Supply chain management is now 30 years old. As companies plan for the next decade they should expect that the new technologies they deploy will represent a revolution, not an evolution. They will be powered by big data analytics and focused outside-in on market sensing. (This will be a redesign of buy and sell-side sensing with new systems to sense the health of channel and supplier relationships. Both are equally important.)
Let’s face it: today’s supply chains are inflexible. They respond, but they are bad at sensing changes in market demand, supplier conditions and other factors. The systems are based on optimizing old data. The early architectures were built to analyze shipment and order histories which for various reasons are not an accurate reflection of “true” or market demand. The average company has over 600 supply chain systems, but it uses very few. A recent Supply Chain Insights quantitative study of 61 supply chain leaders from 40 companies found the executives are dissatisfied with the performance of these systems they consider important–the largest satisfaction gap seen in the last eight years.
In short, companies did what they could with the technology as it evolved. Today’s supply chain applications were as good as they could get ten years ago. But, today’s world is different and it is time for companies to seize a new opportunity in five areas:
- Mobility. Data from mobile devices is ubiquitous and real-time. Both of these conditions are a sea change for supply chain systems because existing systems were based on limited sets of near real-time data. With in-memory processing and the lower cost of computing, it is time that supply chain leaders ask how they can use real-time data through mobility applications. This includes redefining the customer experience and enabling the mobile worker. Working anytime and anywhere is a reality. The goal is to make it more productive and harness data as it arrives versus put it into batch systems for overnight processing.
- Internet of things. Mobility also supports the evolution of the internet of things, where sensors with IP addresses collect and communicate data on a wide range of conditions. It will drive machine sensing and redefine service supply chains. Here are two examples. Machines will no longer be repaired on a maintenance schedule; instead, repairs will be based on need. Pumps and motors will talk and the supply chain will be designed to respond. Similarly, the health care supply chain is based on efficient sickness. Today, patients go to the hospital and are tested and are treated. The supply chain is based on efficient check-in and check-out. But, how do you know if you are sick? Diabetes, high blood pressure, and cancer are all silent killers. Based on new forms of body sensing, patients will be alerted that they have a problem, they will not have to go to a hospital for testing, and testing and patient care can be done at their home through sensing technologies.
- Big data. Streaming data. Unstructured data. Dirty data. Today, all of these forms of data are a problem to the supply chain. Tomorrow they offer great promise. The traditional supply chain was designed to use structured, clean data. But it turns out the most important data for the supply chain is often unstructured data. (For example, customer service call center data, Twitter data, warranty and return information, customer rating and review data.) In the next five years, supply chain processes will need to listen, test and learn based on the sensing and pattern recognition from big data technologies. It will dramatically change supply chains to improve a wide range of conditions including food safety, biologic drug efficacy and sensing the customer response for new product launch acceptance. New product introductions are the largest contributor to inventory obsolescence and forecast error. Shortening the time to sense true customer acceptance offers great promise to sense true channel demand and reduce the time to respond to improve product availability during the launch phase.
- New forms of predictive analytics. The last ten years has focused on the use of linear optimization to improve supply chain decision support. Business rules have been simple if then statements. But, supply chains are more complex and the needs are greater. They are ready for new ways to mine text data, and utilize pattern recognition technologies. We are on the cusp of the real use of learning systems. Y2K systems were limited by practical scalability. Not so today, yet we still have the same systems. Rules-based ontologies, in-memory processing and map reduce technologies offer great promise for the supply chain.
- The cloud. Cloud computing offers promise to connect the extended supply chain. It also offers great promise to enable real-time benchmarking. Today, the supply chain is blind to its potential. Traditional benchmarking techniques are difficult because they are static and are the inputs lack common data models and data definitions to enable comparisons. Not so with cloud based technologies. Yes, the cloud will make technology deployments easier; but more importantly it will allow real-time sensing on benchmarking data.
These five trends are converging, and as a result, we see a new generation of technologies evolving. We are at the starting line. It is early. I am following ten software vendors that are busy working on new use cases that can map market data and improve sensing. For supply chain leaders, it cannot happen fast enough. User satisfaction with supply chain systems is at an all-time low, and the lack of scalability of the first generation of solutions is strangling business decision-making.
Adapting systems to take advantage of new technologies is about more than modernizing supply chains or stuffing new forms of data into existing architectures. It requires a redesign. It is about improving visibility into business activities, providing better service to customers and improving profitability. But, then shouldn’t this be what the supply chain is really all about?
Lora Cecere, the founder of the Supply Chain Insights research firm, is the co-author, with Charles W. Chase Jr., of the forthcoming book Bricks Matter: The Role of Supply Chains in Building Market-Driven Differentiation (Wiley, 2012). You can read her blog, Supply Chain Shaman and follow her on Twitter @lcecere.