Brian Sommer's month in brief - August 2020

Brian Sommer Profile picture for user brianssommer September 8, 2020
August was an unusual month for enterprise software. ERP for manufacturing might see a nice uplift coming while HR organizations are fighting some tough issues. Regardless of the sector, there was a lot of big news.


It's clear that lots of industries took a hit this year. Airlines, hotels and restaurants are often cited as being (seriously and) adversely impacted by the pandemic. Many manufacturers have also seen their share of challenges.

Some experienced big supply chain disruptions that made it impossible to produce product. Some were shut-down due to government mandates. Some had to re-purpose their production facilities to make different products (e.g., PPE - personal protective equipment).

There were a number of articles this month describing the changes in manufacturing globally. One inescapable conclusion from these pieces is that fundamental change in where products are made will occur very soon.

U.S. manufacturers could not be as flexible as some of their offshore competitors. In a eye-opening piece in MIT Technology Review (see "Un-Made in America" in the latest issue), you see how many American manufacturers couldn't spin up their old plants if those plants even still existed. The article reminds us of how much U.S. manufacturing capacity has been lost the last several decades and why this made it so difficult for firms to respond to new market needs. It's a sobering read that lays out the enormity of our fragile value chains and manufacturing capacity.

Logistics Management has a great companion piece called Is it time to reshore manufacturing?. This paragraph sets up the piece well:

Over the past 25 years, globalization, lean manufacturing, improved inventory control, and customer service have revolutionized supply chains. And as supply chains have become global and more tightly stretched, the consequences of supply chain failure have grown exponentially.

And see this:

The pandemic has taught us that "lean" practices may take costs out of supply chains by reducing investment in inventory and minimizing what's in the pipeline, but there is a significant downside too. Carrying little safety stock plus practicing just-in-time processes can leave a company vulnerable should there be any disruption in supply.

Modern Materials Handling magazine quantified the issue in its recap of a 2020 State of Manufacturing Report. The top five findings were:

  • Eighty nine percent (89%) report a direct business impact because of COVID-19 including lower sales, increased costs of materials and production, and canceled or delayed product launches; 
  • Only 17% gave top marks to their supply chain's performance over the last year; 
  • A majority are revisiting their reliance on China and looking to the U.S. as the next key manufacturing center; 
  • Nearly all (97%) said COVID-19 has created new opportunities, with 87% making digital transformation a high priority; and 
  • Supply chain resilience is important to 99% of respondents, with 96% working to increase supply chain agility

Even Chinese manufacturers have faced some of these same issues. In a recent Bloomberg Businessweek piece, this summer's falloff in business adversely impacted Chinese makers of holiday toys/gifts. Disruptions in production, supplies and other factors impacted their manufacturing sector.  It's now resuming some semblance of normalcy.  In fact:

China's exports rose 7.2% in dollar terms in July vs. a year earlier, mostly on the back of strong demand for electronics, but they were also helped by purchases of anti-coronavirus products and orders for furniture and toys. Exports to the U.S. rose 12.5% in July from a year ago, the fastest rise since 2018 despite tensions between the two nations.

But when a pandemic, mandated government shutdowns, suspension of travel and other factors all hit at once, the fragilities of a super-lean supply chain, offshore logistics, dependency on marine or air transport, etc. become unacceptable. Businesses will need to de-risk their supply chains and reshoring some production will likely be part of that equation.

When taken together, these articles (and others) lay out a number of conclusions for business leaders:

  • Over-reliance of one country for one's products, raw materials and/or subassemblies is risky.
  • Diversity of product sourcing is critical if a firm is to remain competitive in the face of new governmental, trade, pricing, logistics or other challenges.
  • Great firms will source/manufacture some of their supplies locally, some nearshore and some from far away locales. However, exclusively granting one firm in one country all of one's business is not a sound practice.

