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I enjoyed reading Bolaji Ojo's blog post, PAPP: Sixth-Sense Solution for the Supply Chain, and it got me thinking about premonition and what that means for the supply chain executive.
Now, I really don't believe that there are people who can see the future, but I am confident that thoughtful analysis can prepare an organization for probable future scenarios. What do I mean by probable future scenarios? I'm glad that you asked because it is core to my message and has to do with taking history, trends, and evolving current events into consideration while driving defensively.
The ability to visualize probable future scenarios has everything to do with connecting the dots, in the sense of: how many dots, or data points, does it take before a pattern emerges? That pattern can be the picture you need to see or it may point in the direction of possible future outcomes. I say possible because data is capricious and over the short term can quickly change direction.
I've heard it said that the past is a prelude and a precondition for the future and I agree with that. In the world that we experience, most events evolve in the context of a causal continuum — sometimes with almost imperceptible movement and at other times with the speed of electrons flying through an integrated circuit. We tend to miss the importance of events that unfold very slowly and to underestimate the significance of those that occur with blinding speed before our eyes.
Climate change is an example of the impact of slow change, it went unrecognized for so long because the day-to-day change in reference point for most people was indiscernible. Social media is an example of rapid change that has profoundly changed marketing, the way we access information and even relationships. It has fostered and carved out new industries that were barely imaginable just a few years ago and has impacted world events.
History, like time, is an arrow that travels in one direction. Being sensitive to history, on both the large- and small-scale, is critical to not only risk management but to all levels of executive management. What is the short and long-term history of your industry, your competitors, your products, the countries and regions where you do business? What is the history of the natural disasters that have impacted the regions where you operate? What is the geopolitical history and working relations among the nations and regions where you operate?
Trends are a subset of history in that by their very nature they have occurred in the past. However, history is what gives context to trends and allows you to calibrate your perspective taking a macro or micro interpretation of the significance of changes in trend data. Understanding trends in the context of historical perspective is essential to effective problem resolution, forecasting, and business continuity planning.
With seven billion people, it is a big world, but getting smaller daily. No one knows this better than the supply chain professional. The Internet, globalization, and ease of travel has shrunk the world and brought the effective proximity of all global events to each of our doorsteps. And that brings me to my next point — the importance of understanding the significance of current events. As I write this, my Samsung smartphone has alerted me of a breaking CNN news story — an estimated 8.0 earthquake has just been reported off the Solomon Islands in the South Pacific.
I have to know if and how an earthquake in the Solomon Islands affects my supply-chain, and I need to be sensitive to the implications of another tsunami in the Asia-Pacific region. I have to follow political issues in the countries where my supply-chain operates; be aware of the dangers associated with international hostilities and track issues as diverse as technological developments and social issues. If I'm not aware of these developments, I am missing out on important information that I need to connect the dots in my evolving supply-chain landscape.
No matter how fast you are moving your supply-chain forward, you must drive defensively. By this I mean that you should maneuver with a high degree of situational awareness, avoiding or mitigating risk whenever possible. The concept of situational awareness is very relevant for today's supply-chain leaders and provides a number of lessons that can be utilized at both the tactical and strategic level. For example, are you aware of your organizational vulnerabilities? Have you developed protection strategies — what we would refer to as risk mitigation strategies — for each environment where you operate?
Do you have a thorough understanding of the terrain before you step into it and do you have a well-thought-out exit strategy for each one of your major supply-chain engagements that provides flexibility and enables you to leverage other options? Are you developing your supply-chain foresight to avoid dangers, anticipating and planning for all possible negative outcomes? Are you maximizing technology to improve your decision making? The military has expanded this last point in what is called battlefield situational awareness, using technology to track the dynamic changes on the battlefield to maximize the effectiveness of force deployment. For the supply-chain manager, this is equivalent to the control tower technology that is revolutionizing our industry.
I will conclude by reaching back to Bolaji's post where he referenced Andy Grove, the legendary CEO of Intel, and his book title, Only the Paranoid Survive , and ask you if a little paranoia is a good thing to have with regard to supply-chain leadership.
I welcome your thoughts on this.
I think every business.needs a good number of qualified and passionate people to learn about the history and to plan for the future, supply chain strategy should always take into account all the possibilities that could jeopardise the normal situation.
Gerry: I think experience is all you need to develop a sixth sense. In spite of technology advancements in supply chain management, you can't always trust data. We all know that there has been double-ordering in the past (we might welcome that these days…) but even a casual observer knows that when disaster strikes, people hoard. Understanding human nature is that qualification you can't really quantify, but I'll bet more often than not an experinced buyer has saved the day for an OEM
Gerry, there is no doubt that past experience will be an added advantage to create a sixth sense in supply chain. Forecasting can help to make the decisions more accurate. But I personally feels the sixth sense may not be feasible always, especially with unexpected calamities.
FreeBird, Experience gives one the mentality of expecting the unknown and preparing for the unusual. It can offer quick reaction to events less experienced individuals are seeing for the first time. That's the positive part of experience.
Experience has its negative side, too. It can make one reliant on “trusted and tried” methods and processes that may be ineffective for new situations. Plus, experience has been known to make people believe they've seen it all.
Rich, That would be biting off more than Amazon could chew. UPS at its current market capitalization ($78 billion) may be more than Amazon could handle at its current cap ($118 billion.) Of course, strange things happen all the time but this is one that belongs in the realm of dreams. As you said, there's always the USPS but does any one single company ship anything near what Benjamin Franklin's creation serves?
While we are talking about who is controlling the supply chain or who is at the heart of supply chain, many changes are happening on the component manufacturing front.
With the advent of 3D printing technology the whole component manufacturing and distribution business is likely to undergo a sea change. The OEMs may have to just get the component digital data to print the required quantity on their in house 3d printers as per their production requirements
Even the product integrators will be able to 3D prinit their subassemblies in house and assemble their own products
If this happens many a chains in the supply chain will vanish and a much leaner supply chain will remain – This is what I predict
Prabhakar, You are right that 3D printing will revolutionize the supply chain and may be disruptive also. However, don't forget that OEMs don't really want to or need to be involved in manufacturing whether it is 3D printing enabled or not. You still have to handle and deal with raw materials and other inventories. The concept of minimal touch hasn't gone away and distributors facilitate this for their customers.
It's unlikely we can cut distributors out of the business. They are and have proven they are adaptable and willing to change to better serve their clients. In fact, they've grown even as outsourcing increased and their ranks have reduced dramatically because fewer companies could offer the extended services OEMs want.
We can expect significant changes in the supply chain but we should also anticipate seeing distributors remaining central to the system because they touch all players.
Rich, One of the more likely advantages from 3D printing that hasn't been touched upon is the opportunity to reduce the incidence of inventory obsolescence. I think you can't overemphasize this and it may help reduce the existence of fake products in the supply chain. It probably won't eliminate counterfeiting but parts failure may be reduced.