Statistical forecasting for operations management is running out of time. Latency in communicating demand variations, and the resulting amplification of the demand signal as it passes from one supply chain link to the next, are causing major problems for businesses today. Along with the passing of supply “chains” in favor of supply “networks,” statistical forecasting is passing in favor of more advanced cognitive technology.

The maturity of Business 4.0 technologies drives the vision of ecosystem supply networks to reality. While multi-enterprise ecosystem commerce platforms (ECPs), ecosystem resource planning (ERP4) and ecosystem orchestration are young terms, they’re not new concepts.

With his Harvard Business Review article on industrial dynamics in 1957, Jay Forrester introduced the world to the first supply chain digital twin and (eco) systems thinking. Using computing technology, Forrester developed a multi-echelon supply chain and operations simulation model. The simulation demonstrated the impact that time delay and demand signal amplification has on supply chain demand and inventory behavior popularized as the Forrester or “bullwhip effect.” 

In 1987, Robert Bixby developed the CPLEX Optimization algorithm and suite, which is still the foundation of supply network design, optimization, simulation and ERP4 platforms. 

For the past 50 years, the vision of a digitally integrated ecosystem supply network has been supported by the evangelism of “systems thinkers,” operations researchers and mathematicians. But until today, we did not have the connectivity, computing power, mobility, cognitive analytics, robotics and internet-of-things data collection and integration technologies to truly innovate and realize this vision.

While post-pandemic supply network innovation will continue to accelerate from the increase in e-commerce and home delivery, it’s also benefiting from the global recognition of supply network criticality resulting from the disruption and subsequent product shortages, delivery delays and economic consequences that have cascaded through the chain.

Supply chains spawned the bullwhip effect from link to link. Ecosystem supply networks spawn a “cat o’nine tails whip” effect as change explodes through the network. As the ecosystem locked down, demand in the consumer retail channel exploded while demand in the institutional channel imploded. Demand surged in the electronics and furniture channels as consumers moved to home offices. Production and transportation ceased to operate as labor was locked down at home. The cat o’nine tails whips the ecosystem omnidirectionally. 

Taming the cat o’nine tails requires real-time ecosystem information and decision making. Traditional business forecasting and planning models support longer-term problem solving. The strategy model is compressing as change and disruption become more the rule than the exception. Digital twins and ECPs provide the information, integration and harmonization of ecosystem data needed to survive the post-pandemic commerce environment with resilience and sustainability.

Outlook:
Ecosystem commerce and resource planning supported by Business 4.0 technologies, ECPs and ERP4 realize the vision of ecosystem orchestration and integration for a sustainable, resilient, purpose-driven and agile business model. In 2022, expect companies to accelerate their journies to digital, exploit the convergence of new technologies and invest in making ecosystem supply network planning a reality.

Rich Sherman is senior fellow, Supply Chain Centers of Excellence, at Tata Consultancy Services (TCS).