Recently, I was cleaning up my office and found some old notebooks from my early days as a supply chain analyst (mid-1990s). This notebook was filled with great mind maps and drawings and lots of ideas I thought I should pursue.
I was surprised by some the prescient “jot downs” of things I thought would come about. Some of them were dark portents of the future — some of the changes to supply chains and supply chain systems that we are living with now.
Figure 1: Mind Map 1996
Major themes in the 90s were outsourcing, Y2K/ERP, understanding and purposefully designing a supply chain, instead of the “just happened” chains that most had evolved to over the decades. And, of course, there was the impact the Internet was beginning to have. I wondered what would happen to supply chains due to the long thin lines we were creating due to outsourcing, as well as the fact that the Internet was creating 24/7 online business. I wondered, “What might need to happen to systems and data, too?” Somehow we needed faster and more visible control while we were busy sending the work somewhere overseas.
I had an inkling of what the system architecture of the future might look like, but not how we would get there. But one thing I felt in my bones was that as these changes occurred, it would leave behind those who were not masters of supply chains and the Internet.
This thought did not come from functional/subject matter ego that supply chain was more important than say, finance or HR, but from my observations and some obvious insights: Slow, more expensive retail chains that could not communicate clearly and accurately with customers, that could not forecast demand and get their supply lines in order were already falling behind, being aquired, and so on. Think of Sears, Kmart, Radio Shack, and many others.
The Porter Model?
Michael Porter, like all great thinkers, had his day. My bosses sent me to a seminar led by Porter and his team on competitive advantage and competitive strategy. I remember that I hung on their every word — written and spoken — and absorbed that into my role as a leader in supply chain transformation in the company I worked for.
But here is the thing. His book was the hot seller in the 1980s and 90s. Once I became an analyst, I noticed every client I visited had that book (and In Search of Excellence) on the bookshelf. But, maybe these books were just shelfware, since it seemed that organizations were doing the opposite. After all, who was focused, really, on their supply chain the in 1980s? And even in the 90s, when I told people, “I work in supply chain,” I often had to explain what that was, in corporate America!
Thus, I added the role of supply-chain teacher, and not just in the companies I worked with. At universities and professional certification organizations, I was getting the word out and coaching people on how to think about all that was happening around them and how to master it. I loved this. But I did find myself asking the same simplistic questions each time:
Class, can you name some the most sucessful companies today?
What makes them sucessful?
OK. We now have established they are masters of their supply chains.
Can we think of examples of companies who didn’t focus on the chain?
(We’ll come back to this thread shortly in 2020.)
Now notice the “Porter” model. What are the primary activities of “the firm?”
According to Porter, they are Logistics, Operations, Sales and Service.
Now, class, think about what we outsourced.
Logistics, Operations and Service.
Many students also mentioned their internal conflicts: “I get along with my suppliers better than the cross-functional team I have to work with inside,” or “Won’t we all be laid off if this continues?”
Figure 2: Barriers in Porter Model
Now, class, note the lack of Finance on this chart.
Lots of knowing nods.
Class, where are we putting our IT investments, then?
ERP, finance, were the answers. “They (management) think our 3PL will manage stuff, but the 3PL’s systems don’t talk to our systems and they don’t have the information we need.”
Of late, of course, a lot of this has changed. Lots of money is being spent in various aspects of supply chain transformation. But we are all victims of history. A lot of the drive for financial cohesion in the late 90s and the installment of ERPs has helped us arrive where we are today — with clunky supply chains that require a lot of integration work to create workable supply chains.
But workable is not necessarily agile and fast and intelligence rich. Workable is not good enough. It is not that advantage that Porter talked about.
So where are we?
Where We Are/Where Are We?
Where we are:
- Outsourced logistics — part or all of the process
- Outsourcing, for many, of manufacturing
- Off-shore manufacturing with fragile supply lines due to trade wars, the pandemic, and some pretty awful weather
- Diminished permanent careers with commitment-loyal employees
- Shrunken HR, training budgets, and along with it, much of the culture of supporting and guiding employees’ careers for mutual success
- And many, in the zeal to catch up, often spend a huge amount of money on supply chain transformation, if those budgets haven’t been cut (which was mentioned a lot in the research we just did).1
We outsourced so much. And ironically, now our customers expect more visibility into most of our operations. For example, I order bread, wraps, and crackers from a bakery across the country. I expect and get visibility into when the bake started, the moment it ships, and I’m able to track it, literally, to my door. We all expect to know that in B2B or B2C context.
Listen: a small bakery in Wisconsin can do this. Yet many really large companies cannot!
