Want a Fast-Response Supply Chain? Facilitate People-to-People Communication

What is needed [in a dynamic business environment] is a supply chain of rapid response…Many people who work in the materials business [and] talk about supply chains and the speed of supply chains [have historically] thought about systems talking to systems across enterprises and about processes. But in reality, the speed of the chain is not really related to the systems used by the various companies—it’s all about people, and people talking to people.

That is my favorite quote from a presentation given by Tony Martins, VP of Supply Chain at TEVA Canada (a subsidiary of TEVA Pharmaceuticals), in a August 2011 Enterprise 2.0 webcast sponsored by Moxie Software. You can watch the full webcast below; Mr. Martins’ presentation begins at 23:27.

Mr. Martins goes on to say:

It’s amazing how much more we get out of working on [facilitating and enhancing] people communication across multiple operations, [the] synchronization of activities through people, as opposed to working through systems; the speed you accomplish is immensely greater than if you try to do it by connecting systems. And this is particularly because the world of information systems and structured processes is the world of predictable things, [of] things occurring as they are supposed to occur. But in the space where things that aren’t supposed to happen happen, systems really can’t respond [and] provide speed; it’s there that we turn to people and the capacity that people have to quickly respond to a situation.

In TEVA’s case, by enabling “spontaneous association” — or as Martins defines it, “the capacity that a group of individuals of multiple skills have to spontaneously combine their skills to respond to a problem without being directed” — the company reduced manufacturing cycle time by 40 percent in four months and improved lead time from upstream suppliers by as much as 60 percent. The next step for TEVA is to apply a similar communication and collaboration model with customers.

If you’re interested in all the details, I recommend that you listen to the webcast. But here a few of my key takeaways and insights:

  • When it comes to the potential value of social media and Web 2.0 technology in supply chain management, a lot of the focus by analysts (including me) is on how it can enhance external collaboration. But here is an example of how this technology can also enhance internal collaboration between different functional groups.
  • It’s important to take a “crawl, walk, run” approach to implementation, and starting within your own four walls first is probably the best strategy. If you can’t improve the way you collaborate and communicate internally, how can you expect to do it externally? In TEVA’s case, the “walk” phase focused on suppliers and the “run” phase will focus on customers. Generally speaking, collaborating with suppliers is easier than collaborating with customers, so this approach makes sense to me.
  • This is not a one-size-fits all strategy and solution. “Spontaneous association” is ideally suited for highly-dynamic supply chains where exceptions are the norm and response time is critical. Likewise, not all suppliers and customers will make good collaboration partners under this (or any other) model, so you have to be selective in who you decide to collaborate with.

Almost four years ago, in “Facebook in Supply Chain Management,” I wrote the following:

Instead of finding and connecting with friends [using social networking tools], we’ll be finding and connecting with suppliers, customers, carriers, logistics service providers, distributors, and others involved in our daily work lives. And when I say connect, I don’t mean in an EDI sort of way, where one computer sends digitized information to another computer; I’m talking about human connections, where one person establishes and maintains a relationship with another person. With so much technology around us, enabling “lights out” and “hands free” processing, it’s easy to forget that human relationships remain the life and blood of any business.

So, yes Mr. Martins, I completely agree with you. In many cases, the quickest way to resolving a problem or addressing an exception — to create a more responsive supply chain — is to facilitate and scale people-to-people communication instead of integrating more computers to each other.