The Sensing + Intelligent + Social Supply Chain: Why do you need it?

• by Trevor Miles
• Published November 15th, 2016
• Supply Chain Visibility and Faster Decision Making

My earlier blog talked about what the Sensing + Intelligent + Social Supply Chain is. So why do you need one? If you’re experiencing supply chain pain points around lack of visibility, slow decision making, or poor collaboration, these may be the symptoms that will help answer that question.

Most existing planning solutions were developed in the 1990s. At the time, they represented big improvements in planning capacity. But, most companies still had supply chains that were almost entirely housed within their own four walls. That’s not the case anymore. Supply chain globalization has exploded. Market needs have expanded exponentially. Companies have surpassed the capabilities of these dated solutions and need full global supply chain visibility.

Today’s supply chains often have data housed in multiple locations. These can include multiple enterprise resource planning (ERP) systems, product life cycle management systems (PLM), ad-hoc databases, and most commonly, mass amounts of Excel spreadsheets. The inherent latency in these islands of data reduces the speed and effectiveness of decision-making. More time is spent collecting and consolidating data than making planning decisions.

No matter how many systems are used, or how much data is available, if decision-making isn’t rapid, the quality of those decisions will suffer. Planning delays lead to higher inventory levels, lower capacity utilization, and subpar on-time delivery performance. As companies become leaner, it becomes clearer that decisions must be made more quickly.

Obstacle 1: Supply Chain Siloes

However, organizations siloed in traditional functional work groups are actually impeding the flow of their own information across the network. To overcome this, there’s a great need to bring people together in a collaborative environment. That would allow them to identify and understand business tradeoffs impacting supply chain performance in time to have predictable results. An example would be delivering an order on time at the expense of margin. Sales would favor on-time delivery, while finance would likely prefer maintaining a better margin. The reality is, there’s never going to be one perfect answer that doesn’t involve some level of tradeoff across conflicting metrics and objectives.

Obstacle 2: Limitations of Current Enterprise Systems

Another key obstacle many companies need to overcome stems from limitations of the current enterprise systems. As noted earlier, ERP and advanced planning systems were developed in the ‘80s. Their primary purpose was to manage manufacturing and movement of goods through an integrated enterprise—indicative of the time when most manufacturing was done in-house. While these solutions offered a wide span of control and management of data, the expectation was that all the required data would be available within the application.

But the reality is that today’s distributed supply chains have large portions of the network that are external to the organization. That means data associated with those sections is external as well. The result is a need for integration between modules, but also between companies with their own ERP systems and data sources. Most existing tools are failing. They can’t effectively connect, synchronize and harmonize all of the disparate data.

Compounding the problem are mergers and acquisitions, which only add to the number of ERP systems used across the organization and the value chain as a whole. Some companies are able to consolidate to a single ERP system, but even then likely require multiple modules for functions like consolidating supply and demand, supplier and customer collaboration, reporting, and scenario management.

The Sensing + Intelligent + Social Supply Chain Solution

But technology isn’t the only roadblock to making better decisions faster. Bringing a social aspect to the supply chain allows for human judgement to be brought into play. There is a definite need to involve informed people. Hence why it’s an integral part in a Sensing + Intelligent + Social Supply Chain.

A supply chain disruption can rarely be resolved in the company’s best interest by addressing a single metric. Functional metrics, tied to just one department, often conflict with those of other teams. Combining the knowledge and experience of people from different organizational groups is the optimal way to resolve supply chain conflicts. Human judgement is needed to reach a consensus decision and balance tradeoffs.

The personal touch is also required to recognize soft constraints, like deciding to pay to expedite a shipment in order to keep a key customer happy. Some things just cannot be accurately represented in an optimization engine. Technology is evolving, but it hasn’t reached the level where it can completely replace human judgement. That judgement, supported by hard facts, is how businesses can best evaluate several ways of resolving the problem at hand and reach a viable solution.

But no one person is likely to have the right answer 100% of the time. The ability to identify others and bring them into the evaluation process is critical—both to validate the proposed strategy, and provide additional insight.

While it’s crucial for stakeholders to collaborate and evaluate alternative solutions, it’s equally important they do so in a manner consistent with financial and operational corporate objectives. This ensures consistency of decision making. It also gives front line managers a clear way to understand the effects of decisions on their own metrics, and of greater importance, the effects of their actions on corporate goals.

So why do you need a Sensing + Intelligent + Social Supply Chain? It’s the way forward to a collaborative and cohesive approach to supply chain decision making. By bringing together the right people at the right time, action can be taken in minutes, driving significant improvements in the supply chain.