Supply Chain Leaders Forum Crafting Supply Chain Strategy

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

Agenda I. Context II. Supply Chain Technology Market – short summary III. Two Topics to Share IV. Your Questions & Feedback Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 1

Context – technology’s impact over the past two decades (just one example from the academic world for today…) ‘ 01 The gift and curse (? ) of technology innovation is the pace and frequency of change – both from a business and a personal perspective -- ‘ 10 $0 ü It took two years for Microsoft’s ‘ 93 innovation to cut in half Britannica’s two-century old business (that lacked a serious competitor in its own industry) ‘ 08 ü Microsoft’s new business only lived for 15 years itself (and they were not impressive years at that) ‘ 95 $99 Britannica’s unit volume falls >50% from its peak year (1990) Technology innovation disrupts business “as usual” 1993 2003 Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 2013 ü While Wikipedia had a shaky beginning, it is now relied upon daily by businesses, students (and even scholars) Implications for us… 2

Your company’s business strategy should [1] inform the creation of your supply chain strategy, strategy and [2] the selection & deployment of supporting and enabling technologies to make it happen… • 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…” Rollin Ford, CIO, Wal-Mart 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. Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 3

Today’s topic: How to enable strategy with technology Today’s other topic: How to navigate change (and select technologies for your strategy) against a backdrop of high uncertainty Remember these? Ø Change and uncertainty are the constants we face today. Ø Technology is both a driver of the challenges brought by change and a source of remedy for managing through it. ü Technology fuels change in many ways ü In degree… ü In pace/frequency… ü In our business lives… ü In our personal lives… Ø Strategies must be set against this uncertain technology backdrop, and Ø 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 Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 4

The best supply chain technology solution you identify for today’s 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? 100+ technology buys since the turn of the century 80+ technology buys since the turn of the century 40+ technology buys since the turn of the century This market reality has implications for the crafting of your firm’s technology investment strategy (to enable corporate strategy and/or supply chain strategy). Source: Wikipedia. org Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 5

In 2012, roughly half of the SCM Software Market ($8. 3 B) was concentrated in four companies -Company 2012 SCM Revenue 2012 Market Share $ 2, 040. 4 24. 6 % $ 1, 453. 3 17. 5 % $ $ 426. 0 160. 1 5. 1 % 1. 9 % 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. ” “Rest of Market” $ 4, 216. 0 50. 9 % Pursuing a multi-year strategy with a short-lived partner presents risk Source: Gartner, 2013 -May Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 6

Agenda I. Context II. Supply Chain Technology Market – short summary III. Two Topics to Share IV. Your Questions & Feedback Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 7

Three topics to share today -- 1 Share a technology decision framework for assessing and mapping your technology strategy to your business strategy 2 Address some key trends that are driving today’s 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. Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 8

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). 4 § Prospective vendor’s technical architecture (e. g. , Is it a new solution built to run on SAP HANA? ). § Prospective vendor’s strategic investors § Prospective vendor’s management team’s bios high 1 st Gain Confidence, then Buy - Solution Fit - Buy on Price Explore “free” 3 4 2 1 If the vendor’s “end game” might be with a larger firm you prefer not to do business with, factor that in. 3 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. 2 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 lowto no-cost solution (Note: many software firms begin this way). 1 No. Self-explanatory. Just Say No low short - Solution Duration - long You find a good fit. The duration of your intent is longterm (measured in half-decades or longer). After solution fit is scored, then assess: Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 9

5 Significant Trends in the B 2 B & Supply Chain Space Topic Observations Players Notes Cloud • Op. Ex v. Cap. Ex • Faster Deployments, less customization (typically) • More data business opportunities 1. 2. 3. 4. Salesforce SAP Oracle JDA Software - Freemium • Alternative economic streams (advertising, data) • Point-of-entry strategic design to ‘land expand’ 1. 2. 3. Tradeshift Ariba Countless others - e. Invoicing Platform - Apps & B 2 B Network - (many will fail…) Big Data • IPO’s happening now • IBM’s smarter planet effort • ERP’s buying in via analytics & cloud 1. 2. 3. Tableau IBM 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. 2. 3. Samsung Apple Nokia - Bet placed on Google Android - Innovation play - Microsoft buy, 9/3/13 for $7. 2 B Social • Corporate “tribes” via Jive, Yammer, Chatter • Professional default is Linked. In. com 1. 2. 3. Jive Microsoft Salesforce - IPO Dec. 2011, now below IPO - Yammer, 4 y/o firm $1. 2 B cash - Chatter solution gaining wide adoption in their installed base Summary 1 st profitable M&A Went Private to ∆ 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. Source(s): Wikipedia. org, Yahoo Finance, Kleiner Perkins Caufield Byers, Corporate Websites, and interviews with colleagues at these firms Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 10

A fundamental requirement for the 5 trends that will ultimately take them global… Cloud Freemium Big Data Mobile Social Reliable, highbandwidth Internet USA Productivity Gains 1995 - 2004 - Today +3. 1% +1. 5% = total gain +1. 6% +0. 54% ~ technology impact As more of Earth’s citizens acquire the same access, entire new waves of economic productivity gains and business value creation can and will be triggered Applied to the rest of the world? 2012 - 2021 ? = total gain 2021 - 2031 ? ~ technology impact Source(s): Federal Reserve, 2012; Northwestern Univ. , Robert Gordon, Economist, 2012; Investors Business Daily, 2013 -June-26 Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 11

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) 244 +18 CHINA 564 +264 INDIA 137 +88 RUSSIA 70 +33 BRAZIL 88 +27 GLOBAL 2, 406 +902 USA % Penetration of Total Population 78% (vs. BRIC) 42% 11% 49% 45% 39% Sources: United Nations, International Telecommunications Union, internetworldstats. com Relevant Takeaway: 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. Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 12

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 G 2000 supply chains? ~ $12 T How many years Duration can an enterprise software investment represent? 10 to 15 A High-Stakes competition is queuing up – in your backyard Holding things constant for ease of discussion then…over the next 10 years, over $120 Trillion in commercewill be conducted in global G 2000 supply chains, all of it needing enabling technologies to manage it. it Much of the previous enterprise cycle from Y 2 K 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… dates Prepared for Penn State Center for Supply Chain Research – Supply Chain Leaders Forum, 2013 – September. 13

_ _ Framework Market Trends Cloud Freemium Big Data Mobile Social

Contact: scott@scottsykes. com www. linkedin. com/in/scottsykes/