Stepping back from the triad, and taking an objective view, the process and software pieces only really exist to make people more effective.  To go a step further, the process and software should exist to make the people work together more effectively.  You can think of this as the promise of collective intelligence of an enterprise.  In “executive speak”, you can think of this as fulfilling the promise of having the entire organization actually executing the strategy across all functions, on behalf of the organization as a whole.

Collapsing planning and execution (real-time response management to deviations from the plan) into a single integrated process and breaking down the silos between various functions, departments, and trading partners, are key tenets of an enterprise control tower solution.

Andy Coldrick, working with Dick Ling, advanced Dick’s original definition and process of S&OP in the 1990’s to introduce the concept of integrated reconciliation – the key to driving the cross-functional, collaborative process at the heart of successful S&OP.  In the past decade, they have advanced an implementation methodology to drive cross-functional collaboration to truly allow strategic and sales and operations planning to become an execution-driven activity.

Andy and I will be presenting a blueprint for enabling people to realize the promise of strategy execution on Tuesday, December 13^th.

Register now for the webcast: Orchestrating Success in Sales and Operations Planning by Driving Cross-functional Collaboration with RapidResponse Control Tower

The difficulty often lies in minimizing the risk of the outsourcing decision. One sure fire way to reduce the risk is by treating your partner as an extension of your business,, whereby, information is shared freely without latency. A company cannot make good decisions based on data that is a week old. Supply chain executives will often challenge receiving data related to the outsourcing process since managing that part of the business is what they are paying their partner for. That is true, but if you are accountable to your customer, you need to have some level of understanding of your business including (and especially) the outsourced pieces. Be selective on what you need to see, but see it often! Let your systems monitor the business and alert you when you need to take action.

The article refers to the due diligence that must be performed when selecting the right partner, aligning strategies, and considering more than cost when making your selection. This is very true – you can pull the trigger on an outsourcing partner relatively quickly, but pulling out work and moving to another partner can have serious consequences, affecting fulfillment and cost.

Service level agreements (SLA’s) are critical along with creating the appropriate key performance indicators (KPI’s) to track performance and project future performance. For example, if your partner is manufacturing for you, and you provide them with a new forecast, you need to understand the implications of that forecast before execution commences. You may have just created an obsolescence issue worth millions of dollars that could have been mitigated if you knew sooner. This is why visibility into your partner’s operations is so important in this example. Often when things go wrong in an outsourcing model, there is considerable finger pointing, and resources are wasted tracing back to root cause. The end result is non-value added activity. Understanding how your actions today will impact all of your KPI’s now and in the future eliminates this waste. Look forward rather than backward.

An important aspect of any outsourcing relationship is trust. Progress is being made. However, this will continue to be a challenge as both parties are so focused on their own profit and loss. My colleague, Trevor Miles, has made some excellent points on this topic in his post: Do you trust yourself to collaborate? The real barrier to collaboration is not technology, but trust.

Companies that have struggled with outsourcing or are considering it as a new strategy will benefit from the referenced article.

What are your thoughts on outsourcing?

I would like to expand on a couple of these points, focusing on optimizing the supply chain through the use of collaboration, simulation, and scenario comparison utilizing modeling tools.

The supply chain network is composed of many different components acting in concert to deliver the required goods and services at the right time. The better these interdependent relationships are understood, the better the supply chain can be optimized. This raises the question how best to optimize such a complex set of data points.

In order to get an accurate simulation, you must be able to obtain accurate data about each node in the network, and then utilize software to model it. These nodes can include, but are not limited to:

• manufacturing plants,
• supplier plants,
• sub contractor plants,
• warehouses, and
• transportation routes.

This requirement would suggest that any simulation model must be able to incorporate multiple disparate data sources in a relatively easy and timely manner. Important data to obtain would be:

• lead times,
• inventory levels,
• in transit times,
• associated costs,
• quality levels, and
• service levels.

There are many others that could also be included to give a more accurate picture of the network.

Once this data has been obtained (which may require some effort, especially with off shore suppliers), the next question then becomes, what do we do with the data? This is where the requirement for multiple scenarios becomes critical.

Because these networks can be extremely complex with many factors influencing outcomes, we must have the ability to compare many different scenarios in order to determine a path forward. One scenario may give us a lower overall cost, but poorer customer service. Another may result in cheaper raw material costs, but lower quality levels and increased transportation costs. All these outcomes must be weighted in order to determine the most optimal design, -this requires some way to be able to compare multiple scenarios in a clear and efficient manner.

