demand driven

Bait and Switch

by Lora Cecere on April 17, 2013 · 2 comments

Bait and switch:  A form of fraud.  A dishonest marketing tactic where a marketer advertises a very attractive value proposition and then switches the offer to something else after gaining interest by the buyer.

Source Merriam-Webster Dictionary

DDSN. DDSC. DDVN. CDSN. The acronyms keep coming…. The cadence does not stop. Everyone seems to have a new one. Today, they swirl in the market forming a fog. The term demand driven has become vogue again, but what does it really mean? And, should it be taken one step further to orchestrate bidirectionally market-to-market in market-driven value networks?  Or will companies stumble on the path by mistakenly implementing supply-centric processes and calling them demand-driven initiatives?

There are a number of newly anointed experts writing articles about becoming demand driven.  They are piling up on my desk.  As a writer of research on demand-driven supply chains for over eight years, I find many amusing.  I like the idea that this old concept is gaining new steam; but unfortunately, too few people writing the articles really understand the concepts. Instead, I see a behavior that I call bait and switch. The article is written and the story is spun, but the solution offered is a supply-centric solution based on yesterday’s technology.  The original principles of a value network that can sense, shape and translate demand with near-zero latency are being lost in the fog.

 Why is this happening? The market for large ERP programs is slowing. The gravy train is coming to an end. User satisfaction with planning systems is low.  The market shift is towards analytics, but this new market is confusing. It is still early.

Supply chain leaders feel stuck. Their current technologies are inadequate. They are struggling to manage the challenges of  simultaneously driving growth, improving profitability, absorbing complexity and reducing cycles. Frustration is mounting.  The concepts surrounding demand driven sound right.  Companies are interested.  As a result, articles are written proclaiming demand-driven results and then the reader is given a solution that is anything but demand driven.  Each time that they are published, the Shaman sighs and chuckles in her little apartment in Baltimore.

 The first definition of Demand-driven Supply Chains was pushed into the market by AMR Research (now part of the Gartner Group) in 2004. What the articles that flood the market do not tell you about is:

  • Slow Adoption. Eight years after the evolution of the concept, there are only a few companies making progress on demand-driven concepts. If asked, I would only cast a vote for the demand driven work that is happening at Cisco Systems, General Mills, Pfizer, PepsiCo, Procter & Gamble, and Kimberly Clark. Each of these pioneers would tell you that it is hard work. No one company—technology provider or supply chain line of business leader—has figured it out. Most have implemented the concepts in parts of their businesses. The most successful have used best-of-breed solutions. (We will show how the adoption of these practices have improved market capitalization in our webinar on April 25th.  Join us for the launch of the Supply Chain Index.)
  • Hard Work. Many companies that have started demand-driven initiatives have abandoned them.  The rewards are high, but the cultural barriers are difficult.  They are sometimes insurmountable.
  • Misunderstood.  A frequent reason for failure is a lack of understanding of the basic concepts of demand latency, sensing, shaping and translation.  As a result, many well-intentioned companies have mislabeled supply-centric initiatives as demand driven.
  • Demand-driven Concepts Are Not an Evolution. They are step change requiring either the redeployment of existing technologies or the purchase of new platforms.  Details matter. Data model structures are the difference between success and failure. Today’s architectures are inside-out not outside-in, and to be demand driven, the process focus needs to change. This often means a reimplementation of APS, and a change in focus for the company.
  • Be Careful of the Word “Integrated.”  The promise of the integrated supply chain sounds attractive, but tight integration of the supply chain has reduced agility and made the supply chain response less flexible. Today, due to tight integration, only 10% of companies are satisfied with their “what-if” modeling capabilities, and only 23% can model supply chain profitability. Both are essential.  The goal should be synchronized demand and supply with role-based dashboards, workbenches and optimization engines that allow users to work across the supply chain.  To accomplish this, demand has to be sensed, shaped and translated.
  • Change Management Issues Are High.  The largest challenges are in the redefinition of process flows from inside-out to outside-in. Demand-driven concepts are expansive they extend from the customer’s customer to the supplier’s supplier, but the areas of sales and procurement are often very resistant to the demand-driven concepts. To do this companies need an end-to-end leader.  Only 1% of companies have defined this role.
  • Most Have Defined “Demand” too Narrowly.  Demand in the demand-driven network is about much, much more than forecasting.
  • It Needs to Be About More than Demand.  Supply is volatile. Shortages abound. It is for this reason that I have defined market-driven value network processes in the book Bricks Matter.  The definition is: An adaptive network focused on a value-based outcome that senses and translates market changes (buy- and sell-side markets) bidirectionally with near real-time data latency to align sell, deliver, make and sourcing operations.

