From the moment last year that toilet paper started disappearing from supermarket shelves, our reliance on well-managed supply chains has become apparent to all. With shortages of everything from computer chips to construction lumber still continuing, it remains front of mind. This has shone a welcome light on the influence that supply chain professionals can have on customer experience, rather than their traditional back-office role in driving down costs and working capital requirements. Anne Robinson, Chief Strategy Officer at Kinaxis, believes it's about time for enterprises to acknowledge that customer-facing impact. Her message?
You're the last person to touch the widget before the customer opens the box. You are directly impacting the top-level dollars and cents of this organization. Why isn't that included in how you think about your supply chain?
As with so much in business that's being transformed by the adoption of connected digital technology, the bar for effective supply chain management is rising in line with customer expectations of more accurate and responsive supply. Even before the pandemic, says Robinson, businesses had been looking into the technologies and processes they need to put in place to get supply chain planning and execution "in a lot more lockstep." Now there's even more pressure for supply chain planning to be dynamic and flexible to adapt to changing circumstances, as well as meeting those heightened customer expectations.
Concurrency across the supply chain
I spoke to Robinson as a follow-up to our coverage of the vendor's recent Big Ideas in Supply Chain virtual event, which included customer sessions presented by aircraft maker Bell, cleaning products manufacturer Clorox and confectionery-to-petcare giant Mars. She believes these trends have found Kinaxis in the right place at the right time, providing a technology solution for what it calls "concurrent planning." She provides a definition:
I need to think holistically about the supply chain from stem to stern, so that when a change happens in one part, we automatically know the impact of what's going to happen in another part.
That's not something that's achievable with conventional supply chain applications, which she argues have not been built with a view to connecting information end-to-end. The key to this is having information available as near to real-time as possible, presented in a way that allows you to assess the knock-on effects of any changes:
A supply chain is a connected entity, and it is truly a chain. So you need to understand the impact — this technique of concurrency and the ability to understand [that when] I make a change up here, I understand what the change is going to be down at my fore end, [and] what it's going to be upstream from where I am right now, with minimal to no latency across all of that.
I don't have to be perfect in my decision, because if something happens, I know about it right away and I can pivot right away ... This notion of being able to see, without latency, the impact of your decisions is really unique to us.
Data, metrics and automation
There are three core elements to making this work. First of all it means collecting the right data from various different sources, at appropriate time intervals. Secondly, there need to be consistent metrics and KPIs for parameters such as production capacity, distribution networks, and so on. Finally there's the automated analysis that supports decision making by supply chain planners. The emphasis here is on augmenting rather than replacing human decision making. Analytical models, says Robinson, "do not know what to do in times of crisis." But it's important to automate away low-value data preparation and analysis. She explains:
In my former life, I had people who actually validated every single data element that came out of their supply chain planning system. What a ridiculous job and a waste of time! We want to automate all of that using the most intelligence we have ...
But we do believe that ultimately, to have the most successful supply chain, it is the combination of that human domain knowledge plus the AI — advanced analytics, predictive, prescriptive analytics — it's the combination of the two that's going to allow you to be successful, and quite frankly, differentiate yourself in the market.
As an example, she cites the use of dynamic Bills of Material (BOMs) within Kinaxis, which respond to supply variations across what might be many hundreds of sub-components in a complex product, each with their own lead times, yields and so on. In a traditional planning scenario, those BOMs are typically assigned fixed lead times that are rarely, if ever, updated. By making these dynamic, the Kinaxis system is able to make adjustments in response to seasonality or transportation disruptions as they arise.
There's increasing scope for this kind of responsiveness as enterprises bring more flexibility into their supply chains, for example adopting dynamic warehousing, or even dynamic production capacity. These are examples of decisions to open up and shut down facilities that were once planned on a five-year cycle and are now becoming quarterly operational decisions. This is a growing trend, she says:
One of the things I have noticed is that supply chain design is shifting from being a strategic, again, do it once in a while [thing], to something that could be done on more of an operational basis.
It's consistent with the Kinaxis philosophy of concurrency, in which traditional Sales and Operational Planning (S&OP) gives way to Sales and Operational Execution (S&OE). She comments:
You can't have it so far apart. You don't want any latency between your decisions and your execution. How much closer can you make that happen?
The demand for metrics and closer management will only intensify with the uptick in policies on sustainability, leading to enterprises monitoring their consumption of water, carbon and other measures, as well as building reuse, repair and recycling into their product designs and production processes. She cites the example of an aeroplane manufacturer that collects offcuts from large carbon sheets used on its production line and passes them on as raw material for use in the computer industry. Collecting the right information is foundational to this kind of effort. She explains:
The classic supply chain trade-off [is] information and inventory. The better information you have, the less inventory you need, and the more latency we can take out of the supply chain, the less inventory you need to have. That is a great first step.
Preparing for the future
Another area that's going to become a big supply chain headache in future years is cybersecurity. She comments:
It's concerning me that people aren't talking about it enough ... The attack surface for supply chains is increasing, because we have so much more technology, we're taking advantage of more information. Every one of those spots is a potential entry for a cyber attack. There's going to be major companies shut down in the next five years from cyber attacks on their supply chain. And I do not think that we're ready.
For supply chain professionals, keeping on top of all this information and feeding the results back to colleagues across the business is going to amplify their impact. That will require a new set of skills, not just analytical, but also in communication and leadership. She advises:
Make sure you understand the science, you understand the business, because guess what? You are the last person before the customer gets the widget, and you're the one who's going to interface what's wrong with that widget back to product, understand the pricing back to marketing and sales. It's an important role to play. And those soft skills, the influence skills, the communication skills are required in that new supply chain professional.
All this adds up to an exciting future for Kinaxis and its customers. She sums up:
I don't think we've ever been in such a prime position to solve so many of the world's supply chain problems as we have been right now ... We really are helping people see a new way of delivering on their supply chain that truly is a paradigm shift from how they've always operated.
Supply chain is yet another traditional enterprise function where digital connection is fundamentally changing the game. Better access to more timely information and analysis enables organizations to fine-tune how they serve customer needs, and every element of the business needs to get behind that goal. Supply chain therefore can no longer be solely a back-office function, focused purely on internal metrics such as cost control, stock turn and working capital. Its performance must be judged in terms of metrics that relate to the customer experience — done right, that in turn increases profitability and margins because happy customers drive business success.
For more diginomica stories from Big Ideas in Supply Chain Summit 2021 visit our Big Ideas in Supply Chain event hub. The virtual event ran from June 1st-2nd and sessions are available to view on-demand until further notice. Click here to see all on-demand sessions.