What is a Smarter Supply Chain?
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.
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 the 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.
In this case, it’s easier to provide a picture. 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.
There is a lot there. What are the key takeaways? 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 had actually done some thinking on “the intelligent supply chain” a number of years ago, and went back for this column to look at that work. Back then, I had several similar thoughts to IBM on what made a supply chain intelligent, including advanced analytics and web-based visibility. I especially focused on achieving near-real time visibility to actual customer demand, as it seemed clear that a supply chain reacting to that would be a whole lot smarter than one reacting to a guestimate of what that demand was.
I also referenced the need for tighter integration of supply chain planning and execution, driven by the notion that what might have seemed smart in planning often gets dumbed down quite a bit through the supply chain execution process. In our more recent work on this topic, 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.
Also in my definition of an intelligent supply chain was the notion of a common messaging and alert system backbone. 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. More on that soon.
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 interwined, but yet I think there are some distinct “smart” components of each.
So that is my new challenge – what will be the future smart supply chain across people, process and technology.
I am working on it. More soon. Would love your thoughts.
What do you think makes an intelligent or smart supply chain? Does it makes sense to consider it across people, process and technology? How do you like the instrumented, interconnected, and intelligent framework? Let us know your thoughts at the Feedback button below.
by Dan Gilmore