Supply chain professionals have continued to establish a consistent foundation of achievement using traditional technologies such as Demand Planning and S&OP. And today they are embracing their digital, connected future.
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After more than twenty years developing foundational supply chain technologies—from merchandising/demand, logistics, and manufacturing to sourcing and procurement, the supply chain world is going through a profound change.
The digitalization of the supply chain has arrived. Empowered by analytics, integration, and a range of smart, connected devices and connected people, we are taking the next leap. This change is critical to support our global world and mobile professional. This is a world that has a relentless demand for more and better data and more automation of results—in other words,answers, not just data. Analytics based on algorithms and machine learning not only support the need for better, more instant decisions, but enable the understaffed supply chain team to keep up with an ever-expanding charter. These and other topics central to today’s supply chain leader were discussed at Connections 2017.
Today’s Supply Chain Provider
The kick-off session at Connections provided an overview of the state of the profession as well as the technology required to support an organization today and into the near future. Logility’s Allan Dow, Karin Bursa, and Mark Balte discussed the big forces redefining the supply chain-technology landscape such as big data and analytics, social media cloud/pervasive computing, and the need to address the talent gap. Allan asked the audience, by a show of hands, how many had openings in their departments, and over three quarters of the audience raised their hands. Interestingly, Allan also showed a quote from the head of global planning at a major international company who stated that he only expected planners to stay in the job for about two years! Hence, working with the staff on hand means using technologies and services that can make us more productive and a heck of a lot smarter.
Today, the supply chain professional is already a lot smarter than when the concept of the ‘supply chain professional’ and its function came into being in the mid-nineties. Then, folks were struggling just to be departmentally deep.1 Nowadays, each department has become more sophisticated in what they analyze and in the capabilities they possess, due to technology. Today’s supply chain professional is a lot more knowledgeable about the whole cross-functional process and understands the interrelationship and impact that events and plans have on each other. Thus, they need a more global view—visibility and scenario/impact analysis—as well as more interactive collaboration with peers and trading partners.
If we are to create a holistic picture of what is going on in real time as well as its impact on the future, we need systems that take us beyond spreadsheets. Yet, as Allan Dow pointed out, the user must also evolve in order to understand these approaches and leverage them, which will be hard for those who live in the ‘spreadsheet world’ to do.
The truth is that most events that do impact the supply chain are broader than rows and columns. Unstructured data coming from the web, social media, and conversations need to be absorbed into our view of our universe, then analyzed, understood, and acted upon.
Consumers in the 21st century are digitally connected. Retailers and manufacturers no longer depend on the confines of the traditional storefront to sell, nor use demographics to predict demand. Sales depend just as much on digital tools—triggers from social media, mobile devices, promotions, and surfing the web. All are part of the actual shopping experience.
Those triggers set the supply chain in motion and they are as much in the hands of the market (the customers and their social networks) and the random pop-ups as they are in cleverly crafted marketing and demand planning. Today’s consumers are more savvy, cross-shopping and making choices amongst retailers and brands. And the prices posted on your site or in the store may be challenged by dynamic pricing engines that serve up the best deal. (See Figure 1.)
The point of purchase has become merely the place at which the transaction is finalized. It may be the home or some other location where the whim attack for that item hit. If the desired product is not available or doesn’t match your competitor’s price (easily found with a simple web search), the whole supply chain loses—manufacturers, wholesalers, and retailers. And it may not be a loss of just that one transaction, but, potentially, the lifetime loyalty of the customer. We know intellectually this is our world, but we have not really adapted to our digital reality yet.
At its core, the need sounds deceptively simple: the customer wants, as Allan pointed out, “price certainty and availability.” However, integration, speed, and accuracy of data are all required to make that happen.
On the supply side, corporations are becoming more and more automated. A portfolio of software solutions needs to be integrated. IoT—sensors, RFID; barcoding; mobile devices and mobile workers are connected to the cloud to provide real-time data about production activities, location and condition of goods in motion, and so on.
These trends require, as Karin stated, an “outside-in vs. inside-out” view of the supply chain. It is not only an insightful view of customers, suppliers and competitors that is required, but the inside need for planning and responding. The problem has been that, previously, plans were created with little market insight and then not fully integrated into action. Thus, S&OP today needs to be an automated process connecting NPI, Demand Planning, Production, and Procurement.
