As digital innovations are transforming how products and services are offered and delivered, it’s become clear that no part of the business environment can be left untouched by technology.
Traditionally, a ‘catalog’ approach to sales gave companies the confidence to own assets, keep products until sales were executed, and keep a very ‘static’ supply chain to deliver their products. The pervasiveness of technology has consumers migrating towards choosing ‘outcomes’ over brand loyalty (such as finding a pharmacy within 5 minutes’ drive from my location.) This vastly different marketplace necessitates new supply chain innovation and dynamism.
In order to evolve their supply chains, organizations should look to major disruptive leaders like Amazon and Uber and the strategies driving their success – three of which I’ll be exploring in this article.
Crowdsourcing
Crowdsourcing has transformed the way organizations design and develop new products, enabling them to cater to previously unmet or undiscovered customer needs. In order to request community input in bringing in new offerings, organizations must have a supply chain enabling them to quickly bring new products to market.
Today, companies are no longer looking for programs to satisfy single business objectives for limited periods of time. They are looking for the opportunity to position crowdsourcing communities as a more constant, controlled and long-term part of their strategies, going beyond IT development or design into physical flow supply chains. Most companies embracing crowdsourcing are interested in both innovation and in wanting to become more “reachable.” They are committed to connecting with their customers to validate their strategy and improve business.
In a B2B context, one positive impact of crowdsourcing is the reduction of supply chain risk, since it enables companies to communicate and collaborate with their suppliers in real time. Partners share their internal data and contribute information that affects the supply chain, such as transportation timelines, severe weather conditions, and manufacturing interruptions. This quick information exchange creates increased visibility that empowers key stakeholders to quickly mitigate risk.
Microservices
CIOs want to know how their teams can build a more dynamic “face” to their supply chains. To translate business requirements into technology, teams must have the ability to create rapid prototypes and make frequent changes based on operations and market feedback. They also need to understand supply chain strategies and make sure the applications will be able to handle the growth expectations (or surprises) of the business.
Microservices and its modular scalable architectural style seems particularly well suited for companies in need of supply chain dynamism (Fig 1) . Its clear advantages have already convinced some major players like Amazon, Netflix and eBay to adopt these architectures. Its applications are constructed as a suite of small services that run as separate processes and communicate through lightweight network-based mechanisms. Microservices can be deployed and managed independently, and once implemented have little direct interaction with the underlying operating system.
Before, in the more “rigid” SOA environments, organizations were hesitant to make changes in any single application, with the thought that if any single function or component fails, the entire application would fail. When using Microservices, instead of deploying the entire application only once everyone’s modules are done, organizations can deploy their respective services independently without waiting for everyone to finish their different modules. They therefore gain much more agility to change and redeploy technology supporting the supply chain’s operational needs.
Figure 1
Supply Chain Orchestration
Orchestrating the supply chain ensures quick and efficient management of supply chain scenarios, giving organizations the ability to manage people, process, technology and business accelerators end-to-end at the lowest sustainable cost (Fig. 2). An order orchestration work area offers a single platform for trading partners and customers to interact directly, providing order tracking, visual progress analysis, visibility into global supply and backlog management. It deals not only with outward shipments but also with returns, streamlining multiple touchpoints.
Most importantly, SCO proactively detects risks, sensing signals from information coming from social media dynamics, digital supply chain messaging, retailer integration and the Internet of Things (IoT), synthesizing them in the cloud in real time, and generating predictive insights that could affect a global order delivery promise.
Figure 2
Traditional value is generated through specialization, protecting trade secrets, and keeping out competition. Basically, trying to protect your turf in a limited market by only protecting specialized core competencies. Companies trying to take the lead in SCO and gain a competitive edge have to make it by creating value through dominance of inbound orders data, flawless order orchestration, and downstream (product and customer) integration.
Tomorrow’s Supply Chain
Organizations that have applied any number of these three strategies have clear competitive advantages. Both Amazon and Uber have invested in automation and scalable infrastructure. They are both ‘programs and platform’ organizations. Both rely heavily on feedback loops and continuous testing, with Uber’s advantage being that its lack of assets allows for more experimentation and more integrated decision-making.
Amazon cannot reach this level of experimentation since its business model is inventory dependent and experiments involving its upstream partners would be complex. However, the retail giant has secured massive brand loyalty with millions of Prime subscribers, having understood the importance of speedy shipping earlier than many rivals. While Amazon has invested relentlessly in infrastructure and technology, this logistics process improvement is far from complete. Amazon will have to become more experimental to complete this transition, and be able to reduce its risks by decreasing its dependency on ‘on-hand’ inventory.
Improving supply chains ultimately improves sales, and a new digital supply chain has become the ultimate means of survival against emerging and disruptive competitors.
Sources:
- Microservices architecture: advantages and drawbacks. November 30, 2015 by Vineet Badola
- The secrets behind Amazon’s success – Paul Simpson in Supply chain, Technology, 21 January 2016
- Companies such as Adidas and Amazon re-write the rules on supply chain management – Supply Chain 4.0 – by Carlos Cordon, February 2017
