Supply Chain Shaman

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The Saga of Supply Chain Innovation

This November is a layoff season. As pink slips ripple through Silicon Valley to over 120,000 workers following overexuberant hiring, it is a time for both sadness and reflection.

At the end of this chapter in Big Tech, it is time for a reality check. As supply chain leaders face heightened demand uncertainty and extreme supply chain disruption, the answer will not come from Silicon Valley. The curtain for digital transformation from Silicon Valley is closing. There is a need for a heart-to-heart discussion.

Definition of a Heart-to-Heart Discussion: (adjective) An openly straightforward discussion without reserve or secretiveness.

Demand levels still exceed pre-pandemic levels. Inflation levels are the highest in forty years, and a recession is in the mirror. Big Tech innovation did little to improve supply chains, but the implications of these layoffs loom large, adding another layer to the current disruption.

Learning From the Past

The news takes me back to the 2002 market downturn and the market correction with the failure of B2B players and the impact on the supply chain. Players like Cisco Systems rode the wave of selling high-end servers and did not shut down production soon enough. Here is a quote from the time:

On Tuesday, the network-equipment giant provided the grisly details behind its astonishing $2.25 billion inventory write-off in the third quarter, essentially admitting that it too was caught up in the Internet hype that, at its peak, gave the company the highest market capitalization in Wall Street history. Said Needham & Co. analyst Tad LaFountain. “As a result of what has transpired, network equipment management might consider looking beyond the car in front of them as they speed down the information superhighway.”

Wall Street Journal

Back then, the wicked combination of the dot-com implosion and the deteriorating economic conditions in the United States and abroad finally caught up with the world’s largest data networking equipment maker, causing sales to decline at an astonishing rate and leaving Cisco with billions of dollars in equipment and materials that it couldn’t sell and the infamous $2.25 B write-off.

Fast forward, the rapid failure of FTX, and the struggling cryptocurrency market, will intensify and move across the digital asset sector and potentially hit the wider financial system shaking consumer confidence. The retail sector is bracing for the sell-off.

When I was at Gartner Group in 2002, I followed 212 B2B exchanges. The global B2B e-commerce market was worth $12.2 trillion in 2019 — more than six times the size of its B2C equivalent. The correction was termed the $1.755 trillion investing lesson. Today, B2C reigns, and thirteen B2B exchanges remain– each with a questionable value. Remember start-ups like OneCommerce, Transora, Webvan, or WWRE? I doubt it. Look up the history. Each failed.

The failure of business models in each case, ripples through the economy, reminding investors to invest in value. But, the line between innovation and value is not clear. As a result, hype and promise reign until the bottom falls out of the market.

What Does This Mean for Supply Chain Technology?

Bottom-line supply chain innovation will come from innovative start-ups. Here is my reasoning.

The rush of spending in the market upturns side-stepped supply chain technology doing little for innovation. The rush of the last two decades was the tight integration of enterprise data into planning under the guise of building end-to-end supply chains. Let’s face it. We failed.

The current planning systems are not end-to-end and tight integration to transactional data resulted in brittle systems unequal to the challenges of the last thirty-five months. (For example, Distribution Requirements Planning (DRP) has nothing in common with Transportation Management (TMS). The lesson from the pandemic is that the order is a poor proxy for demand in times of heightened variability.)

While supply chain leaders give lip service to building networks, nothing evolved.  Companies speak of demand-driven efforts, but market data sits in marketing and sales teams and is not used in supply chain decisions. Continued investments in transactional systems resulted in very efficient sales and marketing processes widening the alignment issues between commercial and operations teams. There was never any R (relationship management) in either CRM or SRM. The failure of SAP to deliver value in decision support is giving rise to a new wave of best-of-breed innovation. (While all ERP providers failed, SAP was the market share leader.) Processes are not defined from the channel back. The historic process focus assumes that the process could start with the order. This logic is flawed.

In 2010, there was a veiled promise that innovation from Silicon Valley would transform supply chain processes. It never happened. The hype cycle of digital transformation is over. Earnings across tech are weakening in the face of a looming recession. Sadly, supply chain innovation is a heady topic that never made the radar of Silicon Valley.

What Does This Mean for Supply Chain Leaders?

Now is a good time to hire talented tech. Employee turnover in the supply chain is both a problem and an opportunity. How so? Retirements of first and second-generation supply chain pioneers are a problem. Companies are losing tribal knowledge, but it is also an opportunity to look at solving problems in different ways. Despite multi-million-dollar investments, many of the problems and black holes in the supply chain remain. Traditional thinking needs to change.

