July 26, 2022
Migrating too many old practices into new infrastructure or not focusing on realtime data could have catastrophic effects, members of Protocol's Braintrust say.
Good afternoon! In today's edition, we asked supply chain and manufacturing experts to tell us what mistakes they see companies making during modernization. Questions or comments? Send us a note at firstname.lastname@example.org
CEO at Blue Yonder
Too many companies are finding themselves struggling to manage the extreme supply chain volatility of the past few years, often turning to disconnected technology tools, along with planning and execution processes that are spread across functions. This ultimately results in a disconnected response or companies find themselves placing their own metrics and objectives above what’s best for the supply chain as a holistic, connected entity. These are simple mistakes when approaching supply chain modernization, which companies can’t afford during this period of economic uncertainty. To keep pace, supply chains must evolve to become living, fluid ecosystems. This will enable disruptive events to be recognized and addressed by all partners, immediately, in a synchronized and collaborative manner. No matter how geographically distributed the value network is, and how many partners it includes, today even the most complex global supply chain can be digitally connected via intelligent solutions in near real time.
Managing director, Global Supply Chain, Logistics & Transportation at Google Cloud
One of the biggest mistakes I often see companies make when modernizing their supply chain processes is focusing just on their orders, forecasts, and inventory, and not taking into account external factors like public information, traffic, weather, climate, and financial risks. In order to adequately prepare for inevitable future disruptions and interruptions, companies need to look holistically. By connecting these internal and external data sets, we create a community of data that fosters collaboration between business partners.
Companies need to be able to see how goods move from the factory to the warehouse to the store and ultimately the front door. The challenge with this increased visibility across the supply chain is that it has created an increase in data complexity at a scale that is impossible for humans to manage. As a result, analytics and AI are essential for managing and making sense of it all.
One of the most exciting opportunities created by all this internal and external data is around predictive analytics. Predictive analytics can make it easier for companies to make better, faster decisions, both in how they support moving inventory through the supply chain and in how they understand available capacity to support customers, for example. They can predict traffic, storms and customer demand. And as climate, pandemic, global conflicts, migration, and other issues continue to constrain the supply chain, the role of data and analytics in helping to anticipate issues is even more vital.
Senior vice president and chief supply chain officer at Honeywell
Supply chains are now – more than ever – a technology-driven industry, and in our case, we put technology and our domain knowledge of the supply chain team in one.
The most important ingredients are the transparency and visibility of data. At Honeywell for instance, we created the largest operational data infrastructure with the integration of Honeywell Forge. It resulted in a single source of truth for data, performance monitoring and analytics. This intelligence helps Honeywell not only predict future business outcomes, but also better analyze and respond to real-time data to optimize production processes, increase productivity and be more cost-effective. Throughout the process, I learned six lessons, that I can now share with you are the top six mistakes you should avoid, in order to be successful in your modernization endeavor:
- Being too short term focused
- Not having a real program but trying to do it one business case at the time
- Not taking employee aspects into account, i.e. training, upskilling, ‘who-does-what’
- Outsourcing the entirety of the modernization plan to third party vendors
- Limiting the modernization to supply chain exclusively or separately. It needs to be a business transformation including commercial and engineering teams
- Not having a digital strategy that goes alongside the supply chain modernization
Like at Honeywell, your thorough and broad transformation can directly impact the supply chain, which as we’ve seen, can become more resilient, more intelligent and more agile. This would not have been possible without our employees who continue to build the supply chain of the future.
Partner at Eclipse Ventures
The biggest mistake leaders frequently make when attempting to modernize supply chains, is focusing on implementing new tools or technologies rather than doing a root cause analysis of the specific problems they are trying to solve.
Over the past several decades, most supply chains have become convoluted, inflexible, inefficient, and opaque. There were many historical benefits to offshoring supply chains, but we’ve also collectively assumed significant risk in how we manufacture almost everything from chicken nuggets to smart phones.
Supply chain leaders looking to modernize their manufacturing or logistics operations need to first closely examine where their chains are inefficient or broken before attempting to implement solutions. There are many examples of different types of supply chain issues: single-sourced raw commodities, sub-assemblies that travel several times around the world before final assembly and test, suppliers who obfuscate yield reports or shipping records, and/or the use of congested ports all represent common issues in supply chains today.
Supply chain leaders should resist the urge to believe that any one technology can be a panacea to their supply chain woes. A thorough risk assessment of each step of their chains, paired with an evaluation of different solutions, including simple fixes like removing middlemen in communications chains, asking for data in your suppliers’ preferred format or language, or ensuring your process includes a detailed serialization of inputs and finished assemblies for downstream traceability, may be the best - and often most simple - solutions to some of the most egregious supply chain problems.
General manager, Manufacturing & Digital Plant at GE Digital
Consider the process of modernizing your supply chain as a great opportunity for improvement. The biggest mistake would be to migrate existing procedures and practices into a new infrastructure. Clearly, you don’t want to mimic your old systems in a modern one.
As a result of changes in behavior and recent disruptions caused by the pandemic, certain areas in your supply chain need special attention. A modern supply chain demands world class manufacturing processes. A more efficient supply chain requires that you have complete visibility into your KPIs across your operations, including carbon emission, energy consumption, etc. The production system shall not be the weakest link of your supply chain. In this regard, software has become mission critical.