The next step would then be to examine each scenario, and determine if the best parts of each can be combined into one ‘super’ scenario. As an example, one scenario may have a supplier with lower cost, but higher transportation costs. What if sourcing is split between a low cost/high transportation supplier and a higher cost/low transportation supplier? By managing the sourcing between the 2, an optimal outcome may be achieved (happy medium). This can only be determined by developing a complex model with multi-sourcing.

If you take this case and apply it across the network, the number and complexity of the inter-relationships can soon become mind boggling. This is why a multi scenario engine which can rapidly calculate the various outputs of the model from its inputs is so vital. In order to implement the optimal supply chain network, it must first be designed as a whole to deliver the optimal results.

Once the supply chain network has been successfully modeled, a powerful tool is now available for what if analysis. The maximal use of this tool can be realized by incorporating continuous improvement into the business development cycle and optimizing the network on a regular basis. But in order to make this an effective tool for continuous improvement, a plan must be generated quickly and easily analyzed, as time and resource constraints limit the amount of time to turn around the results and push improvements to the network. This is why speed and performance matter when implementing complex modeling solutions.

Because the only way to realize the benefits of an optimal network model is to implement it, collaboration among all the players in the network (inside and outside the enterprise), is vital. This leads us to another key criteria for a simulation system - the ability of many users to access and collaborate on the development of the network model.

Once the simulation, model, and collaboration pieces are in place, it raises the question: Can this environment be used to model other complex systems as well as the supply chain? What about the ‘sales chain’, the complex relationship between you and your customers? What about the complex network of relationships that exist between an enterprise’s internal resources (employees) and the enterprise? Financial models? As can be seen, there are a myriad number of networks in the modern world that can be modeled for the purposes of increasing efficiency, and thereby reducing costs or improving service levels.

• Let’s start from the perspective that a control tower is a decision making tool, not merely a visibility tool. Visibility is a precursor, a building block. In optimization parlance, visibility is an adequate but not sufficient definition of a control tower.
• A key requirement of a control tower is that several simulations can be performed to test high level hypotheses at a granular level to determine the potential effect on operational and financial metrics, as well as identify any constraints.
• A control tower by definition must cross functional and/or organizational boundaries. I think we can all agree that the term implies a view across a fairly broad span of operations, not a narrow functional perspective.
• Because a control tower crosses function and/or organizational boundaries it must support collaboration in order for people to be able to share perspectives and arrive at consensus and compromise that balances competing objectives and performance measures.
• Direct people to what is important and alert then to what is critical, and of course within their span of control.
• Identify consequences to underlying events, as well as the people who are responsible for both the events and the consequences, so that they can arrive at a joint resolution.

The analogy of the airport control tower has great deal applicability to supply chains. All of the systems required to manage airplane departures and arrivals, airplane cargo management, bookings, maintenance etc. are interwoven into a real-time mesh of information and decision making in addition to the visibility that an elevated position and radar afford. In contrast company supply chains, by and large, are separate, isolated, data ‘islands.’ The very best of these typically have ‘batch’ type connections to each other. When things go wrong the signals are late to arrive and impacts difficult to estimate. Imagine a supply chain world that is run like the world’s airports, with common standards (like pilot/tower communication always in English) and systems designed to communicate with each other in real-time. This is a very instructive model with standards and collaboration at its heart.

Below is what Sameer Patel wrote earlier this year in a blog titled “2011 Business and Technology Forecast,” with my emphasis:

As organizations increasingly start to see the benefits of deploying social and collaborative initiatives to improve employee, customer and partner engagement, they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised. In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them. And reseller partners are constantly spending time looking for the right answers not available on asynchronous partner portals to keep end customers happy. Silo’d but open collaboration initiatives on activity streams and other enterprise social networking utilities currently being deployed will expose such engagement not historically possible in an ERP or CRM laden design. Consequently, LOB and IT leadership will realize that traditional process approaches and fluid collaborative constructs need to come together to truly accelerate business outcomes.

My definition above focuses on the process and organizational requirements, but also on some key functional capabilities. What is clear from Sameer’s perspective is that by definition the solution will not be coming out of ERP or CRM systems. I think his observation that;

… they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised.

is particularly important because for years these systems have been sold on the promise that they encapsulate best practice processes. If a process is repeatable isn’t it by definition a standard process and not a best practice process? OK, I concede that the process may be best practice and repeatable in a few organizations, but if everyone deploys a standardized best practice process, is it still best practice? I could go on forever on this topic, but I will leave it to Sameer’s devastating observation that;

In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them.

