HOW TO MANAGE VALUE NETWORKS FOR SUPERIOR PERFORMANCE
CONCEPT: Three panelists offer insights on how CEOs can improve their supply chains
JEFF SILVER, CEO, COYOTE LOGISTICS
“To run a supply chain effectively, you need a coordinated leader heading up manufacturing, warehousing, distribution and transportation. If you try to do any one thing without considering the others, you will be in bad shape. One of our clients called us to complain about our detention charges—which is when you start charging by the hour after a truck sits for two hours waiting to get loaded. He said, ‘This is ridiculous.’ I said, ‘I agree. If we never charge you a penny in detention, that would be wonderful. Let me send an engineer in to look at your process. But you have to promise me that you’ll be able to implement change.’ Because if transportation is getting billed for $1 million for detention, but they can’t turn around and bill production for not getting the trucks loaded, it’s all fruitless. Nothing will change.”
ERIK FYRWALD, CEO, UNIVAR
“You can’t be optimal with logistics without strong analytics. Three years ago, we distributed almost $10 million of product with thousands of trucks and individuals’ making decisions about how to dispatch them. You can’t imagine how sub-optimal that was compared to working with computers and algorithms.
“Look at how the best-in-class in your industry handle logistics. We visited FedEx and UPS to look at their processes and what we could learn from them. It’s also important not to be afraid of forging alliances with companies that can help you rather than trying to do it all by yourselves.”
ANDRA RUSH, CHAIRMAN,
DETROIT MANUFACTURING SYSTEMS
“Keep it simple, but streamline is our solution to success. We do our own analytics. When I first started out, we had a business partner from France. They said they were experts at [analytics], but using their system was far too complicated. It was a bit like saying. ‘We want to go from New York City to LaGuardia airport but we want to use a spaceship and so we need to send a rocket scientist in case something goes wrong.’ We had 20,000 backflush errors in three weeks. If you overcomplicate, you can destroy your business overnight.”
L Brands CEO Leslie Wexner is just as enthusiastic about philanthropic endeavors as entrepreneurial endeavors—perhaps more so.
At December’s CEO2CEO Summit event, L Brands’ CEO Les Wexner was honored with Chief Executive’s 2015 Lifetime Achievement Award in recognition of his visionary business leadership. Wexner is something of a legend in the retail world, having created and grown a litany of successful retail ventures, including internationally recognized brands like Victoria’s Secret, The Limited, Lane Bryant, Abercrombie & Fitch and Bath & Body Works. Over a career spanning more than 50 years, he forged an $11.4 billion company that today operates 2,942 specialty stores in the U.S., Canada and the UK.
But while Wexner’s successful business track record is well documented, his considerable philanthropic endeavors are less known, says Columbus Partnership CEO Alex Fischer, who was among those who gathered in New York to participate in the award ceremony. “His business accomplishments—among other things, his creation of a store that has resulted in multiple reinventions and ancillary spinoff enterprises—alone make him one of the greatest success stories of modern times,” notes Fischer. “What might be less obvious is that if there were an equivalent award for community leadership and philanthropy, or for development, master planning and architecture, he would also be the right choice. His greatest legacy beyond his family—in my opinion, actually greater than his business achievements—is the value structure that he’s brought, taught and instilled in our community.”
Wexner serves as chairman of the Columbus Partnership, a membership organization he founded in 2002 to foster local economic development and support civic projects. What began as eight CEOs meeting informally has grown to include 52 members who meet regularly to discuss community issues, economic development strategy and civic matters. “We have a motto: ‘We leave our selfish interests at the door and we bring our community interests to the table,’” explains Fischer. “Our member CEOs give back, invest, roll up their sleeves and do good in our community and that all stems from what Les started.”
Read more about Les Wexner:
The Man Who Changed How America Shops
On Character: A Look at Those With and Those Without
ARE YOU READY FOR THE INTERNET OF THINGS?
What CEOs need to know to compete in the next great wave of value creation in manufacturing.
Unless you’ve been living under a rock, you’ve probably heard quite a bit about the Internet of Things (IoT). The buzz around employing advances in embedded sensors, processing, data analytics and wireless connectivity to enable the type of machine-to-machine communication that can revolutionize businesses has definitively become a roar. For manufacturers, the
implications are huge. McKinsey estimates the IoT could unleash as much as $2.3 trillion in new economic value worldwide by the year 2025.
In fact, the IoT topped Garner’s Hype Cycle for Emerging Technologies last year, bumping Big Data off the peak. To some, this might sound like a potentially dubious distinction, given the somewhat negative connotations of the word “hype.” However, what occupying the pinnacle of Gartner’s Hype Cycle actually indicates is that the market has enormous expectations for an emerging technology. In making it to the peak, the IoT joins a venerable list of technologies with game-changing potential, including 3D printing, gamification, wearable user interfaces and cloud computing. In other words, expectations may be inflated, but the potential is undeniable.
Yet the excitement around the IoT’s capabilities is also a source of anxiety for business leaders, who face the challenge of getting their arms around yet another emerging technology. For value creation to happen on the scale predicted by McKinsey, manufacturers must be ready to collect, analyze and capitalize on vast streams of data from customers, suppliers and even products themselves, all arriving at increasing volumes and speed.
