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Digital supply chain is the “in” thing! Don’t take my word for it, though. Just google the term. You will come across many articles talking about how supply chains are being remade by industry 4.0, internet of things (IoT), 3D printing, big data analytics, cloud computing and so on. But what most of these articles focus on are the means rather than the ends for the digital supply chain. On a day-to-day basis I speak to a number of supply chain practitioners. Most of them tell me they are at some stage of evolution with their digitization strategy. However, much confusion exists in terms of what constitutes a digital supply chain. So, I decided to write this blog to share my point of view on the topic.
Supply chain digitization is not simply taking existing information and capturing it in a digital format. It is not about automating your existing SCM processes. It is not about layering in Sales & Operations Planning (S&OP) as a band aid to connect disjointed processes. It is about having the most current information to run your supply chain effectively, available on demand, so you can service your customers and grow profitably. In other words, think of a Google search for supply chain. You ask questions and you get answers!
Here, I will introduce 6 design principles that make up a digital supply chain. I will lean on the example of Uber, how it digitized the taxi experience, and draw parallels to digital supply chain. Let us take a look at these design principles:
Supply chains are growing more complex by the minute. With increased outsourcing, companies’ broad market penetration and expansion, not to mention the overall volume of products, it’s no wonder the difficulty in integrating all those internal and external supply chain nodes has grown exponentially.
Smart companies are turning to improving their supply chain visibility to help combat this connectivity problem, but the truly wise ones realize end-to-end visibility alone won’t yield effective supply chain orchestration. It’s just one step of many on the path to achieving higher levels of maturity.
Gartner’s five-stage demand-driven maturity model for supply chains outlines visibility as a key focus of supply chains in Stage 3 (Integrate), but with two more stages (Collaborate, Orchestrate) on their maturity model, it can’t be the end goal.
I came to the realization that you would get the same reaction from a supply chain executive when discussing supply chain technology.
When I refer to supply chain technology, I am talking about software to support the fundamental supply chain business processes — Demand, Supply, Inventory Planning, and Sales and Operations Planning.
We have electric cars, new transportation systems, wind turbines, solar panels. There is much excitement about technology favorably impacting the climate.
Like climate change, when you hear about new supply chain and manufacturing technologies, and the advancements being made, you want to be part of the sea change. Advanced analytics, cloud solutions, cross functional collaboration, big data, in-memory computing, 3D printing. These are all advancements in supply chain that are changing the way you do business. You will be more competitive, more profitable with more market share if you embrace these advancements.
Supply chain risk. It’s a topic that just never seems to go away (nor should it!). Everyone and their uncle has probably read at least one article, blog, research report, etc. on the topic. We’ve covered it here extensively on the 21st Century Supply Chain blog, and Kinaxis has even produced a great infographic about it. There’s no denying it’s a very important subject when it comes to good supply chain management.
Recently however, I’ve been thinking about supply chain risk in a whole other light. Thanks mostly to a fabulous guest post by MIT’s Yossi Sheffi on the Wall Street Journal, which I had the good fortune to stumble across. In it, Sheffi talks about the concept of a ‘black swan’, no not the risk of slightly unstable ballerinas invading your supply chain, but rather a term popularized in 2007 by Nassim Taleb that’s used to describe occurrences that are thought to be impossible.
At first blush, it all sounds a bit familiar. Make sure you prepare for the unexpected. Got it. We’ve long been proponents of making sure your supply chain risk management strategy targets three key areas: anticipated risk, uncontrolled anticipated risk, and unanticipated risk. Surely this concept of a black swan fits squarely into the third category, which is characterized by an event that is entirely out of our control and hard to anticipate and plan for. And it does.
In my previous blog I looked at the role company culture plays in being able to develop and maintain a best-in-class supply chain. This blog will explore the role supply chain processes play.
Insight #2 – Your supply chain processes
Do your supply chain processes look like this?
There is still a mindset that drives a focus on functional excellence, which means processes end up siloed.
