High-Tech Industrial Supply Chainnovators 2018: The Digital Supply Chain Transformation - Gartner
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High-Tech Industrial Supply Chainnovators
2018: The Digital Supply Chain Transformation
Published: 15 May 2018 ID: G00350735
Analyst(s): Virginia Howard, Michael Burkett, Simon F Jacobson, Sam New, Eric O'Daffer, Noha Tohamy
Gartner's High-Tech Industrial Supply Chainnovators award recognizes
innovative and high-impact initiatives used to transform the supply chain.
Supply chain leaders can learn from this year's winners, Intel and Flex, to
make comparable advances in their own supply chain.
Key Findings
■ High-tech and industrial business is increasingly complex — characterized by seemingly
unending changes in business models, customer demands, technology and industry entrants.
Supply chain innovation enables leading organizations to manage that complexity and drive
differentiation and value in a digital world.
■ Digitization represents a step change for supply chains. Increased connectivity and a
continuous flow of information enables today's digital supply chains to couple a deeper
understanding of customer requirements and supply network capability with the ability to drive
actionable decisions and share real-time insights across their ecosystems.
■ Leading high tech and industrial organizations in partnership with their supply chain solution
providers have moved beyond targeting only cost optimization opportunities to focus on
transformative investments in digital supply chain processes, tools, frameworks and
competencies.
Recommendations
Learn from Intel and Flex's leadership in innovation:
■ Immerse yourself in innovation. Examine what's possible by understanding the application of
digital technologies in the supply chain and the potential value to your business and your
customers.
■ Build your ecosystem. Assess what steps must be taken to fully leverage and integrate
innovative capabilities, technological investments and best practices across end-to-end supply
chain networks.■ Learn from this year's Chainnovators. Utilize Flex and Intel examples of successful supply chain
digital initiatives to demonstrate and evangelize the potential benefits to customers and your
organization.
Table of Contents
Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 4
Immerse Yourself in Innovation..........................................................................................................4
Build Your Ecosystem.......................................................................................................................4
Learn From This Year's Chainnovators..............................................................................................4
Flex Intelligent Supply Chain Platform............................................................................................... 5
What Is the Chainnovation?........................................................................................................ 5
How the Chainnovation Was Achieved........................................................................................6
The Impact of the Chainnovation................................................................................................ 7
Intel Novel Planning System for Hybrid Manufacturing Supply Chain.................................................9
What Is the Chainnovation?........................................................................................................ 9
How the Chainnovation Was Achieved......................................................................................10
The Impact of the Chainnovation.............................................................................................. 10
Looking Forward............................................................................................................................ 11
Appendix..............................................................................................................................................11
Mission and Methodology of Gartner Supply Chainnovators........................................................... 11
Gartner Recommended Reading.......................................................................................................... 12
List of Figures
Figure 1. Flex Pulse Ecosystem — Intelligent Supply Chain Platform.......................................................6
Figure 2. Impact Flex Chainnovation....................................................................................................... 8
Figure 3. Intel Novel Planning System..................................................................................................... 9
Figure 4. Impact Intel Chainnovation..................................................................................................... 11
Figure 5. Chainnovation Award Vetting Process.................................................................................... 12
Introduction
Gartner High-Tech Industrial Supply Chainnovators 2018 is a research and recognition program to
celebrate innovation in supply chain. Companies recognized as Chainnovators have been
successful with innovative and high-impact approaches that others can learn from and emulate. The
Page 2 of 14 Gartner, Inc. | G00350735program offers supply chain leaders valuable insight for annual strategic planning, resource
allocation and investment cycles. For the Chainnovator, formal recognition is targeted at sharing the
impact of their efforts, providing a beacon for attracting supply chain talent, and promoting further
innovation (see Appendix: Mission and Methodology of Gartner Supply Chainnovators section).
This research highlights specific innovations from two high-tech and industrial manufacturing
sectors:
■ High-tech and industrial goods manufacturers
■ Electronic manufacturing and electronic component supply chain solution partners (EMS and
distributors)
The significant number of submissions we received this year clearly demonstrated the extent to
which supply chain innovation is accelerating. While this year's submissions were diverse — ranging
from developing talent to designing circular supply chains — digital supply chain transformation
was at the core of this year's chainnovations.
Two companies — Flex and Intel — are recognized as our 2018 High-Tech Manufacturing Supply
Chainnovators.
