Social networks and supply chains: It's a question of maturity

I am often asked what will be the role of social networks in supply chains. I think their potential is enormous, and I think we are seeing an emerging interest in their use in supply chain management. I’m not talking about the direct use of Facebook or Twitter, although I would not rule out this possibility, but rather the use of the concept of social networks and technologies.

However, as I noted in a recent blog titled “Do you trust yourself to collaborate? The real barrier to collaboration is not technology, but trust”, the real issue to overcome is trust between trading partners. I am a firm believer that a simple exchange of information on a regular basis is a way to build trust, which can then lead to the sharing of more information. In other words, as with nearly all processes and technology enablers, a maturity model can be used to describe various levels of collaboration, and each stage of maturity requires a greater level of trust.

In a recent Aberdeen paper titled “Enabling Supply Chain Visibility and Collaboration in the Cloud”, Nari Viswanathan places B2B integration into “Visibility”, a necessary precursor to collaboration. The Aberdeen maturity model for building integrated demand-supply networks between trading partners, which is published in the paper and captured in the diagram below, can be boiled down to:

• Getting connected (B2B Integration)
• Making sure the data is right (Data Management)
• Working together (Process Collaboration)
• Working together on the right things (Network Intelligence/Performance Management)

Perhaps more interesting is the distinction Nari makes between Visibility and Responsiveness. Without a doubt in today’s outsourced and off-shored supply chains, knowing where items are is a major challenge and is a necessary first step in being able to determine the “health” of the supply chain. But knowing that something is not right (Visibility) and being able to correct it in a consistent and timely manner (Responsiveness) are two very different levels of maturity.

Relying on phone/FAX/email to devise a response to an issue in the supply chain is simply too slow and too error prone, the greatest drawback being the lack of ability to evaluate the financial and operational consequences of any proposed changes in a timely and effective manner, let alone reach a consensus and compromise on the course of action.

Social networks can already play a role in the Visibility stages of maturity. So much of the data transferred between trading partners has nuance and meaning that is lost in EDI, which is where the use of social networks/media can play a strong role. And not only as a replacement for phone/FAX/email, but also as a way of capturing the information for governance and corporate learning. While I see social network technologies playing a role at all levels of the maturity model, though it is really in the Network Intelligence/Performance Management stage that they will be most widely adopted.

As we can see from the Aberdeen diagram, the benefits will be highest, as will be the supply chain responsiveness or agility. The interplay of visibility and agility is brought out very well in a blog by Bill Dubois titled “Supply chain visibility is vital, but the larger business goal is agility”, especially the value of agility brought about by the collaboration between trading partners.

Collaboration is a lot more than the exchange of data: It is the exchange of information that is helpful in identifying opportunities, and compromise to achieve joint value. Hard facts play a huge role in response management and agility, but so do “soft” facts. Especially as it is the “soft” facts that will lead to consensus and compromise. As I point out in my earlier blog, the decision processes of enquiry-to-quote–to-order often take as long as the physical order-to-delivery process, which is not only more difficult to reduce, but will likely extend with the continued increase in off-shoring and outsourcing.

Why not focus on the decision processes and use social network technologies not only to speed up the process, but also to enhance governance and organizational learning? These are much easier to change than the “poured concrete” of the physical supply chain. I suspect much of the early adoption of social networking technology for business processes, other than social media marketing, will be across functions inside of an organization, initially automating manual processes that require interaction between functions and translation between different function specific applications. Two extracts from a blog by Ray Wang titled “Organizations Seek Measurable Results In Disruptive Tech, Next Gen Business, And Legacy Optimization Projects For 2011” bring this out very clearly, though Ray believes that the biggest changes will come from interactions outside the organization.

• Organizations will put business back into social business (@sameerpatel). As organizations increasingly start to see the benefits of deploying social and collaborative initiatives to improve employee, customer and partner engagement, they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised. In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them. And reseller partners are constantly spending time looking for the right answers not available on asynchronous partner portals to keep end customers happy. Silo’d but open collaboration initiatives on activity streams and other enterprise social networking utilities currently being deployed will expose such engagement not historically possible in an ERP or CRM laden design. Consequently, LOB and IT leadership will realize that traditional process approaches and fluid collaborative constructs need to come together to truly accelerate business outcomes.
• P2P will displace the old notions of B2B and B2C in social business (@rwang0). B2B and B2C will cease to exist in 2011. Organizations will conduct social business through Peer-to-peer (P2P) relationships. Attempts to stove pipe individuals into forced-fit, artificial market segmentations will fail because each individual brings multiple roles to the community. Each role brings a new perspective and a set of expectations in customer experience. Organizations will have to retool to the new rules of business and also move beyond social.

One of the trickiest aspects that will need to be addressed in order to get a broader adoption of social network technologies in business processes is the concept of “responsibility”. Existing social networks such as Facebook are principally about sharing or “pushing” information, but most business processes require an interaction between at least two people, each of which is responsible for an aspect of the decision and who need to reach a consensus and compromise in order to take action. Often these interactions require input from as many as 5-10 people.

Identifying who needs to know can often be an insurmountable barrier to reaching a timely decision. I want to draw the distinction here between the people who need to know, which implies responsibility to take action, and the people who want to know, which implies an interest but not a responsibility. Existing social technologies address the want to know, but not the need to know aspect.

To illustrate the difference, Angel Mendez, SVP of Customer Value Chain Management at Cisco, commented during a talk he gave at a conference in 2008 that there are over 20,000 people in Cisco’s value chain, only 2,000 of whom work for Cisco. Knowing specifically what person at which component supplier is responsible for the delivery of a specific item by a specific date to a specific contract manufacturer and the specific person at the contract manufacturer who can commit to a scheduled delivery change in order to meet an order change request for a specific end item …, is crucial to being able to make a timely decision on whether or not the requested delivery date can be met.

Responsibilities are of course related to security issues, but security deals more with who has access to certain information, not who is responsible for taking action if that information changes by an amount that exceeds a certain tolerance. For example, a customer service representative will need to act on any new order enquiry from a customer, but may only need to know of the existing orders that will be delivered late because of a change in supply. On the other hand a VP of Sales will not need to know of each order, but may need to take action on any orders that, say, exceed $100,000 in value and a 10% discount on the full order.

Value chains by their very nature require huge amounts negotiation and collaboration between trading partners, which has up to now been carried out largely by phone, FAX, and email. Social network technologies are a natural extension of these existing technology enablers that brings much greater agility through speed of decision making and levels of governance and conformance not available with existing technologies.