Supply Chain's Dead End

The Dead End of “Supply Chain” Thinking

Big Data, Cloud, Network Business

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More and more, companies are looking to leverage the cloud for predictive and actionable supply network operations, integrated financial measurement, and integrated business planning. Unfortunately breaking away from old ERP processes is not as easy as one would think, largely because connecting partners in this traditional sense has locked them into the chain paradigm and blinded them to potential gains that are possible with today’s technology. In this article Adeel Najmi shares his insight on the problem. (This article was first published in Supply Chain Brain).

Adeel NajmiThe “Supply Chain” Problem

For over a decade, many companies have attempted to build elaborate networks by connecting supply chain partners and their systems. Unfortunately, most have simply re-implemented the same old business processes that have been designed for the chain paradigm. While connecting partners in this traditional sense may have resulted in modest incremental performance gains, there are huge opportunities yet to be seized. This is because most are still locked into the chain paradigm and are held back from realizing the full benefits of networks.

If a problem is inherently multi-party, then single-party paradigm solutions only create complexity and cost... Click To Tweet

There are two fundamental flaws from the old “chain” paradigm that linger on:

Single Enterprise Silos: Thinking in terms of chains has led users to build single enterprise silos linked in pairs as an afterthought.

Sequential Batch Processes: Thinking in terms of chains perpetuates batch processes with sequential waterfall information flows.

The Single Enterprise Silo

Let’s use a familiar cell phone contact management apps example to illustrate the limitation of designing for single-party silos. Most phone contact apps are designed for a single individual. If you happen to update a contact on your phone, all the people with whom you may have shared this contact previously will be stuck with the obsolete information.

In contrast, a social network app such as LinkedIn lets everyone keep their own information current, and contacts are shared by simply making connections. Individuals do not have to share updates to their contacts, as it just happens through the network naturally. There is no duplicate information that needs to be synchronized, and there are no silos to connect, as the social network app was designed for a network of multiple parties from the ground up.

If a problem is inherently multi-party, then solutions designed within a single-party paradigm create unnecessary complexity and involve excessive maintenance costs. Multi-party solutions require different information models and fundamentally different architectures, so users often find these single-party solutions unable to meet their real world requirements.

Single enterprise systems can not effectively model real world multi-party ecosystems. Click To Tweet

This is the fundamental flaw in the design of most supply chain systems today, as they are designed as single enterprise systems even though supply chains are multi-party in their very nature.

In today’s environment, just a single business transaction can involve a mix of buyers, sellers and various service providers. Yet, many systems still treat each enterprise as an island and companies are forced to integrate between these islands as an afterthought.

Sequential Batch Processing

The second major flaw is in breaking down supply chain planning into a sequence of en-masse decision silos and then throwing the resulting plans over the wall to an execution system in its own silo. Planning, execution and monitoring are treated as distinct activities running in different systems and running on a periodic cadence. This is akin to going on a journey and periodically stopping to ask where you are and getting fresh directions.

Batch processes require large amounts of data to be copied from one silo activity to another. Typically, these take several hours from where data snapshots are taken to when plans are generated and then copied yet again to execution systems. Several hours may pass by the time the batch jobs have finished, and the resulting input data is already obsolete. In today’s dynamic business environment, companies simply cannot afford to stop and wait that long. Furthermore, for global companies there is no convenient nightly batch window where the business can take a pause.

So what’s a supply chain professional to do? Stay tuned. In our next article we’ll look at how you can simplify and unify your supply chain.

This article was first published in Supply Chain Brain.

 

Adeel Najmi
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