When I started my consulting career nearly 20 years ago, Supply Chain was not a well-known term. Today, everyone is talking about supply chain, even the President of the United States as supply chain topics had implications in the 2016 US general election. Many companies have a mature supply chain organization, with a chief supply chain officer (CSCO) who often times reports directly to the CEO. It is great supply chain is so well known and people are realizing its importance. But truly what is supply chain?
It is not just transportation, warehousing or purchasing. Simple descriptions such as “field to fork” allow people to comprehend what it involves, but I believe the framework provided by the Supply Chain Operations Reference (SCOR) model is the most complete. SCOR details a supply chain consisting of the following key processes, which involve the movement of products, information, people and money or the delivery of services:
- Plan – The planning activities associated with operating a supply chain
- Source – The ordering, scheduling and receipt of goods and services
- Make – The conversion of materials or creation of the content for services
- Deliver – The creation, maintenance, and fulfilment of customer orders
- Return – The reverse flow of goods back from the customer
- Enable – The activities associated with managing a supply chain: business rules, performance, data, network, assets, contracts, compliance and risk management
Traditionally people used to equate supply chain with dirt, grease and grime but now with recent technological advancements, supply chain is getting associated and linked with cutting edge technical capabilities such as:
- Machine Learning – Ability to automatically apply complex mathematical calculations to big data generated from your supply chain, over time and at a higher throughput, leading to better decisions
- Artificial Intelligence (AI) – Related to machine learning, the ability to learn from previous computations to produce reliable, repeatable decisions and results
- Robotic Process Automation (RPA) – The application of software robots and intelligent business rules to mimic actions that a human being may perform
- Internet of Things (IoT) – The interconnection through the Internet, of devices embedded in everyday objects, enabling them to send and receive data
- Blockchain – A distributed list of transaction records ordered into blocks, linked and secured with various protections against tampering and revision
These technologies truly are revolutionary, but in order for companies to maximize their benefit, core structural processes and capabilities need to be in place.
Blocking and Tackling
Blockchain has a strong link to supply chain and will truly revolutionize how many, often unrelated entities, can efficiently and safely work together. The key to blockchain is making required changes based on a situation and then everyone knowing about that and being able to deal with any potential impacts. However, unless the company has visibility to these changes, how will they know if anything has happened. In many companies, they are not even aware of internal changes, let alone external changes. In addition, if there is no way to be able to communicate and work, i.e. collaborate with the different partners in the blockchain, what use would a blockchain be. It is therefore key for companies to have visibility and collaboration.
Similarly, consider a company leveraging artificial intelligence or machine learning to predict changes in demand based on weather, marketing campaigns, social media buzz, etc. Based on all of the information that is collected, algorithms can estimate changes and impacts in demand. Most of us would expect real time updates to changes. Let us just say conservatively the algorithm feeds back six changes in a day, i.e. every four hours. If the company has a weekly, and most companies have a monthly planning cycle, how can the systems and processes even comprehend or deal with all of these demand signals and recommendations. If it takes a week to create the demand plan and then send it to the supply side of the organization for balancing, six updates a day is simply noise. The six updates a day would, primarily, be directed for execution, to determine if shipments could be rerouted and inventory decisions adjusted to satisfy latest changes. However, you get the idea that unless there is a reasonably robust planning capability such frequent updates are quite useless.
It is clear that companies have to ensure the basics are performed well before getting into some of these more sophisticated capabilities and in some instances these capabilities can be used to help
further develop the basics.
The way to effectively combine the required visibility, collaboration and planning is to leverage a control tower architecture. Think of air traffic control at an airport. They have full visibility to all of the planes in the air and are communicating and collaborating with them as to where they are and what they are doing. In addition, they are planning for when aircraft can take off, land as well as start and finish their journey based on what is currently taking place. A supply chain control tower works in a very similar way allowing a company and its partners to execute and plan everything they need to do. Logically the control tower can be thought of as a multi-layered cake:
- Level 1: System Platform – Internal and external integration and data management to gather and clean all the required information
- Level 2: Visibility – All the data is processed through business rules which trigger alerts and exceptions, which get acted upon by the company and its partners
- Level 3: Planning – Decision making and process management on forecasts, orders, material and capacity
- Level 4: KPIs and Reporting – All required dashboards and metrics to evaluate short and long-term performance, as well as allow root cause analysis and scenario management
A supply chain control tower provides a framework for companies to successfully handle the basics of visibility, collaboration and planning, allowing them to leverage the latest technologies or function with a greater deal of sophistication within their supply chain.