Is the Supply Chain Management Dead?

 

Browsing through Harvard Business Review, there is an interesting post published titled “The Death of Supply Chain Management”. The article makes a radical forecast. It posits the death of the supply chain within the next decade. So the question naturally would be the possible replacement of the same. It argues a smoothly running self regulating utility. Thus it becomes interesting to decode the possible radical propostion being put forth by HBR. After all, it was not too long ago, that people began talking about supply chain management as something of a buzzword. As Li and Fung had demonstrated internet was not even a sine qua non for running an effective supply chain operations. So what has changed is the question that should concern the management experts.

 

There is no doubt, that the company of age of globalization has the supply chain as the heart of its operations. Without doubt, the managers have to base their action on data and this data has to be real time. Furthermore, there needs to be uninterrupted access to this real time data. Besides, tools must be capable of interpreting the data to ensure effective and swift decision making. Secondly while the legacy technologies had their inherent limitations that put certain barriers, the new technologies potentially disrupt the supply chain functioning at least we know it. There seems to be little dispute to these assertions as even the HBR piece seems to contend. The radicality of HBR’s proposition rests on the assertion that human intervention would perhaps be very little as firms shift to new tools for optimizing end-to end work flows. The availability and interpretation of real time data, as the article suggests, would fuel process automation,predictive analytics, artificial intelligence, robotics, all which have potentially creative destructing the supply chain management.  In other words, supply chain is facing the prospect of radical labour saving or capital deepening.

 

While the article does not cover case studies of successful attempts at transition, it does indicate the efforts of few firms that are in the process of transition. It points to instances of quite a few firms ( it doesn’t name any firm) that have made use of robotics to automate labour intensive repetitive tasks like invoice processing, customer service, accounts payable among other things. Firms rest on implied demand uncertainty. The scenario thus necessitates the use of predictive analytics to minimize the bull’s whip effect that arises out of the existence of implied demand uncertainty. Better volatility management, increased asset utilization would obviously reduce costs given the level of revenues while at the front end improve the customer service and thus customer satisfaction and drive revenues

 

To buttress the above, the article cites a few instances. Data on machine use and maintenance are being increasingly used by manfacturers to estimate lifetime of machines, when machines will break down thus planning and minimising downtime. Flexible supply chain networks necessitate collaboration among multiple diverse parties without compromising on integrity something being facilitated at substantial length through the use of blockchains. Retail industry is using robots to improve productivity and margins in warehouses and fulfilment centres. Drones and self driving vehicles are possibly in the first stage of their life cycle. It cites the example of Rio Tinto which wants to completely digitize its operations from the mine to the port. It is experimenting using host of technological applications from driverless trains to robotic operations to cameras, lasers, tracking sensors and what not.

 

Akin  to the air traffic control tower, the new supply chain paradigm envisages the creation of digital control tower. This tower would provide real time data and end to end visibility to the supply chains. As the articles points out, retail industry seems to be adopting this with the tower becoming a nerve centre of sorts for their operations. According to the article, a typical tower is actually a physical room staffed with a team of data analysts. Their 24/7 monitoring on high screens accompanied by 3D graphics and other high technological tools, they seem to monitor every step of the supply chain from the order to the delivery. Inventory shortfalls would be alerted through visual observations thus minimizing stock-out costs. This also on the other hand precludes the possibility of higher inventory costs. The continued focus on customer satisfaction with total accuracy, process excellence enables the firm to obtain competitive advantage in rheir domain.

 

While it was natural to expect retail companies to embrace the digital control tower concept, the industrial companies are not lagging behind. It may be unsurprising given their operations entail building a complex network of moving across a million parts and components every day. The control tower is responsible or perhaps acts  in its role to flag the potential supply chain issues, flags them for escalation or using the tools of AI among others to fix those problems before they escalate. The customized scenario planning tools developed by a steel company mentioned in the article has enabled it to enhance responsiveness and resilience of the supply chain. Through simulation of big hits, the tools suggests the possible mitigation tools thus enhancing the prospective productivity of the firm.

 

The article suggests the trends are very evident in the context of capital deepening and labour saving. This obviously has an impact on the skilling and wages in the labour market. The jobs which were performed by humans would now be performed by machines. Therefore would the supply professional become redundant?

The article argues that the focus must be on designing and managing information and material flows. This obviously calls for limited set of highly specialised workers. Of course as the new management paradigms evolve, the new processes mount their learning curves, new jobs like data analysis, data validation, data structuring, algorithm development etc. would emerge leading to newer jobs being created. The new specialists would be few in number but their role would become critical given that they have to design supply chain engine that is able to support dynamic strategy evolution and formulation meeting the priorities of the business. Their skills would perhaps lie at the intersection of technology and operations. Therefore, the implications and opportunities for education industry in meeting these future industry requirements would be immense.

The arguments put forth by the article does point out towards the supply chain being in its twilight but what is untested is the future evolution of the next gen supply chain and the differentials it might result in economic productivity and growth across different countries. All theeconomies are obviously not in the same bandwidth to leverage these changes without factoring in the unemployment it might herald in the short to mid run.