Business theorists have been talking up the concept of supply chain as a “competitive weapon” for so many years that if it were really happening, they’d have a well-stocked armory by now.
Unfortunately, aspiration doesn’t make for a strategy that can be taken to battle. Too many obstacles have stood in the way of true supply-chain harmonization. Certain exceptions apply — consider Amazon.com and its relentless push for fast and reliable delivery of e-commerce orders. Or Dell Computer, which helped launch the age of the laptop with its approach to product customization. For the most part, however, the notion of a finely synchronized supply chain that buries the competition has remained a distant dream.
Steven J. Bowen, chairman and chief executive officer of the management consultancy Maine Pointe, believes that dream can become reality. He’s the author of Total Value Optimization: Transforming Your Supply Chain Into (wait for it) a Competitive Weapon.
Bowen believes the task can be accomplished through the application of “total value optimization,” or TVO. He defines the term thusly: “A set of methodologies and techniques that allow you to drive a demand-built supply chain from a digital-based perspective that creates a level of collaboration, synchronization and thereby integration that you’ve been unable to achieve previously.”
Take a breath. Again, Bowen appears to be calling out ideas that are anything but new. Indeed, he says TVO draws on decades of old technology and ideas, including Lean Six Sigma (combining the minimization of waste with strict quality measures) and advances in category management and strategic procurement.
Now take those blasts from the past, and apply them in the age of Big Data. What makes TVO possible today, Bowen says, is the ability of supply-chain managers to collect data from disparate systems and transform it into “an information-rich decision-making matrix on a daily basis.”
For the first time, Bowen says, “you can show your supplier’s supplier your customer’s customer’s demand, instantaneously. That to me is the heartthrob of data analytics.”
In truth, Bowen admits, the data was always there. But manual processes and organizational silos kept companies from accessing and making sense of it on a timely basis.
Still, the true realization of TVO doesn’t lie with technology, whether old or new. It’s more about changing the human mindset. Bowen says managers must abandon the idea of “negotiating with power and winning” in favor of one that “helps to create value up and down the entire chain, where everybody wins.”
“Win-win solutions”: again, a buzz term hailing from the distant past. What makes it possible to achieve that today, Bowen believes, is the use of sophisticated data analytics, which removes the uncertainty and doubt accompanying human interactions, and allows for true collaboration based on a shared understanding of demand.
“The evidence allows you to make much better decisions, and helps to take unnecessary emotional reactions out of the equation,” Bowen says. He stresses the qualifier “unnecessary” to acknowledge the ultimate need for human judgment and decision-making in supply and demand fulfillment. “But the more you can present the full set of evidence, so that everybody understands it from the same perspective, the more you have a formula where everybody wins,” he says. “That’s the magic of data today — it changes the game.”
Another practice that must fall by the wayside is the jealous guarding of data by nominal supply-chain partners, who fear that revealing their numbers will somehow threaten their margins. “That attitude needs to be flipped completely the other way,” Bowen says, “to one of, ‘If I share with them, maybe they’ll help me make more margin.” More than the concept of leveling the playing field, he adds, it’s about “making the whole playing field visible.”
As for the idea of transforming the supply chain into a competitive weapon, Bowen believes the use of 3D printing, or additive manufacturing, is key. It allows each partner in the supply chain to make its own parts on site and on demand, eliminating the need for excess stock. The technique slashes manufacturing costs, encourages customization and speeds the progress of product to market. And it greatly reduces the number of suppliers needed to make it all happen.
Bowen views suppliers as “value providers.” Keeping track of them all, he says, is akin to brain mapping, a notion that’s advancing rapidly but yet to be fully realized. After all, even the most streamlined global supply chain is likely to comprise thousands of partners who are expected to respond instantly and in lockstep to sudden shifts in demand. For most companies today, those “synapses” aren’t yet firing in unison.
When they do, the supplier becomes more than just a seller of parts, components or finished product. “If you want to be a value-added supplier,” Bowen says, “you need to be able to sense and respond in a fashion that [provides] other partners with something of value.” That requires near-instantaneous reactions to ever-changing conditions in the supply chain.
“The only way to do that,” Bowen adds, “is to have an integrative view with a collaborative relationship and enhanced technology.”