Innovation in scm

Conference Theme : ”Innovation and Optimization of Supply Chain
towards Business Excellence”
Aug 10,2018
Dr. P. Balasubramanian, Ph.D.
Founder & CEO, Theme Work Analytics, Bangalore
presented at The Chancery Pavilion, Residency Road,
Bangalore India
balasubp@gmail.com
IIMM / SCALE 2018
Gray Matters in Supply Chain Management

Innovation and Optimization of Supply Chain
towards Business Excellence
u Innovations History in SCM
u Demand Variability in SCM
u Bullwhip Effect
u Complexity
u Technology impact on Supply Chains
u Gray Matters
u Diversity accommodation in Design
u Diversity management in Execution

u Innovations History in SCM
SCM in earlier years
• Control inventory
• Optimize Logistics
• Efficient PPC
+
Arms Length relationship with
Suppliers
F.G.Inventory is
the buffer to
absorb the
mismatch
between demand
and supply
Capacity
utilization is a
key goal
Prior to computer to computer connectivity era : till 1970s
Price and
delivery
commitments
constitute the
interface
Innovations came from optimization

Inventory: Boon or Bane ? 
Two ends of the spectrum
The Japanese concept of MUDA :
Consider Inventory of any form as a
Waste.
Inventory is a
must for any
enterprise; but
needs to be
contained
Shun
Inventory
Post 1980s concept giving rise to JIT ; MTO;ATO
Tandon ( 1975) and Chore
Committees ( 1979), set up by RBI,
evolved norms for Inventory and set
the limits for bank credit extended to
firms to meet Working Capital
Requirements.
Strategic innovations.

New Paradigms since the 90s
• Globalization of industries
• Focus on Core Competence
• Emergence of Internet
Supply Chains have become complex.
Customer expectations have exploded.
Competition has been intense.
Structural changes in economy giving rise
to complexity.

❖  Globalisation: leading cause for variations in demand
❖  Going beyond peak, seasonal or cyclical demand
❖  Exploding product variety and specifications to cater to
multiple markets
❖  Need for more stratification in markets due to value preferences
❖  Longer lead times to procure adding uncertainty
❖  Rise of fashion goods

Demand Variability/ Causal factors

u  Perceived demand being significantly different from
underlying true demand
u  Higher degree of separation from manufacturer to the
customer leading to exacerbation of demand variability
u  Lack of information sharing across SC partners adding
layers of opacity

Bullwhip effect
Grasp of Bullwhip effect lead to higher level of
collaboration among SC partners

u  Make or Buy
u  MTO or MTS
u  Local or Global Sourcing
u  Online or Brick and Mortar
u  Efficient or Resilient supply chains
u  Tightly or loosly coupled Vendor Relations
Connected world expanded the decision options
on all aspects of Supply chains
The solutions were no longer black or white

New Industry types have emerged
Make to
Stock
Make to
Order
Assemble to
Order
Engineer to
Order
Demand Risk
carried fully
Market Grip
Integration,
Quality and
Delivery
challenges
Conversion cost
and capacity
utilization
management

New Industry types have emerged
Make to
Stock
Make to
Order
Assemble to
Order
Engineer to
Order
Demand Risk
carried fully
Market Grip
Integration,
Quality and
Delivery
challenges
Conversion cost
and capacity
utilization
management
“ It Depends” was the response to most queries
MRF
ABB
INFOSYS
NIKE

Interaction
level
Data Process Policy
Coordination Many to
Many buyer
seller
scenario
Purchase
Orders;Delive
ries;Payments
Interfaced
processes
At Arms
Length
Cooperation Chosen few Demand data;
Inventory and
Production
Synchronized
processes
Loose
Coupling
Collaboration The Go to
Market
partner
Sale Prospect;
Costs; Market
Potential
Common
processes
Loose
Coupling
Integration One to one
relationship
Investment
levels
Shared
processes
Tight
Coupling
Differentiate interaction intensity; align systems and
processes.. “It Depends”

Impact of logistics and transportation
Ø  It is simplistic to assume that unit cost of transportation
remains constant
Ø  It varies from one mode of supply to another ; depends on
quantity transported;
Ø  Many a time it is a function of temporal demand versus
supply for each pair of origin and destination
Ø  Levies and taxes can play a critical role in transporting
finished versus semi finished products
Decision issues relate to Mode of Transport, Duration of the
contracts, Combined transportation of multiple goods, Loading
patterns etc.