And I will go further to state that not only should a control tower identify the experts for the employees, but in addition a control tower should allow an employee to suggest a resolution and to test its efficacy against operational and financial objectives. By all means get an expert to validate the assumptions and results, but all too often it will take too long to get expert feedback, especially if the expert must be identified, the problem described to the expert, and then have the expert investigate resolution in a separate system. The customer or prospect will have moved on to other problems by then.

In other words a thin collaboration capability that is little more than sharing ideas without the capability of evaluating the impact of the ideas is not likely to be of much value and is only a slight improvement on using phone, FAX, and Excel attachments. The issue isn’t that humans don’t have ideas, but rather that they don’t have a timely and effective manner of testing their ideas at a sufficiently granular level to ensure both feasibility and value. This is the key to having an effective control tower.

Gartner has also being weighing in on the topic of control towers, although nearly all the article focus on logistics visibility, hardly a ground breaking areas.  (Any references I make will require access to Gartner materials for full viewing.)  In an article titled “Supply Chain and Manufacturing Outsourcing Discussion with Supply Chain Leaders” published on (Michael Dominy, Hussain Mooraj; Nov 22, 2010), the authors define a control tower, that goes beyond logistics, as follows:

a “control tower” or centralized shared service organization to manage relationships and information between the company and its outsourced manufacturing, logistics and other service providers.

Unfortunately they don’t include a mention of collaborative decision making, but they do go on to state in the same article that;

Even if a partner delivers the supply chain visibility and events across the ecosystem of supply chain partners, the enterprise must control and direct the response across the supply network.

I can only presume that being able to control and direct the response across the supply network implies the ability to reach
a timely and consensus decision on what that response will be.

What I do like about this Gartner article is that it includes a maturity model. I am often guilty of describing nirvana without painting a picture of how to get there and the steps between. Something else that is brought out by the Gartner diagram and article is the applicability of control towers to outsourced environments. In other words when key operational activities are outsourced it is necessary to get on overview of the operations in order to provide the control and direction to the extended supply chain.

So far I have focused very much on the definition of an “operational” control tower. In my next blog I will weigh in on a “corporate” control tower that focuses more on the needs of the executive level. In the meantime please give me some feedback. I’d love to hear your ideas about control towers and the convergence of consumer-led social networks concepts, enterprise 2.0 ideas, and control towers.

Although there may be no such thing as a perfect forecast, there are plenty of opportunities for improvement and managing demand in support of a more cost-effective supply response. Better collaboration between trading partners is the necessary next step toward waste elimination in the value chain.

Maximizing value from the supply chain won’t be reached without improved collaboration between trading partners.

In fact, Mike identifies the lack of collaboration between trading partners as the primary cause of demand volatility. (I agree that the lack of demand visibility increases demand volatility, but there are other industry dynamics that are increasing demand variability.)  Of course, visibility and collaboration are the key messages behind The Beer Game (or beer distribution game) which was originally invented in the 1960s by Jay Forrester at MIT as a result of his work on system dynamics to illustrate the bull-whip effect.  Absolutely critical to a smoother functioning supply chain is demand visibility across the entire supply chain.  Of course visibility isn’t a very mature form of collaboration, but it is at least a start and a necessary precursor to more mature forms of collaboration. And let’s be honest, after 50 years we still haven’t really got to effective demand visibility, although there have been improvements.  To get some estimate of how well your company is performing in this regard you can take the Gartner Demand-Driven Value Network (DDVN) maturity self-assessment.(Registration or Gartner membership required.)

But it isn’t just so-called Easy-West collaboration between customers and suppliers that is required.  I would be happy to start with the so-called North-South collaboration between strategic and financial plans, usually the focal area of the executive suite and Finance, and operational plans. Some analysts and commentators have called this integrated business planning, which also dates in concept from the 1960’s. I’d even settle for East-West collaboration between demand and supply functions within one organization, including Gartner’s stage 4 Sales & Operations Planning (S&OP) maturity. There is no inter-company process that is a better measure of collaboration than S&OP done well.  According to Jane Barrett of Gartner, most companies are stuck in stage 2 maturity.  This is largely due to the inertia and resistance to change so prevalent in many companies.

