Do you know how Supply Chain 4.0 will affect your business? Are you familiar with the supply chain guiding principle about the ‘rights’ of supply chain execution? If you answered No to any of these questions, you should check out Talking Logistics’ recent video interview between Amber Road’s Director of Global Product Marketing, Gary Barraco, and Talking Logistics’ founder, Adrian Gonzalez. Adrian and Gary delve into the guiding principles that executives should use to help keep them a float and ahead in today’s evolving market. Gary not only delves into the reasons why the ‘Rights’ and ‘Mores’ are important, but he discusses how companies can overcome barriers to evolving their supply chain. Watch the video below to find out more about how your company can stay in the lead:
In a recent blog post you stated that in today’s consumer-driven world, success for retailers and consumer goods manufacturers boils down to six guiding principles that you call the “rights” of supply chain execution. What are these six “rights”?
Adrian, like you, I attend a lot of events and listen to what industry leaders are concerned about. So I was at a sourcing summit in New York recently and one-third of the sessions focused on how brands can design, produce and (quickly) ship products that consumers are insisting on. Since the disruptive “Amazon Effect” has established a new norm, the stakes have been upped for retailers, pushing the traditional pace of supply chain execution to a faster, more reactive speed. I thought – this is sourcing? But truly sourcing executives are concerned with all of the aspects of the supply chain today.
The 2018 holiday season winners will be determined by which companies have properly stocked their shelves with the right products at the right price. But it goes further than that - success for retail and consumer goods manufacturing in today’s new world order boils down to six guiding principles. Called the “Rs” of supply chain execution, these principles are:
- The right product
- At the right price
- In the right place
- During the right time
- With the right compliance
- Working with the right partners
To hit all of the Rs on target, a Chief Supply Chain Officer (CSCO) has to address each functional area of the supply chain to ensure optimal performance. However, supply chains are undergoing a transformation that supersedes all imperatives about digitization. In shifting from a product-focused supply chain to a consumer-centric one, the demanding, fickle consumer now has more say in what is “right.”
You also talk about several “mores” that are also redefining the rules for success. What are these “mores”?
Speed to market used to be the hallmark of supply chain success. But no matter how fast a product moves from concept to consumer, if the cost is too high, the quality is lacking, or if it’s not truly innovative, the bottom line will suffer. To truly increase speed without compromising on other equally-important factors, a company must become both more efficient and more agile. While there are a few different methods to accomplish this, digitization is the only answer worth exploring. So not only the “rights” but also the “mores” are governing your supply chain operation.
In addition to determining the “rights,” this dynamic is leading to a new dynamic for measuring supply chain execution: the “mores.” These newly-required supply chain characteristics are layering on top of the Rs.
- More speed to market - shipping times have gone from weeks to days
- More agile processes - planning, production and shipping processes have to be nimble enough to flex with the ebb and flow of demand
- More granular data - product data needs to be down to the SKU (size and color in some cases) level at every stage of lifecycle
- More accurate tracking – in-transit visibility from the first to last mile are vital KPIs
So, in light of these new rules for success defined by these “rights” and “mores,” how should companies respond? What’s the first step?
None of this is achievable without first digitizing your supply chain – so we are back to square one in the transformation game. Like I said before, no matter how fast a product moves from concept to consumer, if the cost is too high, the quality is lacking, or if it’s not truly innovative, the bottom line will suffer.
According to Christian P. Hagen, partner at A.T. Kearney Inc., “with the emerging digital ecosystem, supply chains will not only be efficient, but also have the ability to pivot against increasing business complexity and uncertainty. This means the end of today’s performance trade-offs, with potential to unlock 20 percent to 30 percent productivity and 20 percent to 40 percent inventory reduction, while supporting more channels, products and personalization. In short, supply chain becomes a critical strategic weapon for growth and differentiation.”
Earlier this year, I wrote about the 2017 holiday sales results and how “traditional” retail sales (in brick-and-mortar stores) went down, so companies shifted to bigger e-commerce channels to satisfy consumers. This supply chain model – dubbed Supply Chain 4.0 by many industry gurus – is “here to stay, and not just for the holiday rush.”
And this makes sense because the world is now experiencing the Fourth Industrial Revolution – the first three driven by coal and steam, then electricity, then the automobile, and now computing. This is a new global trade environment caused by the internet, mobile devices and automation. So we are looking at profound transformation of people, processes and products. Digitization of data is imperative to make this all run smoothly.
What are the main barriers to digitization? Is it change management? Bringing trading partners along on the journey?
Gartner, IDC, and Forrester predict that 80% of companies will have made the digital transformation by 2020, yet only the most progressive companies are leading the way to digital transformation for supply chain management.
Many companies have realized that going digital is the best solution to break traditional supply management chains and move boldly into the future. Digital technology will create a significant improvement in business outcomes, as long as businesses reinvent their supply chain strategies while concurrently re-imagining their supply chains in the digital sphere.
As with any disruptive movement, digitization tends to blur the picture quality that most leaders’ have for their organizations. In a recent report, The University of Tennessee Global Supply Chain Institute provides supply chain managers with a framework to help them make informed decisions about supply chain digitization technology and to accelerate what Gartner has called the slope of enlightenment leading toward a plateau of productivity.
Using the acronym SAVVY, supply chain management executives work through a process of assessing where digitization might be successfully employed within their organizations on the following dimensions:
- Sources of data
- Analytical capabilities
- Variety of applications across the supply chain
- Value provided to the organization
- Your changing role
Ultimately, there is a lot behind a transformative process and companies need to conduct a digital supply chain maturity assessment to help them assess how their organization has transformed its supply chain to meet the challenges of the digital economy.
What are the benefits of creating a consumer-centric digital supply chain? What capabilities will companies gain?
The consumer-centric, digital supply chain has greater functionality, including:
- Adopting digital product lifecycle management (PLM) data to integrate tech specs, images and other product details in one space to spur collaboration and the ability to share early plans with test consumers.
- Global product compliance management to centralize standards and regulatory requirements with globally distributed vendors, factories, and compliance teams, and ensuring customers can see that the products meet the quality criteria they desire.
- Gain visibility over day-to-day supply chain management that alleviates bottlenecks through management-by-exception, ensuring on-time delivery.
- Achieving transparency and traceability through end-to-end visibility with all of the information located in a safe and secure portal, which can track items, lots, and shipments from raw materials all the way to the consumer’s doorstep.
The consumer is playing out to be the most powerful dynamic that is driving supply chains to new levels. While most are figuring out the “rights” and the “mores,” digitizing your supply chain is the first step to wholly solve the problems of today and tomorrow.
To wrap up, for companies that are still on the sidelines or skeptical about the value of digitizing their supply chain, what advice or recommendations would you give them?
Digitization allows companies to get the most value from the supply chain, with the real value being end-to-end visibility, improved efficiency, cost savings, and minimized risk.
The global supply chain is one arena that’s particularly ripe for digitization. It’s an environment where globally-scattered suppliers, labor rates, transportation costs, and last-mile delivery challenges are putting obstacles in nearly every shipper’s path right now. Add the complexities of increased customs enforcement, evolving consumer behaviors, and shifting trade policies to the mix, and what do you get? A perfect storm of challenges for the growing number of companies that are doing business in the global trade arena. For these and other reasons, it makes sense to digitize the global supply chain. To learn more about a software automation platform that creates that digital model of your supply chain, supports all of the executionary aspects and provides global trade content to stay up to date on the changes, explore what we offer at amberoad.com.
This post was published on December 21, 2018 and updated on February 7, 2019.