@ Supply Chain Management


Three issues in Supply Chain Management 2.0

Michael Lamoureux did an interesting thing by calling this SCM 2.0 implying that something of a change is necessary in that same ol’, same o’ SCM 1.0. But that begs three questions:
1. What is SCM 1.0?
2. What is Web 2.0? and
3. What is SCM 2.0
I’ll begin with (2) because that is probably the least unknown of the three. (1) will reveal itself when (3) is sufficiently fleshed out. Since (1) is really dependent on (3), perhaps an analogy mapping from (2) to (3) might be sufficient at this point.
So what is Web 2.0?
Web 2.0 is a marketing gimmick – nothing but hype. So says, Tim Bray about Web 2.0:

I just wanted to say how much I’ve come to dislike this Web 2.0 faux-meme. It’s not only vacuous marketing hype, it can’t possibly be right. In terms of qualitative changes of everyone’s experience of the Web, the first happened when Google hit its stride and suddenly search was useful for, and used by, everyone every day. The second syndication and blogging turning the Web from a library into an event stream is in the middle of happening. So a lot of us are already on 3.0. Anyhow, I think Usenet might have been the real 1.0. But most times, the whole thing still feels like a shaky early beta to me.

Now, that you’ve heard from the opposition – a contrary opinion simply pleading a lack of visibility and the very need for a name for something that is not that big of a deal, I’ll go to the proponents case for what Web 2.0 is. This article at O’Reilly – What is Web 2.0 describes the position quite well. If you have the time to peruse the article, I think it’ll be worth your while. However, what is of immediate interest to the me can be found on page 5 of the article – Web 2.0 Design Patterns (Refer to the grey box on the right side of the page).

The blurb about Web 2.0 Design Patterns is an excerpt from Christopher Alexander’s book – A Pattern Language. The following are the core patterns identified by Chris Alexander:

1. The Long Tail: Small sites make up the bulk of the internet’s content; narrow niches make up the bulk of internet’s the possible applications. Therefore: Leverage customer-self service and algorithmic data management to reach out to the entire web, to the edges and not just the center, to the long tail and not just the head.

If you taking nothing else away from Web 2.0, take this piece of insight away because it captures an essential aspect of the anarchic nature of the Internet. The key takeaway is simply a mirror of prevailing economics – the head is the result of a greater investment of greenbacks (dollars) while the tail and the middle lacking the generosity of dollars make up for the lack with niche/original content. What makes Web 2.0 applications successful is that they target the whole instead of the obvious head. This calls for a different business model as well as different operational technology.

2. Data is the Next Intel Inside: Applications are increasingly data-driven. Therefore: For competitive advantage, seek to own a unique, hard-to-recreate source of data.

This is something that firms have always known – hence, Information Technology has been an important component of all firms. Of late, you would find words such as Analytics and Data Warehouse entering the lexicon. In an anarchic world, especially in the context of information overload, Data (and/or meta-Data) and how to extract and employ it is very important.

3. Users Add Value: The key to competitive advantage in internet applications is the extent to which users add their own data to that which you provide. Therefore: Don’t restrict your “architecture of participation” to software development. Involve your users both implicitly and explicitly in adding value to your application.

In one sense, Web 2.0 is built on a participatory model of user interaction but there is a larger sense in which the User doesn’t just add value, he creates it. This notion is not only restricted to the design and/or development phase but most importantly to the deployment phase. If anything, this is a source of competitive advantage because it creates considerable customer/user captivity.

4. Network Effects by Default: Only a small percentage of users will go to the trouble of adding value to your application. Therefore: Set inclusive defaults for aggregating user data as a side-effect of their use of the application.

A corollary of (3) that reflects the reality of our lives. A blog is a ready example of this effect – few create the content while many read it. A significant lost opportunity that I have realized in this blogging experience is the lack of reader interaction that my own blog provides. A reader has access to my views and opinions (and for some reason, there is a significant threshold when it comes to commenting) but I have no opportunity to confirm or correct my views based on reader input except if he/she posts a comment.

5. Some Rights Reserved: Intellectual property protection limits re-use and prevents experimentation. Therefore: When benefits come from collective adoption, not private restriction, make sure that barriers to adoption are low. Follow existing standards, and use licenses with as few restrictions as possible. Design for “hackability” and “remixability.”

If anything is counter-intuitive to the development of competitive advantage within a firm, it must be this particular aspect. However, this aspect doesn’t call for making all aspects of a particular technology open to hackability. Hackability of certain components of a key offering opens up the development and refinement process to come up with new services and offerings that draws on the insights of others. Better yet, leverage their work within your own in some mutually acceptable fashion.

6. The Perpetual Beta: When devices and programs are connected to the internet, applications are no longer software artifacts, they are ongoing services. Therefore: Don’t package up new features into monolithic releases, but instead add them on a regular basis as part of the normal user experience. Engage your users as real-time testers, and instrument the service so that you know how people use the new features.

This aspect directly flows out from addressing the long tail rather than the head. In the software development roadmap that developers often have in front of them, a client firm is one step away from having its processes upset. But imagine a Web 2.0 perpetual beta service. How does a firm cope with such changes? There is an adage of Peter Drucker that goes something like this – “The best way to predict the future is to create it.” So if you’re not part of the movement, you’re likely to be swept up in the swells and troughs of the tides that others create.

7. Cooperate, Don’t Control:Web 2.0 applications are built of a network of cooperating data services. Therefore: Offer web services interfaces and content syndication, and re-use the data services of others. Support lightweight programming models that allow for loosely-coupled systems.

Yes and No. Every firm creates its own models of cooperation and competition. But on the internet, because general adoption of standards and internet technologies, there is scope for a great deal of cooperation and collaboration. That is something that firms can learn to emulate. Better still, to adapt the internet for their own ends.

8. Software above the level of a Single Device: The PC is no longer the only access device for internet applications, and applications that are limited to a single device are less valuable than those that are connected. Therefore: Design your application from the get-go to integrate services across handheld devices, PCs, and internet servers.

The last of the Web 2.0 design patterns indicate that such applications are not PC specific but targeted at a several devices using a broad technology spectrum.
Given, this briefest of explorations into Web 2.0, what it means and how it is structured, the stage is set to infer and map some of the elements of SCM 2.0. I hope to use that stage of SCM 2.0 as the basis for my top three issues in SCM. The three issues that are uppermost in my list are:
1. Supply Chain Talent
2. Closed loop Supply Chain Management
3. Supply Chain Collaboration
These three issues are the subject of my next post.

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Category: Supply Chain Management


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May 2007