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Is the supply chain fit for purpose in a 21st century world? Lora Cecere thinks not.

Den Howlett Profile picture for user gonzodaddy February 7, 2019
Summary:
If you think that technology driven supply chains are delivering value then you'd be mistaken. According to Lora Cecere we're going backwards. Why?

There is a steady stream of sharp critique swirling around the world of enterprise software, much of it coming from seasoned independent analysts. Most recently I came across an address delivered by Lora Cecere, founder, and CEO of Supply Chain Insights where she proposes that current supply chains are looking at the world the wrong way. The assertion is that in order to meet the challenges of the modern world, supply chains need to look from 'the outside in and not the inside out.' I'll get to what this means momentarily but it is useful to understand why Ms. Cecere thinks this way.

Her conclusions are based upon extensive quantitative research. Among other things, Ms. Cecere discovered that rather than improving balance sheet outcomes, supply chains are stuck. Any demonstrable improvements over the last 10-20 years have come from financial engineering or supply chain shenanigans rather than the effectiveness of supply chain software applications. That's a stunning revelation which she explains across multiple dimensions. But before getting into the detail, why should you take note of what Ms. Cecere says?

The folk who impress me the most are those who have not only done their homework but can also contextualize expertise from a background of having done the work on the ground. It's why I prefer to speak with practitioners and tend to (but not always) eschew marketers. Ms. Cecere meets that sniff test in spades. Check this from her bio:

Previously, I spent 9 years as an industry analyst with Gartner Group, AMR Research, and Altimeter Group; 10 years as a leader in the building of supply chain software at Manugistics and Descartes Systems Group; and 15 years as a supply chain practitioner at Procter & Gamble, Kraft/General Foods, Clorox, and Dreyer’s Grand Ice Cream (now a division of Nestlé).

Where are we now?

Her ah-ha moment came in 2012 when she was researching with a view to writing a celebratory book covering 30 years of supply chain improvement and excellence. That was when she discovered that only around 10% of manufacturing companies had succeeded in driving value. Ms. Cecere asserts that rather than driving value, five factors have contributed to the current state of play.

From our conversation:

  1. Supply chain initiatives are focused on functional excellence, are caught up in silos which, in turn, works against value.
  2. Companies have invested in legacy technology which served the functions but not supply chain capabilities and so there is a significant misalignment between what we have and what we need for tomorrow.
  3. As currently articulated, supply chain strategies and architectures are about us and not driving value in networks. We've not really collaborated but use big sticks with which to beat trading partners. We're not holding ourselves accountable. Market signals are not present inside supply chian decisions so we can't anticipate what wll happen.
  4. The other struggle is that we've never had more exciting technology such as cognitive computing and blockchain which allow us to reimagine what technologies could be but companies are very stuck in investing in system upgrades with systems that are not evolving with these trends. The same system integrators are largely rewarded for implementing legacy systems.
  5. Most companies are like Kodak back in the 1970s which had a patent for digital photography but was afraid of killing the print business in that most are stuck with business models they can't get past to drive new outcomes. In the pharmaceutical industry, the customer is changing. How do I move to wellness and use the new technologies to move from efficient sickness to wellness? The inability of companies to redefine themselves shows up because people are stuck in functions and are not clear where they're supposed to go.

And that's just the start.

What does it take to make a change?

Ms. Cecere has some answers to these issues one of which is to

...stop the hype madness and concentrate on what we can do now. So data cleansing is a big opportunity for machine learning to help us reduce mistakes in master data. That in turn allows us to have a common understanding that cuts across the organization.

But what will it take to move companies from where they are to where they need to be in order to improve? Here the answers are far from clear. I wondered whether another recession would wake people up but then the last one didn't to the extent she expected. Maybe it's the emergence of China and the kind of leapfrog changes we see in places like Africa that will propel firms forward?

However, success is far from guaranteed, even where new technology is available. Ms. Cecere worries that the large system integrators will simply recreate the problems of the past and that events need to be substantial at an economic level in order to instantiate change.

My take

There's a lot to unpack but the important thing to understand is that Ms.Cecere's position is driven by long-run analysis of the data. That same analysis provides good indicators as to why success in the supply chain ebbs and flows. There are no easy fixes and results don't emerge as quickly as we might wish but if Ms. Cecere is correct, business as a whole cannot continue on its current path. Some of the challenges are readily recognized, others are less easy to see but one thing is certain, best practices in an  uncertain world won't help.

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