Digital Business and the Supply Chain of the Future

Stephen DeAngelis

October 21, 2014

“Evolutionary theory teaches us it is neither the strongest nor the most intelligent of the species that survives,” writes Peter Bigelow, president, xCell Strategic Consulting. “It is the one that is the most adaptable to change.” [“The Supply Chain Of The Future: A Strategic View,” Life Science Leader, 2 September 2014] Bigelow insists that supply chains are going to have plenty of opportunities to prove their adaptability as they confront changes in areas like “ingredient suppliers, manufacturers, quality standards and audits, and logistics.” Although Bigelow focuses on the pharmaceutical supply chain, his point is well made. In nature, however, chance plays a role in which evolutionary mutations are going to be advantageous. A classic example of this is the peppered moth. Prior to the industrial revolution, pale-colored moths possessed the best camouflage when they rested on the trunks of trees. As the industrial revolution progressed, things changed. The trunks of trees became darkened by the smoke that belched from the stacks of newly created factories. The darker the trunks became the more conspicuous pale-colored moths were for predators to spot. Gradually, dark-colored moths, which had been rare during earlier times, became more prevalent as birds started eating their easier-to-spot, lighter colored relatives. Everyone knows that change is inevitable; but, predicting which changes are going to have the most impact on the future remains a difficult task. That’s why Bigelow suggests that companies should ensure their supply chains are nimble rather than rigid.

 

To achieve adaptability, Bigelow insists that companies must take a strategic approach in order “to improve supply chain performance and avoid costly and disruptive delays.” This strategic approach, he writes, has at least three necessary ingredients. The first ingredient is a “customer-first” approach. It doesn’t really matter how good your supplier-facing supply chain is if your customer-facing supply chain falls short. The second ingredient necessary to achieve strategic supply chain success, Bigelow states, is a plan. You’ve heard the phrase: “If you don’t know where you’re going, any road’ll take you there.” Basically, that idea is a paraphrase of a conversation between Alice and the Cheshire Cat in Lewis Carroll’s Alice in Wonderland:

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“—so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”

Without a plan, you’re not much better off than Alice. The final ingredient necessary for to achieve a successful strategic approach to supply chain transformation Bigelow insists is “a greater focus on getting operational excellence right. Manufacturers must attack variability, waste, and inefficient processes with a vengeance.” The only caveat I would add to that notion is that, when attacking waste, don’t make your supply chain so lean that it is no longer resilient. After all, resilience is at the very heart of evolutionary adaptability. Although Bigelow doesn’t explicitly state it, there is a thread that runs through all of the ingredients that he suggests are needed to create a successful strategic approach to supply chain transformation. That thread is big data analytics. At the Supply Chain Insights Global Summit earlier this year, Lora Cecere (@lcecere) and her colleagues gathered some of the best-informed people in the supply chain arena and asked them how they foresee the future of the supply chain. I was flattered to be included in the group interviewed. If you watch the following brief video clip, you will understand why I think that big data analytics is going to play such a significant role in the future transformation of supply chains.

 

 

All of Bigelow’s suggested ingredients to create a strategic and adaptable supply chain benefit from big data analytics. This is going to become even truer as the Internet of Things (IoT) rapidly expands. Michael Burkett, managing vice president, and Steven Steutermann, managing vice president at Gartner, Inc., predict, “As digital business emerges, few trends will impact the supply chain quite like the Internet of Things and its billions of connected devices, all negotiating, creating and generating data.” [“How Digital Business Disrupts the Supply Chain,” The Wall Street Journal, 15 September 2014] If your company wants to be an evolutionary survivor, it will have to come to grips with changes being wrought by digital business. Burkett and Steutermann explain:

“We can already glimpse some of the impact today. Lockheed Martin monitors the health of its F-35 fighter jets to guarantee flight availability by predicting service needs and driving the service supply network. In consumer products, Coca-Cola’s Freestyle beverage machine allows customers to custom mix their own drinks, disrupting the traditional distribution model while also capturing valuable customer insights for future products. While the IoT is still in its early stages, digital business promises to harness its potential for new value, while disrupting the supply chain as we know it today. … As devices become more self-aware and communicate with their ecosystems, new possibilities are opened for the supply chain. Many more enterprise assets will describe availability, capacity and health, while inventory — such as perishable goods — can be located and even its freshness determined. Real-time availability of more granular data will improve decisions for planning, allocation, optimization and service.”

Burkett and Steutermann recommend three things that companies can do to meet the challenges they will face in an environment dominated by digital business:

  • Prepare your supply chain to add value in a world of connected devices where demand signals and asset locations are visible at a granular level.
  • Plan for the onslaught of Big Data these devices will bring, and build your capability to harness it for your supply chain. This includes building a talent pool, including data scientists, and seeking out the experience of other functions, such as commercial organizations, which have often dealt with customer data and analytics.
  • Update supply chain risk plans to mitigate the increased exposure to cyberattacks brought when OT is now connected to the Internet and enterprise supply chain systems. Resolve any differences in accountability or governance structures between IT and OT that can result in risk exposure.

Steve Leavitt, General Manager of U.S. Cloud Solutions for Exact, recommends that companies embrace the future and entrench themselves in the digital business environment so that they don’t find themselves “at risk of being marginalized or, even worse, being squeezed out of the supply chain altogether.” [“Getting More Entrenched In Your Supply Chain Is A Few Clicks Away,” Manufacturing.net, 25 September 2014] “Information on what’s selling well, what’s not and what might be trending is as valuable as hard currency,” he writes. “You can use it to buy access to new partners or new markets, to elevate your standing with existing partners in your supply chain or you can simply apply it toward making your own business more efficient and profitable.” Leavitt notes that there is a massive difference between being stuck in the information age and being entrenched in it. “But the bridge between isn’t as long or perilous as some might think,” he concludes. “But it must be built on information.” Hopefully, the above discussion convinces you that in order to be an evolutionary survivor as a digital business your supply chain must be adaptable and that adaptability needs to be based on big data analytics.