According to Oxford Languages, an anachronism is “a thing belonging or appropriate to a period other than that in which it exists, especially a thing that is conspicuously old-fashioned.” In the Digital Age, many analog processes are quickly becoming anachronistic. Supply chain processes are not immune to this trend. EY analysts Edmund Wong and Glenn Steinberg (@GlennSteinberg), ask, “Are you running an analog supply chain for a digital economy?”[1] With the global supply chain struggling to cope with today’s challenges, there are myriad reasons for them to ask the question. They explain, “The global supply chain is a creation from the past, ill-suited to today’s fast-changing world. It was designed with linearity in mind: a singular focus on minimizing transport costs through building high-capacity, point-to-point distribution infrastructure. These existing infrastructures can be repurposed even as newer, faster alternatives have been and will continue to be developed. And as global trade has accelerated in recent decades, greater levels of investment and manpower have been dedicated to expanding capacity to achieve cost efficiencies. Yet the disruption of COVID-19 has been a wake-up call: the global supply chain is increasingly ill-equipped for today’s world and needs to become digital and autonomous if it’s to be able to automatically identify and respond to external events.”
The Changing Supply Chain Environment
In the past, supply chain operations were rarely the subject of front page headlines. The pandemic changed everything and reports (mostly bad) about supply chain operations and challenges are now liberally scattered amongst other news stories. According to Wong and Steinberg, it was just a matter of time before the bad news started making headlines — with or without the pandemic. That’s because global supply chains were becoming rapidly obsolescent. Wong and Steinberg point to three primary factors driving the obsolescence of global supply chains. They are:
First, consumer demand is changing. Wong and Steinberg report, “Change in consumer demand is accelerating. … Consumers around the world are progressively shifting their expectation toward products and services that are digital, local and sustainable. … Consumer purchases and decisions will increasingly be voice-driven and machine-augmented, with companies’ relationship with customers machine-to-machine, values-based and digital-first.”
Second, climate change is having an impact. According to Wong and Steinberg, “Environmental factors are starting to exert greater influence. … Climate change is fueling increased frequency and severity of extreme weather events. One peer-reviewed scientific study estimated the frequency of intense floods and storms could double within 13 years. … Businesses — especially those with large physical footprints — should expect climate-related disruptions as the norm for decades to come.”
Finally, the global order is shifting. “The global order is fundamentally reshaping,” write Wong and Steinberg. “The impact of the rebalanced global system [increases the] likelihood that multipolarity will be the end state, as China tries to establish its own sphere of influence in opposition to the West, led by the United States. Escalating tensions around trade, technological innovation and healthcare suggest it’s highly unlikely we’ll revert to the cooperative past that characterized the period following China’s 2001 admission to the World Trade Organization. Yet cooperation will be key.”
I believe the Covid-19 pandemic is a fourth factor. It’s not going away and, until more of the world gets vaccinated, it looks like variants are going to appear as regularly as country music awards shows on television. Most experts insist, unlike this pandemic, the next global pandemic won’t take a century to appear. Eric Lander (@EricLander46), President Biden’s science adviser and director of the White House Office of Science and Technology Policy, explains, “New infectious diseases have been emerging at an accelerating pace, and they are spreading faster. … A future pandemic could be even worse — unless we take steps now. It’s important to remember that the virus behind covid-19 is far less deadly than the 1918 influenza. The virus also belongs to a well-understood family, coronaviruses. It was possible to design vaccines within days of knowing the virus’s genetic code because 20 years of basic scientific research had revealed which protein to target and how to stabilize it. And while the current virus spins off variants, its mutation rate is slower than that of most viruses. Unfortunately, most of the 26 families of viruses that infect humans are less well understood or harder to control.”[2] Pandemics halt production, snarl logistics, confuse demand signals, and disrupt every economic sector in some manner. The point is: The world has changed in fundamental ways and supply chains need to keep pace.