Flex was recognized for its intelligent supply chain platform that enables near-real-time visibility and
speeds its ability to respond to supply chain events across its massive and complex network.
Intel won for creating one, configurable, integrated planning system for optimizing and managing
the complexity of its hybrid manufacturing supply chains.
The finalists in the 2018 Gartner High-Tech Supply Chainnovators awards, listed in alphabetical
order, were:
■ Avnet Velocity — Demystifying Mode 2 — How Avnet's Global Supply Chain Innovation Group
(Velocity) unlocks value and creates a virtuous cycle of innovative (Mode 2) revenue
opportunities.
■ General Dynamics Mission Systems — Edge Innovation Sourcing Network — Virtual open tools
and processes design by GDMS supply chain to support early engagement (internal and
external teams) and delivery of strategic sourcing solutions.
■ HP Inc. — Digital Supply Chain Transformation — Integration of factory automation, digital
technologies, reinvented operations network and fulfillment model to support HP's goal to
expand Latin America market leadership.
Gartner congratulates Flex, Intel and the three finalists for their efforts. We sincerely hope that our
research on the challenging work, significant time, resource investment and passion that went into
the High-Tech Industrial Supply Chainnovators' achievements will inspire others.
Gartner, Inc. | G00350735 Page 3 of 14Analysis
Immerse Yourself in Innovation
Traditional supply chain design and measurements of success no longer hold up. The reason is
largely digital. Today's leading high-tech and industrial supply chains are well along their
transformational journey to becoming digitalized, demand-driven supply chains — possessing the
situational awareness, customer sensitivity and competency to provide a personalized, agile and
profitable response to the demands of its business and customers.
This vision of a digital supply chain is no longer aspirational — it is an achievable reality for all high-
tech and industrial supply chains. Both Intel and Flex offer us operational examples, as well as
leading vision, on how supply chains can leverage digital investments to:
■ Provide actionable insights to address the foundational challenge supply chains face in
continuously improving supply chain performance while reducing risk.
■ Provide cross-functional intelligence needed to mature the supply chain into an orchestrator of
a dynamic network of suppliers, trading partners and customers.
■ Provide the means to make faster and more accurate business decisions — enabling the supply
chain to capitalize on its inherent complexity to deliver greater value
Build Your Ecosystem
In today's globalized and outsourced world, success depends on how effectively supply chains
orchestrate their global network of partners to deliver goods and services that meet the needs of
the end customer. This means a fully successful digital transformation depends on all the process
and information flows between every partner within the ecosystem undergoing a digital
transformation.
In other words, to be successful the digital capabilities across the ecosystem are as, if not more,
important than the digital transformation inside any one organization. By adopting a holistic view of
digital transformation — from component providers, manufacturing partners and suppliers, logistics
and transportation providers to distribution channels — the ecosystem will possess the data
access, data sharing, collaboration and networkwide analytics needed to comprehensively
transform the way it operates and the value it can create.
Digital technologies make it possible for ecosystems to automate together. Establishing a
collaborative vision across partners for how the ecosystems will leverage innovative capabilities,
technological investments and best practices to improve service, cost, agility and inventory levels
by using these is fundamental to the ability to optimize operational excellence from the digital
supply chain
Learn From This Year's Chainnovators
Witness this year's Chainnovators' digital ambitions in advancing the capabilities of their supply
chains and learn through their efforts how to get ahead and stay ahead.
Page 4 of 14 Gartner, Inc. | G00350735This year's Chainnovators not only demonstrate their innovative competency in doing different
things, differently, but their initiatives evidence both the innovative outcomes they delivered, the
processes and culture which fostered exploring and evaluating new ideas as well as their
organization's willingness to experiment and take chances.
Flex Intelligent Supply Chain Platform
What Is the Chainnovation?
Flex is an end-to-end supply chain solutions company that provides design, engineering
manufacturing, logistics and aftermarket service capabilities for over 1,000 supply chains across 18
different industries. Their Intelligent Supply Chain Platform — Pulse Ecosystem — was developed to
create greater business and customer value by providing its supply chain organization with
increased visibility and velocity
Flex's Pulse Ecosystem — which compiles data from over 50 different information feeds into a
graphic format — exploits digital, mobile and cloud-based technologies to provide Flex's global
Pulse centers as well as its 7,000 supply chain associates the ability to communicate, share data
and a develop a common understanding of what's happening across its myriad of networks. The
combination of processes and technology elements generates near-real-time visibility and analytics
to accelerate an informed response to supply chain events (see Figure 1).
