The Death of Supply Chain - Jim Tompkins

The Death of the Supply Chain and Birth of the Digital Supply Network

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Jim Tompkins, CEO Tompkins International

The circle of life goes through the stages of Creation – Birth – Childhood – Adolescence – Adulthood – Old Age – Death. I believe this circle of life is true about human life, plant life and business life. Within business life, I believe the circle of life applies to how we approach problems and the resulting solutions; a new business concept is Conceived – Born – In Early Application – Becomes Mainstream – Becomes Old – Dies.

The progression from an earlier stage to death is the most interesting as it is the least predictable. In fact, for some this progression to death begins during conception and for others it does not begin until they are over 100 years old. What initiates this progression to death could be a medical problem or a tragic accident, and applies to human life, plant life and business life. 

"The supply chain is dead, and we must pursue a new beginning of a digital supply network." – @jimtompkins Click To Tweet

This article is about death as it relates to business. Although there are many views on what happens after death in human life and plant life, there is only one view of what happens after the death of a business life. All business death is accompanied by a new business life. The old quote, “Everything that ends is also the beginning of something else” is applicable to business life. This is true for businesses and business practices.

The buggy whip manufacturers to automobile manufacturing (also referred to as from horse dung to car smog) death/birth evolution is a classic illustration of the evolution of business. The evolution of Inventory Control – Materials Requirements Planning (MRP) – Manufacturing Requirements Planning (MRP II) – Enterprise Resource Planning (ERP) – Extended Enterprise Resource Planning (ERP II) is an illustration of the evolution of business processes.

In the case of supply chain, my career has spanned the entire circle of life. I was involved in the conception of supply chain and am still very active, and—in fact—am the first to proclaim that the supply chain is dying. To many this may seem crazy as just now—as a result of COVID-19—supply chain has become fully recognized as a critical component in a company’s competitive positioning. But interestingly, COVID-19 was not only the day in the sunshine for supply chain, but it too was the tragic accident that will lead to the death of the supply chain.

The Six Levels of Supply Chain Excellence

In 2003, I wrote the supply chain book, “No Boundaries,” where I presented the evolution through the six levels of supply chain excellence:

  1. Business as Usual: Organizational elements pursuing self interests.
  2. Link Excellence: The starting point for supply chain excellence.
  3. Visibility: The next step in establishing a visible presence with other supply chain links.
  4. Collaboration: Using visibility to work smarter and meet marketplace demands.
  5. Synthesis: A continuous improvement process to harness the energy of change.
  6. Velocity: The ideal state of synthesis with speed. Faster, faster!

These six levels track a business’ evolution from not performing well to eliminating boundaries within their organization (Level 2) to eliminating boundaries between the organizations (Level 4) to the total elimination of boundaries across the entire chain (Level 6). This link-by-link understanding of the end-to-end (E2E) flow through the chain was what was needed to create supply chain excellence. And, in fact, if the supply chain did not incur any significant disruption, but rather only encountered routine fluctuations, all was good.

Supply Chains Face Increasing Challenges

However, as digital commerce began to disrupt business significantly in 2015, there began to be some challenges with balancing the supply of products to demand by customers, and inventory levels had to be increased to maintain a high level of customer satisfaction.

In 2019, I documented an expanding level of VUCA (volatility, uncertainty, complexity, ambiguity) and how we were beginning to see cracks in the supply chain that were resulting in increasing costs and poor customer satisfaction. Then during Holiday 2019, there were concerns about the supply chain’s ability to hold it together.

"In early 2020, COVID-19 disrupted the supply of goods throughout the world, shut down the factory of the world, and upset demand in the western world. HOLY VUCA!" – @jimtompkins Click To Tweet

In early 2020, COVID-19 totally disrupted the supply of goods throughout the world as China (the factory of the world) was closed, and then when the supply began to flow again, COVID-19 arrived and upset demand in the western world. So, HOLY VUCA, it was impossible to even get close to balancing supply to demand and the world’s supply chains came crashing down. The tragic crisis of COVID-19 in the second quarter of 2020 resulted in the death of the supply chain. RIP Supply Chain – June 1, 2020.

Amazingly, just as many people could not accept that Elvis was dead at age 42 in 1977, many people could not accept that supply chain was dead at age 42 in 2020. The calls came from many different directions saying:

  • “The supply chain is not dead, we just need to recalibrate our forecasting and lead times.”
  • “The supply chain is not dead, we just need to pivot our supply chain to address uncertainty.”
  • “The supply chain is not dead, we just need to increase the visibility between links.”
  • “The supply chain is not dead, we just need to be patient until the new normal arrives and the supply chain process will once again get the job done.”

And just as Elvis was seen at a hotel in 1978 in a downtown Memphis, many still believe their supply chain is still alive today.

But oh, no, no. The supply chain concept of the linear flow through links of a chain in a step-by-step basis is in fact dead.

The Birth of a New Model for Supply Chains

This supply chain concept lacks the agility to respond to VUCA and therefore we must change the links in the chain to become nodes in a network. The supply chain is dead, and we must pursue a new beginning of a digital supply network. We must transition from the dead linear flow of slow, point-to-point communications to a real-time, E2E digital supply network.

"The supply chain is dead. Links in chains must change to nodes in networks. Slow linear data flows must change to real-time single view of the truth." – @jimtompkins Click To Tweet

This digital supply network is not a digitized version of the supply chain, but rather a real-time digital network with a single E2E view of the truth. It uses digital technologies to plan and execute transactions, communications and actions throughout the ecosystem to allow for the E2E synchronization of supply to demand while minimizing cost and maximizing customer satisfaction and inventory turns. 

Welcome, Digital Supply Network – Born January 2021.

Jim Tompkins