Move over old man. It’s time to meet supply chain planning 4.0

TrevorMiles

What I took away from the Gartner Supply Chain Executive Conference

Supply Chain Management is a relatively young practice, though many of the core principles go back many decades and are based on Operations Research concepts. These have focused on optimization and efficiency. Undoubtedly the world is a better place because of this focus on manufacturing and distribution efficiency over the past 50 years, resulting in large gains in productivity and therefore standards of living, initially in the West, but more recently around the world. All of this productivity gain was achieved in the analog phase.

We are now entering the digital phase of business. Even if we discount a great deal of the hype for what it is, hype, the reality is there has been a significant shift to digital. The title of the recent Gartner Supply Chain Executive Conference, “The Bimodal Supply Chain: Tackling Today, Preparing for Tomorrow”, says it all. It was focused on the manner in which companies can adapt to the digital world while still operating in the analog world. Hence bimodal. As outlined in the diagram below, the bimodal approach advocated by Gartner is about innovating on top of a stable platform. Once the value of the innovation has been captured and stabilized it can be drawn into the stable platform.

Gartner Supply Chain Strategy

“Disrupt or Be Disrupted — Defining the Bimodal Supply Chain”, 30 December, 2015 Analyst(s): Dana Stiffler | Jane Barrett | Debra Hofman | John Johnson

The keynote, delivered by David Willis of Distinguished Analyst at Gartner, describes the bimodal shift as:

The shift requires a new approach to investment in technology, leadership and talent, taking a more agile approach. The bimodal supply chain combines stable best practices with innovation-seeking behaviors to keep your organization competitive.

I have no question that Gartner is correct in their assertion of the need for a bimodal approach to the adoption of digital technology, whether more broadly to the business in general or specific to supply chain processes. Industry 4.0 is a reality. The Internet of Things is a reality. The only question is how quickly companies will absorb these innovations and adapt processes to accommodate them.

My opinion, however, is that the bimodal approach has little to do with technology and everything to do with talent and operating models, especially in supply chain. Put more correctly, technology is the forcing function, talent and operating models are the barriers. As a practice we are a bunch of engineers who have been trained and taught to value precision, efficiency, and repeatability over approximation, effectiveness, and agility. The manner in which our practice is measured and organized emphasizes functional excellence at the expense of end-to-end effectiveness.

In fact Jane Barrett of Gartner makes this point in a blog titled “Build a Bimodal Supply Chain and Take Charge of your Digital Future!” by stating that

In mode one Supply Chain must continue to focus on efficiency and operational excellence – the traditional operational caretaker. In mode two, in parallel, you must be able to experiment, fail (fast), innovate and embrace new crazy ideas. This needs different people, incentives and culture. You must hire data scientists and sociologists, experiment with drones and other smart machines, harness unstructured data and design e2e connected processes like never before. Analytics must become embedded and mainstream.

Change will come from people in their late 20’s and early 30’s, such as Mathilde Drouin who presented at the Gartner Supply Chain Executive Conference on Schneider Electric’s strategy for customer co-planning, the next generation CPFR, requiring deeper cooperation between trading partners.

My generation, in their late 50’s and early 60’s, needs to provide space and opportunity for the millennials to flourish and teach these old dogs a trick or two.

As evidence of the need for fresh talent, I refer to a senior executive in a pharmaceutical company. She told me that a few years ago she got tired of being told by senior supply chain people that certain analysis could not be done, and that processes had to remain as they are and had been for some time. She hired a bunch of interns from a local prestigious MBA program and told them to spend the first half of the internship trailing the senior supply chain people in order to understand the type of decisions they were trying to make on a daily basis and the difficulties they were having in analyzing their options. Their task in the second half of the internship was to show the senior supply chain people that the data required for the analysis was available, but that the senior executives did not have the skills to gather and analyze the data. After the exercise a number of the senior people chose early retirement.

Just a few weeks ago one of our CPG customers went through a major reorganization of their supply chain planning organization. At the top are two men in their late 50’s, one in business, and the other in IT. Reporting into both of them is one person, in their mid-40’s, who is both business and IT, but comes from IT. Below him are a bunch of people who come from business and IT. I couldn’t tell from their titles whether they were business or IT focused. And in that statement I am capturing the transformation that is taking place. The new generation is coming through for whom “IT” skills are as normal and as requisite as financial skills.