Referencing Gartner’s Five-Stage Demand-Driven Maturity Model, this would only place your company at Stage 2. Integrated supply chain decisions place you at Stage 3; integration across the extended supply chain to customers and suppliers places your company at Stage 4. Stage 5 incorporates technology that enables value network creation as well as risk management and scenario analysis for profitable trade-off analysis.
Companies that have reached Stage 5 have reaped the rewards of profitable growth.
The Whole is Greater Than the Sum of the Parts
This does not preclude the need for excellence in demand planning, supply planning, inventory planning, and S&OP processes. The distinction is to think of their value holistically. Companies will often conduct technology evaluations on individual processes rather than ensuring that all processes are interconnected through the technology. This requires a strategic vision of the value chain with business and IT.
A supply chain road warrior works for a company that specializes in supply chain, spends many, many hours on a plane, uses lean principles when going through the security line, gets far too much satisfaction from collecting air miles and hotel points, is constantly wondering why the airlines have such antiquated software, can spot a casual traveler from a mile away, and is fixated on every situation where demand does not equal supply… or vice versa.
The focus of this blog series is to share the insights I have gained during my 15 years as a supply chain road warrior. Having spoken to many companies, peeked inside their organizations, and worked alongside them during countless supply chain initiatives, I’ve built myself a bit of a list of what it means and what it takes to be best-in-class.
Insight #1 – Your company culture
Insight #2 – Your supply chain processes
Insight #3 – Your supply chain measurements
Insight #4 – Your supply chain technology
Does being the best at a specific supply chain function — Demand Planning, Supply Planning, Inventory Planning,
It’s not often that a weather phenomenon becomes part of the pop culture zeitgeist. But that’s exactly what happened in the late 1990s, when El Niño became a household name—and even a character played by Chris Farley on Saturday Night Live.
El Niño is a blanket term for the effects of an unusual warming of water in the Pacific Ocean that occurs once or twice a decade. A massive El Niño occurred in 1997-1998, unleashing record rains in California, deadly tornados in Florida, and a brutal drought in Indonesia, thus landing the term firmly on the radar (no pun intended) of millions of people around the globe.
With its whimsical name, El Niño became a punchline—the cause of anything and everything that might be going wrong (hence that Chris Farley sketch on SNL). But El Niño was no joke then. And it still isn’t, despite the headline of this post. That liberal paraphrasing of a classic Prince song refers to particularly strong El Niño conditions predicted by the National Weather Service for winter 2015-2016—the likes of which haven’t been seen since 1998.
“Sense and Respond”, or as we position it, “Know Sooner, Act Faster”, is a favorite topic on the Kinaxis blog. Many have had a lot to say on the topic (see here, here and here as examples). And now, so do our customers.
Before we get to that, let me ask you, do you know what the first step is that leads to being able to sense and respond? Acceptance – a recognition that you can’t plan perfectly. I suspect you are thinking to yourself, “everyone knows this and accepts this already”, right? Well, in theory and in their words they might, but in execution… not so much. For example, at a meeting with a prospect recently the team talked at length about their need to be more responsive and flexible. They said they needed to advance their processes and bring them together to be able to be more agile and effective in their planning, analysis and decision making. Awesome… music to our ears! And when the conversation turned to the capabilities they were seeking, guess what happened? They presented a series of feature checklists for each individual function, primarily focused on planning capabilities. Hmmm.
When an organization truly recognizes the difference between planning better and knowing sooner, acting faster, it means they are looking at the problem differently. And equally important, they start looking at the solution differently. The conversation changes from looking at ways to optimize the plan, to looking at ways to optimize decision-making processes when there are variances. They consider a set of capabilities that are fundamental to creating a competency in “sensing and responding” – from getting harmonized data, to being able to do quick simulations, to bringing teams together to make informed risk decisions and business tradeoffs.
We’ve posted a series of Kinaxis customer clips, among them are a few that speak to this theme. There are some pretty good insights that are definitely worthy of a listen.
“…we haven’t been able to accurately forecast for a long time, and it was just fooling ourselves, and so years ago we really embraced this philosophy that, “No we can’t, so what can we do about it?”…and so what we began doing was… ”