New technology has made today’s world a much more connected place. From the Internet to smartphones to social media to Skype to CNN, we can be constantly connected to what is happening in the world, in our business life and in our personal life. So why are our supply chains so disconnected?
Externally, few companies can trace their products more than one or two levels forward or backward in their supply chains, and thus have only limited visibility to supply chain risks or the ability to find potential cost savings. Few companies share meaningful data with their supply chain partners, and even when they do, the partners often don’t use it. For example, a study by the FMI/GMA Trading Partner Alliance found that 78 percent of manufacturers do not use retailer-supplied forecasts in their own production and deployment planning.
Internally, many companies still operate in silos. Departmental objectives and incentives are often misaligned or counterproductive to corporate goals. Workflows seldom cross departmental boundaries smoothly. The many systems used to manage the supply chain are not integrated and often support decisions that optimize one aspect of the supply chain while de-optimizing other aspects.
Fortunately, supply chain systems have come a long way since many companies last implemented their solutions. Today there are many examples of integrated technologies that can connect supply chain processing internally and externally. With accelerating pressure for seamless and adaptive supply chains brought on by the omni-channel marketplace, companies must connect the dots to stay relevant. That’s why 2016 will be the year of connectivity in supply chain.
The Disrupting Force
Most great changes in the world come about due to some disrupting force that makes the old way of doing things obsolete. The internet is probably the biggest such disrupter in our lifetime. For supply chains, the current disrupting force is omni-channel commerce, which was enabled by the marriage of the internet and mobile communications. These technologies empowered consumers to take control of the shopping journey and obsoleted many well-worn supply chain processes.
What makes omni-channel commerce so disruptive is that it takes the old “divide and conquer” paradigm and stands it on its head. It is now “connect and conquer.” There are no longer stores and e-commerce and m-commerce channels—it is all just commerce, with the consumer deciding which path to purchase they will take at any point in time. To support this, there can no longer be siloed operations, disjointed process flows or trading partners with which we do not share plans, forecasts and data. Everything must become a single connected process.
2016 Connectivity Predictions
With omni-channel being such a disruptive force, the recognition of this new landscape becoming more prevalent, and the maturation of supporting technology, I believe 2016 will be the year where the tipping point of connectivity occurs. Here are six areas of connectivity that will be important this year.
Connecting Planning and Execution
The marketplace today operates in real time. Changes occur too frequently and quickly to allow for a linear plan-make-distribute-sell process. Supply chains must be immediately responsive to changes in customer demand, and to disruptions and constraints, and that requires an integrated and iterative approach to planning and execution. Plans that are not aware of execution constraints are of little value. Changes and disruptions that occur during execution make plans obsolete and performance less than optimal. Integrated planning and execution systems that can immediately re-plan as changes occur will re-optimize supply chain processes for lowest cost/best service operations.
Omni-channel fulfillment requires that fulfillment channels must be connected into one seamless process. New options such as buy online/ pickup in-store (BOPIS), ship-from-store, endless aisle and save-the-sale require an enterprise-wide view of all inventory, and planning and execution systems that can seamlessly accommodate these new processes. Without these integrated fulfillment connections, customers will invariably be disappointed and loyalty will be lost.
Connecting Machines (IoT)
The concept of connecting machines is not new in supply chain. Sortation equipment, conveyors and other automation equipment have been connected through control systems for years. What is new is the direct connection of machines and other objects over the internet. This internet of things (IoT) not only connects these objects for control and reporting purposes, it enables sharing a wide range of information so that many routine decisions can be automated. This will increase efficiency, accuracy and consistency while freeing supply chain professionals to handle the exceptions. This will be an important step in supply chain optimization.
Connecting Planning to the Consumer
Now that the consumer is in charge of the shopping journey, it is critical that the planning process start with understanding exactly what the consumer wants to buy, through what paths and delivery modes, at what times. Retail planning systems based on sales history and customer demographics alone are not specific or agile enough to respond to actual customer demand. Planning systems must understand the preferences of each shopper in order to make the meaningful personalized offers that will separate winners from the pack going forward.
Connecting Suppliers and Retailers
Manufacturing and distribution plans can no longer be based on what was shipped from the DC last month. These plans must understand changing customer demand and this requires that suppliers use detailed customer demand forecasts from retailers, along with their own ecommerce channels, to create demand sensitive plans. Optimizing this process means suppliers and retailers must collaborate on a single forecast and a single view of the business, not simply pass information between companies.
Supply Chain Visibility
The above five connections will pave the way to long sought after end-to-end supply chain visibility. I think consumer pressure for seamless omni-channel shopping experiences and fulfillment options combined with innovation in supply chain technologies will create an inflection point in 2016 in which connectivity moves from a supply chain objective to reality. Companies that achieve this first will have a major cost and service advantage over their competitors.
In his role as Director, Thought Leadership at JDA Software, Jim LeTart is responsible for developing thought leading content to support JDA’s Plan to Deliver suite of integrated retail and supply chain plan and execution solutions. Jim came to JDA in 2013 through its merger with RedPrairie, where he spent over 13 years in various marketing leadership roles. Jim has over 35 years of sales and marketing experience in the computer technology industry, and is a frequent speaker, writer and blogger on how technology can improve business processes and outcomes. Jim has an MBA from the University of Michigan and a BSME from Marquette University.