The Biggest Lesson Companies can Learn is that the Supply Chain IS Business

This month featured bloggers were asked to write about the "biggest lessons leraned from the supply chain." In my mind, the biggest lesson has yet to be learned by many executives in the C suite — the supply chain IS business. I'm not alone in this assessment. “The supply chain IS Business,” insists Lora Cecere (@lcecere), founder of Supply Chain Insights, and “not a department within a business.”[1] That pronouncement gains more adherents each and every year. Supply chain professionals have always believed supply chain operations lie at the heart of a business; now others are starting to see the light. For example, Lucy Dixon (@SMARTsocialLucy) reports, “It is crucial that the role of supply chain is recognised at board level, according to a white paper produced by Holmes Noble. In the report it is claimed that outdated supply chain processes are keeping many businesses in a performance cul-de-sac. Supply chain needs to move out of the functional and into a sector fit for purpose in the modern global marketplace.”[2] What does the modern global marketplace look like? Shannon K. O’Neil (@shannonkoneil), a Senior Fellow for Latin America at the Council on Foreign Relations, writes, “Commerce has fundamentally changed over the past thirty years. Intermediate goods — or parts of products traded through global supply chains — now account for 70 percent of all trade. … In just a single generation, supply chains have grown to dominate global trade, as products are increasingly made across countries rather than within them.”[3] I expect the business landscape to continue to change as more and more manufacturers assemble or build products closer to customers and new technologies — like additive manufacturing — impact supply chains. Supply chains must keep pace — or better still, lead the way. Dixon reports, however, “A lack of focus on supply chain in the board room is resulting in businesses responding to changing economic climates by axing sector improvement programmes.”

Drivers of Supply Chain Transformation

Adeel Najmi (@AdeelNajmi), Senior Vice President for Products at One Network Enterprises, insists part of the problem lies in the historical concept of supply “chains.” He explains, “For over a decade, many companies have attempted to build elaborate networks by connecting supply chain partners and their systems. Unfortunately, most have simply re-implemented the same old business processes that have been designed for the chain paradigm. While connecting partners in this traditional sense may have resulted in modest incremental performance gains, there are huge opportunities yet to be seized. This is because most are still locked into the chain paradigm and are held back from realizing the full benefits of networks.”[3] Realistically, the term “supply chain” is unlikely to disappear from the business lexicon in the near future; but, I agree with Najmi that supply “networks” need to be the focus in the decades ahead. The power of networks, however, is not the only driver of supply chain transformation. Richard Howells (@howellsrichard), a Vice President at SAP, suggests three other drivers are also at play. They are: Customer-centricity; individualized products (i.e., personalization); and collaboration.[4] Collaboration, of course, relies on the power of networks. The thing that strikes me about Howells’ list of drivers is how central each of them is to a business. They are trends that simply can’t be ignored.

Customer-centricity

Jackie Scott (@niceworknj), Global Program Director for Executive Education at Rutgers Business School, notes, “Independent of the product being sold, leaders are focused on listening more closely to their customers and responding with innovative solutions.”[5] Howells adds, “Today’s customers are more connected, informed, and demanding than ever. They want the ability to order from any device, anywhere, at any time. In other words, they want complete omnichannel capabilities.” How do you develop those capabilities? Howells explains, “Gaining visibility of actual demand and increasing the speed of response will be the key to improving customer-centricity. Supply chains must be not only accurate but timely, whether we are talking about the time it takes to bring new products to market, the time it takes to process and deliver an order, or the time it takes to manage returns.” Here’s where I make a business pitch for cognitive computing solutions. The Enterra Solutions® entry in the cognitive computing field is the Enterra Enterprise Cognitive System™ (ECS) — a system that can Sense, Think, Act, and Learn®. As I will point out, cognitive computing systems can help with most of the challenges that face companies in Digital Era. Helping companies learn more about their customers is only one such capability.

Personalization of products

Personalization of products is closely tied to becoming more customer-centric. Howells explains, “Enabling customers to personalize orders is a major business driver. Today, consumers can go online and purchase almost any individualized item they desire, from cars and chocolate to sneakers and spaghetti. But this requires companies to reimagine how they design, plan, manufacture, and deliver products.” Cognitive computing solutions can help with the personalization of products by speeding up the development process as well as optimizing other business processes.

Collaboration

“In today’s environment,” Najmi writes, “just a single business transaction can involve a mix of buyers, sellers and various service providers. Yet, many systems still treat each enterprise as an island and companies are forced to integrate between these islands as an afterthought.” A good cognitive solution can help integrate transactions and other business processes holistically — not as an afterthought. Howells adds, “As supply chains become more global and distributed, collaboration becomes a vital component of the digital extended supply chain. To be able to respond quickly and accurately to customers requires establishing a network of partners, people, and assets. According to IDC, the successful future supply chain will require ‘demand-aware’ demand networks, ‘supply-visible’ supply networks, and ‘innovation-connected’ product networks. This will inevitably evolve into a network of partners that can play multiple roles in designing, planning, manufacturing, delivering, and servicing products brought to market.”

Summary

Here is the lesson that needs to be learned: In order to remain competitive in the Digital Era, companies need to transform their supply networks as they transform into digital enterprises. Scott explains, “Supply chain leaders can leverage digital capabilities to support new business models and improve broader value chain performance. Digital synchronization of manufacturing lines with upstream suppliers and other supply chain functions is where the business value starts to multiply.” Leveraging digital capabilities like cognitive computing requires forethought and investment. Dixon concludes, “Analytics are seen as the next generation in improvements for supply chain. The insights they offer — being able to analyse past events and reflect future scenarios — can not only impact on cost and services improvement, but can also be a valuable tool for marketing, sales and commercial functions across the business. The opportunities that a joined up, technologically-supported supply chain are vast, but this vital joined up approach will only work if the right people are in place. A historic lack of investment has led to a perception of supply chain as a less-attractive sector challenged by slim budgets and lacking in technology. Elevating supply chain to the board is the route to secure real investments that will in return deliver vital agility and reduced running costs — outcomes that make strong business sense to any board.” Like Cecere says, “The supply chain IS Business.”

Footnotes
[1] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.
[2] Lucy Dixon, “Boards must recognise the vital role of supply chain,” Supply Chain Digital, 11 September 2016.
[3] Adeel Najmi, “The Dead End of ‘Supply Chain’ Thinking,” The Network Effect, 15 September 2016.
[4] Richard Howells, “Top 3 Drivers Of Supply Chain Transformation,” D!gitalist, 20 January 2016.
[5] Jackie Scott, “Can you Leverage Supply Chain Trends to Gain Competitive Advantage?” Rutgers Business School, 19 February 2016.

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