As part of our Expert Insights series, Supply Chain Nation sat down with Rich Sherman, a leading supply chain industry consultant to discuss his book, Supply Chain Transformation: Practical Roadmap for Best Practice Results. In Part 1 of our blog Rich discussed how to create a “culture of transformation.” In Part 2, Rich shared how breaking the rules can create a smart supply chain network. In this final installment, Rich discusses the enabling technologies for supply chain transformation.
SCN: You have stated that technology innovation is critical to supply chain transformation. Which technologies are key and why?
Sherman: We are in what I call the “Connected Age” wave of technology change. I talk about auto-identification on steroids— it’s beyond barcoding and even RFID, its sensors, recorders, transmitters, telematics, visual recognition, and others. It’s all of the capabilities today that enable us to collect data in real time, and it’s beyond identification data to include mobility, robotics, big data, cloud computing and business intelligence. We are always on and always connected.
In the cold chain, for example, we’re collecting real-time data on the temperature in the trailer or container because we have to report on it. We’re capturing the genealogy and/or pedigree of foods and pharmaceuticals because the Food Safety Act, FDA rules, and other regulatory bodies require us to comply with those temperature controls and quality requirements for traceability. We’re also tracking products to combat counterfeiting. All of this is creating a new level of data. If you add data-collection capabilities such as visualization and optical search, you may not need a barcode ID anymore. You can just take a visual image of the product, match against a database of images and recognize the object based on visualization. We’ve also got robotics in logistics now. We’ve got driverless forklifts based on visualization and optical technology. There are robots that perform “goods to person” picking. And, there are robots for loading and unloading trailers.
Mobility is creating some interesting opportunities and a lot of new and valuable data. It used to be that point-of-sale data was important, but that’s a lot of data. Then we had the point-of-purchase data where we’re starting to capture some information at the shelf level, and that’s more data. Today we have “point-of-demand” data. You’ve got mobile users and Internet searchers, so you have data on the individual consumer — at the time they’re actually looking, where they’re located, and what products they are searching for. That’s a lot of consumer-intent data that I can use in my market research and demand sensing applications. More companies are building social network trending and information into their planning and responding applications. Converting this big data into relevant, actionable data is really going to be an important issue. New business intelligence tools are emerging to support analytics of the new data. If you add that in with all of the robotics and 3-D printing implications, we can envision some big changes in the markets and operations on the horizon.
When we talk about “business as usual has been cancelled,” we mean that technological change is driving market transformation much more rapidly than ever before. It took a long time for word processing to eliminate typing pools and typing as a career. It took a while for deregulation and computerization to eliminate all those rate clerks and freight-raters. It took a while for financial systems to wipe out all of the financial clerks and manual transaction-posting. In the near future, we’re going to start seeing — in reaction to the driver shortage — vehicles that drive themselves, or possibly be driven remotely like drones. That’s going to change the need for truck drivers. When we look at robotics and automation, the requirements for labor in the warehouse are going to change dramatically. The decision-making skills are going to change dramatically.
Bob Sabath (Trissential colleague) and I recently wrote an article for Material Handling & Logistics where we talked about having “gamers” in the warehouse. These associates may sit with 3-D visualization and move forklifts and products virtually from a control room not physically in the warehouse. We’re already seeing lights-out warehousing in Europe based on their physical constraints. So these changes are inevitable. The problem is that these changes are going to creep up on companies faster than their capability to adapt to them if they’re not in a transformational state, if they’re not in a process-improvement culture already. There are companies that are going to be caught by surprise.
The fact is that all companies change, transform over time. The leaders proactively and intentionally transform their organizational capabilities to create advantage. The laggards are unintentionally dragged, kicking and screaming, into transformation by default. And by then, are too late to take advantage of the opportunity and may not even survive the change.
Cloud computing is another emerging technology that begins to level the playing field. I don’t have to be a Fortune 100 Company to afford the business-decision support capabilities that an IBM Watson, for example, offers to me. IBM did not create Watson to win Jeopardy; they created Watson to develop intuitive processing capable of solving really sophisticated problems, and that capability is available in slices from the Cloud. So companies, both small and large, can afford to buy the processing power they need at the time they need it without having to go through a full implementation. Software and service on-demand and social media are all going to change markets and the competitive landscape across industries.
Finally, what this leads to is more extensive, affordable business analytics and better decision support. We’ve got location-based services, which via GPS are going to allow us to pinpoint demand at the time it is created. Mobility provides us new point-of-demand information and new consumer insights. We’ve got business intelligence and decision-support applications that take big data and turn it into relevant information. And we’ve got the mobile delivery of actionable, real-time information. I refer to this concept as a smart supply network, and it’s not too far off. Companies must transform themselves to take advantage of the integration between planning and execution, and real-time decision support, and leverage forecasts that change as demand changes. We’ll no longer just do a weekly forecast, we’ll be able to do an hourly or daily re-forecast and adjust inventory and schedules to synch up with demand variability.
We’ve got to be able to plan at the same time we execute because it’s not all about being demand driven–if you’re demand driven, you’re probably being driven crazy. Demand is highly variable, highly uncertain, and changes on a daily basis. The key is systems and decision support that integrate planning and execution so you can effectively respond to that change in demand, and re-plan so that you’re not blowing up the entire supply chain.
We are not far away from seeing true synchronization of the different business cycles and material movement across an entire supply chain, and, gaining the elusive “supply chain visibility” along the way. It’s more than a “control tower.” It’s a supply chain information, material, and cash traffic control system. And if you do that, you’re going to be in leader city for a long time, because the key to leader city is collaboration. So the biggest transformation we have to make is to collaborate internally and externally to synchronize and orchestrate all of these activities in the supply network to meet customer demand. Whether it’s industrial, commercial, or consumer, we must synchronize all of that activity to bring the supply to the customer at the time they need it, and at a price that’s affordable.
SCN: Thanks, Rich, for all those great insights. Readers can access the full interview at Supply Chain Nation.