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ASCM Insights

Episode 12: Moving from the Supply Chain to the Digital Supply Chain

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Chris Richard will present Rebuilding SCOR for 2030 at the 2021 ASCM CONNECT Annual Conference

Bob Trebilcock: Welcome to The Rebound where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.

Bob: Welcome to today's episode of The Rebound: Moving from the Supply Chain to the Digital Supply Chain. I'm Bob Trebilcock.

Abe Eshkenazi: I'm Abe Eshkenazi.

Bob: Joining us today is Chris Richard. Chris is a principal in the Supply Chain and Network Operations practice at Deloitte Consulting. Chris, welcome.

Chris Richard: Thank you. Glad to be here.

Bob: We've all heard the saying, "The shortest distance between two points is the straight line." In the supply chain world, we might say that the shortest distance between two processes is a straight line. In many respects, that's the way supply chains following the SCOR model have operated: planning led to sourcing, sourcing led to manufacturing, manufacturing led to delivery and delivery sometimes led to returns. It was sequential, logical, and linear. A straight efficient line from one process to the next. Chris and his colleagues at Deloitte argue that digital technology capabilities such as AI, the internet of things, machine learning, robotics, additive manufacturing, and advanced analytics are changing the game.

From SCOR, they're moving to a new model developed with the Association for Supply Chain Management that they're calling a Digital Supply Network or DSN. In September 2019, they released an initial version of the DSN capability model. That's what we're going to talk about with Chris today. Let's get started. Chris, why don't you begin by talking about the traditional linear model and why it's time for a reset?

Chris: Thanks, Bob. The great thing about the traditional linear model is it was very simple, but the bad thing about the traditional linear model is that it was very simple. Let me explain a little bit more. When SCOR first came out I thought it was brilliant. Plan, source, make, deliver, very easy to understand, very easy to decompose, understand what are my processes? What are my metrics? How do I use this to drive improvement in my supply chain? I think it's been a wonderful creation and a wonderful contribution that's helped move the whole supply chain professionally forward over the last couple of decades.

When we look at how companies operate, as you said in your introduction, it's a little too simplistic. Really what we see, what we experience is these complex interconnected networks. Planning is connected to all the other different functions. Sometimes your customer is your supplier. The linear flow is not you know really reflective of where we are. We embarked on this journey to create a digital capabilities model that is more reflective of how our complex supply networks and our complex manufacturing companies and service companies work in today's environment.

Abe: Chris, give me a little bit more about the DSN model. Why is it different than the linear model? Most supply chain professionals have been very accustomed to the sequential process and the synchronization required. Does this change their perspective on synchronization, or does it enable them to better perform through the DSN model as opposed to what we had traditionally seen as very linear model?

Chris: Abe, it's very much at the core of what we are building here is about synchronization, but it's about multiple party, multiple functional synchronization simultaneously. Moving away from, again, going back to how Bob introduced it, planning talks to manufacturing, manufacturing talks to supply and then we execute after that. This is a model that says, "Planning is synchronizing across supply and manufacturing and logistics and my second-tier suppliers and my customer, my customer's customer, all simultaneously." It's fundamentally about that, what are all those connections? How do we enable those with technology and how do we bring that alive to really achieve a level of planning, coordination, and execution that has been elusive in the past?

If you look at our model and the visualization of it, that's what we've really tried to bring to the forefront. If I contrast it with SCOR, SCOR again is very straightforward at the top and simple. That's been great. It's made it very approachable. As you click down from level one to level two to level three to level four, you see more and more of the complexities, more and more of the interdependency between all these different functions. One of the things we've tried to do a DSN is really show that interconnected complexity at the surface, but do it in a way that is navigable and approachable to all supply chain professionals.

Bob: One of the things that you talk about, I read a great white paper that your team put together, a catalyst for this is digital technology capabilities. Certainly, that's something that's on the mind of Supply Chain Management Review readers and I know from going to ASCM conferences the last couple of years, those tracks dealing with these emerging technologies are always packed. We're all thinking about that. Can you talk a little bit about what are the emerging technologies that are going to enable a shift from linear supply chains to DSNs and why?

Chris: Sure. Let me, Bob, talk about that in three blocks or layers of the technology. The first is just the fundamental building blocks. I've spent most of my career working in the semiconductor and high-tech industry, so this is something I've spent the last 30 years of my life being intimately familiar with. The amount of processing power we have today, the amount of memory and storage that we have, the sensing technologies that allow us to collect information from suppliers, and in-transit shipments and the manufacturing floor, and the communications technologies that allow us to assemble that and put it all together and make sense of it, back to the beginning of what I said, so we can process it and take action.

