Modern Supply Chains: How to disrupt and be unstoppable
It's a challenging world out there for supply chains in terms of modern business environment they operate in. It's incredibly hard to segment and accurately forecast the Omni-channel Consumer demand. Combine the demand volatility challenge with the complex and fragmented trading partner network that needs to service this volatile demand signal fast and profitably, and you have the recipe for persistent chaos on your hands.
The demand from Main Street Consumer for personalization & speed coupled with the demand from Wall Street Investors for economic profit is posing unique challenges for modern supply chains. It's no longer enough to deliver incremental cost optimization, the Chief Supply Chain Officer needs to do that while enabling new revenue streams and market share capturing capabilities from the supply chain. Digital revolution is upon us in terms of enabling growth oriented new models to deliver what Gartner refers to as Bimodal Supply Chains: ones that can deliver cost efficiency and revenue growth simultaneously.
Clearly, what got us here won't take us there. Modern supply chains have to get beyond just demand driven supply networks. We need innovative Digital Models in terms of sensor led supply chains with decision making software acting as digital Avatar of Supply Chain Planner. We need orchestration of entire value network that delivers a step change in financial performance, not just supply chain excellence. In other words, the transformation focus needs to move fully from inward looking cost reduction driven supply management to supply networks. Smart machines and software is quickly getting past the hype cycle and entering prime time readiness.
For example, future supply chains for after-sales service will look remarkably different with no service parts inventory anywhere as field technicians will have capabilities to print parts on demand with 3D printers installed in the technician's van. Imagine the inventory savings (cost reduction) as well as the improved service level when the technician does not have to make multiple trips to first diagnose the issue and then return with the right parts. This is the future of supply chains and players who are slow to adopt the digital revolution curve will see the gap between winners and losers widening beyond repair.
Ashutosh Bansal, GitaCloud CEO, recently attended Gartner Supply Chain Executive Conference in Phoenix, USA. Gartner unveiled the Top 25 Supply Chains that have embraced this transformation, so they are the disruptors, not the disrupted. Top 5: Amazon, McDonalds, Unilever, Intel, and Inditex. So what are these leaders doing right and more importantly what are they focused on in terms of innovation agenda of next 2-5 years?
Gartner spoke about three key innovation trends: bimodal supply chain strategies, increased customer intimacy, emerging digital business models.
Bi-modal: Tailor supply chain capabilities to support both growth and cost efficiency. Focus on satisfying the Omni-channel consumer profitably. Business models must change quickly. Disrupt or be disrupted. Promote the top line while you contain cost. How can you do this? Supplier enablement, co-innovation, efficient NPI, the list goes on - the theme remains same, you need to practice win-win-win paradigms across your entire network to win going forward. Sell in new markets with local sourcing, manufacturing, order management, and logistics. Partner with HR and IT to develop needed talent and systems. Invest in lean supply chains. Remove waste to improve profitability. Drive trade-offs across individual functions / enterprises for lowest cost to serve across your network, analyze this customer segment by segment.
Customer Intimacy: Make customer experience a first tier metric in your network. Measure Net Promoter Score (NPS). Listen closely to your customers. Respond with innovative solutions to their most pressing needs. CP/Retail space is leading with this, but industrial needs to get into this game as well. Push of a button type convenience has become an expectation. Delivery at home or physical store or your car in office. Regionalize customer service and raise quality of interactions with customers. Enable agile response by staging capacity local to each region. Extend visibility and insight beyond first line customers. Move on to the end users of their products. Collect not just details on the sale, but also patterns of usage and resulting sentiment of the end user. Mine online sentiment data to get these insights, feed them into R&D.
Digital: Explore and adopt digital business capabilities to support new business models. Improve broader value chain performance (the network). Manufacturing is at the center of this revolution: predictive quality, energy management, and smart automation leveraging sensors and advanced analytics. Digital synchronization of manufacturing lines with upstream suppliers multiplies business value. Auto and chemical industries are leading here. Logistics is next. Automation using sensors, gateways, tracking systems, and business rules to predict and alert potential variances from plan. For example, rapid emergence of online ordering is focing retailers into the online world of multichannel order management and fulfillment that requires increased visibility. Logistics Control Tower capabilities are not new, but when combined with more affordable sensors and computing power (cloud scale), it democratizes deeper visibility that reduces risk & operating costs while increasing customer service levels. Improve demand visibility with big data and advanced analytics. For example, smartphone manufacturers are replenishing supply and offering additional services based on device activations.
Anaplan CEO Fred Laluyaux had a similar message at Anaplan Hub conference in San Francisco May 18-20, 2015, which GitaCloud sponsored. Fred talked about the need for enterprises to be unstoppable. Average age of organizations is reducing from 60 to 12 years, the risk of disruption is real for even today's leaders.
How can you ensure you are unstoppable? GitaCloud can help. We help you establish playbooks to assess current vs. required capabilities to embrace bimodal, customer intimacy, and digital models, establish transition roadmaps, and deliver compelling business cases that accelerate alignment for scope of the transformation program. Clear and cascading link between corporate and supply chain strategies, Omni-channel consumer oriented performance metrics hierarchies, digital enabled business processes, cloud based technology that scales endlessly, and millennial talent that does not know another way to work all needs to come together in a seamless orchestration to be among the lead disruptors going forward. People laughed at Amazon when they announced drone based delivery models, but Amazon is #1 when it comes to Supply Chains (way ahead of Wal-Mart) and that is no laughing matter. Future will not be kind to companies that don't design and implement holistic transformation agendas to service modern buyers profitably and predictably. The existential threat of disruption from a young player is very real and cannot be removed by piecemeal thinking and knee jerk responses.