The new generation of manufacturing software allows you to provide interoperability between the various components of your supply chain, end-to-end traceability of raw materials and finished goods, and instant access to important parameters such as efficiency and quality data in almost real time. Then, it supports strategies such as continuous improvement and Lean process optimization, monitoring, auditing, and reduction of WAGES (Water, Air, Gas, Electricity, Steam) consumption. All of this functionality can generate tremendous savings. Finally, it leads to more informed decisions regarding investments in production capacity or outsourcing.
Software is essential to industrial and supply chain operations. It delivers the agility required to face disruptions, changes in strategy and adapt to new business models such as the Circular economy.
CMO at Bright Machines
If supply chains were given a tagline in 2022, it would be “Make it Modern.” Outdated outsourcing strategies, antiquated equipment, and a dearth of workers in the right locations brought global supply chains to a virtual standstill when the perfect storm hit. The tendency in these situations is to band-aid the problem – rachet up factory capacity though additional labor and capital expenditures – or conversely, embark on a multi-year digital transformation strategy requiring massive investments in IT infrastructure and software systems.
But there’s a better way to get started, AND future-proof a company’s operations at the same time. By focusing on desired business outcomes – including efficiency, yield, and the ever-elusive supply chain “resiliency” – companies can make smarter decisions about technologies that will drive immediate impact. Take automation, for example. Modern, full-stack solutions are now available that are flexible, programmable, and easy for assembly line technicians to troubleshoot on their own. Multiple SKUs can be run down a single line and changed on the fly, providing the ability to dynamically adjust output as market demands shift. Modular lines can be integrated into an existing facility and enable future reuse, extending the life of the equipment. And due to the economics of automation, manufacturing can be reshored and products can be built closer to the end consumer, shortening lead times and carbon emissions. More and more companies are embracing this pragmatic approach, investing in real capabilities that benefit both their near and long-term goals, versus simply focusing on the act of modernization itself.
Founder & CEO at Stord
If brands want to enact meaningful change, they need to stop modernizing each part of the supply chain in isolation. This causes them to lose the big picture, and with it the opportunity to truly understand and optimize their networks from end to end.
For example, a CPG brand can implement specialized tools for order management or inventory management, or pick up an excellent BI solution to help forecast demand. But if these are treated as discrete areas, the company ends up with siloed data and pockets of intelligence that don’t lead to an overall strategy.
Supply chains are like living organisms in which each part affects the whole. If you want a modern supply chain, you need the system connectivity, consolidated visibility and centralized intelligence that allows you to see what impact a logistics change made over here will make to a delivery schedule halfway across the country.
It’s about having complete visibility to make the best decisions, and that can’t happen when your supply chain is a series of technology islands.
CTO, Manufacturing Industry at Microsoft
As organizations modernize their supply chains, it’s essential to prioritize end-to-end visibility, agility, skilling, security, and sustainability.
End-to-end visibility across your supply chain is critical for businesses across all industries. This kind of view is possible through digital transformation and turns a supply chain into a smart, interconnected network of partners and processes. Additionally, supply chain agility is also critical and empowers organizations to understand and respond quickly to real-time information. By implementing essential technology, companies can implement the right resources – people, inventory, equipment – at the right place, and at the right time.
As many of us know, one of the biggest impacts from the pandemic was on the global workforce, especially regarding safety and operations. When companies prioritize workforce transformation, a combination of reskilling and automation, they can address potential future disruptions.
Lastly, security and sustainability are imperative. By evaluating and investing in supply chain risk mitigation strategies, companies can ensure secure and compliant supply chains. Additionally, organizations can significantly improve operations by adopting sustainable practices. Pinpointing the origins of emissions across supply chains enables companies to begin to reduce their environmental impact. Companies can improve resilience to climate risks by sourcing from alternative suppliers and conducting ongoing analysis of risks to materials, logistics, suppliers, and fixed assets.
At Microsoft, we’ve learned that it’s imperative to lay the foundation for digital transformation capabilities. One thing is clear: disruption is here to stay, and building a modern, agile, and sustainable supply chain will allow manufacturers to withstand future challenges.
Partner at Innovation Endeavors
See who's who in the Protocol Braintrust and browse every previous edition by category here (updated July 26, 2022).
Too often, we see companies innovating within their existing supply chain framework and ecosystems. We believe there is a real opportunity to fundamentally rethink supply chains given the myriad core technical innovations we see across value chains.
For example, one way to modernize the supply chain for heavy equipment would be to invest in high-capex, repetitive production abroad to minimize variable costs. However, we see an opportunity to take advantage of the marriage between industrial automation and machine learning to enable more flexibility and scalability for part production. Companies driving intelligence and automation include Machina Labs in formative, Velo3D in additive, and CloudNC in subtractive methods. These novel approaches not only enable the potential to reshore production but can also be the backbone for a more iterative, agile engineering process.
Core innovations that justify a holistic supply chain evaluation include novel bio materials, new approaches to decarbonized production (e.g., industrial heat, electrification), and increasingly autonomous commercial electric logistics options. Optimizing within an existing supply chain might generate a local optimum but miss the global maximum opportunity, particularly when considering climate impact.
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
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