Digital makes current supply chain models obsolete – What companies can do

The impact

Digital technology is disrupting traditional operation and now every business is a digital business. The impact on supply chain management is particularly great. Companies must re-invent their supply chain to unlock the full potential of digital.

Re-adapting is not enough. Digital is too different. Traditional governance mechanisms and business processes are too inflexible. Piecemeal digitization of supply chain elements is counterproductive. Instead it requires to re-imagine supply chains as integrated digital supply networks.

Digital technology renders traditional supply chain models obsolete. Digital can and will destroy business and operating models. It changes the nature of control points, the role & value of data. It shifts the level of value creation at each stage of the value chain.

Examples of successful digital companies

Coca Cola, for example, analyzes up to 1 quintillion (!) data points with their Black Book algorithms to assure consistent 12 month supply of their orange juice and makes manufacturing plans 15 months in advance based on external factors such as weather, expected crop yields and cost pressures.

Uber and Lyft leverage mobile technology to create secure temporary transportation by connecting drivers with riders.

Cisco Systems pronounced that supply chain and logistics constitute almost $3 trillion in value at stake (a combination of increased revenue and lower costs). This value can be gleaned by re-uniting product, talent, information and currency electronically via a digital supply network.

SMAC technologies are the most disruptive

Social media can help companies tap innovation from outside the organization, generate demand triggers for specific products & services (Physical supply chain), provide customization and community building through social channels and targeted product & service offerings (Information supply chain), solicit feedback and reduce selling costs (Financial supply chain).

Mobile communication provides real-time, 24 hour/7 connectivity, support for corporate field forces (Talent Supply Chain), offer store specific apps that drive demand (Physical Supply Chain) provide updates on product delivers (Information Supply Chain) and enable remote payments and new buying opportunities (Financial Supply Chain).

Analytics analyze employee performance & behavior and improve effectiveness & efficiencies (Talent Supply Chain), implement alerts & response actions and assist with predictive maintenance (Physical Supply Chain), understand customer behaviors that inspire new products, services and customization opportunities (Information Supply Chain) and help optimize procurement spend (Financial Supply Chain).

Cloud computing provides remote access for experts to help companies educate, train and solve problems (Talent supply Chain), leverage the contribution of partners & suppliers through portals hosted in the cloud (Physical supply chain), increase access to applications and crowd-sourcing opportunities (Information Supply Chain) and provide end-to-end source to pay functionality (Financial Supply Chain).

 

Digital technologies make supply chains Connected, Intelligent, Rapid and Scalable

Digital technologies enable networked process and optimization of the entire enterprise rather than just some individual functions. It unites all stakeholders across the value chain and inspires a new way of collaboration and innovation. It can help companies mass produce and mass-customize products & services at the same time.

Digital technologies make supply chains Connected, Intelligent, Rapid and Scalable

Becoming Connected gives companies real-time visibility, seamless collaboration within and beyond physical boundaries, and ability to adjust the product & service functions as well as business & operating models.

Arriba, for example, achieves a complete and seamless source-to-pay process by connecting 1 million suppliers and 4 million users in over 190 countries through the cloud.

Becoming Intelligent allows companies to leverage analytics, cognitive equipment and smart apps to turn data into valuable information, actionable insights, predictive decision making, automated execution (with seamless human-machine interactions), increased operational efficiency and enhanced, accelerated innovation.

Becoming Scalable companies can more easily optimize and duplicate processes, up/ down scale supply chains, add and reduce partners & suppliers; target niche markets, segments and customers more effectively. Digital plug-and-play capabilities make it easier to configure and re-configure. Channel-centric supply networks support customized products & services and personalized experiences.

Lockheed Martin Corporation developed Digital Tapestry and brought digital design to every stage of the production process. It includes 3-D virtual simulations for design and 3-D printing technologies for prototyping and production. The result is a less expensive, more reliable system in a completely artificial environment. Designers can manipulate parts or entire machines and see how they go together and operate. The system responds with a constant stream of automatically updated specifications.

Becoming Rapid – Speed is one of the most important currencies of the future. Digital technologies help diagnose, adjust and execute more rapidly and efficiently. Resources shift from within the company across the extended enterprise.

Enhanced responsiveness and sophisticated analytics help accelerate responses to changing demand, supply signals, competitor moves and technology shifts. Proactive prevention and predictive analytics can increase reliability and adaptability. Last mile postponement helps swiftly repurpose organizational assets and align supplies with evolving demands.

