Supply Chain Innovation
A few years back when I quit my SAP consultants’ job stating to my boss that I came from and wish to go back to Supply Chain domain as there is a lot happening there, the response that I got was that listen to your heart but before you go let me know ONE supply chain innovation in the recent past which is not a function of technology. Leaving the bias to technology (as after all he was head of a SAP practice) it’s a profound question.
Innovation is a breakthrough in a system which is path breaking. It may or may not have similarities with the current way of doing things. e.g. In the past organizations had supply chains which were functionally oriented hence used to have a procurement function, a planning function, a production function, a warehousing function, a logistics function and so on. Each had their individual objectives to be met which may not be consistent with over all organizational objectives. The term used was “Local Maxima”. In later 80’s, I guess, organizations appreciated the concept of an end to end supply chain and local maxima gave way to “Global Optima”. Global Optima is path breaking hence an innovation.
We have seen organizations innovating on products and services. Organizations’ have spent enormous time in design innovation. Innovation seems to be at the heart of Business models and frameworks. But when it is Supply Chain organizations seem to lack. Most of the contemporary innovations which get elaborated and discussed in a supply chain innovation context seem to be a decade old the least. One still feels energized to reduce inventory, reduce operating expenses, to adopt a Kaizen program for continuous improvement, undertake a Six Sigma project or do a Business Process Reengineering for the supply chain. Advanced Supply chains seem to talk visibility, traceability, continuous replenishment, use of 3 PL or 4 PL and collaborations with supply chain partners etc. The advanced supply chains still have innovations which were discovered at-least a decade ago! And on top, these innovations all seem to be possible more due to advancement in technology rather than a supply chain effort for innovation.
The contemporary Supply Chain, which has been stated to be the central nervous system for organizations, is expected to have objectives of revenue enhancement, cost containment and sustainability. Organizations have focused so much on product design/services innovation that as compared to those initiatives the progress made of supply chain innovations is pretty less. And still we hear that – Competition is not between organizations, it’s between the supply chains of organizations. Most of the organizations are no more monopolistic. Most of them offer products or services which can’t even be differentiated. Or at least consumers may not be able to appreciate that. So aligning organizations with the interests of consumers would mean making the organization work along the consumers’ expectations. In simple terms it means – Avoid Commoditization. The goal is achievable through investments in Supply Chain innovation.
I believe that organizations will have to follow sets of principles which will form the base for a sustainable supply chain innovation. e.g. can I have my manufacturing done on the ship which is moving from China to USA, and gets required raw material at multiple ports on its way? This virtual factory will be the kind of supply innovation for future!
PK, you raise lot of different points in your blog. Let me just take one which seems to run throughout which is that most of the supply chain innovations in last few years have been a function of technology.
ReplyDeleteI am not sure what do you mean by function of technology but I am assuming from the tone that it means that without technology these innovations would not have been possible or that most of these innovations have been derived from technology.
In my view this is giving technology too much credit.
Undoubtedly in last few years technology and business have become so integrated that most changes in business have an IT impact ranging from either something done completely by IT (like zero touch, still rare though) or more commonly enabled by IT so that systems help in tracking, analyzing, alerting, etc.
IT has also taken many of the concepts well known before to new levels. For e.g The basic idea of outsourcing is quite old, however this has gained more prominence as IT systems (plus telecom) have made it easier for different forms of outsourcing.
However as we all know just having IT is not SUFFICIENT.
Most companies have the IT systems but we still get very few Walmarts / Dells of the world. Most companies have IT infra in place with gigs of data but it takes THINKING/BPR (whatever one might call it) to get the true benefits
If many of these innovations were a direct function of IT, by installing IT, companies could have started seeing benefits. This is rarely the case.
My view is IT has been a very good enabler on supply chain initiatives but the ROI on many of the specialized multi million dollar supply chain automation projects hasn't been achieved. Companies were promised moon through mere technology without actually thinking about how technology actually helped them move towards the goal, in the process very few have managed to get decisive competitive advantage
I regard technology as a vital enabler, but its only smart use of technology which generates real differential benefits.
Thx, Pinak, it's useful info.
ReplyDeleteWish y all the best, and keep going with your blog.
Best regards
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