What we had to learn, they know. We need to give them the space to redefine the practice of supply chain. This isn’t just about technical skills. More importantly it’s about a more collaborative and cooperative way of working. I love it. I hope you do too.

 

TrevorMiles

As vice president of Thought Leadership, Trevor serves as an expert source for Kinaxis customers, prospects, industry analysts and journalists. Known throughout the supply chain field, he has published many articles, presented at various industry events, and is the primary contributor to the Kinaxis 21st Century Supply Chain blog. Trevor helps Kinaxis seek new market opportunities within the company’s distinctive competence and is instrumental in the company’s competitive and market intelligence. He helps key customers achieve the operational control tower vision, guiding their priorities and architectures to realize the full potential of RapidResponse. Having lived, worked, and studied in Canada, the United States, Europe and Africa, Trevor brings a global perspective to market needs and customer requirements. Prior to joining Kinaxis, Trevor worked for i2 Technologies where he held a number of sales & marketing roles and worked with global industry leaders such as Continental, Volkswagen, Nokia, and Thomson. Previous to i2, he worked for Coopers & Lybrand performing several studies in supply chain reengineering for companies such as Levi’s, Burmah Oil, TNT Logistics, AGA Gas, and Schneider Electric, among others. Trevor has degrees in Chemical Engineering and Industrial Engineering.

More blog posts by Trevor Miles

Discussions

  1. I am one of the “old men”. We not only need to make space, we need to embrace the change.
    We can look ahead and clear roadblocks, see that capital for innovation projects with solid returns is made available.
    Realize that the way of organizing work and innovation in the supply chain needs can be very different ; and in the near future the capabilities of digital engines will generate a lot of “wow” moments for many long time practitioners. Many of those changes have already been happening in marketing and web commerce.
    The day of cognitive intelligence engines segmenting supply and demand matching issues, and handing out the problems to various prescriptive solvers is here. The old adage of “don’t forecast what you can calculate” will take on new meaning as you’re able to blend IoT, call center, weather, socio-economic, social media, trends, (any correlated variables) with in-memory computing. The “forecast predictions” will be calculations. It’s an exciting time and you’ll only be limited by your capabilities and imagination.

    The knowledge and talents required to innovate and succeed with digital engines, and keep them tuned will be quite different than plugging in planning parameters. Graduates are coming out having worked with Python or Hadoop and SPARK will be natural. Or, they are ready to sit down and work with the most sophisticated optimization models. We have to supply challenges early and often so they can understand the problem statements and how to apply their skills in a variety of ways. Many areas, including analytics, can work in team or project based management environments instead of the vertical silos Re-think your role requirements. We’re into the beginning of a period with a high level of innovation possible

  2. Keith, I too am one of the “old men”. And I love your response. Embracing the change is exactly what I want “us” to do. Personally I see this as a great opportunity to learn new skills. I love it.

  3. Trevor, I wonder about the statement that “Change will come from people in their late 20’s and early 30’s”. My comment is that New Dogs are learning Old Tricks and Old Dogs are learning New Tricks.
    When I graduated in 1981 (BBA) one of my senior projects in Operations Management was a case study of barriers (and creating resolutions of barriers) to supply chain optimization and good S and OP – and the financial consequences of removing those barriers – in retail. The solution then was real time collection, transmission, assimilation, understanding and adoption of key performance data by those responsible for supply chain performance.
    The solution presented was a harmonized, end to end supply chain with reverse logistics, functioning in as near real-time as possible. It was predicated on data accuracy to the highest degree possible. Speed of transmission and presentation of data as information (latency) for assimilation and decision making were a problem, as the tools available then were somewhat less flexible to employ, yet did the job well for those organizations that understood and hire those with the blend of skills necessary to use these tools. Walmart on a national and global basis, and Belk, on a regional basis, are examples of success of creating, implementing, and using the tools and techniques available at the time. Both firms also extend the life cycle of the process by updating all facets of the technology and people using it.. The (retail) world is replete with failed or failing firms that did not do this.
    Happily we can now, as Keith Nash said it, “blend IoT, call center, weather, socio-economic, social media, trends, (any correlated variables) with in-memory computing” using computers and any manner of output medium to help executives make good S and OP, and other, decisions. I add Business Intelligence tools to the list of things that must be in Keith’s mix.
    We must all be life long learners, and therefore be Old Dogs and New Dogs simultaneously.

