The Supply Chain Black Hole

February 4, 2010
5:29 pm

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….

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