Supply Chain and the Uses of Enchantment

In the world of ideas, there are two that touch on what I view as the chief value of supply chain process management, and, while seemingly contradictory, they are actually mutually re-enforcing.

First off: “Any sufficiently advanced technology is indistinguishable from magic.” — Arthur C Clarke. Computer technology, as a type of technology, tends to be promoted as having magical features, as many think, in a business context, that just adding automation will solve innumerable problems. How many times has a technology been created which then promptly goes off in the heroic quest of a problem? Though necessity is the mother of invention, some wonderful technology seems more hatched-up than born of need.

What’s the classic example? I remember hearing in the 90’s the groaner, “If we implement an (ERP, CRM, PLM) system, the mere fact of its implementation happening will improve our business results because we will adopt best practices.” Enchanting idea, isn’t it? Of course, numbers of companies implemented the technology of the moment, and cleverly circumvented improving the business by either (1) radically customizing the environment to ensure they got no standard best practices, (2) dutifully implementing bad processes in an automated environment so they would produce bad results more efficiently, and (3) implementing processes in a way which may have introduced some valuable best practices, while at the same time abandoning some value-add custom processes for a net-neutral effect. For some there was a (4): manual processes dominated performance so automating the rest provided marginal or no improvement. Somewhat less enchanting suddenly? RFID has all the features of enchantment and magic and then some – it’s wireless; it’s going to solve all sorts of supply-chain issues; it looks talismanic; consumers fear its power over privacy; on and on. It’s like Bluetooth on Steroids.

Now the second idea intrudes – reality and disenchantment. W.H. Auden, in 1962, declared that poetry was not magic, that its purpose was rather to tell the truth, “to disenchant and disintoxicate.” Is there anything more disenchanting than when the magic wand, once having been waved, sputters and explodes? Something very Harry Potterish. Of course, technology—and, in particular, IT, as the major example we see—has vast issues with ‘disenchantment’ – SPAM, music sharing, electrical networks failing, and ERP costing money and delivering ZIP. Try to ask for an IT budget increase after supply-chain unimprovements, or CRM non-use.

This is where I usually say supply chain centers of expertise comes in. “Morpheus: You take the blue pill, the story ends…you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland and I’ll show you how deep the rabbit hole goes.” Supply Chain re-engineering, SCOR, is the red pill, of course. It’s how things really work instead of what you want to believe. It uses numbers; it models facts, and is thoroughly disenchanting and disintoxicating (but I’m not sure it’s poetry, as I would surmise from Auden). It’s the antidote to the world of enchanted technology, and it shows you how deep the “rabbit hole” really is.

But, of course, there are uses for enchantment (apologies to Bruno Bettelheim).

Technology, appropriately applied, definitely has very high value. It’s precisely in the intersection between magical technology, and truth-based process where we can bring the two to bear on business issues.

Take Realtime Supply-Chain. An event occurs, and mysteriously I have instant knowledge even though it may be far away. A plane is delayed, or a truck has a flat. A factory line must stop because of an accident. A sort of supply-chain version of ESP. But let’s look at this technology from a process perspective.

When I have a customer’s order, I want to give them a commit date for delivery of the material. I can use information a week old, or a day old… but it turns out that that week-old information is probably inaccurate if I actually had to walk into the warehouse to fulfill the order. In fact, the more up-to-date the information is the more likely I am to find the material to ship the order. In the best case my information is immediate, and I can provide 100% accurate commitment. The customer is happier. Turns out, I also have less inventory because of fewer cancelled or changed orders when I find short supply. I also have better cycle times and a whole host of downstream effects. Hopefully you also have excellent demand-driven planning to make the data even more accurate.

Will our 2nd generation frameworks, combining metrics (inventory, order cycle time, cost), with process (order commit, receiving, supplier planning) and best practices (realtime inventory visibility) show us the best uses of technological wizardry? We can measure a process (total supply-chain inventory, total revenue-per- salesperson), then apply the magic (enterprise application integration, realtime operational datastores), and get measurable, valuable results. It’s “magic by intent,” using a supply chain framework as the guide. In HP’s case, it was worth $38M in one-time savings in inventory, and $9M structural savings in one business unit, the realtime magic stuff.

My advice to approaching new technologies like RFID, to avoid being disenchanted through harsh reality, is to use a real supply chain management process to design goals, not tactics: model and analyze your end-to-end business process in supply-chain, link to strategy and move on. Only then look for areas where you might want to bring in RFID to connect two or more processes (you sometimes might want to do away with a process, by the way, rather than introduce a technology just to make it easier). Then look at process performance, and see if RFID changes the process performance – simulation is a great tool.

Only then can you get some use from enchantment. Remember – just putting technology in place, for its own sake, can let a very expensive genie out of the bottle, one that requires immense care and feeding.