Where to turn? Let’s spend a minute to reflect on what did not work:  

  • Consolidations Decimated Value. IBM, Infor, E2Open, JDA, and Oracle gutted supply chain companies under the promise of a greater value proposition for business leaders. The benefit fell only to investors. The intellectual property and innovation of companies like Demantra, Emptoris, JDE, i2 Technologies, Manugistics, M-Factor, PeopleSoft, Steelwedge, Terra Technology, and Vision Chain. The insight? If a consolidation aggregator acquires your software provider, look elsewhere.
  • Consultants Failed to Deliver Value Through Software Models. Software and consultant business models do not support the development of software. While the software is about continual code evolution, the consulting models are based on divergent customer requests. As a result, consultants focus on the urgent (continual stream of customer requests) and lack the long-term commitment to building software. Examples include Ai.Retail and CAS acquisition by Accenture, Edgeverve Systems by Infosys, and IBM’s acquisitions of DemandTec, iLog, Lotus, MRO Software, Netezza, Rational Systems, SPSS, Sterling Commerce and Yantra failed to stay competitive in comparative markets. S&V software Equazion was sold to PWC and disappeared. The reason? Software business models and consulting go-to-market programs lack alignment. The takeaway?
  • Barney Partnerships Bled Purple, not Green. Barney—let’s be friends—press releases are temporal. I know of no tech partnership that drove value over the last two decades. The plethora of paper could wallpaper your house. The reason? They are opportunistic. The lesson? Never buy based on a partnership. Expect marketing hype.
  • The Saga of Venture Capitalists and Private Equity Firms. In two decades, I struggled for an example of how a Venture Capital investment in an early-stage innovator drove value. Investments by Private Equity firms like Insight Venture Capital and Thoma Bravo destroy companies.
  • New Forms of Software Marketing Creates Haze, not Value. In the last decade, the rise of supply chain radio talk show hosts and tradeshow formats makes it hard for the buyer to decipher true value. The problem? There is no filter or judgment call on these new forms of media on whether the solution for business leaders is worthwhile. My insight over twenty years is that the most insightful innovation and the leaders driving the most value do not talk on stage.  

In the Past, What Drove True Value?

As an analyst, I covered many shifts in technology. In my view, trends like DDMRP (demand-driven material requirements planning), MEIO (multi-tier enterprise inventory optimization), and SRM (supplier relationship management) were fads. MEIO became deep optimization for safety stock: never deployed multi-tier. SRM evolved into indirect procurement, never crossing the chasm to effectively manage the relationships in direct material sourcing. Each struggled to deliver long-term value.

The innovations that I believe drove true value are few. I count four:

  • Definition of ATP. The i2 Technologies work on building ATP jump-started a needed innovation to define order promising an important pre-requisite for eCommerce models.
  • Concurrent Planning.  WebPlan (now Kinaxis) defined an in-memory cloud-based model for material substitution. The architecture enabled the visibility of changes across planners concurrently. Under Doug Cobeth, the Company was one of the first planning systems to shift to cloud-based deployment.  
  • Transportation Routing. Optimization by professors at Georgia Tech introduced the concepts of routing software, improving pooling, lane skipping, and continuous moves. Using this optimization, CAPS Logistics (now an INFOR company) improved transportation planning and network optimization commercialization.
  • Warehouse Robotics. Kiva, an early pioneer in warehouse robotics, paved the way to push material to the picker versus having the warehouse employee move through the pick, improving operations’ ergonomics and labor efficiency.

The Promise of Cloud and NoSQL

Today, I am excited about the promise of cloud in combination with NoSQL. Web 2.0 gave rise to NoSQL database structures (non-relational database technologies), which are now starting to hit their stride with early adopters. (Only 3% of manufacturers are innovators.)

For me, the promise of NoSQL is the reduction of data latency in no-code and low-code applications. (The aim is to reduce many supply chain black holes.) Let’s examine some use cases:

  • Real-time ATP. Today, the batch processing required to build a perpetual inventory is a barrier to producing an ATP signal at the speed of business. (Sucking out and processing data from disparate warehousing systems, including third-party logistics, can take sixteen to thirty-two hours.) A NoSQL approach enables interoperability for a perpetual inventory signal that is current within a ten-to-fifteen-minute timeframe. (This answer cannot be a single vendor solution like Manhattan, Oracle, or SAP since over 40% of warehousing is outsourced.)
  • Real-time Exception Management. Using NoSQL in combination with Graph and Ontological data structures allows the resolution of exceptions and the sharing of potential solutions for business leaders in learning systems. We need to design decision support so users can use the tools to make decisions. The tight integration into back-office systems with limited what-if capabilities is a barrier. I hope this approach catches on, and we step back and redefine planning. Along the way, let’s ask ourselves why we need hundreds of planners? My goal is to democratize planning, making business leaders the users, and in this scenario, the planners become orchestrators.

Note that this innovation will not come from traditional supply chain technology providers.


While the current layoffs are ugly in Silicon Valley and the downturn in cryptocurrency decimating for many, it is a great opportunity for traditional manufacturing and retail companies to hire talent from Web 2.0 and 3.0 to drive innovation with new approaches to solve the lingering business problems in supply chain. There is a need for a new wave of thinking.

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