Software AG Director of Supply Chain Innovation Sean Riley Discusses 2012 Supply Chain Trendsby From the Top on 2012-12-17
The Logistics and Supply Chain industry has thrown up some interesting trends throughout 2012. We discuss these with Sean Riley, Director of Supply Chain Innovation for Software AG and get his take on what some off these trends could be.
Thanks for your time Sean, quickly highlight some of the trends that have come out of 2012?
Here are the major trends I have seen throughout 2012:
Improved Customer Service Levels over Cost Cutting
Supply Chain costs have been continuously cut since the recession began in 2008 and customers are pushing back on the cost cutting measures as they are affecting service levels. Companies are now focusing on how to improve service levels while simultaneously decreasing costs. This is the primary focus for all other supply chain activities.
Execution Moves Ahead of Demand & Supply Planning
Demand and Supply planning has been and will be focused on continuously as this is the starting point for supply chain success. However, the ability to execute on the plan and execute when forecast errors occur, which is a constant occurrence, results in the need for companies to focus on execution. Forecast errors, or the difference between what is planned and what occurs, are driven by every day issues of "abnormal" supply chain events that can cause major disruptions. The ability to react efficiently and effectively is critical to every supply chain and primarily relies upon end to end supply chain process visibility at the transaction level.
Resurgence of Contingency Planning
As supply chains have gotten leaner the reduced inventory levels require the ability to react quickly when "abnormal" events occur. Because these "abnormal" events are occurring more and more frequently or are becoming normal occurrences, responding to them in an effective manner is a must or companies will face severe revenue losses. The result is a resurgence in contingency planning, the ability to recognize an "abnormal" event and immediately execute the contingency plan to avoid severe revenue and profit penalties.
End-To-End Partner Communication & Collaborative Execution
All partners in the supply chain from retailers through raw material providers must constantly collaborate on what event are occurring, the data behind those events and how they can execute as a unified group to respond to the challenges as they unfold. By acting separately, problems are pushed from one point in the supply chain to the next and that inevitably increases costs. Trading partners must act in a concerted manner based on transparent information to resolve issues as they occur.
Big Data Is Becoming Mandatory
Combining the data of multiple supply chain partners, turning that data into information and being able to react and execute accordingly requires the ability to manage, process and make use of a lot of data. Big Data solutions combined with Complex Event Processing solutions will be needed more than ever to digest the enormous magnitude of available data and turn that data into executable actions. Leverage these tools with supply chain visibility solutions will quickly become a must have rather than a nice to have as companies that are utilizing these tools set the bar for the new normal in supply chain performance.
The increase and magnitude of Global Natural Events has certainly highlight some major supply chain issues, how has the industry adjusted as a result of these events?
The industry has adjusted to the increasing frequency of these events by spending more time focusing on contingency planning. Detailed actions are created to respond to a multitude of crisis’ so that enterprises are not taken by surprise and can limit their financial exposure to an event. However, these events are still disruptive to a supply chain and to a supply chain team as the transition from creating a plan to executing upon it is not yet seamless. Organizations still have “war rooms” and re-allocate resources to manage the crisis which impacts their overall supply chain performance.
Data and Supply Chain visibility is becoming a major talking point throughout the industry; as a result, we see the emergence of Cloud Technology as a viable solution, what else should companies consider when they want to get a better understanding of what their data means and how they can apply it to their business?
When identifying solutions that transform data to actionable knowledge, companies should carefully examine not only what advancements the solution enables today but also how this solution can be leveraged in the future to continue to enable future improvements. Every year, Supply Chain Practitioners are charged with driving an increasing amount of costs out of their supply chains, and if an offering does not support immediate and future needs, practitioners will find it very difficult to build upon the already realized successes. Additionally, the methodology behind the application should be thoroughly discussed and reviewed to ensure that it fits the strategic direction of the enterprise purchasing the application. Cloud applications are an important part of this framework but hosted solutions can be more flexible which can enable long term, continual cost savings and service level improvements.
Another trend you identify is better end-to-end Partner Collaboration; in your opinion why is this so important and how do we do this as an industry?
A single supply chain can only be optimized to a certain extent. More importantly, optimization steps that may seem pertinent to that single supply chain may be causing additional costs to be incurred elsewhere in the supply chain. It is an old premise that has been stated many times, but it is more relevant than ever as current technology better enables faster, dynamic collaboration and improved visibility for all involved parties. As an industry, Supply Chain practitioners are asked to control costs, to improve customer service and to provide their organizations with a strong, competitive differentiator.
While it is possible to affect each performance point, to achieve the entire objective and sustainably drive improvement all partners in a supply chain have to understand when an event occurs, how each partner is going react to that event and, most importantly, have complete confidence that each partner is going to act in the best interest of the entire end-to-end supply chain. Improved end-to-end collaboration can be enabled by technology that enables improved multi-tier supply chain visibility by providing seamless, shared views into events as they occur, but adoption will require trading partners to obtain a certain level of trust.
The building of this trust will require the segmentation of trading partners into true strategic partners / customers and transactional partners / customers. This doesn’t necessarily mean the largest customers, or suppliers will be considered the ideal partner but focusing on selecting strategic partners based upon which organizations share the same ideals and objectives of the host enterprise. Proper strategic partner selection, the joining of people and the leveraging of current technology will enable widespread industry adoption.
One of the trends you point out is Improved Customer Services, is this mainly an increase in staff training or implementation of new technology to improve efficiencies?
The achievement of improved customer service is going to be enabled by the combination of technology enabling new efficiencies and a strong training / continuing education program. For an organization to improve upon its customer service levels, technology has to be introduced that aids the planning of how a company will react to a supply chain event, the identification of the event, the execution of the planned response process and a sophisticated root cause analysis of the executed response process to continually improve event responses. The supply chain events can be something as simple as a received order or something as large as a natural disaster.
A common thread that seams to be coming out of these trends is that Companies should adopt technology that is flexible, agile with a strong focus on data management; would this be fair to say?
This is a very fair statement, and Software AG has developed a methodology called “The Path To Agility” which leverages all three of the mentioned principles. Data Management and application integration forms the basis for visibility. Visibility enables organizational control and once an organization is able to control its processes, it can make changes quickly and with the confidence that it knows what the effects of that change will be which enables an organization to be agile and react quickly to any event that may occur.
Let’s look to 2013, do you see these trends continuing or are we likely to see a shift in focus throughout the industry?
These trends will continue through 2013 as they are all interrelated and focus on a single outcome: improving the effectiveness and efficiency of an organization’s supply chain from both a customer and shareholder perspective. Additionally, if nearshoring becomes more prevalent or the perception that nearshoring is becoming more prevalent, then the cost and service expectations of retailers and consumers will only increase the focus on these trends.
Lastly, what are some of the new innovations that Software AG is developing, and when can we expect to see them introduced into the industry.
Software AG examined where and how our customers were the most successful and developed a solution based on these findings, as well as the concept of resolving specific supply chain issues within the context of the overall supply chain process. Additionally, a specific methodology was developed that not only aids organizations with the challenges of obtaining visibility but also presents a path for them to build upon their new efficiencies to continually realize value. This new solution concept is named iKnow and was introduced to the industry in May of 2012.
Sean Riley, Director of Supply Chain Innovation for Software AG