Dell launched a global command centers to monitor supply chain activities and make adjustments in real time. The platform links with the global data systems and monitors service dispatch activity, matching dispatch with optimal part location. It also serves as trend spotter, early warning and feedback system.

 

Key steps for companies to build their Digital Supply Network

The supply chain is evolving from a function concerned with the expedient movement of materials to an inter-enterprise discipline that concurrently optimizes materials, talent, resources, information and finances. Supply chain take a crucial role in the enterprise wide realization of outcome-focused missions like “create highly differentiated customer experience”, “achieve perfect order rates”, or accelerate innovation.

The new supply network is built with digital DNA. It is important to follow systematic process to transform a traditional supply chains into a digital supply network.

1)      Envision specific business outcomes for now and a decade into the future.

2)      Conduct a solid value chain analysis (see my blog on Prime Value Chain Analysis)

3)      Map your digital journey with a blue print of your future organization including the people, process, technology and governance aspects of the transformation. It should outline the convergence of talent, Physical, Information and Financial Supply chains into one cohesive network to assure a vibrant, interconnected ecosystem. Include a transformation plan from an existing technology landscape to a future digital one.

Key trends, aspects and opportunities to incorporate into your supply chain

Consider key aspects in your plan

·         Collaborative planning & scheduling - Optimize inventory holding and storage for delivery within hours to a customer for a premium fee.

·         Dynamic inventory and replenishment planning (based on real-time visibility across extended supply chain) for greater customer assortment, faster delivery and product flow streamlining.

·         Leverage external talent and infrastructure beyond customer boundaries: Leverage social networks, interest groups and customer product development forums to create new innovation; combine with up skilling internal employees to enable superior customer experience & service

·         Precision pricing based on collected on the ground and online intelligence and analytics.

·         Procurement mall – an online IT system & helpdesk provides intelligent choices for procurement and facilitates end-to-end procurement operations on a self-service basis. Allows merchants to access and apply best practices from across the global enterprise.

·         Transport planning based on supply side intelligence providing cloud based industrywide collaboration, internal real time demand visibility and dynamic route planning based on real time analytics.

·         Automated warehouse operations that connects people and IT systems on a real-time basis through smart equipment, RFID enabled warehouse picking systems, to increase accuracy and efficiency.

·         Micro-segmenting of customers to improve store layouts, customize offers and product mix based on customer behavior and social media data.

·         In-store/ off-line collaboration: Retailers could offer their physical infrastructure for a fee to the online market place and vice versa to provide customers with unprecedented access to assortments; plus establish on-demand access to inventory in the supply chain network.

·         Transport Cooperation to share transport with channel partners and even competitors. (Nestle and Coca Cola)

·         Shopper Insight – Customer preferences to drive product mix, promotions & sales through fast data analytics, alerts and in-store devices.

·         On-spot selling – arming in-store employees with customer-specific information, advice and upselling.

·         Movable supplies – Bring products closer to the customer to reduce delivery time based on demand sensing and movable warehouse capacity.

·         Last mile delivery – Consolidate deliveries across network, supply chain partners, other retailers and even competitors to reduce costs/ expedite delivery; use also pick-up lockers.

Special thanks & credits to Gary Hanifan, Aditya Sharma and Carrie Newberry of Accenture Strategy – Operations for their thought leadership and publications. This article has incorporated much of their content.


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Tranforming supply chains with digital methodologies

The globalization and digitalization has massive impact on supply chains. Agile methodology can help in the transformation efforts and provide solid, practical guidance.

The ADAPT-model of the Scrum methodology offer five common activities:

• Awareness – that the current situation/ process is not delivering acceptable value
• Desire – to adopt/ change
• Ability – the necessary capabilities and skills to succeed
• Promotion – sharing experience and making sure that others see successes
• Transfer – managing the implications of using the new approach throughout the company

Awareness, Desire and Ability are overlapping, whereas Promotion and Transfer repeat and occur throughout the transition effort.

Mike Cohen, highly respected Agile Leader and bestselling author of “Succeeding with Agile” provides a very systematic and practical approach that can also be well leveraged for driving change and transformation programs in general. I have summarized from Mike and provided additional thoughts:

A transformation leader needs to engage in these activities on multiple levels:

• Organizational
  • A critical mass of people with similar awareness is required before the organization will collectively move forward
• Individuals
  • Organizations are made up of individuals. To change organizations, a transformation leader must change individuals.
  • Important is that individual are in different stages of awareness, desire, ability,  promoting change, transferring abilities/ learning to others. They progress differently and need different guidance & support
• As a team
  • Teams can be aids or hindrance to progress of individuals; enforce or undermine right attitudes & behavior
• Per practice
  • Functional units/ stages within the supply chain

Examining the ADAPT model in detail:

1. AWARENESS

Becoming aware that what worked in the past is no longer working can be extremely difficult. This is especially true for companies that are successful. There is almost always a lag between when the need to change first arise and when we become aware of it.

