Supply Chain’s Must Adapt Before Global Conditions Change

Stephen DeAngelis

November 20, 2019

VUCA is a term first used in the military that started creeping into supply chain discussions several years ago. The acronym stands for Volatility, Uncertainty, Complexity, and Ambiguity and it certainly describes the world in which we live. Back in 2011, supply chain analyst Trevor Miles (@milesahead) noted there is a similar sounding word supply chain managers should associate with VUCA. He explains, “I almost feel that we should be shouting ‘Vuka’ which in Xhosa (one of the South Africa languages) means ‘wake up.’ Wake up to the new reality that VUCA is a new norm.”[1] More recently, pundits have started to insist supply chains can’t sit back waiting to adapt as the world changes, they must get in front of such changes. Steve Martin, a Vice President at Ryder, notes, “Sophisticated technology is just one of the many disruptive forces that are threatening to change the rules of the game for the supply chain and logistics industry over the next decade.”[2] He adds, “Whether it’s the consumer packaged goods, retail, technology, or automotive industry, executives are being pushed to re-evaluate their operations due to these challenges. Industry analysts believe it’s the proactive companies that adapt in order to beat these disruptions that will come out ahead in the end.” Glenn Steinberg (@GlennSteinberg), global and Americas supply chain leader at EY, asks, “Do you want your company to compete effectively in the rapidly evolving future? Then you better have a supply chain that’s already there.”[3] That’s a tall order considering how rapidly the world is changing and how volatile the global economy has become.

Pro-active supply chain transformation

What does the future supply chain look like? Steinberg notes, “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. And now, 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.” We are a long way from achieving “a man and a dog” supply chain; however, the technologies listed by Steinberg are already playing essential supply chain roles. Martin asserts organizations have a “desire for greater transparency and data analytics that drive business insights.” Cognitive technologies, like the Enterra Enterprise Cognitive System™ (AILA®) — a system that can Sense, Think, Act and Learn®, fit the bill. Martin notes, “The ideal system will capture data through new and flexible technologies and make useful data rapidly available. … It provides a clear view of inventory and supply chain activity, and ultimately, it helps create responsive supply chains.”

Steinberg suggests a pro-active supply chain demonstrates “five criteria for gauging whether it is (or will be) the future-ready supply chain you need.” Those criteria are:

1. It’s Agile. According to Steinberg, “Agility starts by aligning business strategy and supply chain strategy. The supply chain must be able to support the agility requirements of your business, with adaptation for everything from evolving customer needs to changing constraints on the supply side. It’s all about immediacy, responsiveness and hyper-accurate anticipation.”

2. It’s Cognitive. Steinberg writes, “The intelligence layer for supply chains is a mosaic of advanced technologies. But it requires far more than adding machine learning, blockchain or additive manufacturing (3D printing). It’s about orchestrating emerging technologies and members of your ecosystem to move in lockstep. And then putting it all under the watchful eye of an end-to-end ‘control tower’ that encompasses everything from planning and supply through logistics and customer service — to provide stellar exception-based or event-based management.”

3. It’s Autonomous. Steinberg insists some parts of the supply chain need to be able to respond on their own as conditions dictate. He explains, “[When a disruption occurs,] with an autonomous supply chain, you watch it do what needs to be done — instantaneously. It acts on real-time data. It automatically puts orders through to your hierarchy of backup suppliers and to dispatch, and to your network of warehouses. There is not much of a blip in downtime in your operations. … A new tariff is announced? Your supply chain adjusts for tax optimization.”

4. It’s Resilient. “Resilience is an over-used term,” Steinberg writes, “but that doesn’t make it any less essential. The fully reinvented supply chain leverages risk intelligence and related mission-critical technologies to contain and avoid most unexpected or fast-breaking disruptions, whether natural or man-made.”

5. It’s Flexible. In a VUCA world, inflexible supply chains break. Steinberg writes, “The global supply chain … must accommodate such disparate factors as labor-law regulations, cultural norms, virtual teaming and matrixed environments. … You need a highly (and differently) trained, flexible, data-driven workforce, from senior executives to the hourly associates.”

Michael Feindt (@M_Feindt), a Professor at the Karlsruhe Institute of Technology and Founder & Chief Scientific Advisor of Blue Yonder, calls the kind of supply chain described by Steinberg a “self-learning supply chain.” According to Feindt, “The self-learning supply chain marks the next major frontier of supply chain innovation. It’s a futuristic vision of a world in which supply chain systems, infused with AI and machine learning, can analyze existing strategies and data to learn what factors lead to failures. Because of recent advancements in technology, the autonomous supply chain is no longer ‘blue-sky thinking.’”[4] Feindt insists a self-learning supply chain must: Read signals and manage billions of pieces of information; look into the future; and overcome human nature. He believes, “Rules-based approaches are too brittle to provide solid forecasts. In fact, these systems may do more harm than good.” He explains, “To help companies draw the right conclusions from the data they gather, businesses need to apply ML and AI technology designed to grasp the oncoming impacts of what’s happening everywhere in the moment and predict how demand and supply will look in the future. That means having algorithms that can evolve over time.” He adds, “With ML and AI, there is now the ability to blend external and internal data to predict demand and areas for growth.”

Concluding thoughts

Steinberg concludes, “A supply chain built for the Transformative Age provides an immediate and compounding edge, enabling you to continually put distance between yourself and your competition.” Feindt adds, “As humans, our instinct is to fix things ourselves, especially if it’s an area we have been tasked with overseeing. The autonomous supply chain requires us to discard pride, ego and personal bias and trust the technology. As trust in the system’s recommendations increases, a greater and greater portion of decisions can be made automatically by the system, without human intervention. This will allow the professionals to focus their time and effort on problems that only they can solve.” Note that Feindt, unlike Steinberg, doesn’t foresee an absence of humans in the autonomous supply chain. He believes decisions that can be made by cognitive systems should be made by them and that humans, assisted by cognitive computing, need to make decisions when ambiguity or other factors require the human touch. I believe Feindt’s vision is closer to the mark.

Footnotes
[1] Trevor Miles, “VUCA, a useful acronym for today’s supply chain,” Kinaxis Blog, 9 June 2011.
[2] Steve Martin, “Transforming Supply Chain for the ‘Now Economy’,” CIO Review, 26 July 2017.
[3] Glenn Steinberg, “5 Ways to Tell If Your Supply Chain Is Fully Reinvented for the Transformative Age,” Manufacturing Business Technology, 13 May 2019.
[4] Tom Taulli, “3 Ways To Transform The Supply Chain With AI (Artificial Intelligence),” Forbes, 2 June 2019.