Future supply chains require a new approach

No ‘management by exception’ afterwards, but ‘manage by reception’ beforehand

Make logistics chains fully transparent. In supply chains that are getting increasingly complex, creating end-to-end visibility is the obvious trend for the long term. Many companies are not yet that far in terms of logistics. But anyone who can proactively anticipate at the front end of a chain in the future, will avoid situations of being overtaken by developments and having to solve problems in the subsequent links. In other words ‘management by reception’ instead of ‘management by exception’.

For many supply chain managers, the picture is familiar: you worked hard all week, processed the last orders on Friday and solved problems, in order to start the weekend with a satisfied feeling. However, Monday has not even begun and all hell breaks loose again. The warehouse demanding when container X will finally arrive. No idea, but we will sort it out and come back to you. Stores calling that due to the beautiful weekend all BBQ's are sold out and new stock is needed urgently. How are we going to arrange it all? Where is the stock, what is the customs status? Day in and day out it goes on and on.

Management by exception versus…

Unfortunately, supply chain managers to whom this is a familiar situation are in the wrong flow. Lack of real-time insight into the logistics chain forces them to accept management by exception, with constant responses to exceptions and problems. No matter how well everyone does their best, logistics will always be overtaken by developments.

The rapidly changing order pattern is an important aspect. Order quantities are getting smaller, order frequencies higher. Whereas in the past one company ordered a thousand items once a month, it is now a thousand parties each ordering one item. 24/7, delivered directly, with preferences that constantly change. How to cope with this? Data analyses and predictive algorithms help, but are not the answer in a rapidly changing world.

…management by reception

Supply chains will be much more effective if from the beginning, where data is created, all links are connected in real-time, right to the end. Then a supply chain manager has a real-time integral view at any moment, and so has every individual chain partner. Management by reception implies that from the start of the chain potential problems can be identified early, and proactive action will prevent "errors" from entering the logistics chain and accumulating. Ten unresolved problems may lead to an exponential increase three links further. 10 x 10 x 10 equals 1000 problems. But even without exponential calculations, three links presenting ten situations that require responses are 30 problems too many.

From the outside to the inside

End-to-end visibility is not easy to realize. Transformations to a new set-up of supply chains take time and require a new mind-set. In a digital transformation IT needs to be addressed as does the organizational culture. Involving everyone is the key to success! When we used to print and send invoices, and then send them by e-mail, we were modernizing, not innovating. Basically, nothing changes. Growing to the next phase of digital chain maturity requires a new approach. By thinking from the outside to the inside and by using internet technology for more intensive chain collaborations, we get to a new era of big data, real-time transparency and anticipation instead of reaction. The current supply chain practice of constantly monitoring exceptions and problems will be a thing of the past. Management by exception switches to management by reception, where processes can be adjusted proactively at the front of the logistics chain (and of each individual link) on the basis of real-time execution data.

Do not replace, but think ahead

ERP systems are not suitable for these transformations. After all, ERP systems are aimed at streamlining internal production, logistics, administration, etc. They were not designed to provide insight into contemporary, increasingly complex supply chains with many links and the involvement of numerous external chain partners. Even talking about replacing ERP systems, means we are imposing restrictions on ourselves. It has to happen, but independent of a digital transformation. The latter is something completely different and will require us to think in terms of personas each with their own customer journey. They report 24/7 and mostly via their mobiles. Third-party systems communicate with fixed messages, customers and suppliers can manage their affairs via a portal and social functions are available for direct questions and adjustments. Self-reliance will also increase productivity and reduce the overheads that we currently need.

Intuitive and workflow driven

Newly developed applications are intuitive; anyone can use them without training or explanation. The systems are workflow driven and users have access via dashboards showing urgent activities. The system takes the users by the hand and does not send them off into a multitude of menu options. Every action that a user enters into the system will generate an event that includes the "who", "when" and "where" of the change of status. Together with physical scan points and information from on-board computers in the chain, this will create a large amount of data during the execution of orders. In case the initial step is different from the planned step, automatic alerts can be defined for problems that arise or are likely to arise later in the chain. This creates an opportunity for tackling error situations beforehand instead of afterwards. That is the heart of the matter. Digital transformation towards end-to-end visibility will prevent problems from escalating at exponential rates.

Pre-sorting for tomorrow's logistics

In today's logistics world, where chain integration is often far away, end-to-end visibility seems like a distant promise. However, pre-sorting is an absolute necessity for future successes. A transparent architecture makes it possible to realize an integral supply chain link by link in which each party takes part in the control and makes changes on time. Tomorrow's logistics require new solutions with an integrated view of supply chains and real-time data exchange. Responsive management, or management by exception, will be turned into proactive management, or management by reception.

‘Deer in headlights’    

We prepare our gardens for winter, fill up the antifreeze in our cars and get winter tires. But in terms of logistics, we are often like a deer in the headlights and wait. The current economic boom has been going on for at least seven years. But for how much longer? The first signs of a recession are there. Now that it is still possible, logistics must ensure that we are prepared and work on a real digital transformation in good time.

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