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Supply Chain's Naughty or Nice List for 2014

Dec. 19, 2014
One surefire way to land on the "nice" list is to embrace the promise of supply chain innovation.

Once again, it’s that time of year where we start to think about all things holiday-related. I can’t help but remember needing to do whatever it took to stay on Santa’s good side; everyone wants to make it onto his “nice” list, right? Of course, this means avoiding the kinds of things that could land you on the list that no one wants to be on: Santa’s notorious “naughty” list.

The lead-up to the holiday season—as well as the fiscal year-end for many businesses—is a critical time of year for product manufacturers in particular. It’s been a challenging year for many brands, and by association, their suppliers. Shipping and transport bottlenecks, a recovering economy, and robust e-commerce growth have converged to create immense pressure throughout the global supply chain. Several major automakers have been afflicted by recalls, with most of the recalls involving small companies in the automakers’ supply chains. Even supply chain icon Apple hit its share of bumps in the road as it rolled out the new iPhones this fall. With these cautionary tales before us, now is the time to take a good, hard look at how we can improve, resolving to be ever more informed, collaborative and resilient.

With that in mind, I’d like to share my thoughts on some of the things that can help make your supply chain wishes come true. Here is my supply chain version of the “naughty or nice” list. Along with a bit of focus and resourcefulness, the following insights will help your business prosper this holiday season and start 2015 off right.

1. Embracing the Promise of Innovation: A Surefire Way to Land on the Nice List

Perhaps one of the most pervasive challenges for today’s supply chain is matching the speed with which technologies and trends emerge. The connected consumer has an increasingly profound and direct impact on the supply chain, and there is a real opportunity to cash in on the demands of savvy consumers with new products and services. A comprehensive report from Harvard Business Review on “The Internet of Everything” makes a stunning case for the revolutionary impact of what they call “smart, connected products.” In 2014 (and racing right on into next year), we saw the rise of wearable devices (e.g., Google Glass, smartwatches), immersive entertainment (e.g., VR, Ultra HD, touch sensors, high-res audio, digital actors), the move from 3-D to 4-D printing, connected cars, and even smart home appliances.

But the consumer electronics market is just the tip of the iceberg. In the pharmaceutical industry, for example, smart packaging has emerged to track user behavior to ensure that patients are taking their prescriptions properly. And with the rise of on-demand shopping experiences like AmazonFresh, where customers can order fresh groceries, merchandise, and items from local shops and restaurants for same-day delivery, the bar has certainly been raised for customer order fulfillment. With the click of a button, today’s consumers literally have the world at their fingertips, and they expect their chosen retailers to be able to keep pace with their whims at any hour of the day.

Who knows what disruptive new inventions and customer experiences the next few years will bring? The question is: Are you and your supply chain partners ready to ride the wave? In short, companies should be prepared to reassess everything they do—from design to fulfillment to after-sales service—in the face of such ubiquitous change. Want to stay on the “nice” list of innovators? Better make sure that your supply chain is up to the challenge.

2. Security Breaches Will Put You on the Naughty List

Let’s face it. Target, Home Depot, JPMorgan—this was a not a good year for cybersecurity.

As the headline-making security breaches from 2014 taught us, you have to pay attention every step of the way. Hackers will continue to keep businesses on their toes, as breaches can run the full spectrum in terms of how they access sensitive data—from something as simple as stealing a credit card number when handing over the card to pay a bill in a restaurant to hacking into large-scale retail point-of-sale (POS) networks. Today’s increasingly sophisticated attacks are particularly keen on seeking out unguarded entry points to exploit—third-party suppliers, mobile devices, POS systems, unpatched software, and remote desktop logins, just to name a few. For example, the massive customer data breaches at Target and Home Depot were executed through POS systems that had been infected via unsecured remote logins at outside vendors.

Though there’s no ultimate guarantee of being 100% secure in any scenario as hackers continue to become more inventive in their approaches, there are a number of precautionary measures that a business can take. Do your suppliers have certifications like ISO and proof points to back up their security measures? And do these companies have processes in place to support a more robust security process-driven architecture? Be sure to think about security across the board from initial design to the point of sale, and at every supply chain step in between. Breaches are bad for long-term customer loyalty and can do irreparable damage to brand and customer relationships. In short, don’t let a breach put you on the naughty list. Protect your customers’ sensitive data from beginning to end, and you’ll be on the nice list.

With this reality, cloud companies have had to build their systems with a wide array of potential vulnerabilities in mind because their whole livelihood—the vast network of customers, their trading partners and the sensitive data that comes along with it—is based in the cloud. Thus, cloud vendors have historically been quite vigilant and have built in a number of safeguards into their systems, including layers of certifications, such as ISO 27001 and SSAE 16 SOC 1, as added security. No cloud vendor takes the need for the strictest levels of security for granted, and the transformative power of cloud-based technologies for supply chain-driven industries is too promising to pass up as businesses become more geographically dispersed.

3. Are You Keeping Your Eye on NPI?

There are a number of lessons to be learned from the mobile phone market, but one in particular that stands out to me is the impact of commoditization in this particular space and the effects on new product introduction (NPI). Building a phone now is easier than ever before, as there’s a generalization of accessibility to parts and a greater abundance of capital. With the reduced costs that come along with these components, BRIC markets are developing technologies that are moving into traditional spaces. With the whole slew of low-cost phones now available in China due to this ease of access to components, companies like Samsung are struggling. The low-end market in China is undercutting the consumer electronics giant, and Apple has locked up the high end of the mobile market.

The pharmaceutical industry provides another telling example. The industry is looking at another year in which a significant number of blockbuster products go off patent; projected “sales at risk” for 2015 are close to $50 billion. Pricing pressures created by patent loss, the Affordable Healthcare Act, stratified medicine, and increased competition have global reach, as the U.S. is one of the most profitable markets for many European pharmaceutical companies.

These shifts in both the mobile market and the pharmaceutical industry naturally raise the question: Do you know where your next competitors are coming from? And how does a business stay a step ahead when everyone has access to the same resources, such as basic components? The answer is in NPI—and not just the introduction but the execution—in essence, the monetization of NPI. A company that can effectively navigate the murky waters of NPI gets the distinct advantage of getting to market first and building a larger market share, which in turn enhances profitability. So how do you get there? Effective NPI execution means staying ahead on the design side and ramping quickly, as well as having the agility to quickly respond to demand changes at either the beginning or end of a product’s lifecycle.

NPI: It’s the difference between a big shiny package tied up with a bow, or a lump of coal in your stocking.

Which List Are You and Your Business On?

These discussions bring up a lot of questions, but tightly integrated collaborative planning and execution gets us so much closer to the answer to all of them: true resiliency—the opportunity to make strategic decisions and ensure they’re being executed upon at the times that matter most, like the end-of-year crunch.

The good news is that there are ways to flip the switch from naughty to nice—from transformation and strategy initiatives to the values-based leadership of today’s supply chain professionals. Every year, I see more and more companies driving better supply chain performance by leveraging innovations that empower partners and customers so the whole supply chain ends up on the nice list.

Wishing you a wonderful and prosperous holiday season.

As president and CEO of E2open, Mark Woodward is responsible for leading the company’s overall operations, including the growth strategy, solutions roadmap, and customer success efforts. Prior to joining E2open, he was the CEO of Serena Software for seven years and held executive-level positions at McAfee and CA Technologies Inc. He attended the University of California, Los Angeles and serves as a member of the board of directors at Nintex and the non-profit All Stars Helping Kids, located in Redwood City, Calif.

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