But how is it that 50 years on from Jay Forrester’s work we are still struggling with this issue? My opinion is expressed in a blog titled “Do you trust yourself to collaborate? The real barrier to collaboration is not technology, but trust”.  Let’s face it, technology can always be improved, especially the user experience. But the capabilities of the technology available for inter-company and intra-company collaboration exceeds the willingness of organizations to share information at the moment.  As Mike Burkett points out, huge gains can be achieved by collaboration, so why don’t companies try to capture these benefits?  My opinion is that the issue is the same that is preventing them moving from stage 2 to stage 3 S&OP process maturity, namely that they simply want to automate their existing manual processes and don’t realize that effective collaboration requires both new ways of working and supporting technology capabilities. 

Nothing captures this better than a Henry Ford quote that “If I had asked my customers what they wanted, they would have said faster horses.”  There is a strong synergy, even symbiosis, between technology and process.  In a great slide show titled “What if Peter Drucker taught Enterprise 2.0?”, Mark Fidelman states that

Neither technology nor people determines the other, but each shapes the other.

But let us recognize that the financial and operational risks of collaboration are tangible and can be high.  There is a good series on collaboration in the Harvard Business Review.  The one I like best dates from June 7, 2011 and is titled “Collaboration is risky.  Now get on with it.”  The author, Whitney Johnson, writes that

Why is teamwork so difficult?

Because collaboration is actually a pretty risky business. Perhaps, like me, you are generally of the mindset that two heads are better than one. But because your ideas frequently get co-opted, there’s a risk-reward imbalance that makes you reluctant to engage. Or maybe you’ve reached out to a potential collaborator only to have your lack of expertise exploited. So, rather than ever again experiencing the one-two punch of ignorance and vulnerability, you’d prefer to soldier on alone. In both instances, the fundamental barrier to collaboration is a lack of trust.

While writing about individuals within a group, clearly Whitney’s observations and opinions are very applicable to collaboration between functions and organizations.  Her prescription is to

1. Start with simple exchanges where the cost of betrayal is low.
2. Remember that our collaborators are competent.
3. Don’t take advantage of our collaborators’ deficiencies.
4. Give others their due, and expect yours in return.

Sound advice.  Yet so difficult to put into practice.  The comments section is well worth a read too, including links to some interesting materials.

Mike Burkett concludes his First Things Monday contribution with the observation that

By closing gaps between partner nodes in the supply chain, there’s an opportunity to address the unnecessary waste across the value chain.

These are the hard benefits of supply chain collaboration.  They are real and they are achievable.  Yes, the risks are real, but the rewards are equally real.

The presentation is an expansion of a blog post I wrote the other month.  Here is the abstract:

Collaboration can bring tremendous value to outsourced supply chains, such as we see in electronics and apparel.  But what is collaboration? All too often collaboration is viewed in the context of exchanging data.  Visibility to data is important, but collaboration is ultimately about teams of people working together to achieve a shared objective (but perhaps not a common goal). The potential value of collaboration in the supply chain is enormous in terms of both reduced inventory and increased supply chain agility, not to mention the reduced cost of ”policing” supply chain relationships. Visibility is a start. Collaboration is the goal.

Follow me on Twitter at @Milesahead or on the 21st Century Supply Chain Blog to get updates from the event.

For more information on the Extended Supply Chain 2011 conference, visit: http://www.centaurconferences.co.uk/brands/theawarenessgroup/events/extendedsupplychain2011/Overview.aspx

Also, don’t forget to enter our New Kinexions contest for an XBox 360 and Kinect! The winner will be the person who best completes this sentence:

Bad software is like an annoying ex because…

Visit the contest page for details, to enter, and to view other hilarious entries.

This week’s episode focuses on collaboration, which according to Google is defined as: A recursive process where two or more people or organizations work together in an intersection of common goals. Unfortunately, this is not a concept that Ari Cole can understand as he continues to do what he thinks is ‘best’ for the relationship.

On a serious note, to learn more about supply chain collaboration check out this research report by Aberdeen Group titled: Enabling Supply Chain Visibility and Collaboration in the Cloud.

Best-in-class companies have gained significant improvements … when it comes to collaborative processes…This ensures that they will continue moving toward integrated demand-supply networks.  This trend is bolstered by the rising importance of this process [collaboration] for succeeding in the multi-enterprise supply chain.

