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Actually, yes. What these executives are saying flies in the face of most media coverage of supply chains, as well as the slick marketing campaigns of traditional SCM vendors. If you were to confine yourself to only those sources of information, you would come away thinking that today's supply chains are high-tech environments where product flows almost continuously across trading partners via lightning fast decision-making technology. You might assume that suppliers and retailers are successfully mining "big data" for insights that enable them to collaborate around consumer demand in real time.
I call this the "iPhone" effect. In the past five years, we have come to rely on powerful, easy-to-use, time-saving applications that fit into our pocket and offer a level of intelligence that, 15 years ago, would have been squarely in the realm of science fiction. Furthermore, we live in a world increasingly dominated by social networks"”frictionless environments where even the most far-flung people can connect, communicate and build relationships. Logically, people assume that supply chains have undergone a similar transformation, perhaps not in their own space, but elsewhere. If only they knew the truth!
As the Deloitte survey above demonstrates, today's executives know that reality is somewhat different. At its best, "supply chain collaboration" today is a mere buzzword with little substance. At its worst, collaboration has actually increased overall supply chain risk and instability as more powerful trading partners have pushed inventory and costs on their weaker suppliers.
The end-to-end supply chain dream has been around for decades now, but despite all the "collaboration" out there, by almost every measure progress has stalled. The key indicators of supply chain health"”out-of-stocks, days-of-supply, and operational costs"”remain largely the same. The burning question that we all need to be asking ourselves is, "How do we go about redesigning an entire value chain from end-to-end for productive collaboration?" Which way forward?
I believe that technology helps us answer this question in two key ways:
First, supply networks today operate with technology that makes communication and collaboration just plain difficult. Communication within supply networks today still largely takes place with disconnected Excel spreadsheets, telephone calls and emails. At some point in the distant past these tools may have been just fine, but no longer. The world moves far too quickly.
What about today's planning and execution systems? Surely those are more successful? It really depends on your definition of "success". Most have an underlying architecture that is designed to optimize what goes on within the four walls of an enterprise, or even more narrowly, within the confines of a specific function (e.g., using a TMS to optimize transportation), and so in that limited sense you could argue that they do a good job. But, and this is a crucial point, most of the events that really affect a company's profitability lie outside of its four walls. Today's planning and execution systems were not designed with the end-to-end supply chain in mind.
The second way that technology helps us solve the collaboration puzzle is that today's supply networks operate with far too many technology systems, resulting in coordination and system integration nightmares. I had an eye-opening discussion with the senior vice president of supply chain at a multibillion-dollar company last year, and together we tallied up the number of systems under his watch. In less than five minutes we came up with over 20. The result is a mess of stand-alone systems that are slow to react and do little to reduce overall risk:
Sales forecasts (those for the end consumer at point of consumption e.g. the store)
Sales forecast ( for the suppliers' side)
Customer order and forecast collaboration (demand sensing)
Replenishment (customer and DC replenishment, including VMI)
Sales and Operations Planning (S&OP)
Deployment planning and execution
Dock scheduling (internal network)
Dock scheduling (customer sites)
Labor and capacity planning
Supplier order forecast generation
Supply and forecast collaboration
Co-packer and co-manufacturer planning
Global Trade (Global TMS optimization)
Now the dysfunction and lack of collaboration we see today begins to make more sense: our systems are designed to optimize locally, and then there's the sheer number of these systems that somehow have to be integrated. Given the size and scale of today's product lines, the highly variable nature of demand, and the reliance on global supply networks, is there any wonder that today's executives are worried?
In my view there is only one form of collaboration worth pursuing, and that is collaboration that centers on the end customer. It's very simple: take end customer data, transmit it back to every member of the supply chain in real time, and package it in a way that allows them to make better decisions. Furthermore, provide a common platform that enables real-time communication among trading partners (somewhat similar to what social networks do) as well as a single version of truth for all existing technology systems. This would eliminate much of the instability and risk that plague today's supply chains. In the end, the success of every participant in a supply chain depends on whether the end customer is satisfied. So why not orient every participant toward the end customer?
For my entire career I've been obsessed with creating more efficient supply chains. I've also been a first-hand observer as the various waves of supply chain technology have passed through the industry and I can say without a doubt that never have I been more excited about where we are headed. For the first time since the concept of a "supply chain" was invented, technology is allowing us to enable a new kind of collaboration that creates value for everyone.
This new form of collaboration will be impossible unless companies take full advantage of the cloud. Use the cloud to connect as many trading partners as they can to the end customer, in the process driving out system lead times and variability and creating value for everyone. Your new collaboration strategy won't be sustainable unless it's truly a win-win for all participants.
I'll leave you with 5 questions that will hopefully get you started on the path toward the new collaboration:
"¢ Do you and your trading partners all work from the same consumer forecast?
"¢ Does the system automatically convert the sales forecast into order forecasts for all nodes and trading partners?
"¢ Have all system-related lead times been eliminated within and across trading partners?
"¢ Do your suppliers match production to their order forecasts, or do they not trust the forecast and therefore increase their lead times?
"¢ Does your planning and execution systems scale to millions of stocking locations, actually make decisions, and engage users only on exceptions? Or do you deploy many people to make all decisions manually.
Forget all the hype. These are the kinds of questions we need be asking ourselves. Leading companies are getting closer to answering "yes" to most or all of these. Can you?
Source: One Network Enterprises
Keywords: supply chain management, supply chain management IT, transportation management, warehouse management, WMS, supply chain solutions, supply chain systems, supply chain planning, sourcing solutions, single version of the truth, demand variability, forecast accuracy, Greg Brady, One Network Enterprises, supply chain management: Business Intelligence & Analytics
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