As we move forward, there are no silver bullets. There are no well-defined industry platforms.  I coach companies to take the following steps.

  • List All the Forms of Demand Data and Map Its Usage. This includes unstructured text data (this can include data from social networks, ratings and reviews from blogs and websites, and channel data), weather data, and transactional data.  Some supply chains also have inputs from the evolving world of the Internet of Things where machine sensors transmit frequent streams of data. This is the case for heavy equipment, vending machines in the field, and smart shelves.
  • Map the Process Outside-in from the Channel Back. Start with the channel, and map the requirements of the channel. Evaluate how to reduce latency by using downstream data to sense demand and implementing demand translation technologies to make the downstream data usable.  These technologies include the work by Terra Technology and ToolsGroup.  (While SAP has purchased SmartOps and is marketing a demand sensing/demand translation offering, I have not been able to validate the solution through references.  It is clear that math matters.  Neither Oracle or JDA references were able to meet the challenges in the field.)
  • Build What-if Analytics.  Technologies like Kinaxis and Steelwedge are frequently undervalued for supply chain visualization and what-if analytics. Cloud-based analytics for sourcing and the management of supplier networks are evolving and should be embraced. Consider solutions from GHX, Elemica, E2Open and SCA Technologies to improve end-t0-end visibility.
  • Design the Network. Actively design the network with clear push/pull boundaries and right size buffers.  The strongest solutions in the market continue to be Llamasoft, Insights and JDA.  And, the strongest consulting partner for network design is Chainalytics.  I also like the work that is happening at the Demand-driven Institute on the redesign of manufacturing to be more demand driven.
  • Focus on End-to-End Orchestration. Build processes that enable the alignment between demand- and market-shaping levers to orchestrate end-to-end bidirectionally through outside-in horizontal processes. Actively orchestrate demand through shaping, and the supply response through the market-driven levers below.  Charter the end-to-end process manager to orchestrate a market-driven value network that connects and orchestrates bidirectionally between markets.
  • Use New Forms of Data. Embrace Digital. Think long-term on the use of digital signals.  Map the use of mobile/social and eCommerce on the future of the digital path to purchase, and the impact of machine-to-machine interfaces in manufacturing on digital manufacturing.  It excites me to see the revitalization of manufacturing applications to be more demand driven based on the Internet of Things in process industries and 3D printing in the discrete industries.
  • Experiment with Best-of-breed Technologies. This innovation is not going to come from the large players. It will require large manufacturers to take risks with smaller players like Applied Predictive Technologies, Enterra Solutions, Orchestro, Retail Solutions, and Signal Demand.
  • There Is No Substitute for Leadership.  Success happens when there is an inspired leader that believes that the supply chain needs to own the supply chain from the consumer/user to the supplier’s supplier.
  • Focus on Building Horizontal Processes.  These bridge the gaps between functions. The four main horizontal processes to tackle are revenue management, sales and operations planning, supplier development, and corporate social responsibility.

 In summary, progress on supply chain cycles and margins, and balancing the trade-offs of complexity, has stalled. Over the last decade, the only metric that we have improved is revenue/employee (see below).  Leaders do not know what to do to power themselves off of this horizontal plateau. The gap between what we have and what we need has widened.

Processes are evolving. Technologies are changing. There is no clear definition of what drives value. In an effort to try to drive progress, the system integrators and technology providers have started providing their own research. The problem is that it is not OBJECTIVE, and lacks research rigor. It is largely self-serving and is confusing the market.

As the research firms have consolidated, primary research is lacking. Consortia research has not filled the void. While these organizations have the reach, the organizations of APICS, CSCMP, GMA and SCOR lack the understanding of research processes.

I want to help.  It is for this reason, that I have built this new company, Supply Chain Insights. I believe that supply chain matters. I can see the impact on balance sheets through the successful implementation of demand-driven concepts; and it’s even greater when the concepts are balanced by market-driven levers. I look forward to sharing these with you in our Supply Chain Index webinar.  While it does not provide all of the answers, I look forward to sharing what we are seeing. We want to stir a healthy debate in the market, and would love to have you join us.

One of the things that you will never find us doing is promoting a bait-and-switch program. Our goal is to help supply chain leaders gain first mover advantage.

