Every Angle Blog
Supply Chain Control Towers – Reporting is Not Enough...
Ever since the dust settled from the global economic crash of 2008, business leaders have had to accept that there is a new normal; a world of demand volatility and uncertainty. A world containing increasingly complex business models made up of omni-channel, digital platforms, created by new competitors who do not play to the rules of 20th Century business. Companies like Amazon, who prowl the business world constantly searching for any market that has margins worth stealing.
It’s a world where the importance of time has never been more important. Supply chains with long-lead times, inflexible suppliers and excessive inventories find themselves at risk of finding that their plans are turned to dust, and their lack of supply chain flexibility means that before they can change direction the sea of demand they were navigating in has evaporated.
Yet - many companies are still fixated on lowering costs, on leaning their supply chains rather than developing agility in the delivery of compelling value propositions. It is a mindset that has come back to haunt many. A long lead time, minimum inventory model works where demand patterns are understood and unchanging, but leave the business exposed when that is not the case – like now.
Developing the agility to navigate the waters of this new business world requires the supply chain team to understand the flow of materials, cash and information. They need the ability to control supply to ensure things happen when they should, customers are delighted and waste is kept to a minimum. To achieve this outcome, everyone in the value chain must have access to, and be working from, the same, single version of the truth.
Yet while visibility is critically important, on its own it is insufficient. It also requires the flexibility to analyze data, ask it questions, determine root causes, investigate alternatives and understand their impact and opportunity costs - all in order to derive insights that drive action. It’s the ability to make conscious choices and understand trade-offs in order to take action that drives financial performance. Action that is coordinated and measured in an aligned way; one that is both centered around an agreed, customer focused outcome.
Running your business based on lag reports of past performance simply do not cut it.
To see the alternative in action, let’s consider the role of an airport control tower. If air traffic control operated like a normal supply chain, it would set the plan for the week (or month), and then measure its success by reporting on the condition and timeliness of the planes that had landed. What percentage landed without crashing, on time and with all the required passengers still alive? How many had we planned to land successfully?
Of course the reality is very different. Air traffic controllers have to orchestrate an airspace that is ever changing; one where it is not good enough to simply let things work themselves out, nor to focus only on one thing.
Air traffic controllers need to understand what is going on with all of the planes, from different airlines, different passenger numbers and different fuel conserves. They need to understand what planes do not have enough fuel to continue to circle the airport waiting for a slot, and which ones are likely to have a large number of passengers who need to catch connecting flights. They need to know the priority and impact of decisions.
They need total visibility, the flexibility to investigate and the accountability to take action. They need a control tower, and as a result that’s exactly what they have. However, your supply chain also needs a control tower. One that has visibility into their equivalents of planes in the air. These may be physical movements such as inbound deliveries, inter-plant movements, production orders, warehouse movements and customer deliveries, they may be information flows such as open purchase orders, planned orders and sales orders, or even financial flows.
However, most businesses only have visibility into landed planes. Many have made large investments into BI tools designed to increase the level of visibility into their business activities; and to a certain extent it has succeeded. Data has been visualized, beautified, converted into graphs and analysis – but has it added value? Do they have better results than before – or just more data?
To make a difference, this visibility needs to be accompanied with insight. For example, it is not good enough to know what open purchase orders there are. That’s just data. It is not even good enough to know which ones will be late. That’s just information. Even knowing when these orders will arrive still means we are dealing with information.
What we need to know is which of these delays is going to hurt us. Which one will cause a delay in production, or a shipment to go short. Which items are urgent, and which are just building stock. Insight enables us to make decisions – to take action.
A control tower that provides cross-process actionable insight – now there’s something worth having.
Value Chain Thought Leader
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