Let me set the scene for you:
It is Sunday, February 23, 2014 at 9:00a.m. Location: Miami, the Trump National Doral… outside patio. I’m grasping two cups of coffee and wearing all white. I’m sitting with Kevin O’Marah and he has an inquisitive demeanor … do I have your attention?
Now, let’s go back 9 hours. I was north of San Diego celebrating at a local home. The event was the Scholars Circle White Party, to honor the donors of a local public school. Naturally I wore white shoes, white pants, and a white shirt. I had to leave the event and go straight to the airport to catch my red-eye flight to Miami to attend the SCM World Live conference. I landed at 7am EST – nary a minute of sleep on the plane. I took a cab ride over to the Doral to meet my good friend Kevin O’Marah, Chief Content Office at SCM World (and wondering why I scheduled a 9am and not a 5pm, but that is beside the point).
Kevin and I go way back to our days at AMR Research. I always love catching up with him, sharing stories of supply chain, innovative practices and research concepts.
The first thing Kevin said to me was “you look ready for Miami!” … referring to my all white attire (for all you Millennials, it’s a Sonny Crockett thing…that’s Don Johnson from Miami Vice).
Not only was I ready for Miami and the SCM World Live conference, I was also ready for a very insightful 1+ hour back and forth with Kevin on digital demand and the impacts on supply chain. I’m sure Kevin was expecting my insights to be on Apple or Bose, where I had worked prior. However, I was actually captivated by an innovation on digital diapers. Yes, digital diapers. I had just read a story about diapers that actually tweet you when they are, say, wet or soiled…
There’s a device inside each diaper: a sensor for identifying when the diaper is wet and a blue-tooth to send a tweet. As a true supply chain practitioner, my main concern was that the cost would be too high for this product. But, when I spent some time thinking about the product and the customer experience, I concluded that the digital diaper cost could not only the same as the regular diaper, it stands a chance to be lower. As the SCM World report “Demand Management 2020” states, “Value to the customer encompasses the product purchased as well as the complete experience around that purchase (Demand Management 2020, SCM World, Research Report, March 2014).”
Our discussion came back to how a supply chain practitioner can participate in building a “digital” product. Certainly it takes marketing, engineering, and sales innovation, but also supply chain innovation.
Having worked at Kinaxis for a little over a year, I told Kevin, “one of the main benefits I see our customers achieving is planner productivity”. Our end-to-end planning with exception based notifications and simulation removes steps from the process and brings significant speed. The result is that planners are more productive. Or said another way, planners can spend more time on innovation.
The SCM World report states, “It is this translation (across demand and supply), that brings about the ability to evaluate different strategic scenarios (Demand Management 2020, SCM World, Research Report March 2014).” Our discussion continued along these lines. In order for supply chains to test innovation, planners need simulation capability to create scenarios. In essence, test the innovation against operational realities and metrics. At Kinaxis, our customers do just that. Achieve the benefit of planner productivity and use it to simulate scenarios. Scenarios improve profit margin, inventory turns, operating costs, value to the customer, new product ramps, revenue growth, capacity, etc.
So, let’s go back to our digital diaper discussion. How does a customer purchase diapers? One would likely go to a retail store, buy a box of 100, get home and put 30 in the downstairs bathroom, 30 in the baby’s room, 30 in the travel bag, and the last 10 in the stroller pouch. When the 30 that are downstairs runs out, you steal from the travel bag a few times, and then probably go buy another box of 100. Never realizing exactly how many you have. You just don’t want to be at Zero Trust me – I have two young kids…
That’s the customer experience, much more than a spreadsheet of demand numbers for your supply chain planners. Now, imagine your team using an application to simulate innovative scenarios and gain significant productivity.
Supply chain innovation scenario: Each tweet the diaper sends out can also count the tweets. When you get to 75 tweets, you also get a tweet or email telling you that there are 25 diapers to go, and asking if you would like a new box of 100 shipped direct to your home. The tweet/email can also suggest other products (such as items in excess) to add to the order, or special price/promotional add-on’s. That data can also go back to the manufacturer, and used for supply chain planning. As Kevin and I talked, we came to the possibility that the “digital” diaper could actually cost less when looking at the “complete experience around that purchase.”
The opportunity is in front of us as supply chain practitioners. Anything can be digital, and digital can change the supply chain significantly. Kevin and I concluded that current business complexity keeps us so busy firefighting and resolving issues 24/7. As leaders, we need to get to true exception based end-to-end planning, and gain the benefit of planner productivity. Only then can our supply chain planners take the time to simulate innovative scenarios that bring customer value, revenue growth, and supply chain excellence, even to products like diapers.