Gartner, Inc. | G00350735 Page 5 of 14Figure 1. Flex Pulse Ecosystem — Intelligent Supply Chain Platform
Source: Flex
How the Chainnovation Was Achieved
To provide the speed required to improve the balance sheet, generate cash, reduce costs and
improve customer satisfaction, Flex determined it needed to increase visibility into supply chain
operations and improve velocity in decision making to meet market demands and the CEO's
profitability targets.
Beginning in early 2015, a team of best-in-class visionary supply chain and IT professionals was
formed to begin development of the intelligent supply chain platform. By design, this platform,
which was developed in-house, introduced a new culture of speed and agility — providing users
with information at their fingertips. The platform included insight into inventory as well as visibility of
the entire supply chain — from purchase orders through to customer delivery.
The creation of the platform required investments in hardware, business intelligent applications and
substantial integration efforts. Solving for the acquisition of real-time data across application siloes
at 120 locations and suppressing data noise to enable more effective decision making were two of
the initial problems Flex solved.
In July 2015, Flex launched Pulse, which became a backbone of the Intelligent Supply Chain
solution package. By the end of 2017, the platform was rolled out and adopted across all Flex
Page 6 of 14 Gartner, Inc. | G00350735global sites by over 7,000 users. Today the platform provides information used in both pricing and
scaling new businesses by helping customers with, among other things, supply chain network
design simulations based on inputs such as oil prices, wage inflation and taxes.
The Impact of the Chainnovation
Flex manages 1.2 million active part numbers across more than 1,000 customer accounts while
collaborating with more than 12,000 direct and 8,000 indirect suppliers. The Intelligent Supply Chain
Platform has transformed Flex's culture and the way employees operate by replacing fragmented
data feeds — which slowed down the decision-making process — with synchronized near-real-time
data. The increase in speed also reduced cost, accelerated working capital, reduced lead-time and
improved customer satisfaction. To date, Flex's Intelligent Supply Chain platform has generated
hundreds of millions in free cash flow, paying for itself within 90 days of launch.
Results include:
■ Working Capital — ~11 days of inventory reduction by end of 2018; equivalent to about $450
million cash available to reinvest in the business
■ Lead-Time — 50% reduction in the time needed from receipt of the customer forecast to
propagation of demand.
■ Productivity — 13% increase in the number of parts/50% increase in volume of purchase orders
handled per buyer
■ Efficiency — ~1,000 reports and 500 head count eliminated
Besides improvements in operating metrics, Flex has also begun tracking actions taken by
associates in the course of their day to day jobs (see Figure 2). The intent is to leverage this data to
build knowledge of issue resolution with future plans to use that knowledge to augment or automate
supply chain decision making.
Gartner, Inc. | G00350735 Page 7 of 14Figure 2. Impact Flex Chainnovation
Source: Flex
Page 8 of 14 Gartner, Inc. | G00350735Intel Novel Planning System for Hybrid Manufacturing Supply Chain
What Is the Chainnovation?
Intel's business is fundamentally changing and the supply chain is evolving to support Intel in the
diversification of its business and its business model from a vertically integrated manufacturer of
semiconductor chips for the high-tech industry. The company, through both organic and inorganic
growth, plans to derive over 50% of its revenue by 2020 from powering the cloud and smart,
connected computing devices. To drive this change, Intel has acquired several technology
companies, each of which came with its own unique supply chain — including different supply
network design, supplier relationships, business processes and planning/procurement tools.
As Intel transforms its business model, it is also transforming its supply chain. Traditionally expert at
in-house manufacturing, Intel now leverages a hybrid manufacturing model that integrates both
internal and external manufacturing resources. To realize its goal of effectively managing its hybrid
manufacturing supply chain, Intel pioneered a novel approach for blending demand, supply and
procurement by creating one, configurable, integrated system for planning and optimizing its
diverse portfolio of products and production sites.
This system helps planners manage the complexity of aligning production schedules maximizing
use of internal resources and leveraging external resources. The new approach allows Intel to
ensure the feasibility of the entire plan and the flexibility to handle the needs of many different
business units by effectively managing its hybrid supply chain (see Figure 3).
