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.The really interesting bit is that HSBC, an international bank, uses the punch line that
“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.
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’.
Great article! I think something that is missing from the Demand Driven Supply Chain diagram is the time it takes for each member of the supply chain to send the information vertically to the overlying information arrow.
Although the diagram presents the demand driven route to take less time, I can't help but think it would take the same amount of time. The switch that occurred from the traditional diagram to the demand driven diagram was seen in the information arrows. The arrows began pointing vertically to the overlying information arrow rather than horizontally to the following member of the supply chain. Even though the demand driven diagram has the underlying integrated ERP system, I have trouble believing that members of the supply chain could send their information vertically to the "Real-time information" arrow at the same time. I believe that the third member needs the second member's information and the second member needs the first member's information first and so on before any member can make a decision. Without knowing how much a company wants, a factory is not going to begin producing simply because they know the same variables that the company does. I believe the information must still travel horizontally along the arrows, because no member is going to send up its information vertically until the preceding member does so first.
This truly was a great article and I enjoyed reading it.
You have identified key issues with which many people are struggling. Let me deal with each separately.
We don't have complete data synchronicity in today's supply chain anyway, even in a single organization that has gone through the pain of ERP consolidation. And we definitely don't have that in multi-entity supply chains in which an overnight EDI transmissions between ERPs is the primary means of data synchronicity. We may have the latest orders, and latest published forecast, but the real forecast is still in someones head. Of course we need time stamped data so that the degree of synchronicity can be understood.
This is where the true process improvement will occur because the time to plan far exceeds the time to transmit data. The assumption many people make is that the planning analytics will remain in the underlying ERP system. Many analysts - Gartner, Aberdeen, ... - advocate that the planning analytics will move into that horizontal layer. In other words the underlying ERP becomes a system of record, but no more than that. Now someone can plan concurrently across the entire network modeled without having to run independent and cascaded planning at each node of the network.
I hope this helps explain how we will achieve a real breakthrough in demand driven networks. Do you agree?
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