Supply Chain Transformation is Technologically Driven

Stephen DeAngelis

February 08, 2016

“Every supply chain organization is slightly different,” writes Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights.[1] To that truism, I would add another: Every supply chain is always changing. The combination of uniqueness and constant change means that supply chain professionals must, above all else, be adaptable. Technology is the greatest driver of supply chain change. For thousands of years supply chains have involved the straight forward movement of goods using manpower, animal power, and wind power (in the form of sailing ships). The invention of steam engines ushered in the Industrial Age and changed manufacturing forever. Steam engines also changed logistics as railroads became major supply chain players. Electricity eventually replaced steam as biggest driver of change and trucks and airplanes quickly joined trains as movers of goods. The information age ushered in even more changes as the retailing landscape felt the upheaval of e-commerce. There were growing pains associated with each of these changes and there is more pain to come because change is inevitable. Change is always hard. In his famous book The Prince, Niccolo Machiavelli discussed how difficult it is to change an existing organization and why one must expect to put his career on the line to effect change. He wrote:

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

Cecere, however, wonders when and where the next period of changes (what she calls the “third act”) is going to take place. “One of the barriers to greater progress in driving supply chain excellence,” she writes, “is the current state of user satisfaction with current technologies. The gaps are large.” For the most part, she writes, “Companies are more satisfied with transactional (think Enterprise Resource Planning (ERP)) versus planning systems. We are also more advanced on transportation and warehouse planning than supply chain planning.” As a result, Cecere believes the next big advance in supply technology will focus on planning and execution and the numbers support that assertion. “In 2016,” she reports, “45% of companies plan to increase technology spending. The focus is on improving planning and execution.” She continues:

“In the market there is a clearer understanding that the software planning functionality by Oracle and SAP does not meet today’s business requirements. Oracle and SAP have not been able to bring enough domain expertise to solution development to stay current with the market requirements. As a result, more and more companies are starting to experiment with new forms of SaaS technologies. I believe we are starting to see the beginning of the The Third Act of supply chain planning technologies. The impact is unclear. There are several options:

  • Will it improve the market for established vendors like Arkieva, Demand Solutions, JDA, John Galt, Logility, OM Partners, Ortec and Quintiq moving to hosted on-demand solutions?
  • Or favor the adoption of SaaS solutions from Logfire, Kinaxis, ModelN, and Steelwedge? (Especially with the current rewrite of the code for greater scalability.)
  • Open the door for new solution approaches from firms like Anaplan, Enterra Solutions, o9, or Terra Technology?
  • Begin a new chapter of supply chain analytics with FusionOps, Halo, Qlik, Trufa, and SAP HANA?
  • Will non-relational solutions start to redefine digital supply chain initiatives? Is it time for Cloudera, Savi, and SAS to redefine what is possible?
  • Or perhaps drive a new market for interoperability between and amongst B2B Operating Networks like GT Nexus, E2open, and Elemica?

The answer is unknown; but what is for sure, the market is going to be far more interesting in 2016.”

In spite of the many questions concerning technology-driven solutions raised by Cecere, technology is going to continue to drive supply chain change. Rex Beck, an Associate Professor of Logistics Management at Norco College, explains, “As its cost declines, supply chain technology continues to improve. Technology implementation depends upon it being economically feasible compared to other solutions, such as deploying equipment or increasing labor. Technology will likely be increasingly used in place of both solutions.”[2] As Machiavelli noted above, just because new technologies can make operations more effective and efficient doesn’t mean that they will be welcomed. People must always be factored into the equation. Beck observes:

“Many [people envision] a future driven almost exclusively by technology, but nothing could be further from the truth. The human factor — strong leadership — will always play a critical role in supply chain and logistics. Technology will not improve performance in companies that lack organizational focus. ‘A computer lets you make more mistakes faster than any invention in human history, with the possible exceptions of handguns and tequila,’ wrote Mitch Ratcliffe. He may have overstated the point, but without mission-committed leadership, supply chain technology is just a solution in search of a problem.”

I believe Beck and Cecere are making the same point. Technology is just a solution in search of problem and, since every supply chain is different, those solutions are going to be applied to different problems in different supply chains. Another way of putting it is: The best solutions will come from technologies demonstrating the most adaptability. One of the most adaptable new technologies is cognitive computing. Since I’m the President and CEO of a cognitive computing company, one would expect me to push that technology. Dr. Judith Lamont, a research analyst and a KMWorld Senior Writer, agrees with my position. Following an interview she conducted with me last year, she wrote, “Part of the promise of cognitive computing is that it can address issues that span the globe or focus on a single individual.”[3] She continued:

“The Enterprise Cognitive System (ECS) from Enterra Solutions can manage risk in global supply chains, determine how to optimize trade promotions or identify a flavor that matches a consumer’s personal tastes, among other applications. ‘A tremendous amount of data is being collected today by organizations, but the challenge is that there are not enough data scientists to analyze it quickly,’ says Stephen DeAngelis, CEO of Enterra. ‘We saw a requirement for systems that could not only ingest a lot of data, but also reason, calculate and generate actionable insights at machine speed in order to take actions within decision cycles.’

“‘Cognitive computing is the solution to big data,’ says Venkat Rajan, principal analyst at Frost & Sullivan. ‘Companies are collecting a lot of information and are having trouble processing it, but if there is a cognitive layer you can more accurately detect an issue.’ … The big advance that cognitive computing has over early artificial intelligence (AI) systems, aside from vastly greater computing power, is resiliency. ‘Expert systems of the past lacked flexibility and could not take into account the exceptions to the rule — they were brittle,’ says DeAngelis. ‘However, there will always be exceptions, and since cognitive computing functions on a probabilistic basis rather than an absolute basis, it can reason without having to break the rule.'”

Of course, supply chain professionals will still require convincing that new technologies are going to make their jobs easier and/or more effective. A business case needs to be made for any new technology. I’m convinced, however, that cognitive computing will prove useful throughout an organization because business analysts are insisting that every business must transform into a digital enterprise — and the supply chain is a good place to start.

Footnotes
[1] Lora Cecere, “2016: The Start of the Third Act?Supply Chain Shaman, 11 January 2016.
[2] Rex Beck, “The Human Factor: What is Technology Without Leadership?Inbound Logistics, January 2015.
[3] Judith Lamont, “Cognitive Computing: Real-world applications for an emerging technology,” KMWorld, 1 September 2015.