It Is Not So Easy....

If only there was an 'easy button'....

...a quick and fool proof way for supply chain executives to connect trading partners and create B2B networks. The networks are longer and more complicated fraught with more risk and opportunity. Unfortunately, there is not an easy answer. 

As supply chain professionals, we are guilty. We draw the concepts of value networks on white boards and waft eloquently about the business opportunity. In our presentations, we teach that we are managing networks not chains. Yet, we build and automate chains. We pretend that it is easy, but it is not. We've been playing this charade for a decade. 

It is time to face reality. It is not easy and what we are doing today is not moving us forward. We have automated the enterprise--the four walls of a company--but, if we are honest with ourselves, we will admit that we have made very little progress connecting to trading partners. 

As an Industry Analyst, I study supply chain processes. I have the luxury to analyze primary research, and think. As I try to solve this puzzle, I find that many of the assumptions that I made at the beginning of the decade were naive. <Yes, my predictions made as a Gartner analyst with a .8 probability did not hold true!>

What have I learned?

-ERP is the Transactional Backbone for the Enterprise. It Is not the Integration Layer for the Extended Supply Chain.

As shown below in Figure 1, the market is slowly learning this also. Extended enterprise connectivity requires many-to-many data models with on-boarding and maintenance mechanisms. Today, with the lower cost of computer memory, the Supply Chain Operating Network technologies are evolving to manage these flows.

Figure 1. Confidence of Supply Chain Leaders in the ERP provider for Supply Chain Visibility

-Outside-in. Use of Independent Demand. There Needs to be a Focus on Flows.

With the increase in demand variability and the risk issues with supplier viability. The use of independent demand in supply chain planning increases in importance. In Figure 2, the size of the bubble represents the relative business pain.

Figure 2. Supply Chain Risk Drivers: The Contrast of 2010 to 2020

The focus on independent demand (the signal of what is sold in the channel) through the use of demand visibility and channel data sources dramatically improves the signal in the extended supply chain. As shown in Figure 3, the demand signal becomes more distorted through the nodes of the supply chain. This is based on reorder logic and truck load order points. Today, the supply chain is longer, and the demand latency is 9-15X greater than it was a decade ago. However, only 3% of companies actively use channel data. The reason? It is hard. Getting the data requires close alignment of sales and operations, and the use of the data requires rethinking supply chain processes and advanced analytics. For most of my clients, this shift requires a re-implementation of demand planning and S&OP.

Figure 3. The Bullwhip Effect: The Demand Signal is Distorted at Each Step

While I like and embrace the principles of Demand-Driven MRP (DDMRP), the concepts have not been baked into enterprise class software. The traditional approaches of DRP and MRP perpetuate the bullwhip effect, but the software vendors are slow to adopt the demand-driven concepts. Solutions focused on flow with advanced analytics don't make it through the development life cycle.

-Automation of Policy. Portals Don't Work.  Portals are static. As data changes on the portal--update of policy--there is no system of record. As a result, portals are not an effective way to automate the extended supply chain. 

The building of multi-tier processes requires a rethinking of data policies. Success happens when there is synchronization and harmonization of data. It is much more complex than data integration requiring ownership of the planning master data (lead-times, rates, item characteristics, and time schedules). For me the use of cognitive computing to manage master data in the extended supply chain is one of the most exciting use cases of big data analytics. 

-We are Comfortable Touching Data Multiple Times. The supply chain team holds onto Excel spreadsheets like Linus clings to his blanket. The current state of B2B is shown in Figure 4. How sad is the story in Figure 4? For me, it is very sad.

After two decades of investment in supply chain technologies, the only technique that companies feel good about is the manual manipulation of data through phone, email, or fax. After the spending of 1.7% of revenue on technology, we have not automated the value chain. Why? There are many reasons; but, unfortunately, teams like to touch data.

Figure 4. Current State of B2B in the Extended Supply Chain

So What Can Work?

While the enterprise supply chain technology market is mature and well defined. This is not the case for B2B networking. It is evolving. At this point, early adopters are testing alternative approaches. Unfortunately, the supply chain has few early adopters. Large companies in North America have become more risk adverse, and the majority of the IT spending in the supply chain is controlled by ERP spending. As a result, progress will be slow. 

Figure 5. Technology Adoption

As I write this, I am on a flight to South Africa. I am in a middle seat on a full plane. The sun is rising. I am tired. The WiFi on the plane enables connectivity to write this blog post. Ironically, today, we have more connectivity in our personal lives than in our supply chains. I can post a blog in the middle of the Atlantic Ocean, but the average supply chain professional cannot easily see inventory levels for their first tier suppliers.

Supply chain leaders inherently know that the answer to driving the next decade of improvements in supply chain requires the building of effective B2B networks. It is important to meet Corporate Social Responsibility(CSR) goals and reducing waste while improving agility in the global supply chain. They are just not clear how to proceed. The late adopter is waiting for the early adopters to define the path forward. My goal is to facilitate that conversation. 

The explosion of technologies offers many possibilities. I am excited by the combination of blockchain, canonical models in combination with cognitive learning, and nonrelational open source database architectures. To understand more, check out my latest post. 

I am interested in your thoughts. What do you think is the answer? And, if you have an easy button for B2B connectivity, please give me a call.

About Lora:

Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora has written the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. She also actively blogs on her Supply Chain Insights website, at the Supply Chain Shaman blog, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research, knitting and quilting for her new granddaughter, and doing tendu(s) and Dégagé(s) at the ballet barre. Lora thinks that we are never too old to learn or to push for excellence.