But the early stage of maturity, B2B integration, is a very necessary step toward collaboration. Without the data there can be no visibility or collaboration.  However, pure visibility is over-whelming because of the volume of data.  There must be a filter mechanism that not only identifies the important information, but also who should know about this information. It is important to recognize that the importance of the information is going to change according to a person’s role and responsibility. Not only that, but often the consequence of an event is more important than the event itself.

Let me give an example. Say a supplier cannot meet a delivery date and instead will deliver the order 1 week later than previously agreed. Who should know? Clearly the purchasing agent responsible. Do we know who that is and can we alert them? Or does the purchasing agent need to find this information themselves? (Often they do.)

Does anyone else need to know? What about the manufacturing manager whose line is about to run out of materials?  If the line is stopped for only for an hour does the manufacturing manager want to know? Possibly, but if it is for a day then definitely. But does the manufacturing manager need to know the details about the late supply? Probably not. Similarly a customer service rep may only want or need to know if an order for an important customer will be delayed by more than two days, but they are unlikely to be interested in either the line stoppage or the late delivery. What about the VP of Sales?  Does he/she need to know about the late order? Probably not, unless it represents a significant portion of the sales for the quarter. Even then the Sales VP will be a lot more interested in this information at the end of the quarter rather than at the beginning of the quarter. Of course in this discussion I am assuming that security exists that identifies who is allowed to know.

In other words a notion of responsibility is necessary to take the raw data provided by visibility and convert it into actionable information. The questions that need to be asked are:

• Who should know?
• Why should they know?
• What should they know?

This is very different from current concepts of social media and social networks in which every piece of information is treated as having equal importance and all the information is sent to everyone who is ‘following’ the publisher. Even within the world of Facebook and Twitter the issue of volume of information and relative importance of information is receiving some attention. But in a multi-tier, outsourced, off-shore supply chain the notion of responsibility is absolutely crucial to separating the important from the trivial and to sending the information to the right people, namely those who are affected and those who can affect the consequences.

In a blog titled “Social media to improve supply chain?” Matt Davis of Gartner, in discussing examples of the use of social media in supply chain management, concludes that;

But so far, these examples are all, shall we say, supply chain adjacent.  Supply chain leaders will use demand insights to orchestrate their environment. Both into the sales channel as well as back to their suppliers. Examples of this capability are still few and far between in traditional supply chain, let alone through social media. Will companies ever use a social media platform to manage factory capacity or expedite raw material shipments? That remains to be seen. But I am seeing where social media helps bridge the functional divide between the demand drivers (sales and marketing) and supply chain responders.  As demand requirements from customers are better understood, the first question asked is often, “how are we going to do this?”  And that connects the demand sensing to the supply chain execution.

So Matt touches on the notion of consequence – that connects the demand sensing to the supply chain execution – but does not address the notion of responsibility. As importantly though, Matt identifies where social media can break down the barriers between functions and organizations to facilitate collaboration and more agile and responsive supply chains. The notion of responsibility is necessary to make the use of social media in supply chains effective rather than overwhelming.

The value of social media in the supply chain really kicks in once the group that is required to collaborate to reach consensus/compromise has been identified. The secret sauce is in identifying who belongs in the group.

In a recent Aberdeen paper titled “Enabling Supply Chain Visibility and Collaboration in the Cloud”, Nari Viswanathan places B2B integration into “Visibility”, a necessary precursor to collaboration.  The Aberdeen maturity model for building integrated demand-supply networks between trading partners, which is published in the paper and captured in the diagram below, can be boiled down to:

• Getting connected (B2B Integration)
• Making sure the data is right (Data Management)
• Working together (Process Collaboration)
• Working together on the right things (Network Intelligence/Performance Management)

Perhaps more interesting is the distinction Nari makes between Visibility and Responsiveness.  Without a doubt in today’s outsourced and off-shored supply chains, knowing where items are is a major challenge and is a necessary first step in being able to determine the “health” of the supply chain.  But knowing that something is not right (Visibility) and being able to correct it in a consistent and timely manner (Responsiveness) are two very different levels of maturity.  Relying on phone/FAX/email to devise a response to an issue in the supply chain is simply too slow and too error prone, the greatest drawback being the lack of ability to evaluate the financial and operational consequences of any proposed changes in a timely and effective manner, let alone reach a consensus and compromise on the course of action.  Social networks can already play a role in the Visibility stages of maturity.  So much of the data transferred between trading partners has nuance and meaning that is lost in EDI, which is where the use of social networks/media can play a strong role.  And not only as a replacement for phone/FAX/email, but also as a way of capturing the information for governance and corporate learning.

