Posted on April 23rd 2019
Introduction New Approach Required
As recently published in www.supplychainbrain.com/blogs/1-think-tank/post/29591-the-need-for-blockchain-in-supply-chain-technology
The hope, the dream, the expectation of the nearly every CEO has always been to constantly synchronize people, operations and suppliers to yield a more efficient and effective business. Winning businesses measure supply chain success by real bottom line Wharton style finance metrics – working capital reduction, ROA, EVA, cash flow and real revenue growth through customer satisfaction. Not declared victories like “took us 5 years but got the ERP system live so let’s take a break and celebrate”.
The leading companies in most every SIC industry code have used supply chain / S&OP to create competitive advantage as measured by these finance metrics. All while the 95% of the rest of industry participants have cumulatively have had static or worsening financial results. Based on global GDP metrics, analysts have measured around $13 Trillion dollars of global inventory buffers that have remained constant or have risen over past decades. Generally, inventory is held as a buffer of the lead time of demand to the lead time of supply. So our interpretation is despite all this “marvelous” enterprise and supply chain technology, supply and demand synchronization has not improved over past 20 plus years all while Google and Facebook can sell proactively sell you antacid as they know what you had or even want to eat for lunch?
These supply chain winners have not perfected supply chain technology but use simple tools that work better. These winners have figured out they do not need to outrun the bear, just the other guy. Thus they use size to indemnify themselves from working capital / inventory exposure and shift most of this risk to their upstream network J The real question is WHY, after all these decades of talk and promise, do we not have solutions that span entire supply chain networks providing benefits to the entire supply chain ? What can be done to push towards a real supply chain solution that helps all players in a supply chain “outrun the bear”
The Disconnect of Enablers
We believe, based on decades of project work in supply chain design and supply chain IT strategy, that there is a tremendous mismatch in selection of appropriate technologies to automate the world’s biggest, most complex decentralized process. Package software / cloud vendor use only centralized technology enablers to provide solutions to a decentralized business process.
We know much of our success with clients has come from mapping, modeling and embracing actual human workflows. Our focus has been to embrace human decision making but dramatically reduce the cycle times of those workflows to assemble aggregate and match demand and supply balancing decisions. We have often created, patented and deployed highly decentralized collaborative techniques and processes. We call this “Synchronizing the Independent”. However, we have also found scaling these approaches beyond individual clients successes has been difficult as it is counter to simplified IT architectures preferred by IT departments and package software providers. In a past decade these challenges have been magnified with the moving from on premise technology to virtual cloud AWS hosting. This movement has been confused with enhancing collaboration.
Insert a New Enabler Blockchain Decentralized Networks
What is encouraging is the growing wave of awareness of Blockchain and DLT (Distributed Ledger Technology). The Blockchain interest appears to be providing an avenue for the true scaling of real-world collaboration by embracing decentralized technology, encrypted security and peer to peer networking technology
We increasingly see Blockchain discussed in the context of supply chain but often efforts are focused on replacing existing applications like tracking. In our view this is not where to apply Blockchain technology. The Blockchain it is most valuable in the supply chain. Our view is Blockchain and DLT has the biggest need and highest ROI applied to areas of the larger process not possible to automate using purely centralized technology.
An example of this disconnect - despite decades of proposed supply chain magical promises of technologies - as much as 90% of all real supply chain planning and plan coordination is done via spreadsheets and email. In particular coordination of S&OP build plans outside of one department or company is almost always communicated by a spreadsheet array via email.
Maybe you have witnessed in your organization’s efforts to deploy real-time “connected planning technology” and efforts to “kill the spreadsheet” in favor of ONE real-time computing /APS planning instance. Has this worked or just created more underground use of spreadsheets, emails, whiteboards and conference calls?
We see this repeating mantra under different names, a red light alarm confirmation of the need for the inclusion of decentralized, distributed technology to support supply chain solutions workflows and begin to embed decision making into the network not just the top of network. The growing underground of decentralized tech It is an acknowledgment that real people insight at the edge of enterprises is critical to success. In many respects these spreadsheets and emails are a decentralized technology that “Synchronize the Independent TM”. Just not one that is scalable or optimal.
Simply put this and many other examples reflect the stark reality for the inclusion of a more human approach. Companies and individuals in these companies rarely work in real time as they most often must make request and promises that require analysis of self-interest. This is in essences the design of decentralized network technologies.
Our focus at DCRA Inc. has been to document these requests and promises for years and provide cycle time reduction enablers. Increasingly, our work involves scaling these designs with these new Blockchain enablers. Reducing cycle times from weeks and month, hours to minutes and seconds but preserving the independence and profits of business entities and value add manufacturing.
It is our observation over past 3 decades that IT solutions that attempt to invalidate this immutable truth - will always fail. Maybe, you will see as we see the past decade of poor results despite billions of dollars of investment and push as confirmation of the need for a new approach.
Business Models That Put Value Add Manufacturers Back in Control
If you can imagine this concept becoming somewhat ubiquitous throughout a supply chain network you can now imagine S&OP becomes the equivalent technology that 3D printing provided to additive manufacturing. Instead of demand fulfillment always being instantiated in built inventory buffers much of this lead time of demand and lead time of supply buffers can be held in a planning bills of material and master plans. When commitments are made some portion or maybe all are locked in take or pay contracts for production rapidly pegged up and down the network vs. piles of built inventory.
This can lead to breakthrough business models that allow value add manufacturers to take the lead with customer demand vs. the current wave of giant middlemen distributors/ retailers dictating sales by SKU pricing.
Instead we move into a GDP liberating era that uses the wonderful technologist and technologies we see levered to provide networked based online advertising used to coordinate diverse, heterogeneous sources of material to coordinate complex assemblies in manufacturing to onsite with construction and all business models between.
Potential Value Creation Enormous
We will plan to share a series of short articles with SCB to further document why the Blockchain wave provides us all an opportunity for scalable answers to the network side supply chain goal.
Generally, we open discussions with explanation of the potential for wealth creation in the world’s supply chain. In this case we close with some simple macroeconomic metrics. Of a roughly 100 Trillion dollar global economy 75% of the processes involve supply chain. That is a 75 trillion dollar process that holds $13 to 15 Trillion dollars in buffer inventories that despite decades of hyped technology solutions has stayed constant or grown. It is our hope to inspire significant innovation that lowers these inventory buffers through true synchronization of resources across all players in a supply chain network.
One more thing we welcome: debate! Whether you concur that there might be a disconnect of enablers or firmly believe the world will be run from one centralized real time “wizard” cloud we would love to have the discussion.
Jon Kirkegaard is President and CEO of DCRA Inc. & DCRA Technologies that focus on creating substantial business value through problem solving solutions with embedded consulting and patented technologies. DCRA Inc. developed the first commercial decentralized S&OP software solution in early 2000’s. Has received numerous patents on our work with and for clients. DCRA Technologies has developed a series of patented blockchain S&OP network synchronization technologies. DCRA Inc. also owns and operates manufacturing business’ where these solutions are applied daily.
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Posted on March 19th 2012
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