Ø  IoT, IIoT
Ø  Automation, Robotics, Machine Vision, Speech Recognition
Ø  Identity Mgt, Network Security, Distributed Networks etal
Ø  AI, Machine Learning, Deep Learning, Analytics
Ø  Additive Printing
Ø  GPS, Autonomous Vehicles
Ø  Wearable Technologies
Ø  Blockchain ( Nextgen SC)
Innovation through emerging technologies
Interlocking technologies are accelerating the pace.
What is their link to Supply
Chain Management?
Where is SCM headed ?

❖  Changing processes, systems, business models and
interactions
❖  Expert systems à Machine Learningà Artiﬁcial
Intelligence
❖  Who gets to perform what task in design and execution :

Human or machines?
❖  How do we handle the humans in the system?
❖  Retrench, retrain, motivate to perform mundane tasks.

Emerging Tech: What is their link to SCM ?
How do we predict what can go wrong?

Ø  We see the world often as black or white
but not as shades of gray
Ø  We prefer to classify or choose either extreme
Ø  Dichotomy and dualism instead of pluralism
Ø  everything in universe reveals diversity, dispersal,
wide spread scatter than extreme singular points
facing up to the challenges of the decade
Replace Black or White paradigm with
“Gray Matters”

Black or White view of people leads to

Ø  lumping all responses as resistance to change
Ø  delayed discovery of true learning disabilities
Ø  prejudging people
Ø  deriving incorrect correlations between people attributes
and performance
Ø  higher level of dissatisfaction, ranting and raving about
people behaviour

Black or White view of the market leads to

Ø  wasted promotional efforts in sales and marketing
Ø  insufficient segmentation and inadequate pursuit of
knowledge on relevant customers.
Ø  products are either crammed with too many features ( to
cover a wide segment’s needs that remain poorly utilized
or average customer satisfaction being pulled down)
Ø  above results in higher price and poor value for money to
the relevant segment

Segmenting the markets in terms of
Age Groups, Gender, Economic Status, Geography
Products are conceived and marketed focused on
predefined segments and categories
But not in terms of
Form Vs Functionality ( Apple vs. Windows)
Competency of Senses ( young vs. old in cell phones)

Diversity accommodation in Design
Ø  Will lead to higher flexibility in Products to facilitate
ease of use by Geriatrics, alternatively enabled
persons etal
Ø  User Interface Design would be inclusive
Ø  Result in rapid advancement of Machine Vision, IVR
and Voice Response Systems
Ø  Tighter standards would emerge for human and
machine interactions; allocation of decision abilities
to machines

Diversity accommodation in Design
Ø  “Toyota uses internal standardization techniques to
minimize complexity, but it has never eliminated
complexity at the expense of a customer’s desire for
quality and variety.”
Ø  “Toyota currently builds its entire variety of cars and
trucks on 13 platforms that can easily be customized.
Each platform derives its subassemblies and parts
from a book of standardized designs”
Source: https://www.tefen.com/insights/industries/Consumer_Goods/
supply_chain_complexity__dealing_with_a_dynamic_system

Diversity Management in Execution
Ø  Promote decentralized decision making
Ø  Enhance the role of humans in cyber physical
systems
Ø  Culture of celebration of diversity will emerge
Ø  Innovation through cross fertilization
Hence the theme “ Gray Matters”

“I have given up extremes of either luxury or
asceticism. I have discovered the Middle Way"
Gautama
Buddha at
Bodh Gaya

Session summary
u  Innovation journey is continuous
u  It has traversed the path of Resource Optimizationà
Strategic thinkingà Technology Assimilation
u  Coming decades pose enormous challenges to redefine
human machine interactions
u  They are best tackled by embracing and infusing the
concept of “Gray Matters” in Design Thinking and
Execution Management

Innovation in scm

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