Supply Chain Portfolio – Q1 2004


Here we are in the New Year. So, what should the going forward picture be of the Supply Chain portfolio? Something old, something new, something from a service provider, something blue (figure 1). OK, enough of that…


Here we are in the New Year. So, what should the going forward picture be of the Supply Chain portfolio? Something old, something new, something from a service provider, something blue (figure 1). OK, enough of that.

Something Old

In spite of the press, people are continuing to buy and implement solutions from APS to WMS, although at a slower rate. In figure 1, The 2002 Portfolio, we define planning to be more strategic: setting up of supply chains, strategic sourcing, etc.-basically designing chains, trade lanes, selecting outsource partners, etc.-optimizing the pipeline. These efforts have actually taken on more prominence since the push to outsourcing.

More and more, though, there is a process blur between a more tactical planning exercise (monthly weekly daily) and executional processes. From the planning view, since firms produce and schedule production based on planning systems, this makes sense. And from the so-called execution level, many of the platform players are providing more algorithms to rapidly replan as conditions change.

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Figure 1
(click chart to see larger image)

Something New!

However, a new era of supply chain performance is beginning. Spending ten years in the asset optimization effort has gotten firms to leaner processes and faster cycle times. But we have to destroy time-it’s still in the way!

We are moving to applications that get us to the power now! Real-time is real. So as far as planning and optimization goes, these solutions will not become obsolete. But by their very nature they rely on the past to function. Historical data drives their models. However, these systems will be enhanced by significantly improved and more timely, accurate information, provided by systems that deliver the NOW.

Big Trends for business going forward are about pure visualization of the customer, and finding ways to integrate the supply chain elements that fulfill that demand. If you think about this in the broadest sense, it spools out some important technology plays:

  1. Systems of the Now:
    • RFID is but one
    • Building on the network platform will be a key effort. Network providers are putting more on the platform. And as firms become more comfortable with this approach, they will utilize those added apps on these near real-time platforms. Lower total cost of ownership and quick time to benefit make this a compelling approach.

  2. Integrative Technologies-I did not say integration technologies. This is about higher order decisions making, that brings together cross functional decision making, like Consensus Planning S&OP, ECO/EOLs etc., Balanced Score Carding etc. (figure 2)
  3. Predictive Systems-when should I make a move and corner the market on Kiwis? How long/when will a part, product or system fail-this deviation from pattern, or new pattern means something big is going to happen. These systems will unbind time, enabling not only visibility of the current scenarios, but allowing predictive views. They can allow us to create new strategies or mitigate risk[1].

Figure 2

2004 will be a Year of Investments

So, that’s interesting, but the word was that the market is still not spending. That’s true-on older models. It wants newer models-really!

The fact is, we have gone some distance in SCM, but there are still big problems to solve. You are planning a new fab, or opening in a new market. These are huge plays, so companies still want to get Demand right. Investments in supply cost a lot! End-users endeavor to try new ways to solve some of these basic problems, even if it takes a sliver off, solving 10% of the problem. Iteratively, smart companies keep at it and keep improving.

I recently read some advice in a magazine that told users to ‘dust off their old ROI model’ and use them. Balderdash! Studies have shown that we move through the technology adoption to legacy in 7-10 year cycles.

APS and ERP emerged in the ’93 to ’94 time frame. So, it’s 10 years on. And the business models that the software supports are radically different than 1993. Oh, CIO, that last century idea of one application linking the enterprise cost a lot of money, and it’s still not implemented. SmallSmartFast organizations fueled by outsourced relationships and enabled by network technologies have quietly been becoming ubiquitous. These new business models present new problems, but also give us a parallax view, if you will, of the old problems.

But let’s give some credit to technology, here! It is a fact that it does make so many things possible! It is so pedestrian to be negative on tech. Leaders want solutions, not observers!

Future Forward

Some redefining of how we look at supply chain problems is going on, enabled by innovation. Consistently, our research has shown that big companies have been building ‘garages’ in the back, funding new efforts that are redefining and solving these new problems. A whole lot of coding going on! That means COTS vendors did not solve that problem for them. So, if you are one of those software vendors of yore, you need to get your head out of the 2002 blues and start anticipating what issues the customer is concerned with now. Revisionists went the way of the Berlin Wall.

Think The Power of Now!

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