Article by Lora Cecere from Supply Chain Shaman; published on October 6th 2013
One of the favorite parts of my job is teaching classes on how to take supply chain concepts to the next level to improve corporate performance.
I love helping people to see supply chain concepts differently. One of the ideas that I am researching and sharing is the concept of building Market-Driven Value Networks. The concepts of being market-driven build on the research that I have done for the last ten years on building Demand-Driven Value Networks (DDVN).
The vision is aspirational and takes the concepts of being demand driven to a next level. To ensure clarity in this post, let’s start with definitions. I define DDVN as:
Demand-Driven Value Networks: A network that senses demand with minimal latency to drive a near real-time response to improve demand shaping and demand translation.
And, a Market-Driven Value Network as:
Market-Driven Value Networks: An adaptive network focused on the delivery of value-based outcomes. It senses, translates, and orchestrates market changes (buy- and sell-side markets) bidirectionally with near real-time latency to align sell, deliver, make and sourcing functions. It builds on the concepts of becoming demand driven.
These are a step change in thinking. Both move the supply chain design from inside-out to outside-in. Traditional supply chains respond, but they do not sense. The processes and architectures that we built over the last thirty years delivered inflexible processes that take too long to respond. These legacy processes amplify and distort market signals putting the supply chain on the “back foot.” As demand and supply volatility increases, the sensing and translation of network shifts is importance to corporate performance. Nine out of ten companies are stuck. They are unable to drive growth, maximize profitability and minimize cycles. More and more, companies are realizing that effective value networks drive GROWTH. No longer should the supply chain be thought of as just a cost center to manage.
As I teach the class, I learn too. Here I share these insights and recommendations to the readers of this blog on how to get started.
My Lessons Learned:
Supply chain practices are steeped in belief statements that there are “best practices” and that the “order is the best representation of demand.” As we build supply chain strategies in the class, I work with attendees to first answer the questions in the green box to design the strategy:
Time after time, I find that companies are left with lofty business strategies that are not translated into actionable plans for the organization. I also find that there are too few business strategy consultants that understand the need for this translation. Most companies struggle with this activity. I find most are in a quite a mess.
The next step is to answer the questions on how to define demand and supply relationships to deliver on the promise of supply chain value networks. The activity starts at the end of the supply chain in the definition of demand and supply relationships. It cannot be effective from the inside-out.
Companies are not good at demand. The gulf between commercial and supply chain teams needs to be closed. For most, the building of demand relationships is a new concept. It is often the first time that attendees to the class have thought about the frequency, availability and cleanliness of demand data. We then work together through activities to gain an understanding of demand synchronization, harmonization and translation. The goal is to make channel data useful by the corporation.
In parallel, the design of supplier relationships to maximize value is a ripe area for discussion. Only 22% of companies are actively managing the end-to-end value chain to deliver on corporate sustainability goals. We discuss the principles of supplier development and how companies shift from punitive practices, where costs and waste are pushed backwards in the value chain, to owning the extended supply chain to deliver on the brand promise.
Most supply chain professionals have spent their time at the center of the supply chain and have not thought about the options and the design of the ends of the supply chain enough. The center is strong and inflexible and the ends are weak.
After answering the questions in the white boxes, companies can then define the process. It should be then, and only then that the business processes can be defined. Process needs to follow strategy. When this happens, there is greater balance between metric trade-offs and resiliency in year-over-year improvements in corporate performance.
Many companies do not know where to start. And, we try to be clear in the course that the starting point is in improving reliability. The Market-Driven Value Network visions need to have both “big wings” and “big feet.” The feet are grounded in reliability. When given the choice between reliability and shorter cycles, the supply chain leader needs to choose consistency and reliability. This includes consistency in manufacturing operations, order-to-cash processes, and customer service. The wings are defined in a clear year-over-year strategy to enable evolution towards a vision. Here is how you start:
EFT has just released an infographic on trucking IT, providing the industry with a snapshot on investment trends, impactful technologies and innovation gaps in the trucking space.
Spinnaker today announced that it has entered into an agreement to acquire Plan4Demand.
With a large number of companies stuck, and the ends of the supply being weak, can taking 5 steps enable you to be part of the solution instead of the problem?