Introduction to Fast-Evolving Supply Chains

In competitive systems, faster evolvers just win. Let’s talk about that from a supply chain context.

Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else — if you run very fast for a long time, as we’ve been doing.”

“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

LEWIS CARROLL, THROUGH THE LOOKING GLASS

This is the first in a series of blogs examining supply chains as ‘digital computers’, and the varieties of ways adopting digital ideas will completely change the nature of supply chain evolution, fitness, and competitiveness. This one itself is the introduction, for “Our Tomorrows” of Digital Supply chain. I hope these blogs help as a brief field guide as to how they will manifest themselves in our futures. I wrote it to feel provocative but thoughtful, and as though you and I were just talking to each other. It’s styled to be fast, with short dense chunks, read most naturally during a pause in your day on a phone.

Most of my professional three-decade career has been in supply chain, spanning tech changes from Internet to smartphone. I’ve been connecting ideas and seeing relationships across the most unusual of disciplines.

In all the supply chain changes I’ve worked with and thought through, two patterns exist which seem to persist across diverse contexts:

1. In adversarial systems, faster evolvers just win
2. Analog[1] business flow always becomes digital.

These patterns are more relevant than ever today, as I feel the future condensing around them.

I’m writing a series of blogs, this one itself as the introduction, for “Our Tomorrows” of Digital Supply chain. I hope these blogs help as a brief field guide as to how they will manifest themselves in our futures. I wrote it to feel provocative but thoughtful, and as though you and I were just talking to each other. It’s styled to be fast, with short dense chunks, read most naturally during a pause in your day on a phone.

Please share.

[1]”Analog” is my shorthand for any process that requires unencoded signals to operate, like electrical sensors, pushed buttons, or urgent opinions.

The Red Queen hypothesis (also referred to as Red Queen’s, the Red Queen effect, Red Queen’s race, Red Queen dynamics) is an evolutionary hypothesis which proposes that organisms must constantly adapt, evolve, and proliferate in order to survive while pitted against ever-evolving opposing organisms in a constantly changing environment, as well as to gain reproductive advantage.

WIKIPEDIA

Propositions — Fast evolvers dominate their world

One of my favorite ideas in evolutionary Biology is the “Red Queen Effect”, the competitive race to get the best genes for a given competitive situation. The Red Queen effect, an adversarial pattern, is as true for supply chains and changing “instructions” as it is for organisms and “DNA”. Fast evolvers dominate their world.

Instruction set switching is the foundation of evolution. Since nothing in our day-to-day life can change instructions as fast as a digital computer — Angry Birds to Amazon instantly, I give you a bold proposition to absorb:

Business supply chains which are digital computers evolve and adapt the fastest and win.

• A corollary: Businesses with analog supply chains are toast.
• An imperative: Make your analog business supply chains digital or you are toast.
• Then a zinger: If you don’t drive analog to digital, with R&D instead of ROI, you’re probably toast.

How much analog to digital conversion is needed to avoid the usual 70% to 90% M&A failure? What’s the value of avoiding a market exit because competitors ran rings around you? I wish I could say.

Without digital, in the future you won’t even be a contender. What’s the cost of that?

I’ll speak more to R&D in the conclusion. Next a little more about thinking of a supply chain as a digital machine.

Definitions for Digital Supply Chains

For all the blogs forward on Digital Supply chain, I want to provide some working definitions of components of supply chains.

Bear with me a moment and think about your phone as being a handheld digital computer. Inside it are instructions called an operating system or OS (iOS, Android), which runs the whole phone for you, organized in different layers. Here’s a very simple view adapted from Wikipedia:

The central key part is the Kernel which uses hardware and software to actually run apps for you — think screen, sensors, speaker, memory and microprocessor. Another layer is what we’ll call Assets, which manages an inventory of music, photos, apps, and other assets. The Network layer controls the connections and flows data in the digital world, think cellular, WIFI, or Bluetooth. Finally, your phone has a Planner layer, which invisibly schedules and coordinates activities across the system.

I’ll give some loose definitions for the supply chain versions of these layers, but all defer to discussion “apps” — all digital, many new, all critical to evolutionary capability — to the rest of the blog, here and there.

The Kernel

In our model, just as in a phone or laptop, the Supply Chain Kernel connects networks, data, and planning together with instructions for driving operations.

In supply chain, the Kernel itself consists of systems of people, process, and technology — all sensing and translating information from the outside world into a digital world. Following instructions, procedures, and processes in “app” instructions, the Kernel generates responses back to the outside world where the physical work of supply chain is managed and driven, and value is created. While work proceeds, the Kernel guides and measures the performance of the processes and ensures the security and the integrity of the flow is monitored and guaranteed.

The Kernel is the foundation in this model and shifting the Kernel from analog to digital is the essence of how the future is shaped. In the machine, because work is highly procedural and digital, changing apps and processes to evolve as needed becomes a digital evolutionary experience.

The operating system ‘running’ in the Kernel is a structure of who or what does what and when on demand from procedures and processes from apps, and corresponds to what we might usually think of an ‘operating model’ in supply chain. The operating model is digital in our machine, and is also therefore quite flexible, and can be adjusted quickly to changing conditions of assets, instructions, plans, or networks.

