I Believe We Have Reached The Supply Chain Plateau

January 13, 2013
9:55 pm

A plateau: a period of stability with no change

Last weekend, I wrote two reports. They published this past week. In the first report, I rolled up my sleeves and analyzed balance sheets of process companies over the past decade with Abby Mayer (@indexgirl). In the process, I discovered that the average process manufacturing company has reached a plateau in supply chain performance. Growth has stalled. To compensate and stimulate revenue, the companies increased SG&A margin by 1%. However, the conditions were more complex; the average company, over the last ten years, experienced a decline of 1% in operating margin, and an increase in the days of inventory of 5%. While cycle times have improved, the majority of the progress has come from lengthening of days of payables and squeezing suppliers.

As I wrote the report, I started thinking about all of the supply chain conferences that I have attended where supply chain leader after supply chain leader has stood before an audience and declared that they had reduced costs, improved inventory and improved customer service levels.

While I believe that individual projects may have had these results, it did not make its way to the balance sheet. I believe that we have reached a plateau and that supply chain performance is declining. One of the primary issues, shown in figure 1, is the executive team’s understanding of the supply chain. Over the past ten years complexity has increased, and many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system.

A Need to Rethink Technologies?

In the second report, I wrote about the current state of supply chain technologies. The greatest gaps are in the areas of the greatest importance. Companies are the happiest with supply chain execution systems, but the gaps in supply chain planning are high, and the ability to use the data from ERP and order management remains a gap.

The good news is that companies are increasing their spend on supply chain solutions. The bad news is that there are major gaps in the solutions where they want to invest. It reminds of the old Turkish proverb, “No matter how far you have gone on a wrong road, turn back.” I think that this is true. In my last post, The End of the Fairy Tale, I shared insights on the changing drivers within the supply chain and the need to rethink metrics and business goals. The fundamental design of supply chain systems has not changed since the mid-1990s despite the evolution of greater computing capabilities and the change in the business problem within the supply chain. The process requirements have changed in five fundamental ways that are not reflected in the software:

The move from vertical to horizontal processes. There is a need for automation and new forms of predictive analytics to power horizontal processes. The need to automate revenue management, social responsibility, supplier development and Sales and Operations Planning (S&OP).
A need for new forms of analytics to sense using structured and unstructured data. Today’s supply chains respond. They do not sense. As a result, the response is usually late. There is a need to use unstructured text data mining technologies to listen and learn.
Inter-enterprise solutions using cloud-based computing. The supply chain is slowly adopting new forms of cloud-based computing to align and synchronize.
Movement from Inside-out to Outside-in. The traditional supply chain planning systems primarily use orders and shipment data for planning. There is a need to redesign the technologies to use channel data market-to-market to sense, shape and drive a more flexible response.
Visualization and better use of data. The traditional definition of supply chain planning was data intensive and insight poor. There is an opportunity to build a new generation of applications using new forms of mapping and visualization to drive new insights.

Today, we have the evolution, not the reinvention, of current systems. Vendors are consolidating and innovation is largely absent. The other day, I was reading about IBM in 1964, and the introduction of the IBM 360. The IBM 360 was a tough decision for Thomas Watson because it made the prior computers obsolete. The APS market needs this type of leadership. I think that there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again. I think that they are legacy. What do you think?

Navigating Supply Chain Economic Downturns

August 30, 2026 5:28 pm

In 2007, the average company took six months to sense market shifts and adapt its supply chain. My estimate, based on work with clients, is that if a downturn happened today, the average company would take 20-30% more time to adjust than in 2007. Here I give insights on preparedness.

Warning: Sidestep the Narrative of the Misguided Goldiggers

August 10, 2026 4:58 pm

Ten years ago, I started writing a book titled Stories of the Misguided Gold Diggers. The book was a collection of stories from two decades of stories of technology leaders perpetuating the myth of integrated end-to-end supply chain planning.

I dusted off the manuscript on Saturday. I think that we have a new chapter. Companies focused on putting Artificial Intelligence (AI) on top of existing architectures are putting AI Stupid on steroids.

The Myth of End-to-End Planning

July 31, 2026 9:14 pm

Supply chain planning, supply management, supply chain execution, network design, and transportation/logistics management operate in silos. Not much has changed over four decades. The connections flow back through transactional systems: order-to-cash and procure-to-pay. There is a myth that companies can buy an end-to-end supply chain management solution. This is largely a myth. Here we explain.

Lead Time: A Broken Gossamer

July 16, 2026 6:38 pm

If you are struggling with supply chain planning, dancing in the light of shiny objects, and scratching your head, please read on. My goal is to help you.

Please do not AI Stupid. What do I mean? AI Stupid is putting agents and agentics on top of existing architectures believing that making them faster and hands free add value. To me, this is fools play.

I love AI. I am excited about new technologies. To this end, I want to shine a light on how new technologies can help address the black holes and inconsistencies in today’s supply chain, which largely stem from the limitations of the first generation of supply chain planning and execution technologies. In this blog, I give you three places to start.

Do You Need a Supply Chain Coach?

July 9, 2026 5:27 pm

Supply chain is where the rubber hits the road. For a public company, over 40% of market capitalization is tied to the trade-offs between growth, operating margin, inventory management, and Return on Capital Employed.

The road for supply chain improvement is fraught with issues. Here we share some and offer some advice.

Is your Supply Chain AI Ready?

June 11, 2026 2:39 pm

A simple quiz to assess an organization’s AI readiness.

The pace of change is fast and furious. Every day, technology advances faster than we can digest. A great challenge to have.

Determining whether a supply chain is “AI-ready” is less about technology and more about the gray matter between the ears of supply chain leaders. Leadership, alignment, and clarity of goals matter.

Too few companies are clear on the definition of supply chain excellence. Measuring and rewarding functional metrics reduces the firm’s value. Putting agentics on top of today’s processes can make bad practices run faster, reducing value.

The toughest job for the supply chain leader is challenging existing supply chain paradigms that were defined by the limitations of decades of supply chain technologies. As the curtain lifts on the potential of new forms of technology, process redefinition is our opportunity, but only if we are clear on what drives value. (Here, I link to the Supply Chains to Admire reports to help you define value. The next report will be published on June 23rd, along with my Dynamic Benchmarking Product, to help you define value in the face of your AI readiness. More information about the launch is at the bottom of this blog.)

Supply Chain Shaman