While I see social network technologies playing a role at all levels of the maturity model, though it is really in the Network Intelligence/Performance Management stage that they will be most widely adopted.  As we can see from the Aberdeen diagram, the benefits will be highest, as will be the supply chain responsiveness or agility.  The interplay of visibility and agility is brought out very well in a blog by Bill Dubois titled “Supply chain visibility is vital, but the larger business goal is agility”, especially the value of agility brought about by the collaboration between trading partners.  Collaboration is a lot more than the exchange of data: It is the exchange of information that is helpful in identifying opportunities, and compromise to achieve joint value.  Hard facts play a huge role in response management and agility, but so do “soft” facts. Especially as it is the “soft” facts that will lead to consensus and compromise.  As I point out in my earlier blog, the decision processes of enquiry-to-quote–to-order often take as long as the physical order-to-delivery process, which is not only more difficult to reduce, but will likely extend with the continued increase in off-shoring and outsourcing.  Why not focus on the decision processes and use social network technologies not only to speed up the process, but also to enhance governance and organizational learning?  These are much easier to change than the “poured concrete” of the physical supply chain.

I suspect much of the early adoption of social networking technology for business processes, other than social media marketing, will be across functions inside of an organization, initially automating manual processes that require interaction between functions and translation between different function specific applications.  Two extracts from a blog by Ray Wang titled “Organizations Seek Measurable Results In Disruptive Tech, Next Gen Business, And Legacy Optimization Projects For 2011” bring this out very clearly, though Ray believes that the biggest changes will come from interactions outside the organization.

• Organizations will put business back into social business (@sameerpatel).
  As organizations increasingly start to see the benefits of deploying social and collaborative initiatives to improve employee, customer and partner engagement, they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised.  In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them.  And reseller partners are constantly spending time looking for the right answers not available on asynchronous partner portals to keep end customers happy.  Silo’d but open collaboration initiatives on activity streams and other enterprise social networking utilities currently being deployed will expose such engagement not historically possible in an ERP or CRM laden design.  Consequently, LOB and IT leadership will realize that traditional process approaches and fluid collaborative constructs need to come together to truly accelerate business outcomes.
• P2P will displace the old notions of B2B and B2C in social business (@rwang0).
  B2B and B2C will cease to exist in 2011.  Organizations will conduct social business through Peer-to-peer (P2P) relationships. Attempts to stove pipe individuals into forced-fit, artificial market segmentations will fail because each individual brings multiple roles to the community.  Each role brings a new perspective and a set of expectations in customer experience.  Organizations will have to retool to the new rules of business and also move beyond social.

One of the trickiest aspects that will need to be addressed in order to get a broader adoption of social network technologies in business processes is the concept of “responsibility”.  Existing social networks such as Facebook are principally about sharing or “pushing” information, but most business processes require an interaction between at least two people, each of which is responsible for an aspect of the decision and who need to reach a consensus and compromise in order to take action.  Often these interactions require input from as many as 5-10 people.  Identifying who needs to know can often be an insurmountable barrier to reaching a timely decision.  I want to draw the distinction here between the people who need to know, which implies responsibility to take action, and the people who want to know, which implies an interest but not a responsibility.  Existing social technologies address the want to know, but not the need to know aspect.  To illustrate the difference, Angel Mendez, SVP of Customer Value Chain Management at Cisco, commented during a talk he gave at a conference in 2008 that there are over 20,000 people in Cisco’s value chain, only 2,000 of whom work for Cisco.  Knowing specifically what person at which component supplier is responsible for the delivery of a specific item by a specific date to a specific contract manufacturer and the specific person at the contract manufacturer who can commit to a scheduled delivery change in order to meet an order change request for a specific end item …, is crucial to being able to make a timely decision on whether or not the requested delivery date can be met.  Responsibilities are of course related to security issues, but security deals more with who has access to certain information, not who is responsible for taking action if that information changes by an amount that exceeds a certain tolerance.  For example, a customer service representative will need to act on any new order enquiry from a customer, but may only need to know of the existing orders that will be delivered late because of a change in supply.  On the other hand a VP of Sales will not need to know of each order, but may need to take action on any orders that, say, exceed $100,000 in value and a 10% discount on the full order.

