Tag Archives: reality

AI This. Not So Fast.

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AI This. Not So Fast.

AI This. Not So Fast.

Grounded during this pandemic, and unable to interact with clients in person, I try to write 3,000 words a day. Morning after morning, fueled by good black coffee, I type away. I share insights, based on research, for the supply chain leader. I write for this blog, craft reports from research for our newsletters, create blogs for Linkedin, and build articles for Forbes. I am also developing a framework for my new book. Stay tuned.

Frequently, when I post about an issue, a well-intending consultant or an aggressive business development executive will tout the evolution of the autonomous supply chain as the answer. The comment is usually something like, “Implement RPA or AI to solve this problem.” Or, “If you need an answer, implement my solution.” When this happens, I sigh. This type of response is just not helpful. Everyone tries to be a cool kid with over-zealous comments on posts, but unfortunately, there is no truth in advertising in the supply chain market. (If the industry were grounded in truth in advertising repercussions, there would be far fewer signs in the airports from consultants and technology providers.)

Background

The autonomous supply chain is a vision, but it is not today’s reality. I find in my Supply Chains to Admire research that 96% of companies (when compared to their peer groups) are unable to drive improvement while delivering higher performance year-over-year on a balanced scorecard of growth, inventory turns, operating margin and Return on Invested Capital (ROIC). I define supply chain excellence as year-over-year performance better than the peer group on this balanced scorecard. Ecolab, L’Oreal, and TJX are exceptions. They did it. Each company ranks in the 4% of companies beating their peer groups.

Shifts in Technology

Data science and cloud-based delivery offer promise, but supply chain planning is morphing slowly. …and at the edges. No technology company is attacking supply chain planning at the center.

Let’s celebrate that over the last two years, there were four significant acquisitions by traditional supply chain planning providers to deepen analytics capabilities:

  1. 07/2018 JDA purchases Blue Yonder (Purchase price confidential.)
  2. 11/2017 Logility acquires Halo for 9.3 M$
  3. 10/2019 Llamasoft merges with Opex (Amount not disclosed.)
  4. 06/2020 Kinaxis buys Rubikloud for 60M$

Examining The Current State

The analyst mindset is to track software evolution by taxonomy where like solutions are grouped, named and tracked. Supply chain planning is a subset of the decision support technology taxonomy. Other forms of decision support include revenue management, trade promotion management, cost-to-serve, and network design. Now in its fifth decade of evolution, supply chain planning is starting to change. The shifts are happening slowly at the edges. I am celebrating, but my hope is to drive seismic changes from the center. What we have now is not good enough, and I have my fingers crossed that COVID-19 will drive a significant and positive shift by highlighting the deficiencies.

Read more at AI This. Not So Fast.

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Resilient Supply Chains in a Politically Uncertain World

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Resilient Supply Chains in a Politically Uncertain World

Resilient Supply Chains in a Politically Uncertain World

The Resilient Supply Chain

Today, the supply chain world iterates faster than at any other point in history. Disruptions – whether related to climate change, trade wars, or a no-deal Brexit – are a given, and black swan events aren’t surprises anymore. We know that the next event is coming fast and supply chains will have to react. So why have we not burned that understanding into our business DNA? Why are we still trying to leverage strategies developed 50 years ago and technologies unaligned to today’s needs?

What I mean is that every supply chain, everywhere, should be prepared at a moment’s notice to shut down, pivot, and spin up whatever operations it needs to, wherever it needs them. I’m of the strong opinion that if supply chain professionals reframe their thinking and look at uncertainties as opportunities then they will thrive. This thought came to me while reading an article on US trade disputes with China, or maybe it was an article on Brexit.

While I understand how conflicts arise, I have a hard time accepting why they are as adversely impactful to supply chains as they are. Contingency planning should cover for every possibility, and the overreliance on any single supplier or region is not smart business anymore. If the year was 1492 or 1839 or 1979, I could understand the desire to optimize a linear supply chain. That’s not the case today. With the advent of cloud technology and the reality of global markets – fallout from any one country’s instability or trade war can be mitigated.

Three Legs of a Resilient Supply Chain:

  1. Availability: For systems to work they need to be ON. As long as power and cloud servers exist, then a supply chain cannot be existentially threatened.
  2. Operational Flexibility and Configuration: Facilities available on a single network eliminate siloes and allow for customized configuration.
  3. More Control: Control is based on visibility, on knowing and seeing exactly where inventory is all the time.

What About Lost Goods?

Declare them lost, minimize losses, and deal with the repercussions.

Over the last two generations, western economies relied on an uncompetitive market to produce goods. Since 2010 the world has effectively been relying on an industrial monopoly.

It may have seemed like a good idea to rely on a single, cheap source of manufacturing fifty years ago. However, by choosing this path, countries damaged their own manufacturing economies.

They also exposed themselves to the exclusive possession and control of that same, supplier. That’s when the system naturally started to collapse. And that’s when the world began to see price-fixing and currency manipulation, among other signs of deterioration. What would you do if you ran a monopoly?

A dearth of suppliers is what companies are now contending with. There is no easy way out.

Read more at Resilient Supply Chains in a Politically Uncertain World

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Supply Chain News: Retailers Rethinking Inventory Strategies

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Are we starting to see new thinking in retail relative to inventory levels?

The reality is that somewhat under the radar, retail inventories have been rising. The inventory-to-sales (ITS) ratio measures the amount of inventory held as a percentage of one month’s worth of sales. As can be seen in the chart below, while the retail ITS is highly seasonal, the trend since 2010 is definitely up. Now, some stores are once again trying to slay the inventory beast.

For example, Tom Shortt, Home Depot’s senior vice president of supply chain told the Wall Street Journal his new message to the stores is “Get comfortable with days of inventory, not weeks.” The retailer is targeting sales growth of nearly 15% by 2018, but wants to keep inventory levels flat or slightly down – quite an accomplishment versus how retail has historically managed sales growth and inventories.

It is a shift happening across the retail sector, as companies try to figure out ways to profitably serve the growing needs of on-line shoppers while making their networks of brick and mortar outlets generate more cash.

“Chains must predict whether demand will come from the internet or a store visit, and whether they’ll ship online orders from a distribution center or a store,” the Wall Street Journal noted. “Every move of inventory is an added cost that eats away at already thin margins.”

As we reported in the Retail Vendor Performance Bulletin recently, Target stores announced earlier this year it was replacing its existing forecasting and replenishment software with in-house developed applications to manage the complexity of inventory deployment and fulfillment across its omnichannel network.

Read more at Supply Chain News: Retailers Rethinking Inventory Strategies

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