Supply Chain & Logistics: You Can't Manage what You Don't Trust

If it feels like performance metrics are taking over the field of supply chain management, there's a good reason for that: That's exactly what's happening. Supply chain analytics is one of the top two strategic priorities among senior executives, according to a recent study conducted by Deloitte Consulting and MHI, a supply chain trade organization, a situation that has emerged as global supply chains become even more complex and expansive. The study was announced at the recent Modex 2014 trade show in Atlanta.

Seventy-nine percent of respondents to the study say that supply chain analytics is either moderately important or very important, notes Scott Sopher, a principal with Deloitte Consulting. "Executives are keen to leverage analytics to derive new insights from the vast amounts of data being generated in their organizations," he explains, "and to use those insights to improve performance and streamline operations."
 

The study cites several examples of manufacturers successfully leveraging analytics to solve supply chain issues. An appliance manufacturer, for instance, uses analytics to predict likely product failures, which has helped the company identify warranty cost reduction opportunities. An industrial products manufacturer, meanwhile, has gained improved visibility into its supplier base through ongoing monitoring capabilities, which alerts the company any time there's a risk of interruption in the material flow throughout the supply chain.

Problem is, though, that many companies simply aren't all that good at deriving meaningful performance measures from the flood of Big Data they're confronted with. As a result, nearly 85% of respondents say they will continue to invest in supply chain analytics tools over the next three years, as well as in training programs designed to build analytics-related skill sets and know-how among staff, Sopher notes.

While some companies are looking at advanced analytics techniques such as simulations and forecasting, Sopher says a better strategy would be to focus first on getting the basics right.

"A key capability for any organization is the ability to track and measure key metrics related to the health and performance of its supply chain operations," he says, pointing out that less than half of the respondents in the survey have a well-defined strategy for these types of metrics. Similarly, due to a lack of quality of data in their systems, many executives aren't even able to trust the data when they're making decisions.
 

Besides analytics, the other top strategic priority is the shift from multichannel (retail, wholesale, online) to omni-channel fulfillment -- in effect, offering products through whatever channel the end-user prefers, which was a major theme at the Modex show. With omni-channel operations, "a distribution center can provide same-day and next-day service alongside ordinary replenishments and other operations," explains Kevin Gue, a professor of industrial engineering at Auburn University as well as editor-in-chief of the U.S. Roadmap for Material Handling and Logistics. "Order-to-ship response times will be the new metric for distribution center design and operations."

The ultimate goal of omni-channel fulfillment, Sopher adds, is to fully integrate all the channels so that they operate as a single unit. "Such a shift will require flexible and agile supply chains that use innovative material handling equipment and processes, such as wearable technology, driverless vehicles and sensor gear."

One of the biggest challenges to innovation, though, observes George Prest, CEO of MHI, is a talent shortage at all levels throughout the supply chain. "The talent shortage is the biggest barrier to harnessing the value of supply chain innovations, due to changing skill sets," he says. He points to estimates that the supply chain field will require an additional 1.4 million new workers by 2018, and wonders where those jobs will come from, as Baby Boomers retire from the workforce and young people continue to shun manufacturing and distribution jobs.

"Supply chain leaders must take a holistic approach to innovations and find better ways to communicate their value," Prest says.