Thank Heavens for Little Girls

HSBC has been running what I think are some of the most brilliant ads for some years now. In case you haven’t seen them they are centered on a little girl who is learning how to run a business by running a lemonade stand. Nothing new there. But what is different is that she is conversant in languages from the recently emergent countries, chiefly Mandarin, Portuguese, and Hindi. The latest version of the ad takes place with the little girl tasting lemons in India and at last being aware of the greeting, Namaste. She then calls a little boy in what I assume to be Paris and speaks to him in French. Love it.

“In the future, a rapidly growing business will need a global supply chain”.

  I don’t know about the rest of you, but it seems to be that many supply chains are already international, but perhaps it is just that most people do not make this association, even though there are many ‘Buy American’ bumper stickers. The general public understands that manufacturing jobs have been outsourced, but not the supply chain complexity that comes with the outsourcing.  And I think it is wonderful that “supply chain” has entered the lexicon of a bank. Of course HSBC is an international bank based in China with extensive operations in the “emerging” markets of the BRIC countries. In my opinion it is significant that it isn’t one of the banks based in the west that has emphasized the importance on global supply chains. There are several other insights I draw from the ads, the most obvious being the need in the future for business people to learn the languages of the BRIC countries, rather than the usual curriculum based on learning European languages. I’d like to use this as an idiom for what I see to be one of the most pressing issues in the extended multi-enterprise supply chain that have emerged as a result of outsourcing. Have a look at the links below for earlier versions of the ads.

• http://www.youtube.com/watch?v=CWwTBiDv5dw
• http://www.youtube.com/watch?v=KNJ0bdV2r9o

This is a link to the ad I refer to above: http://www.popisms.com/TelevisionCommercial/73054/HSBC-Commercial-2013.aspx Clearly there are the obvious language translation capabilities, but there is more to translation. There are two other aspects that are really important to consider in these global supply chains, spanning multiple entities across different time zones:

• Translation of data that flows between the systems being used to plan and execute in each of the entities in the global supply chain;
• And related to this, is what Gartner calls Demand Driven Value Networks - a key aspect of which is the rapid sensing of demand and the translation of demand into profitable supply commits across the network.

Let’s first discuss the scope of global supply chains. The diagram below was published in one of Matt Davis’ blogs this year which shows how much of US demand is supplied from Asia, with the expectation that on across industries about 44% of demand will be supplied from Asia by 2015. What is not apparent from this diagram is the worldwide demand that is expected to be sourced from another country or continent. I suspect it is not much different. A lot of the capital equipment with which the BRIC countries manufacture finished goods for sale to consumers in the West comes from the West. All in all there is a lot of stuff that moves around the world for sale or installation in another country.

How is the planning and delivery of this vast amount of material coordinated across the globe? The Boston Consulting Group (BCG) published a report to which I referred to in a blog from 2012 titled Are Demand-Driven Value Networks still a dream?  It clearly shows the two issues I raised above, namely the speed and accuracy with which data flows across the network.  As illustrated in the diagram, there is tremendous information latency built into the traditional EDI exchange of information between ERP systems.  As you can see from the diagram, BCG is suggesting a new infrastructure that transmits that information across the network absorbing data from each of the underlying ERP systems.

To achieve BCG’s vision, there is a fundamental issue that needs to be addressed in supply chains at a system level, namely the effective translation of data absorbed from the underlying ERP systems so that it is harmonized at the network level.  It starts as simply as the same item being referred to by different part numbers in the different ERP systems. You can see what chaos will arise when I think I am ordering Part A as the purchasing system orders Part Z. As importantly from a planning perspective, is the translation and harmonization of units of measure and time buckets.  This is not a trivial issue if you want to move from simple data transfers to value chain orchestration based upon demand sensing and translation into profitable supply. So thank heavens for HSBC’s core message in their ads. Reaching an advanced stage of supply chain maturity in this global world is all about having an outside-in perspective and being about to translate quickly. You can no longer afford to use a paper ‘dictionary’.