Supply Chain Transformation: Three Critical Concepts

Stephen DeAngelis

June 15, 2015

George Bernard Shaw, the famous playwright, stated, “Progress is impossible without change, and those who cannot change their minds cannot change anything.” I will be the first to admit that not all change leads to progress; but, change is one of those certainties with which we all must deal. Supply chains have certainly endured their share of change over the years and some analysts believe that even greater changes are in store. Rob Spiegel () predicts, “Industry 4.0 is coming to the extended supply chain. Over the coming decade, innovations like predictive analytics, 3D printing, and wearable technologies will change the supply chain even as workforce shortages intensify.”[1] Spiegel is not alone in that assessment. Deborah Grant, Industry Manager for Manufacturing at Loftware, writes, “Change has always been a reality, but there is a revolution brewing in manufacturing, stemming from the new technologies such as robotics, internet of things (IoT), and 3D printing that are poised to influence rapid changes in many aspects of manufacturing and the global supply chain.”[2] Susan Fourtané (@SusanFourtane) goes even further; she writes, “Supply chains can’t wait for things to change. Rather, the organization must make change happen.”[3]

Change for change’s sake is never a good idea and that’s not what Fourtané had in mind. She believes that change must be guided by a vision or philosophy. In her case, that vision is a customer-centric supply chain. In addition to a vision, change requires two other things: a plan and a leader.

Start with a Vision

Good visions start with good questions. Why do you need to change? What are your goals? Who are your customers? Where do changes need to be made? The more questions you ask the more focused your discussions can be become. Fourtané adds, “Change doesn’t have to be immediate, but it must comprise every aspect of the supply chain to be effective.” Since there is really no aspect of a business that is not impacted by supply chain operations, stakeholders from every department should be an integral part of any change process. Each participant can offer a different perspective, ask different questions, and provide different insights than participants from other departments. One of the most serious discussions needing to take place is how technology is going to affect each department in a company. Spiegel reports that analysts are predicting that “new technology will spread across traditional supply chains, changing them radically over the next five to 10 years.” That fact should spur most companies to take action. The focus of Spiegel’s article is the 2015 MHI Annual Industry Report, “Supply Chain Innovation — Making the impossible possible.” Spiegel notes that MHI, an international trade association, recommends that companies “embrace the supply chain transformation quickly, investing in new technologies as they face constant pressure to do more with less.” The report focuses on eight technologies that could dramatically change how supply chains function. Those technologies are: Inventory and network optimization tools; sensors and automatic identification; cloud computing and storage; robotics and automation; predictive analytics; wearable and mobile technology; 3D printing (aka additive manufacturing); and, driverless vehicles and drones. One can see from that list that a company could take days asking a lot of “what if” questions around each of those technologies.

Develop and Follow a Plan

Once all of the questions and concerns that various stakeholders have are surfaced and have been vetted, a course of action needs to be developed. In her article, Grant cites Peter Senge, author of The Fifth Discipline, The Art and Practice of the Learning Organization. In his book, Senge writes about the need to understand “dynamic complexity” in crafting plans to meet rapid changes.

“Unfortunately, most systems analyses focus on detail complexity, not dynamic complexity. Simulations with thousands of variables and complex arrays of details can actually distract us from seeing patterns and major interrelationships. In fact, sadly, for most people ‘systems thinking’ means ‘fighting complexity with complexity,’ devising increasingly ‘complex” (we should really say ‘detailed’) solutions to increasingly ‘complex’ problems. In fact, this is the antithesis of real systems thinking.”

One way of dealing with complexity is letting big data analytics and cognitive computing shoulder much of the burden. Bain analysts, Michael C. Mankins and Lori Sherer (), write, “The best way to understand any company’s operations is to view them as a series of decisions.”[4] They explain:

“People in organizations make thousands of decisions every day. The decisions range from big, one-off strategic choices (such as where to locate the next multibillion-dollar plant) to everyday frontline decisions that add up to a lot of value over time (such as whether to suggest another purchase to a customer). In between those extremes are all the decisions that marketers, finance people, operations specialists and so on must make as they carry out their jobs week in and week out. We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

Many analysts believe that the only companies that will survive in the Industry 4.0 world will be digital enterprises. When considering transforming into a digital enterprise, companies should be asking themselves which decisions can be automated and which decisions still require human intervention when anomalies arise? At Enterra Solutions® we are so convinced that digital enterprises will dominate the business landscape we are developing the Enterra® Cognitive Enterprise System™ to help meet the challenge. The system uses cognitive computing technologies to help companies make sense of oceans of data in which they swim. In the future, I predict that most routine business decisions (including supply chain decisions) will be made by cognitive computing systems. This will free time for humans to apply their expertise towards solving a company’s most vexing challenges.

Use Proven Change Management Strategies

McKinsey & Company analysts Aaron De Smet, Johanne Lavoie, and Elizabeth Schwartz Hioe, note, “Few companies can avoid big, periodic changes in the guts of their business. Whatever the cause — market maturation, a tough macroeconomic environment, creeping costs, competitive struggles, or just a desire to improve — the potential responses are familiar: restructure supply chains; rethink relationships among sales, marketing, and other functions; boost the efficiency of manufacturing or service operations (or sometimes close them). Such changes start at the top and demand a relentless focus on nitty-gritty business details from leaders up and down the line.”[5] A few years ago, MIT professor Alex “Sandy” Pentland told participants at a conference that one of the best ways to promote change is by establishing a pilot project that can prove whether or not the change is valuable to the stakeholders involved. “I will advocate this strongly,” he said. “Set up some sort of test bed — a living lab — something that stores what you have and that does things differently. Maybe a different type of service for a region.”[6] “Proof,” according to Pentland, involves both “the intuitive thinking employed by HiPPOs (highest-paid person’s opinions) with quantitative reasoning from ‘the quants.’ Bringing the two together enables organizations to explore data, visualize relationships and understand in a human, intuitive way what data is telling them.”

Evolution has shown that the species that survive and thrive are those that can adapt to changing conditions the best. Surviving and thriving in a changing business landscape is no different. Fourtané concludes, “Change is constant, and the way that organizations respond to it shapes the future of the organization.”

Footnotes

[1] Rob Spiegel, “Supply Chains Will Change Radically over the Coming Decade,” Design News, 28 April 2015.
[2] Deborah Grant, “Change: The Manufacturing Rule, Rather Than the Exception,” EBN, 12 May 2015.
[3] Susan Fourtané, “Create a Customer First Supply Chain for True Transformation,” EBN, 11 May 2015.
[4] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[5] Aaron De Smet, Johanne Lavoie, and Elizabeth Schwartz Hioe, “Developing better change leaders,” McKinsey Insights & Publications, April 2012.
[6] Renee Boucher Ferguson, “Big Data and Big Change Management: A Path Forward,” MIT Sloan Management Review, 17 May 2013.