Marketing spin or actually making a difference?
When it comes to supply chains, certain words seem to be bandied about like the ball at a championship tennis match. Back and forth, over and over, these supply chain buzzwords seem to have an endless lifespan. But are they just creative marketing spin (after all, developing them is kind of part of the job), or is what they stand for actually making a difference in your supply chain planning? I set out to find the answer and share my findings on whether they’re all hype, or actually helpful.
Internet of Things – HYPE
Ok, ok, I know a lot of folks may disagree with me on this one. But I stand by my claim that IoT in supply chain planning is more hype than helpful. At least for now. Let me explain. The Internet of Things, often referred to as simply IoT, is hard to ignore. With advancements in technology and new IoT-enabled devices launched daily, there’s little question as to why supply chain leaders are taking note. IHS Markit Ltd. estimates the number of IoT-enabled devices will surge to more than 30 billion by 2020 and 75 billion by 2025. According to Gartner Research Director Andrew Downard, IoT enabled devices power supply chain planning by letting you continuously sense, communicate, analyze and act. In one of my earlier blogs, I recapped his presentation at this year’s Gartner Supply Chain Executive Conference, where he noted several real-world IoT examples, including Coca Cola’s Freestyle machines, HP’s Instant Ink subscription model and Tesco’s virtual grocery stores. He also provided commentary on the rise of IoT order buttons, like Amazon Dash, and the impact they’re having on customer orders. The data these sensor-driven technologies provide is real – but where the marketing hype comes is how much value you can actually drive from IoT on its own. In Downard’s examples, IoT is really limited to just the sense aspect of sense, communication, analyze and act. And sensing on its own doesn’t do a heck of a lot of good. Your supply chain must be able to analyze the data, finding the patterns behind it so you can act by adjusting your supply and demand plans accordingly. As it stands right now, IoT has become somewhat of a red herring. There are two schools of thought when it comes to using IoT-enabled devices in your supply chain planning. The first is centered on copying all that sensor-driven data into a single server for analysis and response. With a near endless stream of numbers flowing in, the requirements for actually storing and making sense of all that data are huge. Even if you do eventually make the investment to be able to do that, the speed at which calculations are completed isn’t likely to be in real-time. Unfortunately for you and your supply chain, real-time is what you need in order to dynamically adjust your planning on the fly. The second school of thought around IoT in supply chain planning relates to the devices themselves getting smarter and actually having analysis capabilities and the ability to communicate with other devices and your supply chain planning system. Instead of copying and storing the data, you’ll be able to ask your system a question, which will trigger a series of queries up the chain and across various IoT devices, combining together to give you back an intelligent answer. This can be accomplished through an API-based economy. For example, if you have a temperature sensitive product being shipped in climate-controlled containers on a cargo ship, sensors on the ship can tell you right now its relative location, and sensors within the containers can tell you the current temperature inside. That only helps you know what the conditions are right now. It won’t provide predictions on if those conditions are likely to change. What you really want to know from a supply chain planning perspective is if there are any patterns, based on current, historical and future projections, that could mean a change. For IoT to become less hype and actually helpful, these smarter IoT devices are needed, along with solid concurrent planning capabilities within your supply chain management platform. It can’t just be about the data.
Digitization – HELPFUL
PwC has perhaps one of the best explanations of digitization in supply chain. In the consulting firm’s report on Industry 4.0, it describes how digitization brings down the current siloed steps of today’s supply chains, creating “… a completely integrated ecosystem that is fully transparent to all players involved – from the suppliers of raw materials, components, and parts, to the transporters of those supplies and finished goods, and finally to the customers demanding fulfillment.” While I’m still not sold on the term digitization, the concept behind it is a helpful one. For supply chain planning to succeed in today’s fast paced, globalized, consumer-centric world (like how I added in some more buzzwords for you?), you need to have end-to-end visibility. That transparency must extend beyond your own internal operations to those of external suppliers, distributors, retailers and even the customer. Otherwise, you’ll never be able to continuously plan, monitor and respond to shifting patterns and conditions. Breaking down those traditional supply chain silos is no simple task. In addition to getting your own planning teams (inventory, demand, supply, capacity, etc.) to collaborate and compromise, you’ll need support from other business functions as well, like sales, marketing, finance and the executive team. Why? Because digitizing your supply chain should also lead to digitizing your business. The supply chain can no longer exist in isolation, and is finally being recognized as the next frontier in business optimization and efficiency. Forbes notes that having a digitized supply chain can give your company a competitive edge, but explains that to do so, you need to do the following:
- Connect all the links in your supply chain via unified technology. That means connecting disparate data and legacy ERP systems into one harmonious platform.
- Start with the desired business outcome first to ensure you’re focused on getting the most value from your supply chain. Your supply chain should be the foundation for new business models.
- Focus on the customer. Customer-centricity is the most desired business outcome of supply chain digitization, but requires agility, visibility, data and analytics to achieve. Make sure you have the foundational capabilities in place.
- Ensure your CEO is on board. Supply chain digitization needs to be a high-profile initiative within your company. It requires C-suite champions.
- Look at the long-term and develop a comprehensive approach. Best-in-class companies are investing more heavily in their supply chains.
Transformation – HYPE
Like IoT, there may be some disagreement on my choosing hype over helpful for transformation. It’s a word used a lot in describing how supply chains have matured. But the fact is, people talk about transformation as if it’s a one-time event with a finish line. That’s not the case, and why I’ve labelled it hype. For one thing, transformation is nothing new. It’s what’s pushed innovation and change across industries worldwide, and supply chain is no exception. Without it, we would never have moved past the industrial revolution, let alone imagined the realm of possibilities now being talked about as part of Industry 4.0. Transformation is an on-going process. It isn’t a one and done kind of thing. I doubt there are many companies who aren’t still looking to further optimize their supply chains, even if they’ve already gone through a “supply chain transformation” project. In most cases, these types of projects are completed in phases, and by the time you reach the end of that long-term vision, it’s time to innovate and transform all over again. At least it is if you want to stay competitive. It’s not that transformation isn’t useful. It is, incredibly so. It’s just that marketing has corrupted the word to make it seem like some big, flashy initiative (I’m guilty of doing so myself), when it should be part of the day-to-day conversation. Transformation, innovation, journey – whatever you want to call it – should be at the heart of how you run your supply chain, and your business. What other supply chain buzzwords do you hear on a regular basis? Let us know in the comments section.