Times are getting exciting. We have three interesting evolutions that are converging.
- First, the Cloud is transforming IT, and despite the hype, is providing a number of interesting new possibilities.
- Second, companies never had a more important need to understand their supply chains better. Resulting from cost cutting exercises performed over the last couple years, supply chains have become rather lean. This implies they can no longer coop with variations in demand or with unexpected events. The Iceland Volcano crisis in EMEA actually demonstrated this quite effectively. So, companies need increased visibility in their Supply Chains.
- And third, a new generation is joining the workforce. It’s called Gen-Y. This is the first generation that was born with the internet. They are always connected and expect this in their work environment.
So, how are these elements coming together? Companies are looking at gaining more understanding of their supply chains. They look for Supply Chain Visibility. This requires two things, on the one hand, the development of a “collaborative sourcing” approach, and on the other, the establishment of an infrastructure allowing the exchange of information across the ecosystem. This can be done through traditional approaches such as business exchanges.
An alternative however is to use the cloud to host the functionality. The advantage of such approach is that it avoids having to do upfront investments, very unpopular these days. But obviously, you will point at security threats in the public cloud, and you are right. There are alternative solutions existing today. Building on their experience in outsourcing, HP have developed a service, called Adaptive Infrastructure as a Service, providing a secure, managed environment which companies (or groups of companies) can use to perform specific functions. Available compute capacity can be increased and/or decreased in function of the needs at any given moment in time and charging is done on a pay-per-use basis. This is ideal to develop a supply chain community cloud, in which the members of a specific ecosystem can securely exchange information and analyze it for alarms, trends, reports etc.
This explains the link between cloud and supply chain, but what has gen-y to do with this. Let me come to that. Cloud computing is not just about the infrastructure that performs the job without having to bother about the infrastructure on which the work is done. But to become pervasive, cloud computing will all be about the end-to-end experience. Having the data available is one thing, providing it timely to the user is another.
Let me explain you through a little example. You are a junior planner for of an electronics OEM, and are just going out for lunch with your big boss, the supply chain VP. You just placed an order for a juicy piece of salmon, when you receive a short message on your smartphone. The advanced shipment notification for a key component is late by 15 minutes, and no confirmation has been received from the supplier to how long the delay will be. This is the opportunity to impress your boss. Fortunately, you had taken your slate with you. You quickly log into the community cloud to look at what is happening. Indeed, a key component shipment is delayed, but what is worse is that the inventory at the contract manufacturer, where the shipment was supposed to head too, stocks of the component are extremely low. At the current consumption rate, if the components are not received within 6 hours, the production line will have to stop. Checking through historical data, you realize the delivery usually takes 5 hours, so if the shipment leaves immediately, things could still be OK.
Using VoIP you call the suppliers head of logistics to understand the situation and immediately realize he is worried (video helps in communications, isn’t it). They have just gotten a major storm damaging the warehouse, and leaving it without power. So, they cannot operate their automatic warehouse in which the parts are located. He is unable to tell you how long the problem will take to be resolved.
So, now you need to look at alternatives. So you are on the look-out for inventory of the part within your eco-system and quickly identify that another manufacturer has quite some stock of the part available, and is working on the manufacturing of another of your products, not requiring this part. A quick call to the warehouse manager gets an emergency supply to the contract manufacturer, allowing him to pursue production. But that may not be enough. You also contact procurement to check with an alternative supplier if additional parts could be sourced within the next 48 hours.
And all of this is sorted out between your order for salmon and its delivery. Your boss is really impressed.
This is not rocket science. Gen-Y works like this. The cost reductions done in the supply chain leave it increasingly exposed to events such as the one described here. It’s by thinking through the end-to-end experience that we can truly address the needs of the business people. But we need to think differently on how IT and business interact. Having IT literate people in the business, facilitates the tasks, but IT people will need to think of new and creative approaches, as the traditional IT environments do not lent themselves for such agile, real-time approaches. Worth looking at isn’t it?
