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Joe Bellini discusses some of the factors driving the trends documented in 2021 Supply Chain Trends.
Q: Joe, what’s keeping supply chain executives up at night?
The thing I hear most often from all the prospects these days is that “we didn’t really know what we thought we did.” In the post-COVID world, they all went in assuming they had a certain amount of visibility and control over their supply network, and now they’re realizing that they don’t have what they thought they might have had. And now they’re trying to figure out what’s next for me? Where do I need to focus?
These trends emerged from talking to these companies that are in different situations. They’re in different markets, they have different item types which require different types of policies for demand and replenishment through network, so they’re all a little bit different. But in other respects, they are struggling with the same basic challenges and looking to take the next step to digitize and leverage new technologies.
Control Towers with AI and Prescriptive Workbenches
One of the common themes today is still the lack of visibility. Thus, there is a need for supply chain control towers. I don’t think that’s a surprise to anybody.
I think it caught a lot of companies off guard. They assumed when one supply channel was cut off, that whatever they had built with their IT infrastructure through whatever ERP systems they were using, would have been capable enough of switching over to a different supplier. Then they realized not only couldn’t they do that, but they didn’t even know who some of the suppliers were as they went upstream in the supply network!"Covid exposed a lot of false assumptions we've been living with. Companies thought they could easily switch suppliers using their ERP systems. They found they couldn't, nor did they even know who some of their upstream suppliers were!" -Joe… Click To Tweet
This is because they weren’t modeled in the system – that’s not how those systems worked. So, they all came to this realization, “We need to know what’s going on in the overall network, so we understand the risk patterns if we’re thinking about resiliency, continuity, and operational readiness.”
So, they all landed on control towers. And depending on the analyst firms, some of them are still talking about it as supply networks, like Gartner. Others are talking about it as control towers. But essentially, they want the visibility and control.
The way I look at it, there’s really two views of this that they’re searching for. One is just flow, they’ve got planning and they have execution, and they just want to know, well, how does this flow? If I look at the different roles in my company, the roles that my customers have that interact with me, the roles at my suppliers, carriers, logistics, co-manufacturers, whoever it is, they’ve got different roles, and I just want to know how this flows. How does the planning flow and how does the execution flow?
You can look at that from a control tower perspective, so that you understand your frame of reference. But then they know that nothing ever really flows as you plan.
Even if you had a perfect forecast, things happen. So, you need to understand, “How does the guided resolution work? Is there any way to make some of it autonomous?”
We hear a lot about machine learning and AI in supply chain, so it should be possible to set up some performance guardrails and have the system respond automatically. In the control tower, I get visibility, and I understand the flows. Then I get help with guided resolutions to solve some of the problems.
Why do you need AI? You need help, because these days there’s so much data that you couldn’t hire enough people to address all the opportunities that would present themselves as things begin to shift and change on you.
So, a lot of people I talk to are asking how they can use control towers and intelligent agents.
Others are thinking past that saying, “Great, I want some robotic process automation with these agents operating within guardrails for performance, but I know sometimes the decisions are a little bit bigger, a little more important. I need a workbench where the user and agents can interact in this whole area of prescriptive analytics.”
That’s what I’m seeing right now when it comes to control towers. It does depend on the maturity of the company, and on the health of the data that they have, and how much exposure they might have had already to being able to operate through a network rather than the old “stove pipe,” hub-and-spoke enterprise-centric ERP stuff. So, they have different requirements based on their level of sophistication and their current technology, but they are all eager to put control towers and AI to work.
Q: Is what you’re discussing possible for small and medium businesses? It seems like it is more appropriate for enterprise scale companies?
