Supply Chain Predictions for 2018: Real-Time, Innovation, Cognitive, Blockchain, Industry-Academic Partnerships, and Taking a Stand!
I had an opportunity to work on a number of exciting projects this past year, and in the process, spent a lot of time talking about digital supply chains with a lot of really informed people.
1. Prediction: Real-Time LIVING Supply Chain Investments Will Separate the Winners from the Laggards. The most exciting development for me personally this year was the publication of my book The LIVING Supply Chain, co-authored with Tom Linton, Chief Supply Chain Officer of FLEX. The importance of velocity, speed of decision-making, and the return on working capital generated was recently emphasized in a financial analysis by UBS who explained the financial impact of having faster more responsive supply chains and impact on share price.
“…Flex’s philosophy emphasizes speed whereas EMS competitors emphasize control or resiliency. [Linton] co-authored The Living Supply Chain, which argues that “Speeding up the supply chain is at the root of everything that is good: improved revenue, reduced working capital, higher profitability, and less obsolete inventory. Conversely, slowing down the supply chain is at the root cause of everything that is bad: working capital write-offs, reduced profitability, and slowing revenues.” A control approach creates friction. With 780,000 parts being handled each day, Flex can’t afford to slowdown decision making. Amazon also optimizes for speed. Rather than have one mega-ERP system, Flex is willing to stitch together 26 ERP systems that feed into Pulse. It argues that it would rather the software works for Flex than Flex works for the software. Flex is helping its own engineers design for profit by recommending the best components and suppliers to use in their product designs, taking out cost and increasing speed. The goal is to move upstream toward demand creation with customers rather than downstream to product fulfillment. Upstream increases leverage and profitability.”
Real-time data sharing will become more important then ever in driving quality improvements, but will hinge largely on the ability of organizations to build effective data governance strategies to control how data is managed and collected. This will become especially important in healthcare supply chains, where data governance is abysmal for the most part. Real-Time Data will also be key in managing risk and disruption, given what was a particularly horrific hurricane season this year.
2. Prediction: Small is Beautiful: Innovation will Increasingly Be Found in Small Companies. Just like the economist Schumacher predicted years ago in his incredible book, the biggest shifts will come from the smallest companies. Supplier driven innovation was also a major theme at the Procurement Leaders meeting in Miami this spring. Small companies are continuing to grow in multiple areas, and creating innovative solutions using the massive amounts of data floating around in the ecosystem. These small companies are focusing on specific business issues, and attacking them using small teams of analytical experts, and piloting and re-piloting new projects with clients. I also wrote about this in the context of “heedful interrelating” between people working in the same supply chain. This is how innovation ultimately occurs. In a podcast discussion with Kathryn Kelly, who leads the Ohio State University Manufacturing Network, we talked about some of the big impacts that the LIVING Supply Chain will have on small business. On this same trip, we discussed how small companies need to find the right supply chain partners and for companies to be courageous in exploring new technologies. (It is no coincidence that Flex has a sketch to scale center in their Innovation Center that works with small companies to develop their new products with them!)
3. Prediction: People Will Begin to Experiment and Learn to Interact with Cognitive Technologies. Other blogs on the LIVING (Live, Interactive, Velocity, Intelligent, Networked, Good) Supply Chain also note some of the major shifts that will be required. I also wrote a white paper and webinar that documented the journey that IBM took in developing the Transparent Supply Chain, and the catalysts that drove them to move in this direction. The webinar was with Jeannette Barlow from IBM and Simon Ellis from IDC, and the focus was on the impact of AI on supply chain decision-making, and I spoke about a recent case study on IBM’s application of Watson to their own supply chain. One of the key lessons I took away from this experience was the importance of training machines, and understanding not only the potential of cognitive learning, but also the limitations of computers in completing tasks that are performed by humans (which I wrote about in another blog earlier this year on Big Blue beating Gary Kasparov in chess). People, particularly those with expertise and specialized skills, will need to learn how to train machines and interact with them to be truly effective in the future. Asking the right question will increasingly be an important component of successful human-machine interaction.