Value chains by their very nature require huge amounts negotiation and collaboration between trading partners, which has up to now been carried out largely by phone, FAX, and email.  Social network technologies are a natural extension of these existing technology enablers that brings much greater agility through speed of decision making and levels of governance and conformance not available with existing technologies.

col•lab•o•rate   (k -l b  -r t )

intr.v. col•lab•o•rat•ed, col•lab•o•rat•ing, col•lab•o•rates
1. To work together, especially in a joint intellectual effort.
2. To cooperate treasonably, as with an enemy occupation force in one’s country.

I think this definition brings together the ying and yang of collaboration very neatly.  On the one hand we see collaboration as something positive that will bring mutual value.  On the other hand we view collaboration as working with the enemy to the detriment of our own group.  What I find fascinating is that the same action can be perceived to fall in either category depending on the perceived objective and the level of trust one has of the party with which one is collaborating.  The conclusion I came to is that the real barrier to collaboration is not technology, but trust.

This came out loud and clear in a recent discussion titled “What’s happened to CPFR” in the Institute of Business Forecasting (IBF) group on LinkedIn (membership required) that was started by a guest blog by Lora Cecere of the same title on IBF.  For those who may be unfamiliar with the term CPFR it is an abbreviation for Collaborative Planning, Forecasting, and Replenishment which starting in 1995 as a Wal-Mart initiative to improve the efficiency of planning and replenishment between retailers and suppliers.  Clearly collaboration is at the very heart of this initiative.   The VICS organization has been promoting CPFR for a number of years, which is where I found the diagram below.  Notice the x-axis of “Time degree of trust and complexity”.

As one commenter in the LinkedIn group states:

I tried CPFR with one of my biggest customers. It was failed before it started to work. The customer’s only interest was to put all the risk/cost on my side. They even didn’t want to be [bound] by their own plan. 

Where’s the trust in that statement!  Another commenter on the LinkedIn group, whom I presume works for a retailer, states (with minor edits from me):

I don’t think CPFR can work… Retailers also don’t receive any info from the consumers of what and when they will be purchasing. I think [the] process [should] start [with] the “Voice of the Customer”. … ( I want to find the product I am looking for on the shelve and buy and take it home if possible).

To bring it all together a 3rd commenter stated that:

… forecasting and planning process is used to set sales targets, rather than predicting demand…

Lora Cecere’s opening statements are also very direct.

Go to any supply chain conference, and you will hear it.  Yes, the term collaboration is bandied about. It is over-used and often over-hyped in discussions largely without meaning.  So, what does it mean?  And, what happened to the supply chain collaboration initiatives of the 1990s? Let’s start with the definition.  The greatest success in supply chain relationships is when true collaboration happens.  What does it look like? It is a when a sustainable win/win value proposition.   Six elements are required:  resources, skills, joint vision, leadership, a plan, and aligned incentives. The problem is that the so-called “collaborative programs” of the 1990s focused solely on process missing the mark on these six elements.  The tenants of VMI and CPFR were well-intended, but they fell short in building true collaborative relationships.

And yet the potential value is enormous in terms of both reduced inventory and in terms of supply chain agility, not to mention the cost of ‘policing’ the supply chain relationships. The concept of the Bullwhip Effect has been around for 50 years now, having been defined by Jay Forrester in 1961 in his seminal book ‘Industrial Dynamics’. What amazes me is that the central lesson learned from the exercise is that end-to-end visibility, in other words a rudimentary form of collaboration, has an enormous positive effect on the efficiency of the supply chain.  So is it really just power and control, or lack of trust, which is preventing the adoption of this core learning?  And yet the evidence is difficult to refute.  In an article titled “Supply Chain Management Application Trends, 2010” which was published by Gartner on Nov-30, 2010 (subscription required), the authors Dwight Klappich and Chad Eschinger included the following diagram, clearly indicating a much lower level of interest in “Inability to coordinate and synchronize end-to-end supply chain processes” (in other words cross-company collaboration) than other areas, although “Lack of internal, cross-functional collaboration and visibility” is clearly an opportunity for collaboration within the 4 walls of an organization.   What really jumps out at me in the diagram is that the biggest issue is “Forecast accuracy, demand variability”, exactly the point raised by one of the LinkedIn commenters.  But didn’t the Bullwhip Effect show 50 years ago that visibility and collaboration across organizational and functional boundaries, particularly with respect to the demand signal, leads to a far more effective and efficient supply chain?