Just look at our business. We’ve got a lot of hubs in the network, and those are big companies – tier ones – and the bigger tier twos. But because we’re a hub-to-hub architecture, we’re not the old hub-and-spoke model where small and medium suppliers are merely a spoke in the ERP world, and where you’ve got a portal into every customer. That’s no way to work. You have to have a whole staff of swivel chairs just trying to respond to demand and supply through all these dozens of portals, everyone keeps throwing at you, even if you’re on some kind of EDI."With the old hub-and-spoke and EDI supply chain architecture, you need staff in swivel chairs to login to all these different portals and to respond to demand and supply." -Joe Bellini Click To Tweet
That’s not how our architecture works. One Network is hub-to-hub. You on-board once and that’s it. Then you’re known to everyone on the network and you can interact, you can aggregate all their demand, you can aggregate supply from your suppliers.
When a Hub comes in, one of the big companies, they bring in all their medium and small suppliers with them because they want them in the network. We have a big onboarding infrastructure that can do thousands of suppliers a day. We onboard them at no charge, because the big customer hubs are paying us, and they need them on the network to interact with them.
But those small and medium businesses quickly realize, “Hey, instead of dealing with those eight other portals, I’m being forced to deal with, I can just declare myself a hub on the network, and then have all that consolidated to me. My life is going to be a lot easier.”
That’s how it works. If you look at all the smaller suppliers and carriers in our network, there’s like 70,000 or 80,000 of them, so it’s very friendly to small and medium businesses, and they can be hubs just like the big companies.
Moving on to the next trend, you’ve got omnichannel. We saw that it was pretty imperative a few years ago to go direct-to-consumer. We had always had parcel within our logistics network, so the key would be, okay, can you provide order visibility as well, direct-to-consumer through the network, so you’re combining orders and transportation.
A lot of the traditional transportation software companies are not combining the order with the transportation, so you’re not getting full visibility. We added telematics, we added connections to IoT, whatever is required for direct-to-consumer.
This is necessary because the manufacturers are now selling through Amazon. Obviously, it gives them some nice volumes, but Amazon takes a cut, even if they’re going through one of the fulfillment engines like a Shopify, direct-to-consumer, they get the revenue and margin directly.
So, you want to be active in all channels, from an omnichannel perspective, and it’s important for us as the network to provide that capability so that companies come into the network and go omnichannel and direct-to-consumer with ease.A Q&A with Joe Bellini on the top supply chain trends to watch in 2021… Click To Tweet
A key point here is that we’re the catalog of catalogs because everyone has some representation, they want you to follow some canonical form for their catalog. Well, what’s nice is that you can declare your items once in our catalog format, and then we worry about the canonical and the APIs depending on which channel you want to offer your items through, whether you’re going direct to consumer, and have all the logistics and telematics associated with that, the order visibility and ETAs and so forth, but also if you’re moving through the Amazons or eBays or Shopify, or whatever. We’ve put a lot of focus on that area as part of the architecture.
Of course, that does vary. You’ve got a lot of, different item types. You can get food, electronics, aftermarket in automotive and industrial, so you’ve got repairs and maintenance.
Those omnichannels are working in both directions, they’re not just going out to the consumer or to the warehouse that’s consuming the item. You’ve got returns and repairs that you need to worry about too, as part of that network. They may buy in one channel and a return on a different channel, so you need to have all that tracking of the orders plus the logistics, and that’s a lot of what we’re doing in the omnichannel right now.
Q: Those returns particularly, I assume have been rising fast along with the real jump in e-commerce that a lot of people that have been reporting through stay at home and during pandemic, and people avoiding stores.
You’re exactly right. And we’re getting pushed pretty hard by the automotive and industrial companies right now. They’ve always had maintenance returns, that’s all a core part of the business. Now you’ve got the consumer saying, “Yes, that’s not what I thought it was,” and they’re sending it back.
Optimizing for OTIF
This brings me to On-Time In-Full (OTIF). You’ve got to have that tracking we spoke about, but even something as simple as on-time and in full is poorly done. Walmart, a few months ago, just sent something out to suppliers saying, “Well, if you’re not 98% on time and in full, we’re going hit you with a 3% cost of shipment charge.”
The average has been about 80%. How are these companies are going to get from 80% to 98%, so that they don’t get that charge from Walmart?
