Consumer financial technology has reached a tipping point where pretty much everything you need to do on a regular basis can be done electronically. You can pay the rent, make a car payment, and even lend your friend $20 all from the convenience of an app on your smartphone. Then there’s that one payment, you know the one, when you have to dig around in your desk drawer to find your checkbook. At its core, supply chain integration does for you, the production planner, what eliminating the checkbook does for the general population, speeds up transactions and allows every relevant stakeholder access to the information they need. It’s about enabling your entire end-to-end supply chain to interact and interconnect via Industry 4.0 technologies. Because no matter how much of that tech you have deployed internally, if your supplier is still presenting you with a handwritten invoice—well, it just doesn’t add up.
Remember that one part of The Wizard of Oz? The one where the wiz comes out from behind the curtains? How was that one little guy able to control everything from his perch back there, without anyone being any the wiser? That I can’t tell you, but I can tell you we’re getting closer to a 21st-century version with the continuing maturation of the Internet of Things (IoT). The emerging technology that powers the 4th industrial revolution, Industry 4.0, is giving us a glimpse of what it would have been like sitting back there, with a view into all the goings-on of our realm.
A friend of mine once told me he wouldn’t eat in any restaurant where he couldn’t see into the kitchen. What he was getting at is that you never know what’s going on behind closed doors, and he doesn’t want to eat anything he can’t see being prepared. Now imagine your supply chain is that restaurant kitchen, do you know what’s going on behind the closed doors of your manufacturing, business, and logistics processes? Visibility into the end-to-end supply chain is something that every production planner and logistics manager wants, yet few seem to achieve. And like that restaurant kitchen, what’s lurking behind the scenes can impact your customer’s satisfaction and therefore your bottom line.
Today we’re dusting off our supply chain crystal ball and are going to give you a glimpse of what inventory management may very well look like ten years from now given the advancements made in just the last five years or so. Logistics 4.0 is combining with Industry 4.0 to lead to massive disruptions in how the manufacturing value chain is run. IoT sensors, RFID tags, and AI are allowing for more automation, and advanced analytics are giving planners unparalleled transparency into the supply chain. This combination is potent in its ability to allow for more accurate forecasting and planning adjustments down to the day or even hour. In the future, these practices will eventually reach even wider adoption, becoming ubiquitous across sectors and allowing inventory management to ditch the pen and spreadsheet once and for all.
Let’s says you’re playing chess. Traditionally, a chess player looks at the whole board and comes up with an overarching strategy, which she can then adjust as needed when new conditions (i.e. her opponent's strategies and maneuvers) emerge. For this game, however, you decide to do something different: you have a series of different plans, one for the pawns, one for the bishops, one for the queen, etc. with no obvious connections or interplay between them. As situations arise in which multi-step, cross-functional movements would be helpful, you stay in your lane and stick to the separate plans for each function. At the end of the game, your rooks have performed admirably, and everything went according to plan for your pawns, but you still found yourself in checkmate.
Transparency is at the heart of both Industry 4.0 and the sales & operations planning process. Without visibility into every aspect of a supply chain, planners have no way to know for sure how something they do today will impact another department or team in the months to come. With visibility into those teams’ processes to see where the overlap is, they can see clearly how each move they make will impact the rest of the company and can better ensure that the entire value chain is protected from non-compliance. This may look different for production planners and operations managers, as each has their own priorities and needs. different needs. It can also look different at each stage of the plan from the same department, but the bottom line remains the same—visibility into the planning process is key to successful implementation.
Digital supply chains can help manufacturing businesses reduce costs and disruptions in a variety of ways. They make it possible to predict potential breakdowns and bottlenecks far enough in advance that you can take steps to address them, just as they help you to boost operational efficiency through smarter sourcing, inventory management, and capacity management. More than that, going digital makes it easier for your business to integrate with other highly-digitized operations, meaning that especially sophisticated supply chain partners (whether they’re suppliers or logistics providers) will be more excited to partner with your business.
In his seminal work of economic theory, “The Wealth of Nations,” Adam Smith famously uses a pin factory as his example to illustrate a number of basic concepts in what was then modern capitalism. Today, the production of something as simple as a pin can essentially be a global affair. In all likelihood, your production facility needs to receive shipments of raw material from elsewhere in the world via a complex set of routes and distribution points. The factory itself may be part of a larger, international organization with diffuse planning processes taking place in parallel all across the world. And the finished product, once it’s been produced, might be sent anywhere in the world—after all, people all of all nationalities and backgrounds sometimes need pins.
Sales and operations execution, or S&OE, is a little bit like flying an airplane. In the modern era, you already have a host of processes that have been digitized and automated, including many of the actions that pilots themselves used to be solely responsible for. Your point of departure and destination, as well as the route that you’ll take from one to the other, is already fixed—all of which means that as a pilot your job is mostly to monitor incoming information and make slight adjustments as needed, even if those adjustments are just a fairly rote response to alerts being sent to you by your instruments.
Whether you’re a freight forwarder seeking out a new ERP system that helps to manage the flow of goods from origin to destination or a manufacturer looking to add visibility and bolster efficiency within your own transportation management processes, selecting the right logistics or transportation management software can be a difficult task. In some ways, the process of selecting the right technology is a lot like finding a 3PL (third party logistics provider) with whom to partner. In both instances, you need to consider price, customer service, existing relationships, and scalability—but you also need to take stock of your organization’s values and provide a clear roadmap for the future of you're your operations. Even if you choose the most reputable partner in the business, the partnership likely won’t be a success if their goals aren’t well-aligned with your own.