In a recent conversation with Lora Cecere we agreed that our guestimate, based upon discussions with customers, is that the inquiry-to-quote-to-order process, in other words the decision process, often takes longer than the order-to-delivery process, in other words the physical process. How sad is that? This is where a great deal of the agility can be extracted from the supply chain processes, especially when we hear of customer expectation of shorter order lead times.  George Stalk was writing about time-based competition 20 years ago in which he captures the basic tenets of time-based supply chain inefficiencies in the following 4 rules:

• The .05 to 5 Rule
  Most products and many services are actually receiving value for only 0.05 to 5 percent of the time they are in the value-delivery of their companies
• The 3/3 Rule
  The waiting time has 3 components, which are the time lost while waiting for:
  -  Completion of the batch a particular product or service is part of
  -  Completion of the batch ahead of the batch a particular product or service is part of
  -  Management to get around to making and executing the decision to send the batch on to the next step of the value added process
• The ¼-2-20 Rule
  For every quartering of the time interval required to provide a service or product, the productivity of labour and of working capital can often double, resulting is as much as a 20% reduction in costs.
• The 3 x 2 Rule
  Companies that cut the time consumption of their value-delivery systems experience growth rates of 3 times the industry average and 2 times the profit margins

I wonder how much of the lack of adoption is due to people being used to the ‘open’ world provided by the internet?  I think that the First Things Monday blog (registration required) of Dec-12, 2010 titled “Reader Response to ERP in the Cloud” by Dennis Gaughan goes quite a long way to suggest that social media concepts combined with cloud computing are beginning to increase the level of interest expressed by enquiries:

They would like to see applications that blended business processes from ERP with social networking technologies and the cloud to truly deliver a new way of collaborating with their trading partners. To quote one reader, “The power of a supply chain which identifies and allows various sourcing options based on product availability, right now, is compelling.”

And yet there is an argument raging between Dennis Howlett (http://www.zdnet.com/blog/howlett/enterprise-20-is-beyond-a-crock-its-dead/2607) and Andrew McAfee (http://andrewmcafee.org/2009/09/e20-is-a-crock-discuss/).  I commented on Andrew’s blog with reference to process/decision vs physical lead times.  Dennis is arguing, I believe, that trust is a major barrier to adoption of Enterprise 2.0, or Social Business, concepts within an organization, let along across organizations. Andrew McAfee on the other hand points to real examples where value and trust have been delivered by Enterprise 2.0 technology, although, unfortunately, none of his examples are within the supply chain space.

I don’t believe these positions need to be mutually exclusive or diametrically opposed, or argued quite as ‘loudly’ as they are by Dennis and Andrew.  I think people largely come from different experiences and some are very distrustful of all things electronic let alone on the internet.  As an example I will use my wife’s resistance to TiVo.  She is a classic example of someone who should not be given a universal remote.  In 2003, when we first got TiVo, she had only just mastered setting timed recordings on the VCR.  I knew that presenting her with the TiVo remote with about 25 buttons would be the wrong approach.  Instead I showed her what she could do with TiVo by recording films with actors that she liked, without having to page through the 120 page TV guide. Once she saw this value she was willing to tackle the complexity of the TiVo remote and expanded her use to much more complex use of TiVo.  Too many of us technologist (yes, I am one too) start with the cool technology stuff, forgetting to start by articulating and getting buy-in to the business benefit. Put differently, in building trust that the collaboration is of both individual and mutual benefit, and that technology is not a barrier but an enabler.

So I am optimistic that a combination of unique circumstances of both business drivers and available technology will lead to increased adoption of collaboration within the supply chain space, both within an organization across functional boundaries, and across organizational boundaries.  I believe the diagram above from the Gartner article supports the business imperative in spades.  After all, the challenge of “Lack of internal, cross-functional collaboration and visibility” is tied directly to S&OP because an absolutely key aspect of S&OP is internal, cross-functional collaboration.  And we hear from all analysts that S&OP is the top enquiry by far. I also think that we need to restate CFPR as S&OP across organizational boundaries.

The business case is there.  What we need to do is to provide tools that make the collaboration feel natural.  I think that the very rapid adoption of social media concepts inside the workplace, such as Salesforce Chatter, indicates that the users are ready. To repeat, the conclusion I came to is that the real barrier to collaboration is not technology, but trust.  How can we build the trust to make collaboration a reality?