Manucore Advisory Board member Frank Vorrath, VP Global Supply Chain at Johnson Controls, discusses how to create value and organise for growth, game-changing technologies, and strategic decision-making for supply chain success.
What are the core areas of growth for your business?
Johnson Controls has 130 thousand employees and $30 billion (US dollars) in annual revenue. Our two business segments are Building Technologies and Solutions, and Power Solutions. To grow these segments we are focusing on several global megatrends. These include changing demographics encompassing a move toward urbanisation with a surging middle class concentrated in urban areas and aging populations; energy availability and resources; sustainability and regulations; and digitalisation, all of which create opportunities for our organisation. In building technology and solutions, we’re a leading provider globally of fire and security systems, building controls, HVAC, and integrated building solutions and services. For power solutions, we are the world’s largest manufacturer of car batteries and are moving into products such as energy storage solutions. Our aim is to create a strong ecosystem of inter-related solutions that can unlock more value for our customers. The two segments of our business are complementary, which leads to future business models that offer great opportunities for our customers.
What supply chain projects are you currently focusing on?
We have developed a Johnson Controls Supply Chain Excellence vision, strategy and system linked to specific goals and objectives. Currently, we are focusing on building our end-to-end supply chain capabilities within our supply chain excellence maturity model framework. The capabilities relate to prioritised objectives that are aligned with our business units. This prioritised approach will help us accelerate the development of our supply chain capabilities in the areas of people, processes, technology and metrics and will immediately create incremental value for our business.
Currently, we are focusing on building our end-to-end supply chain capabilities within our supply chain excellence maturity model framework.
What recent innovations have helped to add the most value for your company?
Our Building Technologies and Solutions business is about controlling indoor environments and making cities and buildings smarter, more energy efficient, and more secure. We recently completed a merger with Tyco, which was a leader in fire and security solutions, and we are benefiting from their innovations. Recently, we introduced an artificial intelligence solution for fire fighters that incorporates a thermal intelligence technology in firefighters’ masks that give them hands-free visibility so they can find people in a burning building and identify exit points. Integrating this technology with a firefighter’s mask also creates the ability to collect real time data that can be transmitted directly to authorities or hospitals. This is an example of innovation that saves lives as well as creating value for the company.
Our building management system, Metasys, connects various building operations such as heating, cooling, lighting, occupancy sensors and security with other services to create a “smart” building that alerts managers to replace parts before they break down. It is more energy efficient, secure and user-friendly for occupants, building managers and owners. Another innovation of Johnson Controls is our distributed energy storage (DES) solutions which can be connected to multiple buildings and enable greater energy efficiency in an urban environment.
Which technologies are going to be the game changers in supply chain and why?
Smart, connected ecosystems combined with artificial intelligence integrated in your products is game changing. You can link products and services at the front-end of a business with the back-end of a business. There are solutions that connect with the front-end to provide business intelligence, which creates visibility and transparency in supply chain and that is key. In the commercial world, you have to be responsive and reliable as an organisation for the end user to unlock value. To do that you need to streamline processes to enhance performance, and adopt systems and technology that enable that.
Industry 4.0 and digitisation in supply chain means we can take full advantage of the information available to us.
What does a digital supply chain mean to you and what is the effect on your business?
Overall in an organisation you need a digital strategy. We all know this because connected products and services mean we are able to collect a lot of data, but we need to know what to do with that data – how to make it work for our business and our customers. When we collect data we need to create value. This is a huge driver to set up a digital supply chain. For example, if you establish a preventative maintenance business model and collect data on products regularly, you can foresee product breakdowns and be organised to deliver a new product or spare part when it is needed. The supply chain needs to be set up to collect data, which is then integrated into your back-end business operations system so you can act proactively and deliver ongoing value. Industry 4.0 and digitisation in supply chain means we can take full advantage of the information available to us.
What is your vision for the future of supply chain and what are you doing to prepare for it?
Our leadership style is to think big, act small and accelerate fast. We will create a superior systematic process of capability improvements to sustain business performance and to deliver customer and shareholder value. That means we will build a strong and competitive eco-system that helps our organisation win in the market place. The goal of our supply chain excellence vision is to enable Johnson Controls to become the most operationally capable company in the world. Our company’s leadership has made a strong commitment to support the Johnson Controls Supply Chain Excellence System.
We will create a superior systematic process of capability improvements to sustain business performance and to deliver customer and shareholder value.
Overall, people are key to our successful supply chain transformation. I call it the 40:40:20 supply chain creation wall. Forty percent is related to people, behaviour, skills, knowledge, action and results; 40% is related to technology systems, tools and end-to-end metrics; 20% is related to asset infrastructure. Traditionally, in other businesses, the focus is 80% related to asset infrastructure, 10% to technology and 10% to development of people. Our approach is different and we believe it will create exponential value. We focus on our end-to-end capabilities by enhancing employee skills and knowledge, and positively influencing their behaviour.