projects, consumer manufacturers are using digital technologies to influence the moments of truth of the shopping experience:  the decision to put the product on the list, the decision to put the product in the basket, the decision to use the product and the decision to repurchase.  This will redefine retail/customer collaboration.  So, as the news flashes about retailer X, Y and Z abandoning their social presence on Facebook, I YAWN.    Just another example of soft rain washing the window…. I am watching the big news happening in the background.

Disc Drives are a Case Study of Supply Chain Resilience in the Making. 

I am SO getting into the financial returns of the Disc Drive manufacturers following the floods in Thailand.  This is a wonderful story of why supply chain matters.  Sony, a supply chain laggard, did not have the supply chain muscle and resilience to meet the challenge. Sony’s products and services unit sales fell 24% year over year.   Sony reported: “The floods in Thailand were one of the major factors behind the significant decrease in sales and deterioration in operating results for the quarter. Several overall manufacturing facilities incurred direct damage, resulting in halts in production and the delayed launch of certain products. Moreover, the supply chain across the entire industry was impacted and the demand decreased as companies we do business with were affected. The decrease in sales and significant deterioration in equity in net income of the affiliated companies caused us the record operating loss for the quarter. ”

Western Digital did much better. The market expectation was that Western Digital would take a huge hit from the Thailand flooding.   CEO, John Coyne of Western Digital reported,   “We’ve made substantial progress in our mission to restore our manufacturing capacity in the aftermath of the historic flooding in Thailand. This is reflected in our Q2 financial performance announced earlier today, the continued ramp of our Thailand High Density Disc production capacity, and in the fact that we now have deployed alternate capacity that had  been suspended since October 10 made a difference. While much work remains to be done over the next several quarters to reach our pre-flood manufacturing capabilities, the progress is far ahead of our original expectations and is a tribute to the dedicated and effective actions of our employees, contractors and Thai government agencies, the efforts of our supply partners, and the support of our customers. “

Seagate the supply chain leader of the group with diversified operations performed despite the Thailand flooding.  Steve Luczo, CEO stated;   “The disaster in Thailand affected a vast number of individuals and thousands of businesses. Although the industry is continuing to increase output, it’s important to note that while many observers tend to believe that mid to late October was the low point of industry production, we believe the low point was closer to mid-December. Seagate’s geographically diversified factory footprint and broad supply chain provided inherent advantages that mitigated the impact of the floods to Seagate’s operations.

Although many of our external component suppliers are still working to recover their businesses and return to full capacity, we have been very impressed with the response and efforts of our suppliers who have worked tirelessly to rebound from the effects of the flooding. There are still clear challenges that lie ahead in our component supply chain. And to help address the gaps in various product lines, Seagate has worked with its customers and suppliers on aggressive qualifications of new parts and factories, allowing us to match precious supply to end demand.”

As a result, Seagate can predict its fiscal 2012 results while Sony cannot in this sector. Given the company’s improved visibility due to long-term supply agreements with all of its top customers (60% of capacity is under Long Term Contracts for the year), the company provided guidance not only for March and June but for Calendar Year 2012. In the March quarter, Seagate expects revenue of $4.3 billion (+62% year over year and a 36% improvement quarter over quarter) on expected unit shipments of 60 million (including Samsung).

Across the Pools

This week, I am speaking on supply chain excellence at the IBF conference in Phoenix and then flying to Santa Clara to speak on the topic of Supply Chain Big Data.  Will I see you there?

And, yes, I did get the 5th Chapter of the book done.  I am still on track for the August publication.  This picture of my grandson expresses my excitement!  Soon, you will be able to pre-buy it on Amazon.