Wow, I am recalling a great three days in Dallas, Texas this past week at the WTG Supply Chain and Logistics North American conference. I went for a run in sunny 75 degree weather! Now, I'm back in San Diego and just finished reading a post from a friend who is an American Airline attendant. She came to Dallas the day after I flew out, to do Airbus training. Her blog described how she was stuck at the airport due to hundreds of canceled flights – freezing weather that went down to 20 degrees!
It looks like I left just at the right time. As the saying goes, “timing is everything…”. This saying is much like my presentation at the conference: the topic of speed as the true innovation in supply chain. Not just speed to be fast, but velocity, which is speed moving in a specific direction.
That’s what I believe is the next innovation in supply chain. I grabbed some of my old AMR Research Top 25 data, and looked at the results of supply chain processes and tools. It seemed like in a recession, supply chains focused on reducing costs. Lean was the top challenge. In recovery periods, supply chains focused on improving efficiencies. Demand forecast accuracy was the top challenge. Supply chains responded in kind with functional lean efforts or functional demand forecasting projects. I love Lora Cecere's (Supply Chain Insights) chart on “Progress in Inventory Turns and Operating Margin (2000-2012)”. One of the best pieces of research data I’ve seen in a long while.
This shows pure “functional” focus from every industry. Very limited “end-to-end” focus. Consumer electronics shows a good 18% for consecutive improvement in turns and operating margin for two years. But, for 3 consecutive years… 0%! For four consecutive years…another 0% ! Supply chains have been focusing on a few nodes of the network, and placing functional processes & tools in place to address the challenge. If you ask a functional question to a bunch of functional systems, you will always get a functional result. And functional results will never bring consecutive, sustaining improvements. At Kinaxis, we have the motto: Know Sooner, Act Faster. That’s the innovation. Speed with direction. Stop asking functional questions and ask end-to-end questions. And that requires significantly faster analytics across the functional nodes. Better said, significant velocity. Yes, it does mean pure speed when a supply chain acts. But, it also means speed in the right direction. And speed comes from planning ahead, through simulating scenarios in advance of the challenge. In fact, after reading the past seven years of Top 25 Supply Chain research, the one thing the best on this list do is: What-If planning. It is not a PhD in the corner working for days,but a core facet of their Planning. I challenged the attendees on “Know Sooner, Act Faster”. What do you truly “know” about your supply network. One of the best ways to answer that question is “how much fire fighting do you do ?”. If you are fire fighting, you are losing. You haven’t planned ahead. You are losing profit & margin to accomplish what an effective simulation could have prepared you for. Tough words, sure, but great supply chain leadership should reward knowing sooner more, fire fighting less. Then, we talked about “Acting Faster”. I asked the audience what the first 10 minutes of every CPFR meeting was. Answer = Comparing Data! That’s the best way to determine if you can act fast. If you are checking which set of numbers each node is using, you will lose speed. Every node has to be working off the same version of the plan. The next great innovation in supply chain is Speed. And, for the best supply chains, it’s quickly becoming table stakes to have your suppliers, distributors, shippers, etc, on the same plan, acting within minutes of a change, and simulating scenarios for end-to-end network turns and operating margin. Why? I say because the consumer is using technology to speed up their decision and purchase. Every industry has seen their consumer build leverage, and demanding personalized attention. Supply chain networks need to address this attention by knowing a lot sooner and acting a lot faster.