  4. Hi Fritz

    You are correct. And I am pleased to see your response. My blog was largely to provoke a response similar to yours from people in the 50s. All too often I see a dismissive “been there, done that” response, without the added acknowledgement that there is a qualitative difference that requires change, and that much of the change comes from the person. In other words old dogs do need to learn new tricks.

    Of course IoT/digitization also provides a quantitative difference to which you refer. This quantitative difference means that we can perform analysis that is substantially greater in speed, scope, depth, and fidelity. We cannot pretend that this quantitative difference makes no process or organizational difference.

    Well, I am arguing that we should embrace the IoT/digitization opportunity to make operating model changes, meaning talent, process, and organizational changes.

    The largest qualitative difference to me is the manner of sharing. Even though what Walmart and some other retailers did in the 1980s was substantially different from what went before, not all sectors, particularly manufacturing, have embraced the same processes. I refer to Schneider Electric’s adoption of the concept of customer co-planning in the original blog. They found CPFR, the origins of which were of course Walmart, to be too “transactional”, meaning, to the best of my understanding, too execution focused. Hence the use of the term “co-planning”. Of course this still requires the core capabilities provided by CPFR, but extends it to “what could we do”, “what should we do”, and “what will be do”.

    But the purpose of my blog is not to argue the difference between CPFR and co-planning. It was more of a rallying cry to the Old Dogs to learn New Tricks. And to look to the “youth” for leadership in what is required in terms of new operating models rather than to repeat what has been done before, only more quickly.

    Regards
    Trevor

  5. Funny how boomers always skip (my generation) X who are currently in their 30’s and 40’s and taking over many leadership roles. In fact many of our current technology startups and companies were created and are led by X-ers. From Elon Musk to the Google boys to Pieter Thiel. In fact most of the digitization revolution was and is created by X-ers (and late Y-ers).

    We know what iterative means, what SCRUM means, MVP’s and Design Thinking. We invented most of the processes and procedures used today to get to a target fast without wasting time on perfectionism.

    Other than that I do agree: baby boomers have mostly no clue and nor do traditional engineers. So wait and see, we’ve all identified Industry 4.0 as a next place of disruption. We’ll be there soon enough.

  6. In fact I did a quick check on the founders of Twitter, Linkedin, Uber, AirBnB, Facebook, Pinterest, Paypal, Tesla/Space-X, Amazon, Stripe, Palantir, Elance/Odesk, –> all Unicorns ($1 billion valuation).

    Facebook, Stripe and 50% of Pinterest have founders below 35. The rest is Gen X. I’m not even mentioning all AI/Machine Learning related startups (except Palantir).

    Sure there’s tons of startups by late 20’s, early ’30s (as it should be, it’s the VC business model after all) but to rule out people in their 30’s and ’40s and assume they’re as inept with technology as baby-boomers are is totally laughable and condescending (and it happens a lot).

  7. Hi Harold

    Thank you very much for two excellent comments. But I want to “unruffle your feathers”. First of all I am not assuming that Gen X is irrelevant. My target is more the Boomers. Second, I do wonder when the idea came to the Gen X people you mention? I suspect, but do not have proof, that the essential idea came to them in their late 20s and early 30s, and they had to wait until their 40s, once they had sufficient management experience and business acumen to extract a lot of VC money, to realize their dream.

    However, the real purpose of my blog was to point to leading indicators of new ways of working. As it has been for millennia, the power usually resides with the older people who then impose their views of how companies should be structured and work performed based upon what they learned in their 20s and 30s. The consequence of this is that we now have organizational structures and ways of working that date from 19th century military concepts of command and control that are most appropriate to the early Industrial Revolution and the adoption of mass production concepts.

