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Three issues in Supply Chain Management 2.0 – Part 3

As mentioned previously, Michael Lamoureux is hosting this year’s Big Bad Blogger Throwdown at his blog – Sourcing Innovation. Here is the link to the announcement of the cross-posting cornucopia. As recounted in the first and second part of this series at Three issues in Supply Chain Management 2.0 and Three issues in Supply Chain Management 2.0 – Part 2, I listed out my three top issues that I think are important for firms to be cognizant about. They were:
1. Supply Chain Talent
2. Closed loop Supply Chain Management
3. Supply Chain Collaboration
In this last post, I will delve into the second and third of the three issues in a more substantive fashion.
The essential design patterns in Web 2.0 are recounted here. The first issue is linked below.
Issue #1: Supply Chain Talent
Issue #2: Closed loop Supply Chain Management
I refer to closed loop supply chain management in a sense that is quite different from the usage that I have encountered at many websites and discussions proceeding on the web. A typical reference to a closed loop supply chain would be like this one linked here – The Challenge of Closed-Loop Supply Chains. The proposition advanced here is that a closed-loop supply chain includes the forward part of the supply chain (i.e. product/material flow from producer to customer) as well as the reverse part of the supply chain (i.e. product/material flow from customer back to the producer). The closed-loop supply chain here has more to do with product flow.
What I mean by closed loop supply chain management includes supply chain decision making and translation into operations and execution on the forward loop and information flow on the reverse loop of the supply chain. This proposition has more to do with information feedback about the effectiveness of the supply chain strategy and how to continually make course corrections in order to address the current market. Such a closed-loop supply chain naturally lends itself to continuous improvement – it is actually continuous improvement expressed in Supply Chain Management.
Remember that in the forward loop, lies strategic decisions concerning the supply chain such as manufacturing configurations, inventory levels, sourcing decisions, investments in supply chain assets etc. These decisions are taken by the few or perhaps within middle management with a view of the world that they have built up with experience and/or sales data (feedback loop), growth forecasts (wishful thinking and/or statistical inferences) etc. The closed loop that exists here is some decision making on the forward loop and data warehouses that either relay information or calculate forecasts on the feedback loop. The actual feedback loop should extend all the way to the customer and the sales rep who interacts with the customer because even if a customer doesn’t end up buying a product the information gathered about the customer within the context of a conversation (apart from a standard sales survey) is quite important for the whole system.
So how does Web 2.0 figure in this particular issue? Today, in Web 2.0, you would observe a proliferation of blogs – “71 million blogs… some of them have to be good – Matt” as the Technorati dogs-ear goes. A blog if anything can be described as the creation of meta-information by experts, semi-experts and downright doofuses that add content (of questionable value) to the information stream. In the case that we’ve been talking about, the customer and the sales-rep play the role of value creators except that instead of it being printed/typed, it is verbal information.
So in order to get at this valuable information, you need to store the conversation between a sales-rep (who is equipped with a vocabulary) and a customer, parse it and glean the required information (and perhaps for purposes of privacy – destroy the conversation at the end of the parsing process). This is the sort of process that Google undertakes within the context of its gMail service – or as I have understood it.
A system of the sort that I have described above, takes the feedback loop closer to the customer than the information that is presently obtained at the point-of-sale.

Issue #3: Supply Chain Collaboration.
Supply Chain Collaboration has been a great success story – NOT! Other than the few behemoths that have the clout [Or as one would find in Porter’s five force’s model – bargaining power] to force either buyer’s or supplier’s to collaborate in order to achieve benefits such as visibility, order adjustments and JIT inventory positioning, the promise of supply chain collaboration has largely gone unfulfilled. For a good primer on Supply Chain Collaboration, visit Beyond EDI: A Framework for Understanding Supply Chain Collaboration Alternatives.
The suitability of Web 2.0 principles in this area is undeniable but in my opinion it is not the lack of technology (something that Web 2.0 can adequately plug) that has been the stumbling block here. I’m sure that the reasons differ from firm to firm but I have assembled a list that in my opinion might cover some of the significant reasons:
1. The data is all over the place
2. The data (or all data) is considered secret by default
3. There is no time for collaboration
4. There is no planned investment in code data exchange layers
5. There is no competency in enabling such data exchange and collaboration
Of these, the first three reasons are probably the big ones but let’s take a step back. There is the mindset that is very prevalent in N. America that supply chain collaboration is a technological problem that requires a technological solution. If I were a big evangelist of how Web 2.0 can be plugged into the gap, a button clicked somewhere and:
It’s just that I don’t think that it will create supply chain collaboration because the core of the problem as outlined above is not a technological problem – it is a supply chain problem manifested by varied systems, a burden on the time of decisions makers and ops people and an overarching directive of how supply chain problems can be solved i.e. adopting the Push model in some form or the other. A lot of firms seem to have the mindset, especially if their operations are driven by some sort of a Push model, that they’ll carry the inventory and the associated costs instead of getting down to brass tacks upfront, collaborate and reap the dividends of a Pull model or something close to that. Instead, you’d have shared forecasts, actual demand information flows etc that one has to share with a select group of collaborators. I would also hazard a guess that those firms that integrate much more than demand information such as product design considerations, customer driven efforts to determine value etc would be willing to engage in supply chain collaboration.

So why bother about this Web 2.0 or SCM 2.0 thing in the first place with respect to Supply Chain Collaboration? Collaboration of the sort that companies engaged in today are typically with key suppliers or key customers as the case maybe. However, in Web 2.0 parlance, that would be addressing the head while a long tail waits to be addressed, developed and used to mutual advantage. The challenge that Web 2.0 innovators seek to address is the long tail which is the bulk of the population of the creative commons as it stands today. That is what a Web 2.0 application would be able to deliver but like I’ve outlined above, the key hurdle is not really technological, it’s the business case for supply chain collaboration and lacking a Pull model or something like that, firms might not be compelled to deal with the issue of supply chain collaboration in a substantive way.

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Category: Supply Chain Management


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May 2007