Supply chain excellence

 This week, I am off on vacation.  On some beautiful Caribbean island, I will raise my glass to toast Barbie.  Barbie, you might say?  Yes, this year, my early childhood friend is 50.  I am DEFINATELY telling my age when I share that she consumed the first 10 years of my life. 

I am also telling my age when I share that Supply Chain Management (SCM) has consumed the last 20 years of my life.  Did you know that SCM is less than half the age of Barbie?   It is a relatively a new area of study, but one that is growing in importance. As it changes, it is important to retool, and embrace new concepts.  As an analyst tracking the evolution of supply chain management, one of the fascinating aspects to me is the rate of change.

New Vocabulary to Know

 Which leads me to vocabulary.  I know, a lot of us hate it; but consider that new words open the door to new concepts.  As I get ready for 2010, there are seven new words that I think are noteworthy and plan to add to my research agenda.

•  Digital Consumer:  The use of digital media–social networks,blogs, B2C mobility, e-commerce strategies, guided shopping– to shape demand and influence customer buying patterns.  Based on recent IBM research of 32,000 consumers in six countries, 22% of the world’s population, or 1.5 billion people, are online.  It will reach 2.2 billion consumers by 2013.  Today, 63% if adults research purchased through social networks and 47% of the time online reading influences buying patterns.  Teenagers send over 2700 texts per month and retail segments are blurring. In a similar fashion, consumer products and retail value networks are blurring. Communication in emerging economies is through mobile phones. Today, in China, mobile devices reach 56% of consumers. The digital consumer is about presence and connectivity.   62% of  Gen Y stated that they would be willing to use texting to buy an item.  78% of consumers (primarily baby boomers) are willing to co-create (to share comments on assortment, store layouts, and service requirements) with retailers and consumer branded companies.  With this kind of impact, how can we not have digital consumer strategies for 2010?

•  Gravitas:  When you reach gravitas, you achieve seriousness in conduct and speech.  When the practices of supply chain evolved, early adopters yearned for board-level presence.  The Great Recession of 2008 drove this transformation.  In my travels in Europe in October, I met with five companies.  Four of the five had just announced a NEW director-level position on the board.  Organizations are maturing, but the practice and processes still need to mature to achieve gravitas at the board level.  They are just not taken seriously enough.  To evolve, supply chain management will coalesce with macroeconomics and strategy and risk management practices to become the fabric of go-to-market strategies.  This is the primary thrust of my research agenda this year.  And, maybe my new book.  Doesn’t your supply chain need more gravitas? 

• Ontology: Increasingly, companies are finding that supply chains lack well-defined behaviors and that one-to-one data mapping and rules don’t do the trick.  As a result, the logic of the first generation of supply chain solutions falls short.  In computer science, an ontology is a formal representation of a set of concepts within a domain and the relationships between concepts.  An ontology provides a shared vocabulary to model a domain and contains information about the objects, concepts and relationships of that domain.  In the mid-1970s. researchers in the field of artificial intelligence began to use the term ontology to refer to both a theory of a modeled world and a component of knowledge systems.  Key elements in ontologies are attributes, relationships, restrictions, rules, axioms and events. This allows the modeling of relationships and drive more intelligent rules and events. In 2010, look for a new set of solutions based upon supply chain management rules-based ontologies to appear. They will fill the supply chain black hole within the enterprise, form the foundation for collaborative relationships and drive new answers for master data management. 

• Stochastic Optimization:  This type of optimization incorporates probabilistic or random elements either in the problem data set itself or in the algorithm itself through random parameter values.  This is in contrast to the deterministic–where data is assumed exact and constant– approaches that are traditionally used as the basis of Supply Chain Planning (SCP). 

• Sentiment Analysis:  These technologies apply rules-based ontologies to mine unstructured text on the Internet.  The technologies allow the user to understand the sentiment of users–expressed in blogs, ratings and comments, and social media– to understand the true voice of customers.  This type of data is useful to gauge the success of new product launch, the effectiveness of competitive products, and the change in customer sentiment.  In 2010, the use of sentiment analysis will be especially valuable to high tech electronics companies to understand the acceptance of customers to product features (e.g. battery life on a digital camera or wine commentaries in blogs) on a more real-time basis.  It also makes global sensing — all customers by customer attribute and geography attributes– more readily available to drive product portfolio rationalization.  

• Supply Chain Black Hole:  In organizational enterprise architectures, there is a black hole between traditional Enterprise Resource Planning (ERP) and supply chain application of Supply Chain Planning (SCP or APS) and Supply Chain Execution (SCE).  The fixed integration of the early solutions, just does not allow enough flexibility to drive a flexible, agile response or alignment to deliver a profitable order.  In 2010, we will start to see the evolution of new solutions to fill this black hole.  They will come from best-of-breed providers from non-manufacturing industries– military, financial and insurance technologies– to re-architect back-office applications from the outside-in. (For more on this topic, reference my earlier blog post.) 

• Trickle-up Innovation:  Traditionally, product development and innovation processes have launched products first in modern trade and then adopted the products to evolving markets.  This is changing.  Increasingly, supply chains are shifting to launch new products FIRST in evolving economies and then expand the concepts to modern trade.  This shift increases the need for build anywhere, design anywhere practices will be a boon for the virtualization and collaborative workflow capabilities of Product Life-cycle Management (PLM) technologies.

 So, while I am sure that these are words that Barbie will never know or care about, for us serious about supply chain management, these terms represent exciting new concepts.  So join me in drinking a toast to Barbie.  After all, with all of those shoes and accessories, you will have to agree that she was the MASTER of profitable supply chain SKU proliferation.

And, keep your eyes and ears open for evolving opportunities.  What words do you think are important for 2010?  Let me know by sharing your comments below.

Until then the supply chain shaman is off to uncover new technologies to help you drive supply chain leadership.

Drop me a line.  What are the words that you are adding to your supply chain vocabulary in 2010?