Supply Chain Complexity and the Need for Disruptive Technology

By Jeff Bodenstab28 Sep 2016

The keynote address at the always enlightening Supply Chain Insights Global Summit was given by Lora Cecere, and she used it to focus on the problem of growing supply chain planning complexity and how to fix it.

“The processes we have designed over the last three decades do not allow us to embrace complexity,” said Cecere. “They do not allow us to really drive global interactions to the degree we need for localized assortment. They don’t allow us to really get the data.”

As a result, Cecere says that today 80% of companies are seeing the same results (operating margins versus inventory turns) as they did ten years ago. They are up to their ears in data but lack understanding. They are “drowning in data and yet low on insight”.

Cecere says the companies that do supply chains well—at a 90% confidence level—have much more supply chain visibility. These better supply chains know how to use data. She said that unless you can analyze and act on available data streams, your supply chain will seesaw in and out of balance as complexity increases and demand varies.

Interestingly, some once follow-the-leaders retailers are now advancing their supply chains to deal with e-commerce and multi-channel demand. They’ve developed outward-facing processes that leverage channel data with minimal latency to grasp demand, balance inventory, and replenish supply across complex “networks of many”.

These demand-driven supply chains are driven by analytics. They are not “your father’s reporting systems”, sitting sleepily on top of ERP, but engines untangling endless streams of data, structured and sometimes unstructured. It’s much more than data visualization, Cecere says; it involves cognitive reasoning, “sentiment” analysis of social media, and feedback from the Internet of Things to identify demand signals. “The supply chain can sense, can test, can learn, can adapt, if we can connect it to the outside and data,” she says.

Looking into the future, you won’t likely do business the same way in 2030 that you do today, and your supply chain will need to keep pace, says Cecere. That’s going to take some innovation and disruption. She outlined five predictions:

  1. We will build outside-in processes using channel data to improve demand signals (See Costa case study). Cecere predicts that supply chains with outside-in processes will extend what sales and marketing know about customer segmentation and cost-to-serve into a more dynamic collaboration between supply chain and operations teams. Analytics will enable these supply chains to simulate the profitability of responses and learn from successes and failures.
  2. The learning supply chain – A rules-based ontology will learn, sense and adapt. These new supply chain planning systems will have predictive and prescriptive engines that liberate the chain from fixed procedures and rules.
  3. More socially responsible – Whether green, fair labor, water, or whatever, companies are already responding to consumer who are “voting with their feet”.
  4. B2B network of networks – Not just connecting ERP but a true “many to many” architecture that increases visibility between trading partners.
  5. Supply chain as an engine of growth – Cecere says that analytics-infused supply chains will be able to support new business approaches that solve the complex, shifting equations of demand, inventory and fulfillment — thus exploiting new opportunities for growth. She cited the example of Keith Nash of Lennox describing a coming HVAC industry transition from reactively servicing equipment to a business model where maintenance data transmitted from equipment in the field identifies likely impending failures. Not only does this enhance the service vendor’s relationship with their customer, but it also balances demand load, since service activities and spare parts can be planned and proactive, rather than strictly reactive.