newclothes

The Emperor’s New Clothes

Network Business

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I read with great interest the recent blog post over at Forbes “Why the Supply Chain is Dead”. The author argues that the old concept of a linear supply “chain” is obsolete, and that in the future trading partners will coordinate via networks.  One part I particularly liked:

 

Chain implies a plodding, step-by-step process where discreet elements must be tied together one by one, without anything happening in parallel. Can you imagine a company working like that?

Of course not! The real world has never been a “chain”. More so than ever before, it’s a complex web of connections and relationships—in other words, a network with a common goal of fulfilling consumer demand in the most profitable manner.

It’s always nice to see one’s vision for the future validated by someone else, and when it’s validated by a competitor it’s even sweeter (the author was an SAP employee).  Yet while the old-guard enterprise software companies are only just beginning to recognize the inevitability and wisdom of the network approach, here at One Network we had our own light bulb moment over 10 years ago when we created a platform that was designed from the ground up to connect thousands of trading partners together in a single cloud –based network, all oriented toward the end consumer.

If you’re really serious about moving from a chain to a network, I highly suggest you take a good long look underneath the “clothes” your potential technology vendor is wearing. New labels and product names are a good place to start I suppose, but slick marketing can only get you so far. Moving from a chain to a network requires a fundamental shift in thinking and a completely new technology approach.

Thus, given that One Network has a bit of a head start in this area, I thought I’d relay some of the lessons we’ve learned from transforming chains to networks. Your own network project will be unlikely to deliver the expected ROI without the following:

  1. Comprehensive multi-enterprise platform: For most companies, getting POS data is as much of their network as they can see; yet they are leaving so much value on the table! Most of what determines your profitability exists outside the four walls of your enterprise. Today, most technology vendors focus on one part of the network at the expense of another—leaving out, say, logistics. This is a major flaw as critical information resides with your logistics providers. Your network should look beyond any given enterprise and allow all trading partners—suppliers, retailers, and logistics providers—to work off of the same real time demand signal on one multi-enterprise platform and collectively fulfill that demand.
  2. Seamless, real time “collaboration”: Last week in Supply Chain Brain, I explained “Why Traditional Supply Chain Collaboration is Dead”.   Let me add a few more specific thoughts about “collaboration”: Today collaboration typically means negotiation with suppliers in the form of an (at best) weekly meeting that attempt to determine requirements at the national level.  Can they do it store-by-store? Forget about it.  Instead of real time POS data are they using stale, week-old inaccurate shipment forecasts? Probably. Your network should enable seamless relationships among trading partners whereby daily demand at the SKU level is automatically computed into orders and order forecast for downstream suppliers and logistics providers. No need for another meeting, more negotiation, or even human intervention. This kind of collaboration is happening today, so don’t be afraid to demand it.
  3. No Divide Between Planning & Execution:  ERP, MRP, DRP…Given the millions of dollars spent on marketing smoke screens, I’ll understand if you’ve forgotten, but I’d like you remind that the “Ps” in those acronyms stand for “planning”. Sure, planning is important, but what about execution? Your plan is only as good as your ability to execute it. What good is the ability to see across your network in real time without the ability to rapidly react to events?  What I’m talking about is being able to plan and execute in the same system. For example, when demand suddenly increases, your network technology should recalculate the requirements for every trading partner and give them the ability to immediately, automatically, and collectively execute off of those requirements. Or when a supply shortage happens, trading partners should have instant visibility to impact and make intelligent allocation decisions across the supply network all the way down to the store-SKU. Human planners could never manage to keep up with all this data (especially if you’re managing this at the store/SKU level). Thus, your network technology should recalculate demand and requirements automatically while executing across your supply network to meet it, saving people for the difficult exceptions. 

So how do you enable these capabilities? Well, reverse engineering existing technology that has been oriented towards functional management of a single enterprise is virtually impossible. Because of this, existing enterprise software companies have no choice but to bolt them on top of their existing systems—increasing the amount of complexity and virtually ensuring a systems integration nightmare. Saying the words “network” doesn’t mean you can do it.

What kind of clothes is your vendor really wearing?

Greg Brady
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