So here is the dichotomy: we all want frictionless information flow from source to end-customer. Yet, we have made that task extraordinarily difficult by the real walls between functions which are performed outside our enterprise2 and the artificial barriers within the enterprise.
Transcending the Barriers
So, how do we live with this dichotomy? As hinted above, those companies who did not see the unintended consequences of the whole outsourcing push are really suffering today. We are watching corporate failures all over the place — and not just because of the pandemic.
Was the answer not to outsource? This question is for each enterprise to brood about, themselves. But as my old business partner back in the 90s said to me when I was brooding about all the outsourcing, “You can’t fight it.”
That means, then, transcendence.
The companies who saw the implications of these issues early on are mostly doing pretty well today.3 They built strong linkages within their organizations and with their trading partners.
What are these linkages?
- Meaningful working Policies. There are agreements governing how all partners will operate together — inventory strategies, payment terms, standards, and so on. These are living, agile policies that get Performance measured, reviewed, and changed as needed.
- Adaptive and resilient Processes. These processes are not paper flowcharts, but are embedded within the daily tasks — the minds, work, and information systems — that run these supply chains. Again, these have to be evaluated to ensure they yield the right Performance outcomes. Resilience was always important, but more so now, since “poorly tended gardens do not yield crops.” In other words, we have a lot of broken supply chains with short ships, unavailable supply, and so on. Resilience needs to be embedded. Large companies often thought a hammer — beat up your suppliers — would suffice. But that has proven to be a fallacious way to operate in these times (and is also unkind to humanity).
- Enablers/information and systems that emphasized supply chain cohesion. We emphasize the information as much as the tech component in enabling, since great algorithms are nothing without the data. And, today, with so much structured and unstructured data to use, actually making use of it can be a gold mine. Again, the companies who knew the value of good data and continued to invest in it are generally doing OK. That continued investment included keeping up on the ever-expanding data offered in the supply chain, from EDI/AS2, scanning, RFID and IoT, and the SNEW (Social, News, Events and Weather) and unstructured data from visual and voice streaming and the ability to use it, to inter-enterprise collaborative systems (supply chain networks) and AI/Machine Learning.
But even the so-called best, most successful companies have to be vigilant and constantly adapting because things around us are changing very fast. Having agile and resilient 3Pes had and has profound implications for information systems.
Breaking the Barriers
Turning the page in my notebook, I came upon this mind map.
Figure 3: Mind Map 1997
It is eerie, now, to see what kind of tech revolution and supply chain challenges we are going through.
Turns out, we added to the artificial barriers (cross-functional conflicts) some real ones — our overseas suppliers or customers. This means we have to rely on information systems to break or at least transcend those barriers.
And that means:
- B2B technologies with speed and intelligence, embedding AI/ML within.
- Adherence to standards. For those who only do ASNs, it’s time to step up to the plate to do more. For those who are not really standardly communicating, don’t be a thorn in your trading partner’s processes, and at least adopt the “common man’s” EDI and AS2.
- Share supply chain platforms, Supply Chain Application Networks, wherever they apply. This can be anything from “simple” goods tracking all the way to complex activities like demand-supply balancing and/or global multi-mode transportation.
- Manage your data. There are plenty of automated techniques today to do this, as well as 3rd-party IT platforms who will govern this for you.
- If you still have it — give up your cynicism about forecasting and learn to get good and great at forecasting.
No doubt it’s a big job to even contemplate issues. But that is the job of leadership in a company. Getting back to the basics and building from there is never old. Steadily investing the time and resources, and adapting to change has kept organizations thriving. And today it just might be about survival.
For more on:
Supply Chain Networks
Multi-party Solutions for Supply Chain
Supply Chain Networks Revealed
B2B – World in Transition
Business Transformed—Integrating B2B Communications
Artificial Intelligence / Machine Learning Collection
AI Myths and Realities
1 Investment has been made in fulfillment warehouses, re-imagining our transportation networks, integration within and beyond the corporate walls, lots of devices — mobile, IoT, and robotics — and adoption of new software that has more smarts, and is often cloud-based. — Return to article text above
2 Many enterprises point to the fact that they have reduced costs and, thus, consumers, today, experience lower prices on many goods. However, in many cases, that was merely a redistribution of cost across the supply chain. This process created many new or growing industries such as contract manufacturing and 3rd-party logistics services. But there was that all too painful cost of lost jobs and reduced hourly pay for those who have jobs in these industries today. We have to ask ourselves, is the real economy better today than before? Yes, consumers can shop for really cheap goods, but many get half the pay at the same time. — Return to article text above
3 Big-Box Retailers Were Prepared for the Coronavirus — Return to article text above
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