I recently ran across some research that really has me thinking. The IBM Institute for Business Value surveyed 664 supply chain management executives in 29 countries around the world, and the results are pretty much what you would expect. That is, those executives cited global economic turmoil and uncertainty as the driving factors behind their three most significant supply chain challenges.
Those top three challenges are:
Volatility—driven by global complexities and fluctuation in customer demand
Visibility—specifically the need for accurate, time-sensitive information
Value—continued corporate pressure for supply chain management and operations to create enterprise value
Those are indeed, significant obstacles. Fortunately, considerable progress can be made addressing them through the use of a supply chain management solution, and, more specifically, S&OP tools.
There’s been quite a bit of discussion about demand volatility here on this blog and in the Supply Chain Expert Community. For instance, Lora Cecere from the Altimeter Group addressed the subject in a webinar titled, “What S&OP capabilities matter most?” Trevor Miles has had some good posts on volatility too.
What Lora, Trevor and others have noted, is that in recent years, demand has not only fluctuated more significantly than in the past, but the frequency of change has also increased. The result is that forecasting by looking only at historic demand patterns is no longer sufficient. What’s needed instead, is the application of a robust what-if? capability to do range forecasting. That way, rather than a single number forecast, users can also test upside and downside scenarios to evaluate potential risks and mitigate against them.
It isn’t surprising that visibility—or, more accurately, lack of visibility—was cited as the second most prominent supply chain challenge by respondents in IBM’s survey. As today’s supply chains become more complex, visibility becomes more important. This is particularly true in industries such as high-tech electronics and consumer goods, where brand owners and contract manufacturers face high demand volatility and rapid product evolution. They also have increasingly complex operations where many critical activities take place outside the traditional four walls of the enterprise, and there are many geographically-dispersed sites and/or partners using disparate data systems.
I’ll argue, however, that the real challenge isn’t to simply gain visibility. It is a pre-requisite to the end-goal, not the goal itself. Sure, visibility is vital but the larger business goal is to improve agility.
Many will promote “visibility” solutions and will tie that to statements like “sense and respond.” The problem is few, if any, are actually providing tools to enable the response process. They provide a limited level of visibility and leave users to determine how to benefit from it. Visibility without the tools to drive action gives only minor advantages to the organization. One needs to be able to alter and analyze information, not just see it.
I’ll also add that collaboration plays a critical role. Having access to “actionable” supply chain information can set the stage for more meaningful and effective interactions between stakeholders based on informed decisions whereby the impact of decisions are understood and action plans are clearly defined. To truly improve supply chain performance—and ultimately address that unrelenting pressure to add enterprise value—a company must first gain supply chain visibility, but then they must be able to collectively leverage that data to make rapid decisions and act accordingly.
That is true value.