Well-constructed instructions grouped into processes and procedures in the form of “apps” — a ‘build a car powertrain’ is an app, as well as ‘test a vaccine’s purity’ app. A ‘gather future demand’ is an app, as well as ‘generate a warehouse picklist’, and ‘react to a train derailment’. They’re all apps in this model, a recasting of the familiar forms of Plan, Make, Source, Deliver, Return, Enable. And, as we’ll see, apps don’t have to be ‘in’ the supply chain: as we’ve seen in industry, apps can be located anywhere within a supply chain network. More digital.

The Assets

Everything that relates to inventory and resources in our supply chain machine is handled by the Assets layer.

The Assets layer manages storage, retrieval, measurement, integrity, and information about the raw materials, work products, and inventories, in supply chain. Assets supports critical data for scheduling through the Kernel, provides buffer in network flows, and constantly works to provide timely and perfect integrity to the Kernel to ensure flawless ability to perform. Your Kernel, therefore, at all times, knows where all assets are, and what can be allocated to be used to perform ‘apps’ to run the supply chain. This ensures that the digital speeds of operating and change are always fully supported.

When manufacturing pulls raw materials from a bin into assembly, when a ‘pick’ message is sent to a warehouse, when shipments are received, when a freight carrier crosses Europe, or a container crosses the Pacific, apps are utilizing the core Assets layer to drive and manage flow and create a perfect digital record.

When you need to people to perform tasks from apps — someone has to physically build an assembly, someone has to unload a truck, someone has to update inaccurate data in our system, someone has to design new processes and procedures, that information is part of assets. The Assets layer stores and manages such as skills, IP, apps, the structure, storage, and meaning of asset data.

The Assets layer in our core ensures that our machine perfectly reflects, in real-time, exactly what is in the physical world. When a box isn’t found, a skill is absent, or a data lake becomes a swamp the machine would grind to a halt.

The Networks

The Networks layer handles the flows of work, information, and materials in and out of the core in supply chain. It makes and breaks connections, tracks, and assures flows are managed, secure, and controlled. It controls how apps interface to each other if they connect and flow across different supply chain cores or Kernels.

When a supplier calls to confirm a purchase, when you receive an email with inventory in a channel, when you get a logistics tracking alert, your apps are using the core network. When packages are in transit, when shipments are merged, when freight is expedited, you are using the core network.

In our machine, it’s both the flow and the language of connection between supply chains. It is in networks where there are the most important requirements that supply chain apps across cores must all speak the same language. Fast instruction switching never works when data is lost or slowed in translation.

Without the network, there are no customers nor any suppliers, surely no real reason for the machine?

The Planner

The Planner layer is focused on optimizing and coordinating time and resources from assets to networks flow. Even the ‘operating model’ resources and planned and focused to support the demands which apps make to the core to operate. This is true whether they’re materials from suppliers, people, factory time, finished inventory, logistics, or technology.

Scheduling on your phone OS avoids things like app stutter or lockup. The Planner in supply chain have a similar role. The Planner takes the business app demands and being aware of and knowing all the other activities…all the resources in play…all the business rules… the goals and service levels that need to be met; the Planner balances them all and drives the Kernel to make it so.

While balancing short-term demands against resources within the Kernel the Planner also considers the long-term system of controls. The Planner also manages the feedback loop with metrics and analytics to adjust the performance of the whole.

Digital speed is key for planning to ensure that we keep positioning our machine on a well-adapting track ahead of the pack.

So, from these definitions, for the rest of this blog series as we consider a digital supply chain machine, I’ll often just write machine, like it was a phone or a laptop. The machine also has a Kernel, and “operating model” which I’ll reference just as the core, and which will have four layers similar to your phone. I’ll use the term Kernel with an analogous meaning and continue to use the term networks.

Finally, in digital supply chain, we’ll call all our instructions and processes plain old apps or processes interchangeably where one or the other makes more sense.

Finally we have the Ask — because 99% of the technology discussed here is available, but in the words of William Gibson, “it’s just not very evenly distributed.”

On to Tomorrows

With your digital supply chain machine, Ask for the future, and please get mad as hell if you don’t get it, because otherwise you’re doomed. It will always be “Groundhog Day Y2K”, December 1st, 1999, testing another ERP upgrade, and order management still isn’t “touch-free” after several decades of discussion.

About 99% of the technology, I discuss here is available, now, for you, really. I’ll want to show over and over how ordinary and quite advanced digital technologies in your supply chain machine… your machine…the machine, exist and simply aren’t understood or aren’t used. It’s slowing your business down, it’s keeping you non-competitive, and most companies lack development investment to even bring them to parity with fast movers and new kids on the block.

There’s a reason that Amazon redefined shopping, there’s a reason that Toyota has chips when other auto manufacturers don’t, there’s a reason that a Covid Vaccine was generated weeks after the vial DNA was sequenced. Some companies are very digital, and some aren’t. Some win, some are toast.

You need to ‘Ask’, persistently, for a completely digital future, and don’t take “it’s too hard” for an answer.

Opinions expressed here are solely my own and do not express the views or opinions of my employer, Accenture. Please feel free to reach out to me directly on joseph.d.francis@alumni.caltech.edu if you have any questions or would like understand how these blogs may apply to your supply chains.