What is going to happen is that U.S. manufacturing will likely experience a moderate resurgence in reshoring or near-shoring. As this unfolds, we can expect:

  • Some capital investments as firms rebuild their old native manufacturing plant and equipment
  • An interest in having new facilities resemble factories of the future not reminders of how they made things decades ago
  • New capabilities to be more digital and flexible
  • Productivity within these facilities to be on a par with other locations globally
  • A new kind of worker to operate these more automated facilities

And for the techies reading this, these new capabilities will mean:

  • Upgraded application solutions to process the big data from machines, machine controllers, sensors, etc.
  • Upgraded and/or new cloud ERP solutions to support these facilities
  • New cost accounting methods put in place
  • Significant new tools to monitor supply chains  
  • A need for new analytics and planning tools
  • A boon for smart preventative maintenance applications

Smart ERP vendors may want to re-energize their manufacturing solutions, sales and support. It's time to do so.

Rootstock had an analyst briefing this month to announce their response to the new world of ERP. Using a number of tools for the Salesforce platform, they are now offering a set of capabilities that make changes/tailoring/new capabilities possible by mere mortals (see graphic below).

Roostock - low code platform
(via Rootstock)

Similarly, ERP vendor IFS also had an analyst update. They discussed a growing top line, more subscription revenue, and the closing of a number of bigger deals with name-brand logos. Manufacturers are definitely looking at newer ERP solutions especially those with advanced capabilities (e.g., AI/ML). What's important to watch though is whether this trend is long or short-lived and whether it will apply to small, mid and large manufacturers. Time will tell...

HR in the News

August was not a great news month for HR and it signals some big, tough challenges are still to be dealt with. Here are some of the high/lowlights:

In Shut Up and Work, Bloomberg Businessweek identified a few major companies that are requiring workers to return to work but not to tell anyone if they or others are infected with COVID-19. In my opinion, any HR person supporting the ‘policies' that some of the companies highlighted in the story should be fired and then held criminally responsible for any further harm to employees.

Here's a sample from this article:

Workers at, Cargill, McDonald's, and Target say they were told to keep Covid cases quiet. The same sort of gagging has been alleged in OSHA complaints against Smithfield Foods, Urban Outfitters, and General Electric. In an email viewed by Bloomberg Businessweek, Delta Air Lines told its 25,000 flight attendants to "please refrain from notifying other crew members on your own" about any Covid symptoms or diagnoses. At Recreational Equipment Inc., an employee texted colleagues to say he'd tested positive and that "I was told not to tell anybody" and "to not post or say anything on social media". 

While there is a privacy issue at stake here, there are also first amendment and public safety issues at stake, too. Silence may be golden in some situations but this may not be one of them.

Right on cue, we learned that health care software vendor Epic Systems is mandating employees return to work. TriplePundit's Leon Kaye reports:

Earlier this month, the Wisconsin-based company announced that it would require its entire workforce to return to the office by September 21. Employees with a higher health risk have until November to forgo working from home.

The irony of a company linked to the healthcare industry telling its workforce to return to the office wasn't lost on many employees, and doubts over the wisdom of going back during the ongoing COVID-19 crisis quickly accelerated.

And then there's Vala Afshar at ZDNet who reports that the Next Normal and return to work aren't going to work. This is one of those pieces that gets better and better the further you read into it. Check it out.

Also, I really liked this tidbit from Chief Executive: "38 percent of private company CEOs report having chosen to take a salary cut to help their company navigate the Covid crisis."  Very Interesting and refreshing to see! 

HR really needs to watch employee's stress and burnout levels. Human Resource Executive magazine reported: 

The vast majority of workers say they're experiencing burnout at work, in large part due to the pandemic-and they also say they aren't getting the help they need from their HR departments.

A staggering 75% of employees say they've faced burnout at work, with 40% saying they've experienced burnout during the pandemic specifically, according to a July survey of more than 1,500 respondents from FlexJobs, fielded in partnership with Mental Health America.

