5 Supply Chain Predictions For 2013, The Year Of The Network

 
Mark Woodward is CEO of E2open, a provider of supply chain management software and services.

Mark Woodward

It’s that time of year when we celebrate the fact that next year is a clean slate and all is possible. It’s also the time when we propose our budgets and very quickly realize that we’d better focus on what’s important, as that’s where the budget will inevitably go. Or, as the beloved Judge Smails of Caddyshack — an amateur CFO (little known fact)— says to his grandson Spalding, “You’ll have nothing—and like it!”
Overarching Theme for 2013: This will be the Year of the Network
Stanford Professor Hau Lee says that competition is supply chain versus supply chain. With today’s prevalent business model of brand owners embracing trading networks of outsourced manufacturing and distribution, one could argue that it’s now trading network versus trading network. The secret to success here is how well brand owners and their trading partners can collaborate — moving beyond the archaic one-to-one manual sharing of spreadsheets to achieve one-to-many and many-to-many visibility based on real-time information across a network that provides a single source of truth.
Harnessing the collective brainpower of a trading network’s supply chain practitioners and leaders provides a formidable competitive advantage and the kind of agility and flexibility needed to handle an increasingly volatile world. This is the derivative factor – the speed at which the trading network can adapt to a new opportunity, business model, or product introduction. Smart people, all working together with timely, accurate data on a platform that coordinates business processes across the global network can make faster, better decisions that provide more profit for them and more satisfaction for their customers.
Looking into the crystal ball, there are some interesting supply chain trends that we here at E2open see on the horizon for 2013:

• Fast Data Will Become the New Big Data

Big Data is everywhere, and we deal with our fair share in today’s complex manufacturing environments. But what is perhaps more daunting is Fast Data – that is, the incessantly changing positions of forecasts, orders, shipments and inventory. This challenge is complicated enough within the virtual enterprise, and becomes downright overwhelming in the context of global trading networks – with multiple tiers of partners trying to manage information changes across unique operating systems.
In order to reap the benefits of Fast Data, all relevant participants – within the organization and across the global trading network – need to have access to a “shared version of the truth,” plus the ability to act on this information in real time. Put differently, Fast Data must be collaboratively managed – shared; agreed upon in terms of source, authenticity, and timeliness; correlated across relevant roles and processes; and understood within the context of actionable opportunities.
In the sea of information flying around the network, where is that one indicator that has “turned red” – that will ruin our day, week, or quarter unless we identify and resolve it quickly, intelligently, and cost-effectively?

• The “Social Supply Chain” Will Transform the Way We Work

When it’s doing what it’s supposed to, the supply chain function is collaborative – people (and companies) working together to meet the needs of their customers. It’s also profitability minded, which doesn’t always “play nicely” with real collaboration across enterprises.
But the ability to be both collaborative and profitable will take center stage in 2013 as two areas of social networking move quickly into the supply chain space.
First is collaborative problem solving. Over the next 12 months, online partner communities will create virtual war rooms where teams can solve problems quickly and collaboratively. They’ll also create online repositories to document processes and decisions for future reference and organizational learning.
Second, demand sensing and sentiment analysis will move upstream from Marketing to Supply Chain, generating earlier awareness of trends (either positive or negative) for better preparedness and responsiveness.
Companies that embrace social tools will have another dramatic advantage. As the supply chain talent gap worsens, the more socially-minded companies will be able to attract the best and most innovative minds of the next generation—a generation that has always approached learning and communication in the context of social networks.

• Supply Chain Control Towers Will Transition From Concept to Adoption

The buzz around Supply Chain Control Towers has been building for a while now; I predict that 2013 will be the year that Control Towers move from concept to reality. This transition has already begun, and it will continue to gain momentum as practitioners adopt a more accurate understanding of the concept: a Supply Chain Control Tower it is not a “cure all” product that can be purchased and installed; instead, it is a core competency in end-to-end collaboration and process management that facilitates good decision making based on the best available information.
Within this framework, Supply Chain Control Towers should provide real-time transparency and exception management, tools for operational and financial evaluation of potential course corrections, and an integrated system for decision execution. This type of “core competency” requires a dynamic combination of people, processes, and technologies, and it is developed (and continuously improved) over the course of months and years—not days. That being said, 2013 is the perfect time to begin the Control Tower journey.

• Dynamic Cost Will Transform Decision Making

Historically, decision making and performance management have been based on standard costs. These costs are usually provided by the Finance organization and are updated infrequently (i.e., annually or when a new product is introduced). The challenge to effective management is that the actual costs of products, as delivered to individual customers, are rarely “standard.”
A better measure is total landed cost, which incorporates shipping and distribution costs. But these costs themselves are often based on standards or averages, despite wide swings in actual costs in response to the supply of, and demand for, transport, the cost of bunker fuel, or other factors.
2013 will see a shift to greater use of dynamic costing, based on real-time visibility into granular information on product production, transportation, and distribution costs. When companies can see the actual costs of delivering specific products to particular customers building in real time, they will be well-positioned to make the right customer-specific tactical decisions and to enable more profitable segmentation strategies.

• Risk Management Will Move from Static to Dynamic

Most risk management modeling today involves offline contingency planning based on statistical likelihood of occurrence data. Over the next 12 months, I predict significant movement away from the relatively static realm of risk management theory towards the “real-world dynamism” of today’s integrated supply chain business models.
Specifically, the next phase of risk management will operationalize risk identification and reduce the time it takes to respond intelligently to disruptions across the trading network. By incorporating contingency plans into dynamic operating models with network monitoring, practitioners will be able to make better decisions within the execution window. Risk management tools will move beyond identifying weak links and ginning up responses to hypothetical problems to providing the information and communication platform needed to assess and manage situations as they occur—mitigating downside when the inevitable hits the fan.