Figure 3. Intel Novel Planning System
Source: Intel
Gartner, Inc. | G00350735 Page 9 of 14How the Chainnovation Was Achieved
Intel initiated the project to create its collaborative hybrid planning tool in 4Q14 through partnership
between its global supply chain operations and information technology teams. The project
employed 85 people in various functions, including software professionals, business architects,
program managers and business operations functions spread across the globe. The Chainnovation
was delivered in three years to 10 of Intel's business units based in Germany, Singapore and the
U.S. It also involved transforming the systems used in managing 10 outsource suppliers based in
Taiwan, Korea, Japan and the U.S. The system itself includes capabilities that range from demand
planning, supply planning, procurement, master data management, business metric reporting,
supply planning technical algorithms and information technology functions.
The effort began by planning the data-staging environment in order to integrate information from all
areas of the enterprise, including ERPs, factory systems, demand and inventory planning systems.
This was critical as the new system requires continual updates to ensure an accurate synchronized
set of data to support the planning activity. A key part of the application is its ability to provide
customize solutions — enabling users to quickly create new versions of a plan, explore a range of
outcomes and make the best trade-off decisions.
A key lesson in the development process came from observing early users of the system. Intel
discovered that some of its acquisitions managed different key performance indicators (KPIs) from
those managed at Intel. For example, Intel placed a high premium on fast response to customer
sales orders, even if the Intel response did not meet customer lead time. On the other hand, some
of Intel's acquisitions placed a high premium on meeting customer lead time, even if the speed of
response to the sales order was one or two days after the order was placed. Intel reconciled these
discrepancies and other similar discrepancies during the course of the program.
The Impact of the Chainnovation
Intel estimates the value of its novel planning system in numerous ways — from the benefits of
process simplification to its ability to speed and improve decisions making. For the products
planned and procured using this tool Intel reports $100 million in positive impacts to gross margin,
cost avoidance and resource optimization.
For example, using this web-based optimization tool, it can do Monte Carlo simulations. In just one
of these simulations, Intel could look at capacity utilization across its network of internal and
external production sites and take the decision to defer $25 million in capital spending for assembly
and test in one of its factories.
This novel system has and will continue to enable Intel's supply chain to speed the integration and
drive deal value from mergers. Through the team's focus on developing a tool with the flexibility to
address the requirements of each unique business, they have deployed a system with the ability to
replace the unique planning and procurement processes that had been previously performed by
multiple tools, including email and spreadsheets (see Figure 4).
Page 10 of 14 Gartner, Inc. | G00350735Figure 4. Impact Intel Chainnovation
Source: Intel
Looking Forward
Navigating the future can be a confounding challenge in today's novel, more interconnected digital
age. In 2018, we witnessed how a number of high-tech and industrial supply chains approached
this challenge and successfully created and delivered value. We look forward to sharing and
recognizing others that are driving supply chain transformation through our future Supply
Chainnovators program. For organizations looking to participate in Gartner's 2019 Supply
Chainnovation awards — start formulating your collaborative, innovative, sustainable and impactful
submissions now.
Appendix
Mission and Methodology of Gartner Supply Chainnovators
Gartner's Supply Chainnovator nominees are uncovered through submissions to the High-Tech
Industrial Supply Chainnovator team of analysts. We accept nominations from any size company,
regardless of revenue amount. Analysts vet the Chainnovations on a 10-point scale in five key
categories: innovation, impact, sustainability, collaboration and measurable KPI improvement. Two
other main characteristics are that they:
■ Have enabled innovative new ways of doing business or resulted in significant ROI
Gartner, Inc. | G00350735 Page 11 of 14■ Are willing to share details on how this was achieved
The process begins with a call for Chainnovations and ends with recognition at Gartner's annual
supply chain High-tech Industrial Exchange (see Figure 5).
Figure 5. Chainnovation Award Vetting Process
Source: Gartner (May 2018)
Gartner Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"Guide to Aligning Digital Business and the Digital Supply Chain"
"Industrial Manufacturing Industry Supply Chain Outlook 2018"
"Improve Supply Chain Modeling With the Combined Use of Simulation and Optimization"
Page 12 of 14 Gartner, Inc. | G00350735"How Existing and New Technology Can Help Drive the Digitization of Supply Chain Planning"
"The 2018 Top 8 Supply Chain Technology Trends You Can't Ignore"
Gartner, Inc. | G00350735 Page 13 of 14GARTNER HEADQUARTERS
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