In my last blog, I discussed the evolution of supply chain management. As markets and consumer demands expand and change, supply chains are becoming increasingly complex. They're not just responsible for the physical flow of goods, they are now responsible for both financial assets and digital assets. Cost, sustainability, and resilience are impacting each other more profoundly as operational complexity deepens, and disruptions continue. Business models are changing – in addition to buying and owning products, we are seeing a growth in products as a service and a shift towards circular supply chains.
For the last century the objective function of supply chain has been to optimize cost, cash and service, but going forward we need to add on revenue and sustainability.
The traditional approach to supply chain management is primarily based on functional silos. Demand planning, supply planning, procurement, manufacturing, warehousing and logistics all operate as independent functions. Each of these silos may be highly efficient functions, and ideally, like a Swiss clock, the supply chain will reliably tick along, delivering products and services to end customers. However, it can take just a single problem within one function to cause the gears to jam up, making the supply chain descend into chaos. That’s why we need to move beyond the optimized silo-based approach and consider end-to-end orchestration as the new paradigm of supply chain management.
Recently I met the CSCO of a 20bn dollar industrial company. We’d worked together some years previously and as we reminisced about the past, when it was difficult to change the way that the supply chain operated, even though significant issues existed for those of us in the trenches. While we knew that the supply chain wasn’t great, the company thought it was good enough – meaning there was no burning platform and the company had more important areas to invest in.
Today, everything has changed. The supply chain is a burning platform. Customers, suppliers and internal stakeholders are demanding the same thing – an orchestrated supply chain.
In an orchestra, everyone has the same music sheet. However, the music would sound terrible if the songs aren’t written well, and then if all the musicians were playing the music out of tune, out of time or at different volumes. The conductor orchestrates the musicians to play in tune, in time at the right volume – great orchestras have great conductors. The supply chain is like a great orchestra in that each function is like a musical instrument… and an end-to-end supply chain needs a great conductor to orchestrate all the pieces to work in a harmonious way. This is the very visible and important role of today’s supply chain management professional.
Before the music begins, let’s go over three important elements of successful supply chain orchestration:
- Alignment around a clear set of goals, creation of a plan, and tactics to execute the plan
- Agility to react to stressors
- Transparency to collaborate and respond in a harmonious way.
Writing the sheet music: Codify your goals clearly with tactics to bring plans to life
A plan without goals is not worth having, and a goal without a plan is just a wish. As in the writing of a new piece of music, having clear plans to reach the desired result is essential in supply chain orchestration.
All functions across the entire end-to-end supply chain need to be aligned to a common set of market driven goals. The goals must be realistic and should reflect both capability and resource availability, and must also align with the appropriate level of supply chain maturity. Most importantly goals should be in sync with the corporate strategy.
The S&OP or IBP process is the perfect forum for setting these goals because the supply chain, sales and marketing and product management teams all have a stake in agreeing on whether the goals are achievable and most importantly how are they accountable for supporting those goals.
The plan is like the musical score itself: we need all functions in the end-to-end supply chain to operate to the same plan. Whether it’s with sales, finance, supply chain, or procurement …the planning process requires close collaboration between different functions.
Rather than overplanning, incorporate flexibility into the plan to overcome uncertainty. In music, sticking to a rigid musical structure can waste time and hinder creativity. Likewise in supply chain, overplanning consumes too much time and even worse, it can shackle you to following a poor plan even when it no longer remains the best course of action. The level of disruption we’ve faced over the past three years demonstrates that organizations must be agile. Keeping humans in the loop, and fully leveraging their expertise, will enrich any planning process.
The combination of advanced optimization, machine learning, and heuristics paired with the experiences of a planner will result in a better-quality plan and, ultimately, lead to more accurate forecasts. Today, many of the repetitive planning tasks are (or can be) automated, allowing the planner to focus on adding value in areas where the technology is insufficient. Planners also have an important role in determining when to create new scenarios and when those scenarios should be used.
Improvisation: Adjusting when an off-note impacts your supply chain
One of the greatest supply chain learnings from the COVID-19 pandemic was that agility was essential to deal with disruption.
For most organizations, there was no playbook to describe what to do in the event of a disruption. Following a data and time-intensive process, designed to create the best possible forecast, is totally useless when your primary supplier shuts down production for three months. Supply chain teams are often winging it, maybe under the pretext of being agile, but the result is exhaustion and irrational decisions.
For too long, planning has focused on accuracy, while execution has focused on agility. However, in an orchestrated supply chain, both planning and execution should be aligned on accuracy and agility. It’s essential to have the agility to react to stressors.
To be agile, organizations should adopt the process of concurrent planning and concurrent execution. In a traditional model, planning and execution is a sequential linear process. In an orchestrated supply chain, planning and execution happen simultaneously and bidirectional – so disruptions in execution automatically update the plan in near real time.
Skilled musicians are adept at improvising if another member of the ensemble hits a wrong note or comes in late on a beat. Supply chain orchestration involves building a supply chain that can quickly adjust its course in response to market shifts, geopolitical events, or unexpected challenges. This may involve the ability to reroute shipments, adjust production schedules, or identify alternative suppliers.
Synchronizing: Playing in-time with every member of the supply chain
Imagine a conductor attempting to lead his orchestra, but no one can actually see the musical score in front of them: what can they do? They could attempt to play their instruments faster or slower, louder or quieter, as they try to find harmony, but overall neither the conductor nor the musicians have control over what they are playing. They need transparency--they must see the musical score to collaborate and respond well. Transparency requires all functions in the supply chain to be both visible and operating to a common plan and execution signal.
Achieving orchestration begins with transparency. Organizations must have real-time insights into every aspect of their supply chain, from supplier performance and inventory levels to transportation and demand fluctuations. Digital technologies play a crucial role in providing this visibility, enabling businesses to make informed decisions and respond rapidly to changes in the market.
Transparency requires collaboration, which means fostering strong internal and external relationships with suppliers, distributors, and other partners. Technology is needed to facilitate real-time access to information, break down communication barriers, and ensure all stakeholders align with the overall supply chain objectives. However, the supply chain professionals are still the conductors ultimately creating the relationships and making decisions that achieve true value for their organizations.
Be ready for future changes…and opportunities
A well-orchestrated supply chain will deliver significant business benefits.
By orchestrating supply chain processes, organizations can eliminate bottlenecks, reduce lead times, cut inventory, and optimize resource and asset utilization. This results in a more efficient and cost-effective supply chain that can meet customer demands with greater precision.
Orchestration enables businesses to enhance customer satisfaction by delivering products faster, minimizing stockouts, and providing accurate order information.
Supply chain orchestration also plays a crucial role in risk management. By having a clear view of the entire supply chain, organizations can identify and proactively address potential risks, such as supply shortages, geopolitical issues, or disruptions.
As we peer forward into a new year, it’s also clear that supply chain orchestration creates room for new opportunities. After all, if you have a powerful plan, can identify and respond to changes immediately and head off potential risks, you free up space to get creative. A well-orchestrated supply chain has the capacity to look further into the future or devote resources to sensing trends sooner rather than later. By leveraging the latest technology with the high-level skills of experienced supply chain professionals, an organization can bring innovative ideas, products and services to life.
Leave a Reply