Further complicating that formidable task is the fact that the term itself has yet to be clearly defined, agreed participants at a recent Chief Executive roundtable held in partnership with Microsoft. “The hype on IoT is actually pretty deafening,” noted Barb Edson, general manager, marketing, for Microsoft Cloud & Enterprise. “Yet, the reality is that there is not even a common definition for it.”
However, Edson went on to urge CEO participants not to let the murkiness surrounding IoT—the cloud around cloud-enabled technology—to sour them on pursuing the business opportunities it
represents. “Many people are scared of IoT from a business standpoint, and they really shouldn’t be,” she explained. “It’s not about ripping out and replacing existing systems. It’s about looking at which business processes you can really impact. Start small and you can have a big impact.”
IoT can be viewed as an evolution rather than a revolution, building on the infrastructure companies already have in place, she added, pointing out that most companies today are already gathering massive amounts of data on myriad devices. More of a concept than any one specific technology, IoT involves leveraging connectivity to efficiently collect and analyze that data to make more informed business decisions, identify opportunities and predict customer behavior more effectively. That can be as simple as a trucking company’s effort to automate maintenance of its vehicles (see sidebar: “M.G. Bryan: Curbing Breakdowns”) or as complex as an enterprise-wide endeavor to collect, integrate and organize sensor data from remote equipment across global supply chains.
Those struggling to fully leverage connectivity should take solace in the fact that they are not alone. Most companies are early on the IoT learning curve. Several CEO roundtable participants expressed frustration about being unable to make effective use of the huge amounts of data flowing into their companies.
“The ability to install sensors and get millions and billions of bits of information is pretty straightforward,” noted Bob Nardelli, CEO of XLR-8. “The challenge that some of the smaller companies, and maybe even some of the bigger ones, are having is when you get to the data analytics. There’s the question, ‘Okay, I’ve got all these sensors. We’re recording all this data. We’re on this thing called the Cloud. Now what do I do with it all?’”
“In our case, we have information, but we’re not using it to such an extent that it’s preventive,” agreed Erik Fyrwald, CEO of Univar. “It allows us to look back historically and say, ‘Oh, now we know why that happened,’ but we’re not at the point where we can make sure something won’t happen again.”
Even companies like Federal Express, which is viewed as a forerunner in real-time data collection and analytics, are struggling to take IoT’s capabilities to the next level. The company has made great strides in forecasting accuracy since equipping drivers with handheld devices and compiling information on efficiency and customer dynamics in real-time.
“Now we’re trying to link all of that together to be more predictive in nature,” Cary Pappas of FedEx Tech-Connect told participants. “The question is, how do you take forecasting and make it a more exact science by overlapping better information, and how do you then boil that down to the things that are most crucial to your business? In other words, how do you simplify that [data] so it’s usable to the people who run our operations? We’ve got a ways to go before we get to where we want to be.”
While the sheer amount of data being generated and the possibilities that data represents can be daunting, the process can be broken down into more manageable steps, pointed out Sujeet Chand of Rockwell. “You generate a lot of data in IoT,” he acknowledged, noting that crunching the data should begin before it ever reaches the Cloud. “It needs to be processed in layers. For example, data generated by a jet engine needs to be processed locally on the jet engine first and converted to what we call information, because any information you generate directly on the jet engine while the plane is flying can be acted on instantly. The moment you move the data further away from the jet engine, the loop-closure time increases.”
After information, the next step is knowledge, which requires storing information and analyzing it using simulations or other analytical processes, explained Chand. “An example would be predictive diagnostics or predicting failure,” he noted. “Once you have the knowledge, the next goal is wisdom, which comes from analyzing multiple jet engines and then figuring out how you redesign certain components to optimize performance or pre-empt a type of failure that you see across hundreds of engines. It has to be thought of in those layers or you get overwhelmed.”
That thinking resonated with Jeff Silver, CEO of the logistics transportation company Coyote Logistics.
Ultimately, that’s one of the many roads companies that embrace IoT will travel, improving efficiency by monitoring and tracking the health of your assets. “IoT is really not as much about the technology—although advances in technology are what enables it—but about taking a step back and understanding how you want to change your business,” says Edson. “It’s a business process evolution of what you’re already doing and a way to move your business forward in the digital age.”
Leveraging the power of the IoT to develop a scalable solution for remote asset management of its fracturing vehicles came as a real boon for the company, which can now access and analyze in-field service information. Using mobile technology, the cloud-based system gathers control-system data to produce reports and dashboards on the condition of an individual vehicle’s drive train and fracking performance, as well as process performance and maintenance trends related to entire fleets.
Data is broken down into incredibly small packets so that information can be sent even in areas with poor cellular coverage. Or—in cases where a connection can’t be found—stored in a gateway
and sent once a connection is regained.
In addition to improving up-time and productivity for M.G. Bryan customers, the system has the potential to collect data that will demonstrate the vehicles’ competitive performance to customers.