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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Prime Value Chain Analysis (PVCA) – A crucial strategic and operational tool

Traditional thinking like “always the way we have done it” self-limits strategic and operational options.

Prime Value Chain Analysis (PVCA) is about understanding and managing an organizations critical path to value. PVC analysis enable companies to redefine its core business and align functions & roles to support business goals. It is a starting point for strategic transformation. It anchors improvement efforts in the highest level company objectives. It helps create the key set of activities that represent the company’s core value proposition.

What PVCA is; impact and benefits

-          Focuses on the evolving needs of target customers; centers on the company’s core competencies and relentlessly pursues execution excellence.

-          Identifies and addresses all functions, capabilities and inputs that either support or impede business goals.

-          Charts the transaction paths to deliver value and depicts the way work gets done in terms of interrelated values stream traversing the business.

-          Offers a current state, structured consolidation of all activities and capabilities associated with a given business outcome; provides single view of organization.

-          Helps establishing a “true north” for reaching strategic objectives beyond bureaucratic constraints and organizational boundaries.

-          Helps understand the relationship between operating model and execution; helps leverage both structural and execution advantages.

-          Helps plan the product portfolio and optimize product development & life cycle.

-          Helps identify optimal portfolio of cross functional improvement opportunities

-          Serves as a catalyst toward becoming a performance-oriented organization. Helps remove ambiguity about how value is created, delivered and by which accountable groups or individuals.

-          Sets direction for continuous process improvement.

-          Works on an enterprise level rather than on a limited, local process step level.

-          Allows to understand the entire journey rather than only individual activities

-          Advises on where accountability and ownership must be imbedded

-          Guides on updating operating model, systems and performance management practices

How you can do a PVCA

Begin top down with the focus on key vital business outcomes to help align processes, systems and capabilities, overcome functional silos and prioritize improvement efforts.

Key objectives should include:

-          Improve/ perfect total customer experience

o   Accelerate time to market

o   Deliver perfect order

-          Improve operational productivity and excellence

o   Reduce costs with increasing risk or reducing quality, agility, etc.

In the first phase of the PVCA, evaluate strategic objectives vs. current process and organizational capacity; redefine the core business activities; identify key improvement opportunities.

In the second phase, prioritize strategic gaps and develop a transformation roadmap.

-          Gain a clear understanding of the company’s strategic objectives, process capabilities, culture, organizational roles and performance systems to identify strategic gaps.

-          Get the business definition right and understand real value contributors (and the three to five critical activities) to align structure and execution.

-          Separate the critical from the organizational noise

-          Identify a PVC champion to oversee and drive the planning and execution of both assessment and implementation.

Analyze and map the value creation journey

Map out all activities and identify the true value contributors in the value creation journey. For example, the following chart shows 96 activities associated with product development, but only 11 activities directly move the new product from brand strategy to launch and then retirement.

It is important to categorize each activity then into Customer Value, Business Value and Low Value category. The last two values are only enablers and can be often simplified and rationalized. Low Value activities with high costs should be the focus of deep dive analysis and process reengineering. PVC and data analysis can help.

Put your focus and resources where it matters most

Overall goal is to simplify & harmonize activities that add little value through standardization and other efficiency approaches. Then move investments and people to opportunity innovation areas that create customer/ Consumer value.

Various challenges:

-          Business policies drive increased complexes in offerings and processes. This complexity drags down productivity, speed to market, clouds overall performance issues.

-          Executives and managers only carry responsibility for narrow slices and lack a holistic view.

-          Company culture and traditional ways of doing things hinder innovation and creativity.

-          Resources are spread across the organization, rather than focused on true value contributors.

-          Traditional bottoms-up, reactive or isolated process improvement efforts cannot deliver on strategic objectives.

 

Credits & special thank to Mark George, Managing Director and Global practice leader for Operations and Process Strategy at Accenture Strategy for his content and  related thought leadership.



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

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Step by step solution to develop and implement Product Life Cycle Management (PLM)

Global product development and support capabilities have become a key differentiator of corporate financial performance. Innovation and product develop is becoming now accepted as a core business discipline.

This article discusses the challenges and offers a step-by-step process to implement best practice Product Life Cycle Management (PLM).

Understanding PLM

Product Lifecycle Management (PLM) is a strategic corporate asset, a cross-functional, enterprise discipline that augments innovation, drives revenue growth and operational efficiencies.

PLM includes product strategy, portfolio and product management. It covers all activities from idea generation; requirements gathering; product design, engineering, validation & compliance, costing quality, direct material sourcing, manufacturing, after-market services and product retirement.

