Gartner’s Mr. Paul Lord directly addressed requirements for a firm to achieve profitable growth in his recent webinar, “The 3 Performance Lenses for Balancing Supply Chain Cash Flow and Cost”.
- Models that manage the complexity of the demand-supply network across extended time.
- Translating demand into a supply chain is too simple and ineffective in most organizations and firms must invest in better supply modeling capability.
- Managing inventory in isolation is a road to nowhere.
- Strategic realignment and capability investment is critical to breaking through tactical limits.
Meeting these requirements has been the focus of Arkieva’s software roadmap for the past few years.
Supply Chain Management (SCM) as a core business competency emerged in the late1990s. Indeed, every firm had to guess at demand, make production starts, purchase material and count inventory – SCM implies a focus and coordination as opposed to “Warring Nations”.
As with any new technology (for example, telegraph/phone – communication at a distance), it evolves into a more valuable form over time. There are two pillars to this evolution: function provided to the user and technology that enables this function. For the phone, an example of improved user function is moving from a telegraph in each town to a phone in each home. On the technology side, an example is the migration from switchboard operators to PBX.
The same evolutionary pattern applies to SCM. The new functions simply replace the original function with mechanisms that make it easier and faster to do them. This creates the silos of demand management, inventory management, and central or supply planning with simple capabilities. On the technology side, hardware and software enhancements abound requiring a keen eye on which to invest in and a need for a historical perspective.
The question is where next for SCM that generates genuine business value?
Gartner and Suggestions
“As organizations evolve operations for a post-pandemic world, they are shifting from a focus on financial liquidity, which was critical in 2020, to a renewed commitment to profitable growth. As part of the transformation, supply chain leaders must consider developing a comprehensive approach to optimize supply chain performance. To achieve and sustain performance, short- and long-term goals need to map to an overarching aspiration for optimizing total performance. This aligns key stakeholders around both design choices and operating decisions required to efficiently fulfill demand with reliable product supply and effective service delivery.”
This presentation builds on Paul’s perspective that the critical next step in the SCM journey is to understand that managing end-to-end operations requires recognizing the “chain” is a complex network – the old silos must go, and the implementation of tools and processes are needed to handle this complexity. Particularly powerful is his writing on inventory and situational decision-making. This view is starting to become accepted in the industry.
General Highlights: the demand-supply network is complex and profitable business growth requires managing this complexity with models that manage the scope and extend across time.
- Supply and distribution networks are complex systems in a dynamic environment.
- Complex systems require comprehensive methods.
- Profitable business growth requires optimizing the network and extending your time horizon and scope.
Tactical highlights: translation of demand into a supply or central plan that matches assets with demand is often too simple to support growth. This results in a “dangling demand estimate” – a sophisticated demand estimate that has no real place to go since its partner in crime is missing in action. This requires firms to invest in supply modeling capability and recognize managing inventory in isolation is the road to nowhere.
- Translation of demand into supply requirements lacks precision, therefore invest in network supply modeling capability.
- Managing inventory in isolation: the road to nowhere.
- Inventory’s purpose: enable optimized network performance.
- Sell inventory improvement through all performance lenses.
Strategic highlights: improvements in business performance require realigning the characteristics of the network – that is finding a better way to the core tasks.
- Breakthrough tactical limits through strategic realignment and capability investment.
- Lord provides a set of examples to illustrate the importance of this action.
Arkieva View & Orbit
CEO Dr. Harpal Singh has long noted the danger of silos and “dangling demand” and the need to manage the demand-supply network, recognizing that firms have to start “simple” and evolve. Such a journey requires a firm that understands all aspects of SCM and the importance of agents of change to foster community intelligence. He is also adamant that success requires software that supports these ideas. Over the past few years, Arkieva has developed and deployed ORBIT to support this journey, especially on the supply or central planning side. This work is available for large and small firms. He also points to the need for flexible and rapid modeling to assess the impact of strategic realignment decisions – the purpose of the model is insight.