Another Year Older. Another Year Wiser.

by Lora Cecere on July 17, 2012 · 0 comments

Yesterday was my birthday. I am another year older, and hopefully a year wiser.  I was glad to celebrate with friends. I was not alone. Through social networks, I learned that many of my friends have the same birthday.  Yes, Bruce, Eric, Jeff, Marianne, Mindy, Mikey and Tom all share my special date. We celebrated virtually. Social networks make this all so easy.

I was blessed. The team at Supply Chain Insights gave me a beautiful gift. It is a collage of their baby pictures and images of all of the things that we have cooked up so far. It now hangs on the wall overlooking my desk to remind me of that cold day when we started the company. It is scary starting a company. Then, I stared at a blank screen and begged people to join my team. I knew that I could not do it alone. Today, I am proud to have a small and committed team to work with.

A lot has changed since we filed the LLC, got our EIN number, learned about PEOs (Professional Employer Organizations), set-up our servers, and filed our first W-9. The book, Bricks Matter,is out the door and off to the editor. I have never published a book before, but I am told that it will publish in the fall. It can be pre-ordered on Amazon. We are busy planning the book tour, and my energies are now turned to starting the design of training materials for the launch.  (I believe that there is a shortage of good training materials for organizations trying to train supply chain professionals.)

We are also hard at work on delivering on my passion to launch a supply chain community.  The Supply Chain Insights Community will launch on September 1st, 2012. This is designed to be a global supply chain community. It is being built on Jive with rewards to unleash the power and creativity of the Supply Chain Superhero that lives within us all. It will have supply chain benchmark data and ratings/reviews of software providers and consulting partners. It is part of my mission to return the power in the supply chain to the buyer of enterprise software. I firmly believe that analysts should not be rating software in a dark room throwing darts at dart boards. I want to redesign the analyst model too.

Yesterday, the team gave me a great gift. It is the design of the new Supply Chain Insights Newsletter. We have been hard at work on the four reports and will showcase them today in a new newsletter. I cannot wait to share it with my wider network of over 6000 supply chain executives today.  I am committed to the redesign of the analyst model to make it friendlier, the data more usable, and to drive new insights. It is my passion.

The four reports that will launch today are in keeping with our new model. We want to focus on research that helps business users to drive first-mover advantage.

  • Market-driven Value Networks. A Handbook for Building a Market-driven Value Network. Get it here.
  • Market-driven S&OP. A Guidebook for Building a Market-driven S&OP Process. Get it here. This follow-on report builds on the concepts of the Market-driven Value Network report and applies the learnings to building a market-driven S&OP process. It is based on data from three quantitative research studies and five years of work with clients in the field. There is so much to say about S&OP, that I have struggled to get it into just one report. I have broken it into two reports. This first one outlines the process and the need for change. It will be followed next week with a second report “Putting Together the Pieces.” In the second report on S&OP, I will discuss how to sort through the options in the market today to deliver on the market-driven S&OP vision.
  • Retail Mobility. Is Mobile the New Answer to Propel Growth? Get it here. This report was completed in conjunction with Retail Connections for their Retail Mobile Summit. It answers the question of “Is mobile an answer for retailers to reverse the trend of declining sales and combat Amazon?” The answer is yes, but the journey is very early. The current state of mobility in retail is an opportunity for both consumer products manufacturers and retailers. We will be doing some follow-up research this month with Retail Connections on the Role of the Store for their executive conference in San Diego, CA on September 23rd-25th (register here).
  • Big Data. Go Big or Go Home. Get it here. I have been following the evolution of big data concepts for the past year. Through attending big data conferences, I have had the opportunity to interview telecommunications and e-commerce giants that think of data quite differently than the manufacturers and retailers that I normally work with. As I watch data pile up around the supply chain, and as I have tried to help supply chain teams rethink their concepts about social and unstructured data, I felt that there was a need for a new report that could help teams to better understand Big Data. The irony is that the number one issue for supply chain IT teams today is “dirty data.”  Supply chain processes and technologies have been largely designed around structured data that is fairly easy to use.  The world today, that they find problematic, is about ready to change in a big way. As companies try to use these new forms of data and use data elements that are changing in variety, velocity and volume, I felt they needed a guidebook. The world of Big Data Supply Chains will change, but you can use this report as a starting point to help you get started.

Enjoy the newsletter. Sign-up for the community and let us know what you think.  Next month we continue our aggressive research schedule publishing three reports. Check out our research agenda here.

Happy birthday all! Thanks for helping me to celebrate my special day.