This will be the Year of the Supply Chain Network
It’s that time of year when we celebrate the fact that next
year is a clean slate and all is possible. It’s also the time when we propose
our budgets and very quickly realize that we’d better focus on what’s
important, as that’s where the budget will inevitably go. Or, as the beloved
Judge Smails of Caddyshack — an amateur CFO (little known fact) — says to his
grandson Spalding, “You’ll have nothing — and like it!”
Overarching Theme for
2013: This will be the Year of the Network
Stanford Professor Hau Lee says that competition is supply
chain versus supply chain. With today’s prevalent business model of brand
owners embracing trading networks of outsourced manufacturing and distribution,
one could argue that it’s now trading network versus trading network. The
secret to success here is how well brand owners and their trading partners can
collaborate — moving beyond the archaic one-to-one manual sharing of spreadsheets
to achieve one-to-many and many-to-many visibility based on real-time
information across a network that provides a single source of truth.
Harnessing the collective brainpower of a trading network’s
supply chain practitioners and leaders provides a formidable competitive
advantage and the kind of agility and flexibility needed to handle an
increasingly volatile world. This is the derivative factor – the speed at which
the trading network can adapt to a new opportunity, business model, or product
introduction. Smart people, all working together with timely, accurate data on
a platform that coordinates business processes across the global network can
make faster, better decisions that provide more profit for them and more
satisfaction for their customers.
1) Fast Data Will
Become the New Big Data
Big Data is everywhere, and we deal with our fair share in
today’s complex manufacturing environments. But what is perhaps more daunting
is Fast Data – that is, the incessantly changing positions of forecasts,
orders, shipments and inventory. This challenge is complicated enough within
the virtual enterprise, and becomes downright overwhelming in the context of
global trading networks – with multiple tiers of partners trying to manage
information changes across unique operating systems.
In order to reap the benefits of Fast Data, all relevant
participants – within the organization and across the global trading network –
need to have access to a “shared version of the truth,” plus the ability to act
on this information in real time. Put differently, Fast Data must be
collaboratively managed – shared; agreed upon in terms of source, authenticity,
and timeliness; correlated across relevant roles and processes; and understood
within the context of actionable opportunities.
In the sea of information flying around the network, where
is that one indicator that has “turned red” – that will ruin our day, week, or
quarter unless we identify and resolve it quickly, intelligently, and
cost-effectively?
2) The “Social Supply
Chain” Will Transform the Way We Work
When it’s doing what it’s supposed to, the supply chain
function is collaborative – people (and companies) working together to meet the
needs of their customers. It’s also profitability minded, which doesn’t always
“play nicely” with real collaboration across enterprises.
But the ability to be both collaborative and profitable will
take center stage in 2013 as two areas of social networking move quickly into
the supply chain space.
First is collaborative problem solving. Over the next 12
months, online partner communities will create virtual war rooms where teams
can solve problems quickly and collaboratively. They’ll also create online
repositories to document processes and decisions for future reference and
organizational learning.
Second, demand sensing and sentiment analysis will move
upstream from Marketing to Supply Chain, generating earlier awareness of trends
(either positive or negative) for better preparedness and responsiveness.
Companies that embrace social tools will have another
dramatic advantage. As the supply chain talent gap worsens, the more
socially-minded companies will be able to attract the best and most innovative
minds of the next generation—a generation that has always approached learning
and communication in the context of social networks.
3) Supply Chain
Control Towers Will Transition From Concept to Adoption
The buzz around Supply Chain Control Towers has been
building for a while now; I predict that 2013 will be the year that Control
Towers move from concept to reality. This transition has already begun, and it
will continue to gain momentum as practitioners adopt a more accurate
understanding of the concept: a Supply Chain Control Tower it is not a “cure
all” product that can be purchased and installed; instead, it is a core
competency in end-to-end collaboration and process management that facilitates
good decision making based on the best available information.
Within this framework, Supply Chain Control Towers should
provide real-time transparency and exception management, tools for operational
and financial evaluation of potential course corrections, and an integrated
system for decision execution. This type of “core competency” requires a
dynamic combination of people, processes, and technologies, and it is developed
(and continuously improved) over the course of months and years—not days. That
being said, 2013 is the perfect time to begin the Control Tower journey.
4) Dynamic Cost Will
Transform Decision Making
Historically, decision making and performance management
have been based on standard costs. These costs are usually provided by the
Finance organization and are updated infrequently (i.e., annually or when a new
product is introduced). The challenge to effective management is that the
actual costs of products, as delivered to individual customers, are rarely
“standard.”
A better measure is total landed cost, which incorporates
shipping and distribution costs. But these costs themselves are often based on
standards or averages, despite wide swings in actual costs in response to the
supply of, and demand for, transport, the cost of bunker fuel, or other
factors.
2013 will see a shift to greater use of dynamic costing,
based on real-time visibility into granular information on product production,
transportation, and distribution costs. When companies can see the actual costs
of delivering specific products to particular customers building in real time,
they will be well-positioned to make the right customer-specific tactical
decisions and to enable more profitable segmentation strategies.
5) Risk Management
Will Move from Static to Dynamic
Most risk management modeling today involves offline
contingency planning based on statistical likelihood of occurrence data. Over
the next 12 months, I predict significant movement away from the relatively
static realm of risk management theory towards the “real-world dynamism” of
today’s integrated supply chain business models.
Specifically, the next phase of risk management will
operationalize risk identification and reduce the time it takes to respond
intelligently to disruptions across the trading network. By incorporating
contingency plans into dynamic operating models with network monitoring,
practitioners will be able to make better decisions within the execution
window. Risk management tools will move beyond identifying weak links and
ginning up responses to hypothetical problems to providing the information and communication
platform needed to assess and manage situations as they occur—mitigating
downside when the inevitable hits the fan.
Written By Mark Woodward, President and CEO, E2open
Source: Supply Chain management Review
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