“We were looking at supplier performance in Vietnam. We were benchmarking ship window compliance between our suppliers in Vietnam versus Indonesia. Vietnam was losing – by about a 23% margin. And they were losing around quantity exceptions too, another key metric – about 14% off Indonesia’s mean. This was just the beginning. We’d done the math and could see immediately what was at stake financially for us if we could switch to Indonesia fast, before peak season hit – and the stakes were big. Non-compliant suppliers cost us – from expedited shipments to unplanned inter-DC transfers to missed revenue opportunities at the point of demand as a result of stock-outs and late deliveries, and finally because the added variability forces us to hold more inventory in pooling points or in DCs to buffer the shocks – and when you roll all of this up it quickly becomes a large number. So now we had our answer: Shift sourcing for three of our fastest-moving lines immediately to Indonesia. There was only one problem. We couldn’t shift immediately to Indonesia.”
Sound familiar? This scenario, and hundreds of others like it, ranging from global sourcing and import operations at a major apparel retailer to outbound customer order fulfillment for a Fortune 100 heavy equipment manufacturer, play out every day, wreaking havoc on bottom lines and companies’ ability to compete and grow. Business agility is no longer a nice-to-have, it’s a requisite capability. If companies are to compete and win, they must have a strategy for broad and pervasive business agility. That is: they must have the ability to “re-wire” and “re-deploy” any time their global plans – whether small or large, local or global – change. In the world of supply chain this boils down to a company’s ability to quickly add or subtract trading partners and logistics service providers without losing the nervous systems that support process automation and control across inter-business transactions. When that retailer switches sourcing operations from Vietnam to Indonesia, it’s not just a matter of doing it quickly – it’s a matter of doing it completely, without disrupting current process flow. An agile company changes shape quickly. An agile company sees the edge of the cliff and turns in time. They get to market first. The best most competitive companies will be highly agile companies. If there is a battle cry for the next two decades, this is it. Agility, agility, agility.
Is there a fast track to business agility? How do companies acquire this critical capability?
It takes next generation control tower technology for supply chain. Control towers automate and monitor hundreds of inter-business operational processes in trade and logistics – from purchase-to-pay to origin operations and shipment planning, to destination operations and customer order fulfillment. The technology is radically different from traditional business software systems in that it combines Web-based software applications designed for business-to-business collaboration with technology to launch and manage private, permissions-based “virtual” trading communities across an in-place electronically integrated partner data grid. The control tower is Cloud-based – it’s accessed over the Internet, as a service – and it becomes the central hub or informational “nervous system” that the company and its trading partner network relies on to collaborate and execute key business functions. This technology did not exist in 1990. It’s based entirely around the Internet. But today, supply chain control towers are fast-becoming the only way that companies can achieve break-through operational efficiencies and business agility across their trading communities. Neutral, robust, secure, hosted in the Cloud, they are the “single version of truth” system that enables, for the first time ever, massively scalable information sharing across a diverse and distributed trade community. Control towers don’t replace the enterprise software systems that companies have been investing in for the past three decades, they connect to these systems. They turbo charge them; they extend them.
When your control tower is up, you and your whole supply chain are on the same page. You’re speaking the same language. And, because your own “private” network operates above a broader community of partners and service providers who are already wired and ready to plug into your network, you gain more than just fast and consistent process automation. You improve overall agility. To use a social network analogy, the control tower is more like Facebook than it is like software for supply chain. Yes, you collaborate with partners using business software applications, but the underlying platform is a business network – a community of wired and ready partners who can be added or subtracted quickly to support a shift in plans. Like disengaging from Vietnam and doubling down on Indonesia. Or steering around a labor strike in Long Beach. Or the ash cloud in Iceland that has LHR locked down for a week.
Agility. It’s a compass heading. You need to aim there. You can start by plugging into a Cloud-based control tower. That’s where you get your whole community on the same page.