    Every indication is that they are not appropriate to the Digital Revolution, and yet there is very little written about this. Instead the bulk of the attention is on what Hau Lee of Stanford defines as the first two stages of technology adoption, “substitution” and “scale”. “Substitution” is about doing the same thing more cheaply, and “Scale” is doing more of the same. The third stage is “structure”, which is doing different things or doing things differently. I’m suggesting that we look to the current Millennials for indications of how we can skip “fixed line” and go straight to “mobile”. And I think the Gen Xs are best placed to do this, because they have the power and the business acumen to make it real. But I am hoping that they will not get stuck at “scale” because they want to impose the “structure” they learned from the boomers. I rather they looked to the Gen Ys for new “structure”.

    As an indication of this need, I do not see Box, SnapChat, WhatsApp, Spotify, and a whole host of other apps that are on the smart devices of my 20 year olds, but not on mine smart device. Nor are they on your list. Again I am not trying to criticize the Gen Xs. I’m hoping they will be humble enough to help all of us leap frog to new ways of working by tapping the knowledge of the Gen Ys, instead of reaching back to what they were taught by the boomers and imposing that on the Gen Ys.

  8. hi Trevor,

    I can agree with most of what you write.

    In addition: there is a school of thought that considers these last 15-20 years a bit of an anomaly in the sense of stand-alone apps or services. From pets.com to Spottify. You didn’t really need anyone else to develop your ideas. But much low hanging fruit has been taken. And the first signs that life is more complex are visible with AirBnB and Uber which need billions in investments, not just to scale the idea, but to counter-lobby and forge alliances with 3rd parties (i.e. cities in particular). Sure Spottify needed to that too – but many others such as Dropbox/Box or Slack or Campfire or any of SaaS don’t really need these type of alliances.

    In addition, assuming the 10,000 hours of “deliberate practice” many kids start coding in their teens, have the experience in their 20’s. So if no other domain knowledge is required (which many app ideas don’t initially) it’s a good starting point. That fits the mold of “stand alone cool apps” perfectly.

    Thirdly VC funding is now structured in a similar way as financial analysts worked at investment banks: 1 in 7 to 1 in 10 makes it. You give everyone funding, aggressive term sheets, let them code 24/7 (because most in their 30’s+ don’t want to, can’t) and see who survives. This is a very similar scenario as what happens at investment banks, only within the organization.

    That’s not necessarily a roadmap for the future. The first internet revolution actually revolved around partnerships: access could be provided by e.g. AOL but what were people going to do with it? Likewise if you were a content creator, how could you reach people without partnering with someone like AOL? In the case of commerce: who owned the customer? And so on.

    There is a lot to be said that the third digital revolution (or the 4th depending on how you count) reverts back to that approach. That is because digitization now encroaches on “the real world”. E.g. a search engine was cool b/c it didn’t threaten whole industries… suddenly we were all empowered to find something we couldn’t before. Maybe Yellow Pages got hit, but that was about it.

    That is different when forecasting software calculates demand probabilities (try to teach people how to deal with “probability”!) which then sends automatic blockchain contracts to suppliers which send their stuff through driverless trucks and robots do the rest. So to speak. Suddenly digitization may not be so cool because 1) where are the jobs and 2) what kind of jobs?

    It’s interesting you mention there’s little written about the processes & the thinking involved that fundamentally differ from “the past”. I agree. I think it’s part of the resistance because obviously people find it difficult to learn continuously and learn new habits.

    With our first startup we generated some experience with “upgrading thought processes” in a traditional industry (the jewelry industry). It went straight from denial before 2008 to outright panic now and transformed not into action or behavioral change but actually into a “we’re all doomed, let me hold the flag as the last vestige of tradition while the Titanic is sinking”. It’s most certainly not rational behavior – at least not for them being independent businesses that need to survive. And they don’t. Massive amount of closings.

    I have to admit that when talking to businesses I’m a bit surprised how little (business apps) are being used. It might explain why economists do not find the productivity growth due to digitization one would have expected and in line with pre 1970 levels. Those apps in general do require different methodologies yes. For example we worked in a digital team of about 20 people around the globe using half a dozen apps or so.

    Therefore I am not so sure behavioral change can be accomplished – with any generational group (my experience says it’s around 40-45 that a major tipping point takes place with many. Then again we had to fire 2 people in their late 30’s who couldn’t even understand a basic kanban sticky-note style app like Trello.

    It may be the case we’ll just see a huge flux of people coming in, going out. Different people? Who knows.. maybe it’s an idea to collaborate and write a piece together about it 😉 😉

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