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Taking your Supply Chain to the Cloud
By Abir Thakurta, VP of Global Supply Chain, Havertys Furniture [NYSE: HVT]
There used to be a time when supply chains were simple, focused on planning, local manufacturing and delivering product to market. Then came outsourced manufacturing and globalization. Cost savings was the primary driver and lean principles became the key. Supply chains developed a value stream that eliminated waste, time, and ensured a smooth and predictable output.
Today, times are different. In today's global digitally disruptive economy, where the basics of business are being turned on their heads (the world’s largest taxi company owns no taxis, the world’s most valuable retailer has no storefront, the world’s biggest bed and breakfast does not own any rooms…. the list goes on) the one thing that stands tall is a company’s ability to execute in newer circumstances. Today, companies that can react to customer demand faster in the supply chain, seamlessly across various channels, and deliver a delightful experience can win the admiration (and possibly loyalty) of increasingly demanding customers. This is particularly true of markets that are getting disrupted and becoming less predictable.
Ask any supply chain executive, and chances are they will tell you, that today nothing is more important for an organization than supply chain execution. In a world spurred by a rising tide of global uncertainty and business complexity, supply chains have to fundamentally change the way they operate;
• Accept that uncertainty is inherent
• Shift focus from planning to execution
• Manage demand volatility by chasing demand
• Support a high product variety and customizations
• Gain the required technology capabilities
In short, supply chains have to become increasingly dynamic and agile.
What is an agile supply chain?
In simple terms, Agile refers to the ability to react and adapt to the changes in demand and supply situations in a supply chain. To accommodate the inherent variations in demand and supply, supply chains need to react and adapt to such changes as they happen, to minimize the disruption and optimize the objectives, such as costs, fulfillment rates, inventory, and various other parameters.
The big question is; how does the supply chain know when changes happen? How does one get visibility into what is happening in the supply chain across an extended set of partners? How does technology provide the level of real time information that is required for supply chains to become agile?
These questions have been asked time and again. And answers have been costly or ineffective. Until now.
One of the biggest premises on which a supply chain becomes agile is when decisions are made based on information – information beyond the four walls of the enterprise - from market knowledge to product knowledge to inventory knowledge or information that answers simple questions like ‘where’s my stuff’ to ‘who owns inventory’, or ‘where’s my money’ – regardless of geography and entity in the supply chain.
In the world of supply chain, the biggest impact that cloud technology has made is in the information model itself
In such a situation, each member of the supply chain has an effect on the performance of the others, the overall supply chain and the ultimate end-customer. Partners in the supply chain must be able to work both independently and together, and optimization of performance must occur at both levels.
Fig 1: Agile Supply Chain
Such a paradigm for an agile supply chain was not possible with on premise software of yesteryears. These systems were never meant to connect organizations that make up the supply chain – manufacturers, raw material providers, component suppliers, partners, service providers – primarily anyone involved in making, moving and bringing product to the door of the consumers. The advent of cloud computing has changed all of that and much more. In fact, technology driven supply chains of today have no option but to work in the cloud.
Cloud technology has a number of IT benefits, including scalability, immediacy, cost management, efficiency, accessibility, and flexibility. Much has been written about these. However, in the world of supply chain, the biggest impact that cloud technology has made is in the information model itself. It has enabled an information model key to running an agile supply chain.
This model is different from the traditional models of pull or push based information models. Think Facebook or Linked In. By the mere presence of one’s association as a part of the network, and the desire to process information, one can get regular updates on what is going on in the network without having to seek it. Apply that same information model to a supply chain network of partners, and a single version of the truth begins to emerge across various processes - from plan to deliver, order to cash, procure to pay, make to order etc. A partner publishes once (for e.g. an order update, a demand spike or a shipment delay), other partners receive, view or process information immediately (for e.g. make decisions based on that order update or chase demand or re-route shipments). This real time visibility is the key to managing an agile supply chain and effectively chasing demand.
Real time supply chain visibility – a company’s sight line to the status and detail of its orders, shipments, invoices, payments, and costs – has been unachievable for most companies not only because it requires an extraordinary amount of specialized IT, but because it requires companies to compel their entire trading partner communities to participate in the flawless provisioning of high quality, standardized data. That’s a tall order. But a cloud based supply chain network (like an energy grid where the cost is shared across multiple participants and the buildout benefits all), where all partners gain value by sharing information and real time visibility, to the benefit of their own improvement, creates a win-win scenario for all.
Time is not spent integrating and establishing one-on-one connections, but rather on the value of the information, the timeliness of it and the context in which it is released for the benefit of all partners. Such information can then be used to manage an agile supply chain. It’s because of cloud that companies today finally do have access to robust real time supply chain visibility capabilities across their broader business networks. Cloud makes supply chain visibility finally possible.
In the future, the best companies won’t act as a single organization, disconnected from one another, but as interconnected, agile business networks that operate far more efficiently and much more quickly than the companies we know today. And that is a distinct possibly thanks to cloud based technologies.
If your organization has not yet started its journey to the cloud, now may be the time to start blueprinting.