Impediments are:

• A lack of exposure to the big picture
• A refusal to see what’s right in front of us
• People confuse movement with progress
• People listen to their own propaganda

Good way to tools for developing awareness are:

• Communicate that there is a problem. Generate discomfort.
• Use metrics to reinforce core reasons to change.
• Provide exposure to new people and experiences. Encourage people to learn from others in the market, conferences, competitors, etc.
• Run a pilot to demonstrate success (and refine your approach)
• Focus on the most important reasons to change

DESIRE

Without desire there will not be any meaningful action.

Tools for increasing desire:

• Communicate that there is a better way
• Create a sense of urgency
• Build momentum
• Agree on a trial, get teams to test drive
• Align incentives/ remove disincentives
• Address fear
• Help people let go of the past and do not discredit it
• Engage people in the effort.

ABILITY

Becoming agile and equally transformation efforts require learning new personal and technical skills, thinking, working as a team and at different pace.

Tools for developing ability:

• Provide coaching and training (using various approaches & tools)
• Hold individual accountable (must understand that they are expected to apply new skills)
• Share information (collaborate across teams; learn from each other, use tools such as departmental intranet, Wikis, communities of practice and reading groups to disseminate information).
• Set reasonable targets, progress incrementally
• Just do it – Experiment, be patient and expect to make mistakes
• Fail often, fail fast, fail cheaply

PROMOTION

Promotion must lay the foundation for the next pass through the ADAPT cycle. Spread successes to raise awareness and desire for the transformation. Goal is to get the people to commit to the transition, not just merely comply with it.

A good idea is to not put a name on your transition, as it is harder to resist a nameless effort.

Seek shamelessly attention. The more often people here about the effort – even better see or experience it – the better. Use graphical displays, organize events, etc.

 

TRANSFER

A transformation effort requires the support from the other parts of the organization. Without their cooperation, most efforts are likely to fail, even when successful within their own group! The law of organizational gravity pools many innovative groups or good improvement efforts back to the beginning. Key functions to gain cooperation are HR, Marketing and Finance.

Agile methodology is proven. It is structured to embrace change and thus often provides better, faster results. Leading companies driving transformation efforts – across Organization, value & supply chains – will increasingly use agile methodologies to succeed.

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To share your own thoughts or other best practices about this topic, please email me directly to alexwsteinberg (@) gmail.com.

Alternatively, you also may connect with me and become part of my professional network of Business, Digital, Technology & Sustainability experts at

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Exciting Outsourcing opportunities in the Supply Chain

Exciting Outsourcing opportunities in the Supply Chain

Various challenges in the supply chain have made business process outsourcing (BPO) an increasingly attractive alternative. This blogs summarizes and comments on Accenture best practices:

Third party logistics companies (3PLs – represented by DHL, UPS, FedEx and CEVA, etc.) and professional service firms (represented by Accenture, Capgemini and IBM, etc.) are positioning themselves across the entire value chain and are beginning to compete on each other’s turf.

3PLs are expanding beyond their core physical, asset based activities to areas outside logistics. Professional service firms are leveraging their skills in HR, finance, accounting and indirect procurement.

The needs and opportunities are as follow:

• Deliver business outcomes beyond cost reduction
• Provide process excellence, centralization and standardization
• Provide end-to-end supply chain capabilities, integration and flexibility
• Meet expectations of increasingly demanding, diverse and difficult-to-please customers
• Build, operate, maintain and enhance tools & systems able to deal with increasing complexity
• Overcome talent recruitment & retaining challenges
• Provide analytics and planning technologies
• Offer high-end off-shore labor arbitrage
• and industry based insights and deep functional knowledge
• Achieve seamless integration of the above

Business Process Outsourcing has evolved in approach and service over time:

Outsourcing provider – 3PLs or professional service firms – will be a powerful player in helping meeting the complex challenges in the supply chain.

Companies are well-advised to examine offered services and take advantage as it fits their needs.

What are your thoughts?

+++To share your own thoughts or other best practices about this topic, please email me directly to alexwsteinberg (@) gmail.com.

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