Guest Commentary: Supply Chain Resilience, Agility, Efficiency and Innovation

During her welcome remarks at the 2012 Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Atlanta, Nancy Nix, chair of the CSCMP board of directors, said that companies should judge the value of supply chains going forward by their resilience, agility, efficiency and innovation. This is a far cry from the traditional view of supply chains as a trade-off between costs and customer service.

That got me thinking about what common thread might run through these supply chain qualities since on the surface some of them seem to be contradictory. For example, when I researched resiliency, the customary prescription was redundancy. Having worked in the IT disaster recovery business years ago, this made sense to me, as redundancy was what we provided. But redundancy isn’t cheap and would be considered at odds with efficiency.

Also, efficiency is often associated with lean supply chains – streamlining operations and taking out waste. But these actions tend to hurt a company’s agility. When the unexpected happens, there is very little wiggle room to respond.

Innovation is the real stumper. By definition it disrupts the status quo. That is contrary to lean supply chains and at cross-purposes with resilience. How could Nancy lump innovation in with the other key supply chain qualities?

After reluctantly admitting that Nancy is probably a lot smarter than I am, and knowing as an engineer in the software business that I’d want to use technology to solve the problem, I decided the better question might be what common supply chain technology could help make all of these seemingly contradictory initiatives successful?

While there are many supply chain technologies that in one way or another support these four initiatives, the one constant across all of them is the need for supply chain visibility – that ethereal concept so many companies have struggled to achieve. Let’s look at how visibility can help companies attain the four supply chain capabilities Nancy says are essential.

Resilience has become a hot topic since the earthquake and tsunami in Japan and the floods in Thailand exposed the vulnerabilities of many supply chains, but it is not new. In a 2003 article on The Resilient Enterprise, Yossi Sheffi of MIT defined it as “the ability to bounce back from disruptions and disasters by building in redundancy and flexibility.” Yet, redundancy adds complexity to supply networks that have already grown more complex with globalization.

The solution to effectively managing complex global and redundant supply networks is near real-time visibility. While extending visibility beyond internal operations has been a challenge for many companies, the advent of cloud networks and communication tools now allow supply chain partners to communicate on a many-to-many network basis that provides immediate visibility to what is happening virtually anywhere around the world. Knowing what is happening – what goods have been produced, what is in transit, where disruptions have occurred – enables companies to recover more quickly from disruptions, but also reduces the uncertainty that would otherwise lead to increased safety stock and greater expense. Thus, visibility can help improve both resiliency and efficiency.

Creating agile supply chains involves more than being able to react quickly when faced with change or disruptions. It requires the ability to see problems coming before they hit you so you can take action ahead of the curve. For example, you would want to know immediately that your container of goods didn’t make the ship leaving China today because the drayage company had an equipment failure rather than finding out when the ship was unloaded in port 20 days later. Or you would want to know now that your new product introduction is quickly selling out at stores so you can immediately send replenishments rather than discovering lost sales from week-end sales figures. Network-wide visibility can provide early warning of these and many other issues so you can react with more agility.

So how about innovation, which by definition causes change? Change disrupts your carefully planned and efficient supply chain operations. The role of visibility here may not be as apparent. Supply chain innovation isn’t created within your four walls like Edison designing the light bulb in his lab. Supply chain innovation comes from supply chain professionals having visibility to everything that is happening across their networks and seeing opportunities to make things flow better. The supply chain innovator’s laboratory is the entire network and visibility enables him or her to analyze supply chain dynamics to understand where change will be most helpful. Therefore, visibility is the precursor to innovation.

Now that I’ve tied Nancy Nix’s four essential supply chain qualities together with visibility as a key enabler, I feel a lot better that they aren’t so contradictory after all. Unfortunately, that still doesn’t make me as smart as her.

James LeTart has over 30 years of sales and marketing experience in the systems technology field. He has spoken at numerous national and regional trade events and his work has been published in many industry publications and blogs. For the past 13 years Jim has been Director of Marketing for RedPrairie, a leading best-of-breed supply chain, workforce and all-channel retail solutions provider, where he has responsibility for corporate messaging and content development. Jim has an Industrial Engineering degree from Marquette University and an MBA from the University of Michigan.