Lifting the Fog of Supply Chain Transformation

Stephen DeAngelis

October 01, 2019

For a number of years, business analysts have been preaching the gospel of transformation in supply chain operations. Glenn Steinberg (@GlennSteinberg), global and Americas supply chain leader at EY, observes, “You’ve been hearing about ‘the supply chain of the future’ for years. How it will provide end-to-end visibility. How it will self-manage customer inventories. How it will need only two employees, a man, and a dog: the man to feed the dog; the dog to prevent the man from touching anything.”[1] Steinberg, of course, is being a bit facetious. He adds, “In the Transformative Age, such a state-of-the-future supply chain has become vitally important. Disruptive technologies such as machine learning, the Internet of Things and blockchain are leading to super-fluid markets: fast moving, fast changing and frictionless. To thrive in this environment, companies need supply chains that operate as holistic ecosystems.” Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, agrees transformation is necessary. Nevertheless, she believes vendors often use vague terms to try and sell outdated solutions dressed up in the language of new technologies. She writes, “Woolly descriptions. Fuzzy definitions. Over-arching superlatives. … If I struggle, I am sure that others face the same challenges. Together, we walk in a fog. Let’s reflect. Supply chain innovation is slowly simmering in the face of radical disruption. The supply chain visionary wants novel and new. I find technology providers pitching old — often wrapped in the cloak of ‘digital transformation.’ As a result, supply chain leaders continuously ask me to unravel market confusion.”[2] You might say the future is obscured by the fog of supply chain transformation.

The fog of supply chain transformation

Military people are familiar with the term “fog of war.” The term is often attributed to the Prussian military strategist, Carl von Clausewitz, who wrote, “War is the realm of uncertainty; three quarters of the factors on which action in war is based are wrapped in a fog of greater or lesser uncertainty. A sensitive and discriminating judgment is called for; a skilled intelligence to scent out the truth.” In many ways, supply chains are also found in the realm of uncertainty. Laurent Chevreux, Michael Hu, and Suketu Gandhi, partners in the Operations & Performance Transformation Practice of A.T. Kearney, explain, “Today’s most digitally advanced supply chains still try to predict what will happen, then optimize performance against plan. The problem is, the world is not predictable.”[3] Just like military strategists, supply chain professionals must deal with the fog of uncertainty by gaining as much situational awareness as possible. That’s where the technologies listed by Steinberg (i.e., machine learning, the Internet of Things and blockchain) come into play.

Cecere asserts the fog in which digital transformation must take place is dense because a clear and universal definition of digital transformation doesn’t exist. One of the better definitions, she claims, comes from Gartner’s Michael Burkett, “[Digital transformation results in] an intelligent supply chain that makes decisions as it interacts across an ecosystem of digitally connected partners.” Her own definition is, “Digital transformation is the redefinition of the atoms and electrons of the supply chain to drive improved outcomes.” She rhetorically asks, “Is this right?” Her answer, “Nope, my definition is one of many. The key point is to get clear on a definition for you.” Once you understand what you want and need from a digital transformation process, you begin to lift the fog of supply chain transformation.

Lifting the fog

Lifting the fog of supply chain transformation is not easy and involves many different activities. I want to focus on one such activity: analytics. In doing so, I want to stress that it is but one of many ways new technologies are helping transform the supply chain arena. Thomas H. Davenport (@tdav), a distinguished professor at Babson College, and Zahir Balaporia (@ZBalaporia), a Principal Solutions Architect at FICO, note, “Businesses across many industries spend millions of dollars employing advanced analytics to manage and improve their supply chains. Businesses look to analytics to help with sourcing raw materials more efficiently, improving manufacturing productivity, optimizing inventory, minimizing distribution cost, and other related objectives.”[4] They believe analytics are so important in lifting the fog of supply chain transformation they use the term “analytics supply chain” rather than “supply chain analytics.” They explain, “Moving the word ‘analytics’ forward in the phrase ‘supply chain analytics’ may seem trivial. But a small shift in the location of a word can make a big difference on where you focus your attention.” Cecere stresses the importance of advanced analytics embedded in cognitive technologies. She writes, “Cognitive computing capabilities from Aera, Enterra Solutions, Gains Systems, and Noodle AI help with improved plans.” The Enterra Solutions® capability to which Cecere refers is the Enterra Enterprise Cognitive System™ (Aila®) a system that can Sense, Think, Act, and Learn®.

Davenport and Balaporia ask, “How do you know if you have an analytics supply chain problem?” To help answer that question, they provide a simple initial diagnostic checklist:

  • If your ability to deploy advanced analytics is stifled because you need IT, data, and/or other scarce technical resources to respond to changes in your business environment, then you probably have an analytics supply chain problem.
  • If the time it takes to modify, calibrate or maintain advanced analytics systems is cutting deeper and deeper into your time to develop and deploy the next set of models, then you have an issue with the back end of the analytics supply chain.
  • And if you work in advanced analytics and have been preaching about optimizing everyone’s processes but your own, then it is time to focus on your analytics supply chain.

Getting analytics right is important in the corporate decision-making process. Davenport and Balaporia conclude, “An analytics-driven decision is the finished product in the analytics supply chain.” Bain analysts, Michael C. Mankins and Lori Sherer (), assert if you can improve a company’s decision making you can dramatically improve its bottom line. They explain, “The best way to understand any company’s operations is to view them as a series of decisions.”[5] They add, “We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

Concluding thoughts

Despite the desperate search for clarity, companies need to understand the fog of supply chain transformation can never be fully lifted. Chevreux, Hu, and Gandhi assert, “A truth most companies have yet to fully contend with [is] the world is not predictable. In fact, chaos is normal.” Nevertheless, advanced analytics can help companies deal with increasingly complex supply chains. Cecere recommends a cautious approach. “Focus on solving use cases,” she recommends. “Drive test and learn programs to innovate with new players to drive new answers for tough problems.” The fog of supply chain transformation can be made less dense through the use of advanced analytics and other advanced technologies. While trying to find your way, advanced analytics can help ensure you don’t get lost in the fog.

Footnotes
[1] Glenn Steinberg, “5 Ways to Tell If Your Supply Chain Is Fully Reinvented for the Transformative Age,” Manufacturing.net, 13 May 2019.
[2] Lora Cecere, “Our Walk In The Fog,” Supply Chain Shaman, 11 December 2018.
[3] Laurent Chevreux, Michael Hu, and Suketu Gandhi, “Why Supply Chains Must Pivot,” MIT Sloan Management Review, 19 July 2019.
[4] Thomas Davenport and Zahir Balaporia, “The Analytics Supply Chain,” Tom Davenport Blog, 15 February 2019.
[5] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.