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Late-Night Thoughts on Productivity, Efficiency and Global Supply Chain Effectiveness

It is late. I cannot sleep. Darkness surrounds me as I write this post. So many thoughts in my mind.

Yesterday I signed a contract for Robert Gordon, author of the book Rise and Fall of American Growth, to speak at the Supply Chain Insights Global Summit on September 5-8, 2017 at Reynolds Lake Oconee, Georgia (east of Atlanta). We also confirmed the return of Tom Bonkenburg of St Onges, a leading expert on robotics and autonomous vehicles, along with Gita Gopinath, a leading economist from Harvard on China and India to speak on Globalization versus Nationalism and the impact on Supply Chain 2030.

At Supply Chain Insights I have reluctantly built events into my business model. In my opinion the world has too many Supply Chain events; and sadly the majority, based on my experience, are of poor quality. So why do I do this? I host an annual event because I want to drive a different dialogue and connect supply chain visionaries to other visionaries to drive new outcomes. I believe that supply chain leaders are at the tip of the spear of many important debates, and to make real progress in driving supply chain effectiveness we need to change the discussion.

A Closer Look at Productivity

I love Chapter 18 in Robert Gordon’s book. So much so, I think it should be required reading for all global supply chain professionals. While the book is about productivity in the United States, I believe that the trends which Robert paints are global. He constructs an argument that productivity from the third industrial revolution of personal computers and mobile phones ended in 2004.  I think that we need to ask ourselves why? Despite the investment of 1.7% of revenue into Information Technology, the impact on real productivity waned.

Figure 1. Total Factor Productivity and Annualized Growth Rates in the Unite States

I took the liberty of simplifying some of Robert’s data in a chart in Figure 1. As you look at the chart, I believe we need to ask ourselves the question of why was the third industrial revolution not equal to the second? Why did the impact stop in 2004? And, what can we learn to maximize the value of the fourth industrial revolution that is unfolding in front of us.

Autonomous vehicles, robotics, and cognitive learning will reduce the labor input/unit into the supply chain. Will we need planners with the evolution of the third act of planning that is currently happening? Yes, I believe so; but there will be a substantial reduction in the number (70-80%) and the required skills will change. As cognitive computing evolves will we need master data management coders? I think not. Or an order management workforce? My belief is a dramatic reduction.

As we eliminate traditional jobs, how will new roles evolve? Tom Bonkenburg argues that we need to design a job for a robotics supervisor. This is someone who can program and oversee robotic workforces. He advocates that autonomous vehicles open up new market opportunities. We agree.

At the conference we will share case studies on the Internet of Things, cognitive computing, and Hyperledger. We are in the processes of redefining processes outside-in. Our discussion will focus on the impact on the organizations of the future.

Is Efficiency a Meaningful Goal? What Are Supply Chain Leaders Clamoring for?

This week I met with a venture capitalist team that is heavily invested in supply chain technologies. The world of supply chain technologies historically was a nightmare for the investment world. E2open was the first IPO in a decade, and it failed as a public company, and went private. While there are many success stories in the Supply Chain Execution market, Kinaxis is one of the few recent success stories in the planning space. It is a tough market.

So, I welcomed the conversation with the leader of the venture capital firm. He opened the conversation with two questions: “What drives efficiency in the supply chain, and what are supply chain leaders clamoring for?” I smiled and tried to hold back my reply until he finished his sentence. It was hard. I then shared, “You have the option to roll up failed market assets and consolidate applications. This is the path taken by JDA and Infor. But, this has limited value for the market. In the consolidation, the assets lose value in the market and the supply chain buyer feels squeezed for maintenance and services revenues.” I shifted in my chair, and smiled, “Or you have the option to take a different tack and drive technology innovation. They are two very different paths. When you drive innovation, you are working on a missionary sales and marketing plan. You are building against a market need that most supply chain leaders cannot articulate. Technology is moving fast. The supply chain leader is busy. They need the help of technology visionaries to build the fourth industrial revolution. You need to build the solutions that they do not know to ask for which solve real business problems. These have little to do with efficiency (lowest cost per unit). Instead, it is about effectiveness, including time to market, driving growth agendas, and building agile value networks.” 

When I finished the air was tense. Venture capitalists invest for short-term returns. The market needs innovation, and technology visionaries need funding. There is a market quandary. Consultants should not build software. It does not fit their business model. The same holds for contract manufacturers. One option is to have _TJ49617manufacturers directly fund technology innovation as an investment. An example is Intel’s funding of Cloudera for Hadoop. Or P&G’s close work with Terra Technology to refine the modeling. Or Schneider Electric’s willingness to test the Network of Network concepts in their innovation center. I firmly believe that the next industrial revolution will not come from the vendors we know today. Instead, the journey is into a world of exciting disruption. I would like to shape it to have a true impact on productivity and global effectiveness. I hope that you’ll join me at the Supply Chain Insights Global Summit. I promise a rich dialogue, and new perspective. The conference is designed to maximize networking with other supply chain leaders.

procure-to-pay-study_mini_newtextOctoberThis week we are closing the digital procure-to-pay study. Our goal is to understand the value of the digitization of procurement. I believe we have made procurement more efficient and less effective. For example, we are more efficient at transactional processing, but have elongated onboarding of new supplies by months, and the industry is portaled to death. As with all studies, when you give to us, we give to you through open research sharing and a discussion of the results in a small virtual roundtable with other supply chain leaders. So, if you are in the middle of a digital supply chain transformation, consider participating in our Digital Procure to Pay Study. We would love to have you join us.