Longer hours-37% of employees report working more since the pandemic started-and intense stress are in part to blame for the increase in burnout levels.

Fortune offers up It's time to hire a Chief Health Officer. This piece comes at a good time as many HR groups are not staffed with the health advisors and scientists that these pandemic times mandate. While HR groups have responded to the pandemic, many reopening decisions are beyond the training of many HR and non-HR executives. I was fully expecting this development as colleague Vinnie Mirchandani alerted me to this need a couple of months ago.

Everyone should read Peter Cappelli's Stop Overengineering People Management in the latest issue of the Harvard Business Review. It's ready a solid review of evolving management thinking and it makes you want to think more closely about new technologies and business practices. It even considers the wisdom of employers spying on workers that are doing Work From Home (WFH) activities. Here's a taste:

When we take away all decisions from employees, they no longer feel accountable, and their interest in contributing extra falls. With AI-based algorithms calling all the shots, it isn't even clear how they could help. Suppose a truck driver discovers a better way to get in and out of loading docks: Whom does the driver tell? Yes, the algorithms save gas and money, on average, but worker-generated innovations won't happen if we pull away from empowerment and institute the planning and controls associated with optimization.

In A DEI To-Do List, a recent Bloomberg Businessweek piece, we learn what does and doesn't work in creating real change as it pertains to inclusivity, diversity and equality programs. I liked this observation:

Experiments show that when researchers emphasize choosing the most qualified candidate, study participants overwhelmingly choose the White male - even if his experience is identical to everyone else's.

It's worth a scan.

How the American Worker Got Fleeced tells how employers have "held down wages, cut benefits and stomped on employees' rights".  This detailed article looks at how many forces affecting American workers have, in total, created a pretty bleak environment for many people. It's not a cheery read but it is a must-read.

Planning/Forecasting Stays Hot

With all the planning and forecasting going on in since the pandemic reared up, this piece (Learning from the Future) in the Harvard Business Review is quite timely. It covers all manner of topical planning and forecasting concerns like:

  • VUCA (volatility, uncertainty, complexity, ambiguity)
  • TUNA (turbulent, uncertain, novel, ambiguous)
  • Backcasting
  • Contingency planning
  • Horizon scanning
  • War games
  • Crisis simulations

And more.

If you'd had your head down into routine, linear spreadsheets for years, this may be the piece to get you thinking again about what planning in a more chaotic, dynamic and volatile time looks like.

The first planning task after reading the above should be a review of this HBR companion piece: Adapt Your Business to the New Reality. This piece exhorts readers to look at how many ‘habits' have changed since the pandemic happened. And while the authors admit that it take years to fully understand what has changed (or will change), the best firms will have leaders that get ahead of the change curve. A definite must-read.

CPM/EPM vendor OneStream provided a quick update/briefing this month. Consistent with the growth stories we've heard from other CPM/EPM vendors, OneStream posted some very solid growth and topline numbers this year. Growth in Europe was especially strong. OneStream executives reported that:

  • Aerospace/Defense firms are big users of scenario analysis functionality
  • Cash flow forecasting is now a weekly function in many firms
  • Daily Sales and Working Capital Analysis are in demand and often addressed via its XFCloud solution

OneStream screen shot
(via OneStream)

And, for the last word on the CPM/EPM front, Floqast announced a new accounts receivable reconciliation module. They're still innovating even during the pandemic:

Floqast - accounts receivable reconciliation
(via Floqast)

My take

I fear too many people are all-consumed in the here and now. There are clearly several big, structural changes afoot and smart firms and leaders are looking ahead at these and managing accordingly.  For example, some of the same forces impacting manufacturing are also impacting supply chains and transportation networks, too.

These macro changes dwarf some of the minute functional enhancements to software products that PR firms often place in our inboxes. This point was exactly what I discussed this morning with a Wall Street analyst: focus on the big and small changes today not one or the other.

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