That's just really, really different now than it was when I started working in the supply chain profession. What's built on top of that? On top of that, there are hundreds and thousands actually of different let's call them package technologies. They tend to specialize in many of the functions we're accustomed to. There are advanced planning solutions, there are transportation management solutions, there are multi-echelon inventory optimization solutions. Everywhere you look across the supply chain, there are, call them niche, or solutions that are really designed to deliver capabilities to the humans that are operating the supply chains and make them much more able to get their jobs done effectively.

Then the third area where I think it's been a bit elusive but it's very much emerging and we hear talk about it all the time, which is the control tower. It's interesting when I talk to our different clients, speak with different companies in all kinds of different industries, everyone's got a different definition of control tower. If you talk to someone in logistics, it's usually about transportation and warehousing, if you talk to someone in supplier management, it's about visibility and what the suppliers are doing. The piece that's elusive is how do you build a control tower on top of your entire supply chain?

From how you design products to how you manufacturing and how you source, how you monitor what's going on with the customer? That's really what I call it would be the current frontier of supply chain technology. This is really the final piece that's now coming together in this decade here that will really enable the shift from a linear supply chain to a digital supply network.

Abe: Chris, you're describing a fairly coordinated approach that interconnects a lot of the technologies. The demands on supply chain professionals for communication and coordination across the enterprise has just expanded exponentially, not only because of the pandemic but because of the surges and the shifts in demand. As you start your conversations with your clients about the implementation of the DSN network, it takes a lot of coordination as we just described internally, not only on technology side but on the people side.

When you're talking to the clients or when somebody is interested, where do you tell them to start? Do you tell them to start on the staff side, technology side, the process side? Give me a sense of where do you kick this off for the organization?

Chris: Sure. I always like to meet our client where they are ready to start because everyone's in a different position. Some have a grand and glorious vision and want to drive a transformation. Other have just a very specific problem, "My cost is too high." "My on-time deliveries too low." "My on-time delivery is low, but my inventory is high." Everyone's a little bit different. As a general rule, what we at Deloitte like to say is think big, start small and scale fast. The reason for that is if you don't think big, when I say big here, I mean the whole digital supply network.

One of the most powerful aspects of the model we've built again is to show these interconnections. When you look at the model, you can say, "Hey, I may be responsible for planning, but I see how my responsive demand-supply matching capability is interconnected with the warehouses, with my suppliers, and manufacturing." We've created this powerful visualization tool to think big and think, here's where I sit in the organization, but here's who depends on me and here's who I depend on to be able to make things run in that synchronized fashion that we were talking about a few minutes ago.

That's the think big. The start small is, my experience in 15 years in consulting now and 15 years in industry before that is almost all these big programs struggle. While you want to start with the big program, the big vision, my experience where you really want to start is how can I go tackle a problem in the next couple months, next quarter, that's going to really deliver value and show a tangible improvement? When you do that, not only do you get a win under your belt, but you brought up the people aspect. What I find is these big programs can really wear people down.

If you're delivering value quarter, after quarter, month after month, if you're making their job better, if you're making an improvement on that pain point that exists, then people come onboard pretty quickly. They say, "Hey, I want to be part of this. This program is making a difference. I'm excited, I'm energized, I want to be part of it." Then that brings us to the third part we say of scale fast. Once you have built some momentum and you're moving it forward, and you're really getting a business outcome, cost quality delivery, and people are excited about that.

Usually, part of it, what these technologies do is they make their job easier. They can do it faster, they can do it more efficiently, they can do it more effectively and overall, they're more robust. That's how generally we tackle it again, think big, start small, and scale fast but start wherever our client needs to start.

Bob: Chris, I'm going to throw a little curveball at you if you don't mind and ask two questions, even though I'm only supposed to ask one. The first one is a follow-on to Abe's last question. We had as a guest one of the guys from Gartner who does their top 25. If you read the top 25 every year, what you see is this continuum, all the top 25 companies are doing things, some of the things that you're talking about, they're all doing something a little bit different based on the needs of their organization. If you think about this DSN model, one, is anybody doing it?

You don't have to name names, but is anybody doing it? How far along are the best companies? Then the second question which I was going to ask is, we're in a tough operational environment here because of the pandemic, as you're consulting and talking to clients about the DSN network, what's the most important lesson you've learned that applies to supply chains today? I thought I'd throw that other one out. Is anybody doing this at this point?

