1 even mighty elephants can slip and fall. only the adaptive survive navi radjou principal analyst...
TRANSCRIPT
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Even mighty elephants can slip and fall
Only The Adaptive Survive
Navi Radjou
Principal Analyst
Forrester Research
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Theme
To cope with volatility firms need to migrate their static supply chains to adaptive
supply networks
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Agenda
Existing supply chain practices and tools fail to help firms deal with volatility
Static supply chains are dead. Long live adaptive supply networks!
How can firms build adaptive supply networks?
What’s wrong with today’s supply chains?
6Supply chains risk collapsing under the disruptive influence of new business drivers
Accelerated global outsourcing
Ever-shrinking product lifecycles
Fickle demand
These business drivers are exposing manufacturers to:
Supply/demand mismatches!!
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Plans are insulated from execution reality
Supply Chain Planning
Supply Chain Execution
8Glitches -- however minor -- get amplified throughout the supply chain
Dyer(Hong Kong)
7 daydelivery delay
Knitter(Malaysia)
Threadmanufacturer
(India)
Machine#4711is down
Clothingmanufacturer
(Europe)
10 daydelivery delay
Glitch Snowball effect
4 daydelivery delay
Lack of timelyshipment of hot new
model results inmillions of dollars inlost sales revenues
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Opportunity costs associated with supply/demand mismatches
General Motors
Boeing
Sony
Company Supply chain exception Opportunity costs
In 1996, an 18-day labor strike at a
brake supplier factory idled
workers at 26 assembly plants
In 1997, two key suppliers failed
to deliver critical parts on time
Shortage of PlayStation 2
Graphic chips in 2000
Quarterly earnings reduced
by $900 million
Deals lost worth $2.6 billion
Sony console shipment in US
was 50% less than planned
Ericsson A fire in Philips Electronics’ plant
in New Mexico disrupted supplies
of chips for key new handset
Lost three market-share points
againts Nokia in 2000, and was
forced to exit handset market
10But current supply chain apps can’t help due to their centralized architecture
• Only fit “Command & Control” organizations• “Smart” Hub -- “Dumb” Spokes
OEM’s Planning Department
Supplier
Contractor 3PL
Customer
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Optimization tools don’t make the cut
4%
12%
28%
56%
Software suggests solutions
Software provides alerts
Software provides guidance
No software support
Base: 25 European companies implementing supply chain optimization
“How do people in your company manage supply chain exceptions today?”
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Existing supply chain apps ignore the “physical world”
Internetcomputers
Internetusers
93 million
407 million
Shop-floor equipment
Trucks and cargo ships
Containers and Pallets
000,000s
Millions
Billions
Firms must migrate to adaptive supply networks
14To begin with, it’s no longer a “chain” -- It’s a network!
In the 50s:Serial flow acrossstovepiped organizations
Customer
Supplier OEM Distributor
1990s:Internal processes beginto move outward
CustomerShip
Dist Dist
CustSvc
CustSvc
FinalA‘blyMfg
Eng Eng
Mfg
Today:A supply network of dynamictrading relationships
CustomerFinalA‘bly
Eng
Eng
CustSvc
Mfg
Mfg
Dist
Dist
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Flexibility gains
Efficiency gains
Firms must go beyond efficiency
1990 20152010200520001995
CompetitiveAdvantage
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Firms must migrate to adaptive supply networks
Business networks of supply chain partners that use technology to sense and respond in a coordinated
fashion to changes in their environment
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The unique characteristics of an adaptive supply network
Self-regulating
Real-world aware
Adaptivesupply network
Event-driven
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Supply chains Vs. Adaptive supply networks
In today‘ssupply chains
In adaptivesupply networks
Optimization focus
Input for decision-making
Problem-solving
Origin of demand information
Executive imperative Cost-cutting
Efficiency
Historical data
CentralizedManual
Crystal ball
Efficiency and agility
Leading indicators
DecentralizedSoftware-agent-assisted
Point-of-sale dataRFID-tagged items
Risk management
19To gain flexibility, firms need a closed-loop process adaptation strategy
Use feedback loops to reiterate process transformation and reshuffle copingstrategies portfolio
Collect and analyze dataon key leading indicatorsto assess emerging risksand opportunities
Determine and implementappropriate steps tomitigate risk or seize opportunities
Continuous
Adaptation
How can firms build adaptive supply networks?
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You need sense-and-respond software
Connect with physical assets
» RFID tags
» Remote device tracking apps
Manage unplanned exceptions
» Event management tools
Automate decisions -- and learn
» Software agents
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You need people and process changes to:
Interpret data accurately -- by analyzingit collectively
Respond intelligently to changes -- by involving partners
Learn continuously -- by automating mundane decisions
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Caveat emptor
In particular… Beware of vendors who tell you that ERP apps are only good for “book-keeping”!!
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Let’s get real: Survival comes first!
Maslow’s Hierarchy Of Needs
Basic Physiological Needs
Safety and Security
Belonging
Esteem
Self-actualization
4. ADAPTABILITY
3. FLEXIBILITY
2. TRANSPARENCY
1. SURVIVAL!!
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Low-exposure To variability
High-exposureTo variability
Firms’ roadmap to building an adaptive supply network
TraditionalSupply chainoperations
Step 1Transparentsupply network
Step 2Flexible supply
network
Step 3Adaptive
supply network
Establish visibility into factory-floor activities and strengthen connectivity with “weakest” links in the supply network
Use Web services to establish “two-way”
conversation with your trading partners -- to enable collaborative problem-solving and
decision-making
Deploy new technologies like agents and RFID
to automate sense-and-respond
capabilities
Decentralizeddecision-making
Centralizeddecision-making
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Summary
Uncertainty is here to stay
Aggressive firms will beat the competition by making their supply networks adaptive
Firms must crawl and walk before they can run in adaptive supply networks