Digital Transformation of Supply Chains
Transforming analog supply chains in digital value chains is more difficult than it sounds. Jim Tompkins (@jimtompkins), Chairman at Tompkins International, believes the word “transformation” fails to capture the urgency he feels about the need for supply chains to reinvent themselves. He explains:
“I think people are underestimating the magnitude of what is happening today. Transformation was a great process to move a company forward five years ago. But are you telling me that for us to deal with digitalization, digital commerce and the pandemic all we need to do is change the way we do business? … You will not be successful going forward if what you do is transform your business, supply chain or logistics processes. Simply changing these processes is totally inadequate. You must throw out how things have been done in the past and reinvent your business, supply chain and logistics processes.”[3]
Updating old processes to incorporate digital technology is what Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, calls “digitization at its worst.”[4] She explains, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”
Concluding Thoughts
Wong and Steinberg insist there are at least four imperatives for digitizing and automating your supply chain. They are:
1. Supply chain intelligence: According to Wong and Steinberg, “Siloed departmental data is common, so the start of any supply chain reinvention journey is to invest in the right mix of infrastructure and trained talent to enable end-to-end, real-time visibility. That allows the identification of company-specific, industry-specific and geographic-specific pain points.” You can’t talk about digital transformation without discussing the importance of data. Without the data, there is no journey. Data alone, however, is insufficient. Data must be analyzed in order to achieve desired results. Evan Stinson, a Content Marketing Specialist at Jaggaer, explains, “There is no magic cure that’s going to wipe away all of the underlying supply chain gaps and risks that exist. To do that is going to take hard work and some creative thinking. However, a step in the right direction to solve the underlying risks does exist. There are other options you should weigh when evaluating your next steps. Investing in supplier diversity or sustainability are both important avenues to consider. Both offer numerous advantages and should certainly be included on your roadmap, but pound for pound, nothing can give a boost to your supply chain (and supplier risk) management efforts quite like AI can.”[5] Cognitive technologies, like the Enterra Global Insights and Optimization System™ — a solution that leverages Autonomous Decision Science™, can help improve processes across supply chain operations, not just in the area of risk management.
2. Supply chain architecture: Wong and Steinberg write, “Visibility allows the design of an optimal supply chain operating model, from structure to governance and processes. This intelligence also assists in weighing pros and cons to determine the optimal mix among local, regional, and global sourcing and manufacturing capability.” Without stakeholder collaboration, today’s value chains simply can’t function as they should. Collaboration fosters better visibility and significantly increases the chances of a successful digital transformation.
3. Integrated operational excellence and supply chain planning: According to Wong and Steinberg, “This is often the most arduous and continuous step: individually examining key elements such as procurement, manufacturing, logistics and fulfillment while adopting a systems mindset to develop all-horizon implementation plans employing technologies such as smart factory, digital fulfillment and integrated digital planning.” As Wong and Steinberg note, planning can only be effective if it takes place across the entire enterprise. At Enterra Solutions®, we call this concurrent planning. Cognitive solutions — like the Enterra Concurrent Planning Intelligence Solution™ — can help minimize internal planning conflicts and create a balanced concurrent plan.
4. Supply chain sustainability and resilience: “Once supply chain excellence is achieved,” Wong and Steinberg write, “the next evolutionary step is adopting future business models to sustain competitive advantage.” Or as Tompkins put it, “You must throw out how things have been done in the past and reinvent your business.”
Footnotes
[1] Edmund Wong and Glenn Steinberg, “Are you running an analogue supply chain for a digital economy?” EY, 12 July 2021.
[2] Eric Lander, “As bad as covid-19 has been, a future pandemic could be even worse — unless we act now,” The Washington Post, 4 August 2021.
[3] Jim Tompkins, “Transformation is Inadequate: Why Reinvention is the Only Option for Business Success,” Tompkins Blog, 15 September 2020.
[4] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[5] Evan Stinson, “How Artificial Intelligence (AI) can be used in Supply Chain Management,” Jaggaer Blog, 13 July 2021.
