The Need for Supply Chain Excellence has never been Greater

Stephen DeAngelis

June 6, 2016

For professionals who deal with extended supply chains, business is a 24/7 proposition. The old adage — “there is no rest for the weary” — certainly applies. Thomas W. Derry, Chief Executive Officer of the Institute for Supply Management, writes, “In today’s competitive business environment, having visionary leaders and great products is not enough. In the past 20 years, companies have experienced a profound shift, and have dramatically increased their spending on external suppliers. This places the supply management function in the spotlight as a key driver of profitability. The better supply management teams are at selecting, overseeing, and collaborating with these partners, the stronger their organizations will be.”[1] I’m guessing supply chain professionals would be grateful if their concerns began and ended with overseeing and collaborating with partners. Unfortunately, factors affecting their performance are growing in number and complexity every day. Below are just a few of the things with which they now must deal.

Increased Complexity

Klaus Rüth, senior director of analytics & supply chain services at HAVI Global, notes, “In the past two decades, world trade has increased dramatically. Unpredictable demand patterns now have ramifications across regions. As a result, the complexity of individual supply chains has intensified. Forecasting and planning has become increasingly difficult as companies struggle to predict pricing and availability of raw materials.”[2] Of course, complexity doesn’t just affect procurement. Extended supply chains are subject to disruptions from a variety of risks. Logistics become more complicated. Consumer demand varies by time of year and region of the globe. And the list goes on. It’s enough to make a supply chain professional throw up his or her hands in surrender. On the brighter side, we live in an age of information. Data is being generated at an amazing pace and that data can be used to help deal with supply chain complexity. One of the technologies that has emerged for dealing with complex situations is cognitive computing. Cognitive computing systems — which I define as the combination of artificial intelligence, advanced mathematical calculations, and natural language processing — can collect, integrate, and analyze the massive amounts of data involved in today’s global supply chains. Cognitive computing systems can be programmed to make routine decisions and to alert human decision makers when anomalies occur.

Advanced Analytics

The emergence of advanced analytics in supply chain processes has likely caused a few restless nights for supply chain professionals. After all, most senior supply chain executives are more familiar with spreadsheets than with algorithms. That’s why having a natural language processing capability associated with advanced analytics is so important. Amber Markim, an Operations & Marketing Assistant at Flash Global, notes, “Previously, analysis of data gathering required both a data entry clerk and a person to conduct data analysis. The cloud, in conjunction with the Internet of Things, has enabled rapid collection of data from various resources and analysis of this data. As a result, businesses can eradicate these former ‘human’ positions in favor a service that performs the same results on an exponentially faster scale. Ultimately, this allows the business to make better decisions for how daily activities behave.”[3] Often we find that instead of eradicating jobs, the use of cognitive computing systems enhances human performance. What is eradicated are the tedious routine tasks that can lead to boredom and errors when performed by humans.

Digitization

Data is a thread weaving its way through almost every area of today’s business environment. Adam Robinson, who oversees overall marketing strategy for Cerasis, notes, “Technology has driven a new wave of productivity by digitizing key financial and business processes and enabling collaboration across the organization. This 2016 supply chain trend will continue as best-in-class organizations leverage business networks to create a digital community of partners executing coordinated processes in a more organized and informed way than in the past.”[4] Patrick Burnson reports, “The expected benefits of Digital Supply Chain Transformation include, but go well beyond cost reductions for logistics, inventory and maintenance, improvements in customer service and higher overall equipment effectiveness. Perhaps more importantly, Digital Supply Chain Transformation is expected to dramatically improve an organization’s agility. Agility is necessary to respond to changing market conditions, to new market entrants that can threaten existing business models or to unexpected supply chain disruptions. Such disruptions have already caused major harm to the financial performances and reputations of countless organization over the years.”[5]

Globalized Risks

Abe Eshkenazi (@aeshkenazi), CEO of APICS, writes, “Supply chains are like the central nervous system in humans — they are complex, integral systems that are constantly interacting with their environment. While the human body is programmed to automatically respond (and fight infection, for example), supply chain overrides are largely dependent on the experience and skill of supply chain leaders and managers. Because supply chain problems can have cataclysmic ramifications for a business, supply chain managers have a lot on their minds.”[6] Cognitive computing systems can help monitor potential risk areas, provide alerts when a potential problem arises, and even predict downstream perturbations associated with specific events.

Summary

The above discussion only touches on a few of the challenges facing today’s supply chain professional. As Eshkenazi notes, “The supply chain is one of today’s most compelling and exciting areas of business because it is advancing so rapidly.” Derry adds, “These examples, and many others, illustrate how the need for professional excellence has never been more paramount. Supply managers’ capabilities and responsibilities have seen unprecedented growth in recent years. Never before have they been asked to take on as much responsibility as they do now.” Fortunately, new tools are now in the supply chain professional’s kit for dealing with all they have on their plate. Eshkenazi concludes, “Continuing to monitor new developments and identify common challenges enables supply chain leaders to anticipate rather than react to potential disruptions. And hopefully sleep easier — secure in the knowledge that they are as prepared as possible for whatever comes their way.”

Footnotes
[1] Thomas W. Derry, “Why Excellence in Supply Management Matters More Than Ever,” Inbound Logistics, September 2015.
[2] Klaus Rüth, “Three supply chain megatrends you need to be aware of,” Supply Management, 21 September 2015.
[3] Amber Markim, “8 Ways Cloud Technology Is Changing the Game For Supply Chain Management,” Cerasis, 23 July 2015.
[4] Adam Robinson, “2016 Supply Chain Trends: 7 of 12 Trends that Will Drive Supply Chain Management in 2016,” Cerasis, 4 January 2016.
[5] Patrick Burnson, “The Current State of Digital Transformation across Extended Global Supply Chains,” Supply Chain 24/7, 8 April 2016.
[6] Abe Eshkenazi, “What’s Keeping Supply Chain Managers Awake at Night?EBN, 5 April 2016.