- Companies mean different things by the term “digital supply chain transformation.” For some companies, it means replacing manual, paper and pencil processes with digital data and process support. For some companies it means using autonomous mobile robots and other forms of robotics in their supply chain. For some, it means applying machine learning and artificial intelligence (AI) to supply chain Big Data. And for some, it means getting better digital data to support an end to end supply chain involving multiple tiers of a company’s supply chain.
- If a company is focused on digital projects designed to substitute manual processes that exist inside the four walls of the enterprise, that company’s digital and supply chain efforts are immature. For example, putting a warehouse management system in to replace paper and pencil data in the warehouse would be a limited form of digitization. It is something companies should have done years ago.
- However, if jumping on the digital bandwagon allows supply chain executives to get money for warehouse management systems or similar internally facing supply chain solutions, I’m all in favor of it. Supply chain technologies typically have a payback of less than two years and are critical building blocks to building robust capabilities.
- Filling in the information black holes that exist in most companies end to end supply chains would be a digital transformation project that is operating at a much higher level of maturity. This means connecting with suppliers, customers, and key supply chain partners up and down multiple tiers of a company’s extended supply chain.
- Whether a company if focused on robotics, filling information data gaps inside the four walls of their enterprise, or getting better digital data to supply the end to end supply chain, AI and machine learning will have a role to play.
- For an extended supply chain, digitally connecting to trading partners is critical. A new market known as Supply Chain Collaboration Networks (SCCN) has emerged to facilitate this. This market garners over $3 billion in annual revenues and is growing at a double-digit rate according to market research from the ARC Advisory Group.
- A supply chain collaboration network is a collaborative solution for supply chain processes built on a public cloud, many-to-many architecture which supports a community of trading partners. Many-to-many refers to both many participants in a network able to collaborate with many other partners, and many participants being able to access many, many sources of normalized event data critical to supply chain operations.
- How could a brand-new market already have over $3 billion in revenues? Because it is not new at all. Rather if reflects the growing importance leading industry analyst firms attaches to this solution set because of the increased focus of many companies on digitization. Gartner calls this market Multi-enterprise Supply Chain Business Networks, IDC calls it Multi-enterprise Supply Chain Commerce Networks, and ARC uses the more concise term Supply Chain Collaboration Networks. In short, it is fairer to say this is a newly named market than a brand new market.
- The collaboration network market is comprised of companies with EDI VAN solutions – Descartes, OpenText, TrueCommerce, IBM, etc.; solutions that use to be labeled industry marketplaces – Elemica, InforNexus, E2open, etc; and supply chain applications build on a public cloud many-to-many architecture. The many-to-many application solutions are particularly common in the transportation management and execution space where Descartes, BluJay Solutions, E2open, Transplace, C.H. Robinson and FourKites all offer solutions.
- Networks offer distinctive advantages including communication and partner management, benchmarking analytics that leverages the network data, and the ability to much more easily access and leverage supply chain third-party data (particularly downstream and risk data) stored in the hub. Networks can also serve as a collaborative system of record for cross party transactions.
- There can be “network effects” associated with the SCCN market that work to make the leading suppliers increasingly more dominant over time. Once connected to a leading network, trading partners can ex-change electronic supply chain information with each other. The value of the network increases with the number of trading partners connected to it. The addition of each new company enables that company to communicate with existing customers on the network. For networks with the Supply application, it permits existing users of the network to do business with the new customer on the network.
- The message formats support supply chain processes that include Plan, Source, Make, Deliver, Returns, Supply Chain Risks, and Supply Chain Finance. In some cases, true supply chain applications ride on top of the platform to support Plan, Source, Make, etc. processes. ARC’s market research shows the Deliver and Source categories to be by far the biggest messaging/application categories.
- Nevertheless, there are some interesting niche collaboration network solutions. The value of the network is industry and application specific. So, it is possible for smaller suppliers focused on an underserved industry to prosper in their specific niche.
- Connectivity does not always need to be through the network. OpenText and IBM tout their ability to connect their customers to their network to facilitate supply chain collaboration. But they also point out that there may be trading partners that a company may want to connect to their supply chain control tower directly, not through the network. Both suppliers offer a variety of integration tools. This is referred to as a “hybrid” strategy for supply chain collaboration.
- The industry analyst firms that do supplier selection guides, tend to position collaboration network suppliers with a broad set of supply chain applications and large networks as leaders. But providers of robust Deliver and Plan applications can provide a good payback for their customers based on the high ROI associated with transportation management and supply chain planning applications. The ROI of these applications is marginally improved through connection to a network, but good even if not connected.
- A supply chain control tower would also represent a high level of digital maturity. Control tower is a term that implies real-time visibility. But visibility to what? Shipments? The integrated business planning process? Finished goods inventory? The status of work on the factory floor? Supply chain risks? Ideally, it is all of these.
- Further, through connectivity to real-time risk and ETA data, and the ability to do continuous planning to mitigate the effects of unexpected events, a collaboration network platform supports a holistic conception of what a control tower should be. Supply chain risk and planning applications are the most important SCCN applications surrounding robust control towers.
- Supply chain risk solutions are based on an end to end map of a customer’s supply chain, their suppliers (maybe even second or third tier suppliers), how the goods flow from specific factories and warehouses, through specific ports, and so forth into a company’s supply chain. These solutions monitor hundreds of thousands of news and social media sites for terms like factory fire, port explosion, and many, many related terms, in order to perform very early warnings of a problem in an extended supply chain. Supply chain risk data can also be based on real-time data on ETAs of important inbound or outbound shipments.
- Being able to tap into the supply chain plans provides a much richer predictive capability than control towers that only use execution data. Supply chain planning done around real-time events is known as continuous planning. Continuous planning requires the ability to understand what sorts of unexpected events matter and which don’t. It also means planning must be done at a very granular level. Forms of data aggregation in planning require that assumptions are used. This is far from optimal.
- In addition to continuous planning, networks can support orchestration. If you look at the definition of orchestrated, you will see the word “arrangement.” One furniture retailer ARC wrote about that is using a collaboration network solution from Infor Nexus had a global supply chain. They sourced furniture globally and delivered the furniture to customers’ homes in the US. Tight orchestration – the intricate sequencing of work done by their 70 plus import suppliers shipping from 90 or overseas factories, 25 carriers, 7 logistics service providers, and themselves – allowed them to flow product through their warehouses with opportunities to optimize inventory. When you are doing intricate supply chain planning outside the boundaries of an enterprise, that planning is better described as orchestration than optimization.