Various capabilities support PLM including: product structure & reuse; part & intellectual property management; engineering changes; state-gate approvals; software configurations; quality tests & defects; product costs; development project status; design and scientific tools; analytics. The focus is on effectiveness, efficiency and innovation.

Complexity results in wasted effort & resources

Large companies make substantial investments within the PLM process, but half of the spending is wasted on products & output that do not meet market needs or timing. Lack of central coordination, prioritization and integration of processes, systems, data and people results in a substantial number of non-value adding activities & tasks and effectiveness & efficiency drags.

Working with various PLM vendors across capability areas further increases complexity.

Understand client needs and innovate

-          Use understanding of consumer behavior and customer needs as starting point in order to enhance product portfolio and reduce complexity

-          Assess the potential innovation opportunities constantly. Synthesize customer insights, emerging technologies and leveraging own core competencies.

-          Focus on the features that the client really wants/ is willing or able to pay for

-          Practice frugal innovation principles for developing, but also developed markets

-          Re-focus innovation resources on challenges that matter

Design plays a key role

Design plays a pivotal role, as up to 80 percent of product’s cost, quality and client perceived value is locked during the design phase.

Shockingly, currently about half of R&D spending is wasted. The R&D project portfolio must be aligned to more understood market demand and capacity to deliver better sized in order to achieve improved time to market and greater “hit rate” of products.

There are many design types & techniques that should be integrated into an overall Design Practice:

-          Design for sourcing

-          Design for engineering

-          Design for manufacturing

-          Design for dismantling, recycling and zero waste

-          Design for use/ life span

-          Design for serviceability

o   Ease of servicing and reachability (from technician or repair person standpoint)

-          Design for the environment

-          Design for overall Sustainability (including Carbon footprint/ GHG emissions)

Various design & development activities (styling & industrial, mechanical, electrical, integrated circuit engineering, artwork & packing design; software development and technology research) needed to support a company’ portfolio of offerings, increase complexity.

Reduce product complexity

-          Understand the problem

o   Direct materials and components make up 60 to 80 percent of product costs

o   Component fragmentation and limited reuse drives up costs by 10 to 15 percent and increases component count by 30 to 70 percent.

o   It negatively impacts product cost flexibility and speed-to-market

-          Conduct fragmentation assessments; component parametric and substitutability analysis

-          Consolidate global sourcing and supplier management

-          Implement governance and component standardization metrics

-          Simplify Service BOMs

-          Implement end-to-end part standardization

Improve operational efficiency

-          Eliminate bottlenecks capacity constraints and delays.

-          Complexity and costs created in the supply chain must be justified by the revenue generation

Use standard methodologies and tools

-          Lean Six Sigma

-          Value Engineering methods (you may refer to a related article in my blog section)

-          Examples : SAP/ PLM, Oracle/ Agile, Siemens/ TeamCenter, PTC, Dassault Systems

4 key steps to develop and implement PLM

1)      Create an enterprise-wide framework to define the organization’s PLM capabilities.

a.       Define what is and is not PLM

b.      Review all processes, applications, metrics, organization and data that underpin product development process follow (from initial concept to product retirement)

c.       Examine the performance and maturity of each across all organizational entities and competencies.

d.      Connect all corners of the PLM landscape with each other

e.      Determine about 15 to 30 Level 1 capabilities and break further down into Level 2 and 3 (capabilities will increase on each lower level as covering business more in detail)

f.        Companies will be surprise of how disjointed and fragmented their overall PLM approaches are, how many gaps & redundancies exist and little, few metrics & documentation support their PLM activities.

2)      Link the PLM framework capabilities to key corporate and product priorities

a.       Use 5 to 10 business metrics to link; and also to track the effectiveness & efficiency of innovation and product development outputs.

                                                               i.      The metrics should transcend any one department or function and link causes to effect.

3)      Link new enterprise PLM framework to corporate priorities and use as ongoing PLM planning tool

a.       Deconstructing the organization’s PLM capabilities serves as powerful tool for ongoing planning activities

b.      It enables the many, disjointed constituents to have a meaningful dialog about trade-offs, PD investment decisions

c.       It helps measure impacts of projects over time against key metrics.

4)      Establish/ empower group to own, review and update the PLM framework and corporate road map.

a.       Unambiguous, unwavering and visible senior executive sponsorship is necessary to ensure that PLM becomes part of company’s innovation fabric rather than a one-time project or program.

 

Special thanks to Kevin Prendeville, Managing Director – Accenture Product Lifecycle Services, Global and North America, for some of his publications & content.


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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

https://www.linkedin.com/in/alexwsteinberg   or
Xing at https://www.xing.com/profile/Alex_Steinberg   or
Google+ at  https://plus.google.com/u/0/+AlexWSteinberg/posts