4. Prediction: Blockchain, Smart Contracts, Counterfeiting and Legal Involvement Will Continue to Escalate. We have certainly seen a lot of excitement and activity going on around blockchain this year. As my friend at Spend Matters, Pierre Mitchell, joked to me this week, it’s probably not a case of “my business will fail unless I have a distributed ledger”, or that those that fall behind on blockchain won’t be able to do business. However, the link between blockchain and smart contracting is certainly an important emerging area. Smart contracts are probably the best area for AI applications, as it requires translation, understanding patterns of dialogue, dialects, and legalese – to unpack the meaning of meaning. There were a number of predictions I laid out for blockchain in the future, including its potential impact on the procure to pay process and financial transactions, the potential for use in preventing counterfeiting, and other applications. I had an opportunity to sit through some wonderful presentations at CSCMP in Atlanta this year. One of the standout discussions was DHL’s approach to customizing the supply chain using digital technology, as well as a discussion by a group of 3PL’s and lawyers on the legal concerns that exist around data transparency in an increasingly litigious world.
5. Prediction: People Will Increasingly Stand Up and Do the Right Thing. What a difference a year makes! This time last year I was predicting doom and gloom around the emergence of the new Trump presidency. In fact, we had an entire Spring meeting dedicated to the topic of “Mapping the Road Ahead in Uncertain Times.” The impact of Trump’s social media activities have certainly impacted people’s decision-making and those of markets, as I noted in a previous post. The two standout items from this administration are the the pending tax plan, and pulling out of the most important trade agreements (the TPP) that could really hurt us in the future growth of trade. One of the highlights of this fall was going to the Supply Chain 50 meeting in New York, and sitting in on some great speeches by Larry Bossidy, Tom Linton, and Charles Duhigg. One of the big takeaways for me from these sessions was the critical nature of human interaction, discussion, and debate that drives the right decision-making. The importance of diversity as a cornerstone for thinking differently about the supply chain was spoken in a very eloquent way by Merck CEO Ken Fraser, and in this speech he talked about the importance of acting courageous when we see something that is fundamentally wrong happening. (Fraser took the lead in resigning from Trump’s Manufacturing Council, which was followed by a wave of resignations by other CEO’s). The idea of collaboration is one that was discussed very well in a session by New York Times author Charles Duhigg, who talked about how structuring teams to get the best out of people will become more important than ever.
6. Prediction: Collaboration Between Industry and Academia in Supply Chain Thinking Will Become More Important Than Ever. Within the SCRC, we held a number of fantastic events this past year, including hosting two meetings that focused on the themes of “Navigating the Digital Supply Chain“, and “Mapping the Road Ahead in Uncertain Times“. At both of these events, there were great presentations by industrial leaders, including DHL’s presentation on the analytics environment, as well as a great presentation by Advanced Auto Parts on their digital supply chain strategy. We also held a series of excellent Executive Roundtables, including the Role of Supply Chains in Combating Counterfeiting last May, as well as roundtable on the need for Sales and Procurement to work more collaboratively and achieve mutually beneficial outcomes. This will require re-designing the processes used to manage these sales-procurement relationships. We also held an Executive Workshop on Excess and Obsolete Inventory, and developed a white paper that provides insights and sets the stage for the next workshop in this area. This type of industry-academic engagement is getting NC State a lot of attention, as we celebrated our 25th anniversary of the Poole College of Management, and are getting called out for output of our research that is making a big impact on the business world. After visiting with a number of my supply chain colleagues on different visits this year, and benchmarking their programs at the top SCM schools such as Michigan State, Penn State, Ohio State, MIT, and Arizona State, I have to admit that NC State is truly leading the Pack when it comes to a “Think and Do” mentality in working with our industry partners. Our students are working on “real” projects with our partner companies, tackling such challenges as deployment of block chains, managing risk in supplier contracts, creating predictive analytics in the food supply chain, developing cost models for heavy equipment, and benchmarking supply chain salary roles, and many other relevant projects. Students are walking away with skills that allow them to hit the ground running when they graduate. The impact of these projects are seen in their deployment into the companies we work with, and are not just case studies, but innovative analytical and managerial insights. It’s why we are ranked as a top 25 supply chain program by SCM World and Gartner. And we continue to roll into 2018 with a new batch of 28 projects this coming semester!