Recasting the Retail Supply Chain

While the advent and use of the human baby incubator is immediately evident, outside of Neonatology it is likely less well known how enormous an impact the technology has made on infant mortality rates. I recently read that between 1940 and the new millennium, the introduction of the earliest incubator and subsequent innovation has contributed to an estimated 75% reduction in infant mortality globally.

In his book, Where Good Ideas Come From, Steven Johnson writes about how this breakthrough may have been more impactful than radiology, heart surgery or such medical advances. Why? The incubator allows a baby to be protected in its most vulnerable stage of life, giving it a chance to live a full life in comparison to the incremental 10 to 30 years offered by other important medical breakthroughs.

What particularly struck me in Johnson’s book was his description of the inventive methods developing countries have used to adapt the incubator design. Prior experience showed that imported devices had proven unable to withstand the weather, usage, wear and storage realities of developing countries. The user manuals too were hard to decode locally, let alone the cost of original equipment spare parts and repair know-how.

The updated designs accommodated locally available parts from everyday components instead of expensive precision-machined incubator parts. When these localized units break down or need replacing, having in-market replacement parts like automotive headlamps to provide the heat for the incubator or a motorcycle battery as an alternate power supply, allow for quick and easy maintenance.

It’s an example of inventiveness amplifying the value stream.

A question that begs to be asked is – might it then be possible and also about time, that a reinvigorated attempt is made to apply similar principles to the retail supply chain? Could innovation and shift in thinking be infused into what’s already available to devise a simpler, yet more effective alternative to current approaches being adopted across the value chain?

The constituents—suppliers, manufacturers, logistics providers, and retailers—generally execute their individual roles well. However, there is something to be said for end-to-end orchestration. There are walls between trading partners, supported by point processes, activities and solutions, each offering to locally optimize the constituent. While not intentional, parties’ actions appear oblivious, dismissive or distrustful to the needs, strategies, motives and tactics of others that actually are critical for their own success. Few are flexible and responsive; to the end consumer’s liking anyway; while costs are spiraling.

The disconnect between supply chain constituents is an outcome of choices in thinking, structure, behavior and actions. In research conducted by respected sources, key metrics such as product availability at the consumption point, the supporting inventory across the network and taming the ripple effect of demand variability have seen little improvement over years. The pursuit of the Holy Grail is relentless, yet the target remains elusive.

The good news is the parts to represent the whole are available, as are catalytic advances and innovations. Together, representing an integrated model of the supply chain is possible right now. Consider the following:

  • Evolved thinking: Demand planning at every node in the supply chain is counter-productive. Forecasting at the point of final consumption and calculating the rest of the retail supply chain allows a common view of the end game, and supports discussions on assumptions and inputs versus fighting over which stakeholder’s answer is right. This provides all parties exposure to true demand patterns across the consumer landscape as it occurs; then applying streamlined policies and business rules. Constituents receive improved visibility that supports a holistic consideration of demand and best ways to shape and meet it on timely basis. All this is achieved while evaluating and maintaining efficient product flow strategies, optimizing cost to serve, and organizing and functioning as ‘one network’, representing a complete model of the business with collaboration on inputs and assumptions.
  • New breakthroughs: Processing massive amounts of data quickly and economically is a necessary condition to make this evolved thinking practical, economical and possible. Cloud computing, predictive analytics, self-learning technologies, in-memory processing and persona driven user interfaces that enable real business workflows are available today. Agile and responsive planning capabilities that can depict and simulate a unified model have been unleashed.
  • Structure: Key requirements to enable and sustain this shift include changes and alignment to organizational design, roles, responsibilities and accountabilities, operating models, hiring and training of sales teams, planners and operations across the network. The inherent design principle of an integrated, closed-loop system should accentuate secure, continual flow of information, enable collaboration and amplify trust between stakeholders. Early warning signs would allow for holistic review and mitigation of risks, as well as opportunities to create joint value based on “sell-thru” consumption versus “sell-in.”

The conversation is about enabling a model of the way information should flow from shelf to factory and, in turn, drive product flow and reflect real-life actions. Businesses that will see through the seemingly complex to uncover the underlying simplicity will be the ones that come out in front.

As Edison said, discontent is the first necessity of progress. It’s time for fearless, motivated leaders and forward-thinking companies to delight consumers and improve profitability, amplify productivity, reduce variability and enable more control.

  72 Comments   Comment

  1. Excellent post Shri. There are huge opportunities to re-engineer and improve supply chains when we expand our focus beyond product flow to include information flow as well. In your example, the “localization” of the incubator came about only after some lag when developing countries figured out the key idea, its tremendous value in saving lives and core design elements for the incubators (perhaps by reverse engineering). They then built their own using local parts. In today’s connected world, ideas can disseminate quickly. There is also a growing trend towards shared collaborative economies. It is not hard to imagine that soon customers, designers and manufacturers will be able to take new ideas or designs and collaborate to deliver them globally using local resources.

    Reply
    • Rich Lucas

      Excellent post and thought processes… too often many companies spend calories trying to fix or bandaid bloated, inefficient segments as opposed to a white sheet redesign. We must challenge the status quo!! Easier said than done; but still a must

      Reply
  2. Great post, Shri…

    In my experience, the tallest and thickest “walls” are not actually between trading partners, but between the merchandising and supply chain groups within a retail organization.

    Once the retailer has their ducks in a row in that regard, the message they can take to their suppliers is “How would you like us to tell you how much we’re going to buy from you and when for a 52 week future planning horizon, updated every day?” That wall can dissolve pretty quickly.

