Bob Ferrari on Supply Chain's Grand Challenges: Part II

Continuing with Bob Ferrari's series on the 'Seven Grand Challenges for Supply Chain Management', this post will consider the second challenge.

For convenience, I will preface each post in this series with the 6 architectures of high performance supply chains. I want to keep pounding these architectures because I think they are very useful, at a strategic level, in framing any supply chain challenge prior to devising a proper solution.

Physical--the actual movements and flows within and between firms, transportation, service mobilization, delivery movement, storage, and inventories.

Informational--the processes and electronic systems, data movement triggers, access to key information, capture and use of data, enabling processes, and market intelligence.

 

Financial--the flows of cash between organizations, incurrence of expenses, and use of investments for the entire chain/network, settlements, A/R and A/P processes and systems.

 

Relational--the appropriate linkage between a supplier, the organization and its customers for maximum benefit; includes internal supply matter relationships throughout the organization.

 

Innovational--the means by which a firm identifies, prioritizes, and brings new product/service innovation to market.

 

Human--the means by which human resources and talent are deployed, managed and developed across the supply chain for greater performance

 

Challenge #2: True Supply Chain Business Intelligence and Decision-Making Tools

 

Business intelligence, or 'BI', is often used in different ways. I had an MBA course in BI at Thunderbird, and this is the working definition that we used:

"a systematic, targeted, timely and ethical effort to collect, synthesize, and analyze information on the external operating environment in order to produce actionable insight.  When combined with internal company information, it should give an executive as complete a picture as possible of the total decision-making environment."

In this sense, companies use BI for 1) Assessing competitors' strategies, 2) Defining a competitive landscape, 3) Discovering and assessing industry trends, and 4) Targeting opportunities. This is how I want to frame this challenge, but online I notice that BI is most commonly referred to as internal to firms, whereas external BI is referred to as 'competitive intelligence.' With this in mind, let's review how Bob describes BI:

"Think for a moment of the broader possibilities when real-time information related to what’s actually occurring, or about to occur based on previous events, can be applied to more timely and informed decision-making.  Expand your vision to the possibilities of bringing all of this information together, allowing an interaction and query of each of the decision-related dimensions of the total value-chain."

Obviously, it is essential to understand your own firm's supply chain dynamics prior to a concentrated focus on competitors' supply chain dynamics. Thus, what is required is a joint, internal-external BI strategy to improve not only the decisions that will improve a firm's own supply chain performance, but also better position its supply chains against those of its competitors. Overall, this is again a challenge to a company's informational architecture.

Now, the foundational methodology, skill-set, and tools required for such a BI effort will differ depending on whether you are focused on the internal or external environment. Either way, you will need to attack the BI challenge through acquiring both hard and soft information. Hard information comprises of pure data and numbers pulled from the supply chain--inventory levels, total cost breakdowns, employee utilization and turnover, facility and equipment investment, cash flow, etc. across each architecture mentioned above. Soft information comprises of interviews, employee and customer feedback, reports and research published by various organizations, etc. There should be a methodology in place to collect, organize and analyze this information to enhance decision-making within the firm.

In terms of internal BI tools, the deployment of an IT solution specifically for BI is not necessarily required, especially if you operate a smaller business and manage supply chains of low to moderate complexity. Most companies, regardless of size, will have some degree of technology deployed to manage different pieces of their supply chains, even though these pieces might not be strategically integrated. In these scenarios, it would be possible to utilize lower-tech tools to mine this data for the hard information mentioned above, but it may not address collecting soft information.

 

On the other hand, ompanies with highly complex supply chains will likely benefit from the latest supply chain intelligence (SCI) technology to help collect, integrate and analyze several sources of data that may be isolated in multiple locations and multiple countries. Perhaps these data sources are simply not yet effectively translated into actionable intelligence for executive decision-making.

In my experience in Asia logistics so far, the cultural differences, relatively poor logistics training and lack of sophisticated and integrated IT solutions for many conglomerate businesses requires a strong capability in leveraging soft information for supply chain decision-making. In other words, the numbers may support making a particular decision or devising a certain strategy, but internal politics or lack of skills required to execute the decision may throw up barriers to success. I have seen this first hand in both medium-sized and large-sized 3PLs.

I'll end this with a rough example of the mindset that my professor tried to instill in us when collecting BI on strategy:

It's great if you can identify your firm's or a competitor's strategy (the 'what'); but the next questions are--can that strategy be executed (the 'how')? Who is advocating it? When has it been or will it be implemented? Where has it been or will it be implemented? What are the assumptions and expectations for the future behind this strategy? The answers to these questions (and others like it) should be the product of a constantly innovative and successful BI organization and will result in better executive decision-making.