Chris: I would say, I've not seen anyone that has done everything. When I say everything, there's really six nodes. It's the traditional or classic SCOR: plan, source, make, deliver and then the other two we have are what we call connected customer and then our product development or digital development. That really integrates a lot of the company. To really have all that integrated and synchronized efficiently, that is, as I was saying earlier with the emerging control tower type of technologies, I think that's where we'll see some companies getting to in the next decade. I can't think of anyone that does that at scale effectively across all those different dimensions.

Having said that, we've got some really, really great examples of where companies may have integrated two or three of those functions. Planning, manufacturing, and sourcing is a great example. We have a lot of our manufacturing clients that have really integrated with electronic data exchanges, have integrated planning systems such that you're being responsive to the customer, worked out new engagement operational models with your suppliers and your subcontract manufacturers so that you can strike the right balance of predictability. They need to load their factories with flexibility to respond to those customer demands.

They've done this with a variety of technologies, including platform advanced planning technologies, plus electronic data interchange technologies, as well as custom-built analytics and dashboards to fill in the white space where these off-the-shelf solutions don't exist. In summary, I think, yes, we've not really worked with anyone that I would say has really achieved the vision, but I'm very hopeful, I'm working with Abe and ASCM that in the next decade where there's some leading pioneer corporate members in ASCM that are really going to push the envelope and go there. The second question was about COVID, right Bob?

Bob: Yes. The second question was, we're in this difficult operating environment, you've been talking to clients, advising them, watching them work through this. What's the most important lesson you've taken away?

Chris: I think the most important lesson I've taken away is everyone realizes you need resiliency in your supply chain, but resiliency costs money. That is a tension that existed before the COVID pandemic hit, it raised a lot of awareness back in the spring as we started to deal with it, and its attention that's right back here now. As these supply chains have responded and just, not necessarily in a very efficient way, but in creative and innovative ways, how do I keep my supply chain running? When I say supply chain, we've had clients that have had disruptions from six tiers back in their suppliers. A company that provides something to another company to another company to another company that eventually come and hits our client.

What's exciting about some of this, though, is I do think it has precipitated an interest and an openness to look at, well, how can technology help us with this? There's some powerful technologies out there, web scraping technologies, for example, that allow in a much more automated and scalable fashion, the ability to monitor public company risk out there. That's one particular example of what I'm talking about. To wrap up, it's attention, when you're still trying to balance out the ability to hit our on-time delivery goals, but with a more resilient network, and there's a cost that comes with that. I think everyone is navigating through that in a slightly different way today.

Abe: Chris, the last question. As Bob was pointing out and as you're clearly identifying, we're in the throes of a very difficult environment right now. Is this a good time to start having a conversation on implementing the DSN, or at least recognizing that we're in a transition phase? The amount of investment right now in technology and digital transformation is significant. Organizations were already on the way, they've even expanded it because of the challenges that we're facing right now. Is this a good time to have the conversation or to implement the DSN model for a lot of organizations?

Chris: I would say yes, Abe, and for two reasons. One, I'll punctuate this with an example. The first reason is, a lot of these technologies and practices can help us operate a lot more efficiently and effectively in this distributed environment we're working in. The example I'll give you as we were working with a client to really transform a whole aspect around how they do what I'll call tactical demand-supply matching. I've got all these orders, I've got supply in various stages of various suppliers, how do I line this up? Where are my gaps? It's a fundamental piece, but this client had been doing it in a very traditional manual way with a lot of planners.

Literally, a week or two before the COVID lockdown started, we had just helped them implement a very integrated DSN approach to this. The immediate feedback we got as the lockdown was basically, "Well, thank goodness we did this because if we hadn't done this, we would be mailing these 8 MB spreadsheets all over the place. It would just be a disaster." Just a very pragmatic example of using technology to work more effectively and efficiently is actually really helping in a distributed environment where you don't have the luxury of walking down the hall and talking to someone.

The second reason I would say, Abe, is linked to how I was responding to Bob's last question is, COVID certainly has been a big wake-up call. Practically, everyone in the world now knows the term and the concept of a supply chain, unlike in February where it was a much smaller portion of the world that knew what that was. One of the things we've done with our clients is these mini-workshops where we'll take them through and say, "Hey, when COVID hit, let's look at what were all those pain points, and let's use those really to say that's where we're exposed."

When the water level dropped, those were the rocks that showed up and started causing us problems. While they're still fresh and while we're still dealing with it, let's chart out our future and how can we address those as we move forward so that they don't come back and hit us again like they did in the spring of this year.

Abe: Really interesting concepts Chris. That is all the time that we have today. Really appreciate you joining us. For those listeners, we hope you'll be back for our next episode of The Rebound. I'm Abe Eshkenazi.

Bob: And I'm Bob Trebilcock.

Abe: Thank you very much and we'll talk to you soon.

Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.

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