    Nice job!

    Jeff Harrop
    Demand Clarity Inc.
    Co-author of Flowcasting the Retail Supply Chain

    Reply
  3. It is very well connected and author could able to join the dotes. Simply Awesome line of thought!

    Reply
  4. Great blog, enjoyed it a lot.

    From my personal experience, the way to accomplish that kind of synchronization in the complete supply chain, two major vectors are needed :

    1. Creating “Trust Chain” – everyone should trust each other, and you know it’s real hard to achieve as the supply chains become global. Even thought supply chains tend to trust each other, it’s a whole different story with the commercial/trade departments.

    2. Having the technological solutions platform that will allow secure visibility and facilitate collaborative planning. This is the “easy” part because the technology is moving forward at an exponential rate and we should have these tools in place sooner than we think.

    So, it’s back to vector number 1.

    Reply
  5. Interesting thought and lot of things to explore in Supply chain world. Meeting the gaps and bridging the disconnect between merchandising and supply chain groups would help unleash opportunities. But all we need is Trust & co-ordination between the players.

    Reply
  6. Shri,

    Great post. I love the following statement you make…”Businesses that will see through the seemingly complex to uncover the underlying simplicity will be the ones that come out in front”.

    This statement applies even more so to solution providers like JDA. The new paradigm (whether you call it Flowcasting, or not) will require a technology that is built on the same principle as the business process it supports…true simplicity.

    If you think about it, most of the supply chain planning technology has been built and evolved to support the old paradigm – every node for itself. Therefore, companies like JDA will need to take their own advice – strip away and eliminate any unneeded complexity in the solution, which will mean obsoleting a significant portion of solutions that were built without thinking about a completely integrated, end to end process.

    Easier said than done. The company that can do that will undoubtedly emerge as the solution to enable a simple, elegant and seamless planning process from consumption to supply.

    Good luck!

    Regards,
    Mike Doherty
    Co-author, Flowcasting the Retail Supply Chain

    Reply
  7. Marina Thomas

    Excellent! This reminds me of my father – when he was a field expert for the UN in Africa. He once built a photocpier in the bush from parts of broken down vehicles and other scrap materials avaiable locally.
    Adaptation to local environments is always an essential ingredient.
    Thank you.

    Reply
  8. Keerthisekhar Durbaka

    It is a very good post Liked it so much. There are huge opportunities to re-engineer and improve supply chains when we expand our focus beyond product flow to include information flow as well. In your example, the “localization” of the incubator came about only after some lag when developing countries figured out the key idea, its tremendous value in saving lives and core design elements for the incubators (perhaps by reverse engineering). They then built their own using local parts. In today’s connected world, ideas can disseminate quickly. There is also a growing trend towards shared collaborative economies. It is not hard to imagine that soon customers, designers and manufacturers will be able to take new ideas or designs and collaborate to deliver them globally using local resources.

    Reply
  9. Laurent LOUIS

    A post that goes beyond the usual “how do I make more profit or more savings”. Like it.

    Reply
  10. today supply chain is more than supply products to our customers, it is get more information from them and work in a collaborative way in order to increase forecast accuracy and increase fill rate and instock levels

    Reply
  11. Having a place to Incubate within a corporation with a promise that in a few days or weeks the outcome will stretch into the far future and deliver benefits for years to com through strong and safe care in the early stages of development.

    Reply
  12. Mark Alger

    One of the walls that is built between partners is what I call the “Piece of the pie” wall.

    In the Logistics and Retail business, in my opinion, the margins are narrow. It seems that each element wants to protect themselves from the demands of the manufacturer who want to control the flow of product based on manufacturing preferred practices (long runs and large inventories) while being able to answer the constant cry of the ever changing voices of the consumers who wants variety/uniqueness. Manufactures seem to hold the purse strings for the whole supply chain and if the manufactures are not willing to develop trusting partnerships downstream, then a holistic process is mere theory.

    I believe that manufactures have to evolve to a more versatile process before we can truly achieve the ultimate goal of on demand supply chain. Where the simplicity is in the power of producing only what is desired instead of forecasting whims, managing large inventories and mitigating risks. Once that is eliminated, then the process will be determined by the flow of the process and not what piece of the pie you control. There will be no pie to control.

    Reply
  13. Great article! Agree that successful collaboration is the key to mitigating risk!

    Reply
  14. Good Article! This is an interesting correlation. The earlier the organisation adopts it, the more sustainable it would become.

    Reply
  15. Paolo Gesmundo

    Nice article
    I can’t agree more on the fact that good ideas need a localization. Same concepts do not apply same across the globe

    Reply
  16. Interesting – we know where we need to go the troubling part is how do we get there.

    Reply
  17. good information. Too often we spend a lot of time trying to apply and support band-aid solutions, when what we really need is to go back and re-engineer the solution.

    Reply
  18. Michaela Walker

    “Once the retailer has their ducks in a row in that regard, the message they can take to their suppliers is “How would you like us to tell you how much we’re going to buy from you and when for a 52 week future planning horizon, updated every day?” That wall can dissolve pretty quickly”….great comment! I’ll be using that!

    Reply
  19. Luis Martinez

    As I’ve read in some other articles, the key is just not having data or try to apply different techniques at different points in the supply chain, but to actually know how to use that data and get the better results end-to-end.

    Great article!

    Reply
  20. What an interesting analogy, well formed for the layperson as well as the industry insider

    Reply

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