I have the good fortune of being in frequent conversation with supply chain leaders from a variety of companies across a breadth of industries. They are customers, customers’ trading partners and prospects—and I feel like I’m an author interviewing experts on supply strategy and tactics for a tell-all book. I get to canvas them to see what they are working on, what challenges they are grappling with, and what clever things they’re doing to improve their business.
As I listen I can’t help but feel that there are traps out that have been set that definitely need to be avoided. The problem is that many players are set in their ways, or they have higher priorities for change, and as a result they are steering straight for an iceberg.
With that in mind, I want to share my observations on the five traps that chief supply chain officers (CSCOs) should avoid in 2013.
1. Give me some time to e-mail my partners to get their updates.
Out of the gate, I have to say it truly amazes me that some of the world’s most vast, complex supply chains are strung together with spreadsheets. Many of the top supply chains still rely on management-by-spreadsheet for forecasts, production and inventory planning, and order management. Brand owners and their thousands of partners in global trading networks build and distribute goods managed by spreadsheets that are housed on individuals’ laptops and shared on a one-to-one basis, periodically by email (and we even still see many of these being faxed).
This reliance on spreadsheets means that brand owners rely on partner information that is fragmented, latent and non-uniform. Because of this, partners make decisions based on partial information they don’t trust. It’s shocking to me the level of risk that these companies are taking.. Their partners know the brand owner is flying blind, so they hedge their bets, their partners’ hedge their bets, etc. It’s the classic bullwhip in play, which creates an enormous amount of waste in the supply chain.
That’s why the world is bloated with inventory that’s in the wrong places at the wrong time. The result is lower levels of customer service, working capital held hostage and lower operating margins for everyone across the trading network.
It’s time to get off the spreadsheets—to modernize management with dynamic, collaborative tools shared one-to-one, one-to-many and many-to-many among trading partners.
2. This is the plan… well, until we run tomorrow’s plan.
Having been in supply chain since they first started using metal for the chains, another mistake I see is that companies continue to pour investment into planning in a never-ending attempt to determine “the number.” Planning accuracy long ago reached the point of diminishing returns. Instead of trying to push that boulder another inch up the hill, we’re seeing tremendous improvement by our customers in accepting demand they can’t predict. They’re learning to focus more on collaborative execution for lean responsiveness rather than hoping they guessed right based on their planning models.
At the risk of overloading the reader with sports and war analogies, the plan is only good until the opponent is engaged. So put planning in perspective. You’ll see far greater improvement in customer service and margin achievement through nimble reaction to change through visibility and decision tools shared by all in the trading network.
3. We’re charging ahead with our eyes focused squarely on the rearview mirror.
One of the hottest areas of technology investments is in enterprise business intelligence applications. For a corporate planning strategy or trying to identify opportunities for improvement, they can be invaluable. For a CSCO who is trying to make the plan and turn a profit in a frenetic supply chain, looking for intelligence from a system that generates reports based on historical data that is projected into the future is missing the gold mine of opportunity that is available in the execution window.
There’s far more customer satisfaction and profit to be had with real-time, cross-network predictive analytics. By continuously monitoring activity across the entire trading network with real-time feeds and evaluation, you can now know when and where you’re going to be off-course and immediately recognize when you are off-course. With these same execution analytics, you can better determine your options for course correction. You’ve got to look out the windshield instead of through the rearview mirror.
4. Cloud computing is for HR and CRM.
This one could be for the history books: Five years from now, will you look back and be thankful you embraced cloud computing and the rapid advances it affords, or will you look back and regret your misperceptions of technology and security that left you in your competitors’ wake?
Cloud computing is now proven in the supply chain and it is being embraced as a connectivity and process enabler, enabling supply chain leaders to catapult forward for true collaboration, rapid and confident decision making, and step function improvements in productivity. The security model is proven and the technology is reliable. Many are coming to find that security in the cloud is superior to what they are capable of in house. Waiting on the cloud is only positioning a company for competitive disadvantage.
5. I manage supply. They manage demand.
The last one, and this one really does start and end with the CSCO, is to stop thinking of the supply-side and demand-side of the business independently. You must manage the supply chain holistically.
For some reason, whether it is size or complexity, too many enterprise-size companies we’ve seen have complete supply organizations operating independently from the demand side. We’ve seen that those operating holistically have shorter lead times, lower inventory, greater responsiveness to change—and they’re more profitable. And when it comes to major business transformation initiatives, which is where we usually engage, they are able to achieve change faster and with less disruption than those operating with two camps.
So as you steer your way through 2013, those are my words of wisdom to stay on course and live without regret. Did I miss anything? If so, let us know what traps you’re seeing in your supply chains.
Mark Woodward is CEO of E2open, a provider of cloud-based, on-demand software solutions enabling enterprises to procure, manufacture, sell and distribute products more efficiently through collaborative execution across global trading networks. He is responsible for leading the company’s overall operations, including the company’s growth strategy, solutions road map and customer success efforts.