supplychaintechnologies

We should have Listened to Mother Nature

by Lora Cecere on March 26, 2010 · 0 comments

SNAP.  CRACKLE.  POP.  

Yes, we got what we asked for….  Efficient supply chains that snap and break under stress. Have you ever asked yourself the question, in the design of supply chain networks, should supply chain efficiency be the goal?  Based on seven years of supply chain research, I think not.  I think that the goal should be resilience. 

Recently, I got the chance to reflect on this over dinner with two wonderful thought leaders.  I sat between John Hagel (@jhagel on twitter), and Valdis Krebs (@orgnet on twitter). John is finishing his book From Push to Pull (http://http://www.johnhagel.com/view20051015.shtml) and Valdis has spent his life researching networks (all kind of networks from terrorist cells to the networks of nature).  Over a great seafood dinner in Austin, we discussed what nature teaches us about networks. Networks with the greatest resilience — ability to stand the test of time– are not the most efficient. In fact the least resilient networks in nature are the MOST efficient.  The most resilient networks have two characteristics:

 Redundancy:  In nature, the networks that last over the generations are those that have the right amount of redundancy.  This includes excess capacity, extra nodes, and bypass routes.  The efficient network with minimal capacity, node-to-node connections, and no parallel routes fail.  This is especially true in push environments.

Dynamic reconfiguration:  Likewise, in nature, the networks that stand the test of time have the ability to reconfigure dynamically under stress.  Networks with the most centrality have the greatest failure rate.

Ring a bell? Yes, we have designed efficient supply chains that are primarily push-based, with little redundancy and a high dependency on centralized hubs.  Most are in trouble. Most do not know it YET.

I reflected back to when I used to install supply chain planning software.  When I asked a client to define an objective function for an optimization program that would struggle for an answer. They were not sure what good looks like.  However, when I asked if the output needed to be efficiency, they would always nodd their head.  In fact, ask anyone if they want an efficient network–especially a financial controller–and you will get a rousing YES!!!  But, ask if they want a network that will snap and break under stress and you will probably get an emphatic NO! Few know the trade-offs. 

Most companies do not realize that they have designed networks that are not resilent until it is too late. Yep, you got it.  We designed supply chain networks with the wrong goal. We defined supply chain excellence as a set of efficient networks with a high level of centrality and little redundancy.  It is time to consult mother nature, because she got it right.  

SNAP, CRACKLE. POP.

No worries.  It is probably an efficient supply chain network breaking somewhere. It will happen frequently as the recession rebounds out of recovery. As currency shifts occur between China, Germany, United States, and India, the networks will strain.

We need to recognize and fix the problem.  Enterprise Resource Planning (ERP) and Advanced Planning Systems (APS) were installed with efficiency as their goal.  There is too little redundancy, and less than 1% have dynamic reconfiguration capabilities.  It will make for great stories on the front page of the Wall Street Journal. I just hope that it is not your name in the article.  I think that is time to listen to Mother Nature.

 What do you think that we need to do to redirect the course and change the tides?

The Supply Chain Black Hole

by Lora Cecere on February 4, 2010 · 0 comments

We have a black hole in the center of supply chain applications.  A black hole you say?  Yes, a black hole has developed between transactional systems focused on order-to-cash and procure-to-pay processes and supply chain optimization technologies.  It is not there by design. It has evolved because the design of supply chain technologies were insufficient to meet today’s requirements.

Understanding the Black Hole

What is a black hole?  In quantum mechanics terms, it is the region of space from which nothing can escape.  It is the result of the  deformation of space time caused by a very compact mass.  Around the black hole, there is an undetectable surface which marks the point of no return, termed the event horizon by scientists.  It is called “black” because it absorbs all light that hits it, reflecting nothing, just like a perfect black body in thermodynamics.  Despite the invisible interior, a black hole can be observed through its interaction with other matter.

Companies may not realize it, but they have a black hole.  It is the no-man’s land between ERP and Supply Chain Optimization (APS)/Supply Chain Execution (SCE) systems.  We now know that fixed data integration, one-dimensional rules mapping, and traditional master data techniques from ERP to Supply Chain Optimization are insufficient.  As a result, plans are created and consumed in isolation, and transactional systems hum along with little– to no — guided intelligence.  Available-to-Promise (ATP) was our first foray into the black hole, but we did not go far enough.

Technologies are evolving to eliminate the supply chain black hole. In this first generation of supply chain applications, we have built a fixed response with very little sensing.  How can we effectively respond when we cannot sense?

It is my belief, from seven years studying the market, that the technology applications to fill the black hole will come in many forms and from many different sources.  From military technologies, we will see the applications of rules-based ontologies to intelligently sense and connect optimization plans to more intelligently drive transactional systems.  Likewise, from the banking and insurance industries, we will see the application of pattern recognition of early market conditions to shape the supply chain response; and from search-engine  optimization technologies (SEO), we will see the redefinition of master data management. These technology discontinuities will come from emerging technologies: guys that we don’t even know the names of today.

Where to Focus

We will be limited in how fast we move by our own traditional supply chain paradigms.  To solve the black hole, we need to shake several paradigms and recognize that:

  • First generation were a start, but were not sufficient. The first generation of supply chain applications got us started down the path, but they must be cast-off to move forward.  ERP is not the backbone of supply chain management for the future.  The new technologies will not come from the ERP consolidators.
  • Need to Bridge the Discontinuity.  We are at a discontinuity between inside-out and outside-in technologies.  The new technologies will be outside-in. They will help us sense before responding.  They will help drive an intelligent response. They will fill the black hole.
  • Requires a Focus on Innovation.  Companies will be challenged to evolve old technology while maximizing the opportunities from evolving technologies at the same time.  Early adopters have line-of-business scouts seeking to extract new answers to solve the black hole dilemma.

 Going Forward

We have come along way from the go-go days of 2Q 1998 when i2 Technologies stock peaked at more than $110 a share and average APS deal sizes were $1.9 million dollars.  At this time, the APS fueled by exuberance and excitement.  Today, it has lost it’s luster.  In its redefinition through the solving of the black hole problem, we will see a more mature market evolve with less hype and more grounding.  For me, this will be exciting.

As the Supply Chain Shaman, I will be scouring the market to look for solutions to help us tackle the supply chain black hole.  Look for me at industry events.  Until then….