Employees have also changed. Baby boomers are fading out of the working world and millennials who have grown up with smart technology will not want to work for firms that offer only desk jobs—staring at spreadsheets and dull screens.
Figure 1: New elements of the connected and digital supply chain. Source: Logility
Mark Balte provided a heady discussion on analytics. Our cognitive powers are being augmented by new and richer types of analytics.3
Moving beyond traditional trending (what happened and why), systems now provide a foundation for more predictive analytics (what will or could happen) and what I should do about it. This more predictive environment is enabled by artificial intelligence, machine learning (learning from past actions and results), and rich natural language processing.
In the past we might have used some type of optimization exercise to envision what we should do, but those exercises were applied to a limited set of questions and usually to plan an orchestrated event. Today, huge computing power combined with machine learning runs multiple scenarios in a continuous model alerting us to risks, ferreting out poor-decision choices, and presenting us with pre-vetted alternatives.
Who—or What—Is Doing the Analysis?
One of the really interesting discussions was about the transformation from what Logility calls Traditional to Cognitive processing. Allan showed an interesting chart comparing the traditional processing of today with the cognitive/digital processing of tomorrow. Firstly, consider that planners are just not sitting in front of screens monitoring all the events that might impact their supply chain, given that they do have a life outside of work. However, the supply chain is a 24/7 occurrence. Thus, we have to move beyond traditional, manual data collection to that connected enterprise with end-to-end synchronization as a core ‘platform.’ So data collection, transformation and yes, analysis, will go on all the time.
At the higher level, this means that the system will be in a continuous state of learning, interacting with trends, users’ decisions, and their results; then over time, the system will be able to identify the best conditions for the best outcomes or identify risks and deficiencies that need to be addressed. Logility calls this Cognitive Planning—where the system ultimately will be self-learning and a strong advisor of the best course of action.
One day, for many of the actions—or at least for certain things—we will let the system decide. It’s not like we don’t already do that to a great degree with order promising and build-to-order scheduling of many items. But for the bigger decisions, like inventory strategy, we tend to let humans gather and analyze data and decide. Computers, however, can process an extraordinary amount of data and past learning, and scenario test perhaps thousands of options before we have made our morning coffee (what to say drunk it). As we learn to use and leverage these new technologies, building up a library of really good—often better—predictions, we will come to trust our ‘digital partner.’
Figure 2: Moving to continuous cognitive enablers: from today to tomorrow. Source: Logility
Getting to this new cognitive environment will take a partnership between users and their systems. As Allan said earlier, getting beyond those spreadsheets. All this is within the realm of the possible, “doable,” as Dr. Oz says, if we move on the path of adoption.
End-to-End Connected Supply Chains
So far so…. well, maybe not so good. What is basic in all this is the integration layer. Today’s companies can no longer tolerate the custom-coded APIs between their various systems. They need an adaptable method of integration that not only provides real-time data, but can bend and flex—that is agile—as primary systems change.4 So Logility acquired a company last year called, appropriately, AdapChain, and its AdapLink product. This not only helps accelerate the initial go-live, but provides an organic, adaptable integration layer that brings synthesized data from the appropriate systems.
Part of today’s end-to-end is that outside-in IoT and social elements play a vital factor linking things, data, and people. This may not sound sexy, but we all know that integration is one of the trials—essential frustrations and dissatisfying components of the supply chain portfolio. So any progress here is a truly welcome development.
Conclusions: The Journey Forward
All this is exciting, but the need for the traditional foundations does not go away. In fact, they are the gateway to the new generation. It was inspiring at Connections to see end users making progress in their journey forward. For the journey forward to be successful, it is essential to not tread that path alone, but in the company of other supply chain professionals: both the user community and their technology partners.
At a conference, many industries are represented and a user in CPG, for example, can learn from a chemical company, or a manufacturer can learn from a retailer, what to say of learning from colleagues within one’s own sector. This is particularly useful in today’s Omnichannel and, often, volatile market. For example, we heard from Verizon that they not only consolidated their many businesses, but embraced supply chain to great benefit. And look at the resurrection of the Hostess Twinkie. Even non-junk food advocates can learn a lesson from their remarkable journey and achievements. And L’Oréal’s presentation—a ubiquitous brand’s journey to embrace Omnichannel—where a manufacturer could hear about forecasting the wholesale, retail, and ecommerce demand streams.