The reason why suppliers are struggling to even get close, is that a lot of them have the transportation information, the visibility to whether the dock door was available, and whether the shipment arrived on time. But that’s not enough. If you don’t have orders in transportation logistics like we do, you don’t really have the on-time in-full, because you don’t know if you had your perfect order. You just don’t know: Did I have the exact volume? Was it the right mix with no damage?"In order to effectively track and manage on-time in-full (OTIF), you need both the transportation execution data and the order details in your dashboard. Without that you are clueless." -Joe Bellini Click To Tweet
So, the order and the transportation execution data need to be combined in the dashboard, otherwise you really don’t have on-time in-full, because on-time in-full implies transportation plus order. ERP and other popular systems are not designed that way.
We talked earlier about having all those suppliers as nodes in the network as the actual hubs. The value of a true network, is that we can just give them an OTIF service for a couple hundred bucks a month, they just subscribe to the service. And now they have the data and the facts, and can defend themselves. So, if one of those companies comes back and says, “We’re going to give you 3% charge,” they can say, “Hold on here, we have this OTIF service and we’ve been tracking this, and we were not in violation. It was your fault because you didn’t have the dock door available to us to schedule.”
The Value of Real-Time Data Visibility
Q: Yes, it’s amazing how useful data and visibility are, especially when it comes to defending yourself, or giving you leverage and re-negotiating contracts, for example. Without data to back up your points, you really can’t challenge them.
Absolutely. A lot of the contracts do have flexibility built in. The primary hub will say, “I’m allowed within two weeks to change volumes and mix, you have to comply, or you will be in violation. If you can’t live with that, I’m not going to give you the contract.”
Information lag in the old systems is just killing those suppliers because they know what they’re responsible for on a change in mix or volume, and that’s why they carry the inventories they do, so that those things do start to shift, they can comply and not be out of contract.
If we’re able to completely eliminate the information lead times, which can be up to a couple of weeks as you go upstream in the supply network, as everyone consumes their share and they re-plan and then finally pass it on to the next tier.
But if you onboard onto our network in a role, you get visibility to real-time data. That’s because information only exists once in our system, it’s not like the old “store and forward” and data warehouses and data lakes. There’s only one version, a single version of the truth in our network, and it’s real time. So, if you’re a network participant supplying companies, you get visibility to that information in real time. They will have visibility to real-time changes on the demand side; it’s a lot more efficient and better for everybody.
Instead of trying to guess and build ahead so that they can be contract-compliant, they have time to react. And two weeks out before their manufacturing schedule might freeze, maybe they have a two-week, maybe one-week freeze, they’ll be able to get visibility to those mix and volume changes and it won’t be such a disruption as the bullwhip effect runs up through the supply network.
So that’s where that real-time information and the need to eliminate that information delay where it comes from within these networks.
Supply-demand matching is another trend we’re seeing emerging, and it’s pretty important. You can look at it as global in nature, because a lot of people are sourcing overseas these days.
Now a lot of the transportation, 3PL/4PL companies can tell you where your container is on the ship and maybe tell you the ETA for the container, but they don’t know what the orders are inside the container.
We do a lot of work with the military, and one of the things we did to ensure our soldiers are supplied, was to consider the soldier as a moving warehouse. Then we were able to supply him wherever he was in the world with what he needed in preparation for whatever his task might be. So, it’s important to have this notion of moving warehouses for a lot of different reasons.
It’s especially important with a container on a ship, because I can click on it and see what’s in the container, what items are in there, what volumes, the mix, and what orders they’re satisfying.
And if demand has shifted while the containers are in motion, I can go ahead and run reallocations if I need to. I can even re-direct inventory to different warehouses, or even go direct-to-consumer, if I need to. That’s because we’re really a network of networks. So, if you consider the lumpers that are doing a lot of the work in these warehouses, I can have the lumper network coordinated with my network and make sure I’m getting the right items into the right channels.
So, there’s a lot going on with supply-demand match, not only on the planning side, but also on the execution side.
Part two of our interview with Joe to follow soon.
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