Smart Supply Chains
September 20, 2010
The information age ushered in a lot of new terms — many of them beginning with “e-” (e.g., e-commerce, e-books, etc.). Another modifier often bandied about these days is “smart” (e.g., smart grids and smart supply chains). Dan Gilmore, editor-in-chief of Supply Chain Digest, asks the question “What is a Smart Supply Chain” [26 August 2010] He writes:
“If you’ve paid much attention lately, the topic of ‘smart supply chains’ is currently in vogue. But what is a smart supply chain, exactly? And are you trying to build one at your company? The idea of smart or intelligent supply chains has been around for some time – more on that in just a bit. However, part (but by no means all) of the recent reanimated discussion about smart supply chains has come from the efforts of IBM, which has made ‘smarter’ supply chains one of its key marketing messages.”
“In a report IBM released last year summarizing surveys and interviews with hundreds of senior supply chain executives (promoted in many venues since then, including SCDigest), IBM said that ‘To deal effectively with risk and meet your business objectives, we believe supply chains must become a lot smarter,’ and called on Chief Supply Chain Officers to start building to that new vision right now. In conversations with supply chain executives, technology providers, and consultants, I would say the idea of building ‘smarter’ supply chains is in fact gaining some traction.”
Based on the interest we have seen in Enterra’s Supply Chain Assurance Platform (ESCAPE™), I would agree with Gilmore that interest in smarter supply chains is growing. To learn more about ESCAPE, read my post entitled Retailer Chargebacks. Gilmore continues:
“How did the IBM report define a smart supply chain? IBM said there are three important components. The supply chain of the future needs to be:
- Instrumented: Supply chains will be supported by pervasive data collection networks that provide real-time visibility; pallets will ‘report if they wind up in the wrong place.’
- Interconnected: We will have system-to-system integration up and down the supply chain, not only to trading partners but to machines and inventory (shop floor to top floor).
- Intelligent: We will achieve better supply chain decision-making through advanced analytics and next generation optimization software.
“Now we could argue that we have a bit of overlap conceptually between a smart supply chain that has a sub-component of ‘intelligence,’ but nevertheless, let’s take a look in more detail about how IBM defines those three components of a smarter supply chain.”
Gilmore writes that “it’s easier to provide a picture” to explain IBM’s position and, therefore he provides a couple of graphics he drew from an IBM report (click on the images to enlarge them). He continues:
“The IBM report identifies key sub-elements of instrumentation, interconnectedness, and intelligence across different processes such as supply chain strategy development, supply chain planning, product lifecycle management, sourcing/procurement, logistics, etc.”
Gilmore is correct when writes, “There is a lot there.” Fortunately, he provides us with his supply chain expertise in helping determine the key takeaways?” He writes:
“For me, they are these:
- Instrumentation – As I noted in my own 10 predictions for supply chain 2015, we are rapidly moving to a scenario where we have real-time visibility to everything all the time. How companies will best leverage this level of information will become a key competitive vector.
- Interconnectedness – The technical barriers to integration have almost completely fallen away. With Service Oriented Architecture, the web and other technology advances, it is not only easier but much less expensive than it the past to integrate systems. But there is a still a cost, and the key questions start to revolve around ‘trust,’ both in the security of the data and whether the relationship will be long lasting enough to pay off the investment in connectivity.
- Intelligence – We are clearly seeing a renaissance of sorts for supply chain optimization tools, after their image was somewhat tarnished for failing to deliver up to expectations in the early to mid-part of this past decade. Supply chain complexity and lean-ness are key drivers of this trend, along with better working tools.
I totally agree with Gilmore on most of his points. Although there remain a number of challenges in implementing sensitive information sharing, the day is not far off when real-time information sharing among stakeholders becomes a reality. To learn more about service oriented architecture, read my post entitled Great Article on Service-Oriented Architecture. Gilmore continues:
“It is also now clear we need a lot faster feedback loops from execution back into planning processes; and it’s clear to me that in the end operational planning and execution will start to become just one smart, integrated process. … Clearly, we have come a long way in ‘event management,’ and the IBM notion of a pallet reporting itself as being in the wrong place is just one example of where event management systems are going. You could argue we have a ‘common’ alert backbone now – the email system, and smart phones. Do we need more intelligence across events, so that a given event can be considered in the ‘context’ of what else is going on? (For example, a parts delivery being late matters a lot more if it is going to shut down a production line than if it is not.) I would say Yes, we will need that, or at least some better framework for handling all the events being thrown at supply chain managers. Not completely sure how we get there.”
If you read my post about ESCAPE, you may get some idea of how alerts can help prevent issues from arising by informing decision-makers that a potential problem exists. Preventing problems is even more important than learning about them in real-time. Gilmore concludes:
“So, all told, I like the IBM vision, but it is a lot to get your arms around. I like it in part because it actually matches up pretty well with some thinking I had done on the subject (though in much less detail than the IBM report) several years previously. In the end, making supply chains ‘smarter’ is going to be an increasingly important element of making them ‘better’. And as I thought about what a smarter supply chain might really mean, it seemed to me that – while all this new technology may be critical – we need to include the people and process elements of it too. Clearly, the technology and process elements are fundamentally intertwined, but yet I think there are some distinct ‘smart’ components of each.”
At Enterra Solutions we are continuing to explore new tools that can be used to make supply chains smarter. Our solutions touch on all of the elements identified by IBM. They involve user-friendly information dashboards, seamless system connectivity, and artificial intelligence to help with the analytics and alert users to potential problems. As we develop new solutions, I’ll let you know more about them as they are implemented with our clients.