The Fallacy of Supply Chain Integration

The Fallacy of Supply
Chain Integration

Supply Chain Insights LLC Copyright © 2020, p. 2
I Am A Social Scientist

I Write for the Supply Chain Leader

Goal?
“I want to build
an end-to-end
Integrated
supply chain.”

A Close View
Today only 4% of
companies are
driving improvement
while out-performing
their peer groups.

What I Believed
…companies spent
1.7% of revenue on
information
technology
investments and
drove improvements
at the intersection of
operating margin and
customer service.

I Was Wrong….

Today’s Supply Chain

• 29% of companies can access total costs.
• 1/3 of companies have supplier development programs and know the
locations of 2nd and 3rd tier suppliers.
• One in two companies tie S&OP planning to execution.
• 9% of companies actively design supply chains.
• 15% actively manage the form and function of inventory.
One In Three Supply Chain Leaders Believe Their Supply
Chains Are Working Well

Inventory Levels Higher At The Start Of the Pandemic Than
the Great Recession of 2017

Performance and Improvement

Reflection
Demand Driven Value Networks
Efficient Enterprise

What Is An Effective Supply Chain?
Outcome:
Performance
Improvement
Resilience
Goal:
Efficient
Responsive
Agile
Fit for Function

The Fallacy of Integration
Integration is the act of bringing
together smaller components into a
single system to function as one. Using
APIs the data in disparate subsystems
becomes part of a larger, more
comprehensive system that, ideally,
quickly and easily shares data when
needed.

?
What About Context?
Is an each a barrel, a pallet, a cup a
serving unit?

In the theory of constraints (TOC) the supply chain is
managed a system limited by a series of constraints. This
principle is the backbone of conventional planning systems.
The software identifies the constraint and restructures
sourcing and manufacturing decisions to minimize the
impact of a bottleneck.
Evolution: Theory of Constraints

Conventional View
Enterprise Resource Planning

?
What about synchronization?
Synchronization is the coordination of
events to operate a system in unison.

?
What about synchronization?
Synchronization is the
coordination of activities and
flows to operate a system in
unison.

?
What about harmonization?
Process harmonization aligns
different variants without
attempting to make different
elements identical.
Example: Calendars

What About Flow?
The Supply Chain is a
complex non-linear
system with many flows.

For Example: Demand Is A River

42%
20%
16%
16%
12%
10%
10%
10%
Customer-centric
Total employee involvement
Strategic and systematic
approach
Ability to get to data
Continual improvement
Process thinking
Business performance
management
Connected and integrated
processes
Effectiveness
76%
44%
44%
42%
42%
36%
36%
36%
Customer-centric
Total employee involvement
Strategic and systematic
approach
Process thinking
Business performance
management
Connected and integrated
processes
Ability to get to data
Continual improvement
Importance
Importance vs. Effectiveness
Top 3
__________________________________________________________
Source: Supply Chain Insights LLC, Elemica Study (Apr-May, 2020)
Base: All Respondents -- (N=83) -- *Showing those rating elements 6-7 on 7-point scale
Q10: How important are each of these factors to your company's culture in managing transportation visibility?
Q11: How effective is your company in enabling each of these factors in building the right company’s culture in transportation visibility?
COMPANY’S CULTURE - Manufacturer

Organizations Are Not Aligned

The Conundrum
FlowIntegration

Navigating The Shades Of Gray
The world becomes more
gray through the pandemic.
Data requires analytics to
provide context.

• Shifts in Demand
• Higher Costs
• Manufacturing
Outages
• Supply Disruption
• Logistics Outages
Expect

Demand Shifts
A combination of economic downturn and a pandemic.
Historic order patterns provide little valuable insight for
demand manager.

• Focus Outside-in. Base Demand on Consumption with Minimal Latency.
Focus on Flow.
• Get Good at S&OP Execution. Continually Realign Demand and
Supply. (Bi-Directional Orchestration)
• Expect Supply Disruption. Transportation Will be a Constraint and
Supplier Supply Issues a Constant. Build Supplier Development
Programs and Focus on Being a Good Trading Partner. Align Flows and
Design Cycles.
• Base Planning on Actuals. Lead times and Cycles Will Vary. Build a
Planning Master Data Base.
• Align Teams Against Shared Metrics. Traditional approaches focused
on functional metrics are a barrier to alignment.
How To Survive?

Technology In Transition
Traditional supply chain thinking is:
Functional
Linear
Transactional
Inside-out
Moving forward, the thinking
becomes:
Cross-functional
Non-linear
Focus on sense, learn and act
Outside-in

What Needs to Change?
Rebuilding
• The goal is not integration. The focus needs to shift to synchronization and
interoperability.
• There is a need for sensing and reduction of cycles. Build outside-in processes to
drive better outcomes.
• Rise of new forms of analytics like the digital twin, flow management, and use of
advanced what-if modeling.

What To Do Until There Is A Vaccination?
Focus: Form an operational team and a
recovery team. Focus the operational team
on managing day-to-day and the recovery
team on re-imagining capabilities.
Aid: Build strong supplier development
teams.
Reimagine: Deploy agility tactics and
reduce data latency. Invest in new forms of
analytics to sense market shifts and
eradicate supply chain black holes. Focus
on flows.
Design. Focus locally and improving the
supply chain response.

We Must Learn To Unlearn And Build Better

Goal?
“I want to build an effective value
network managing flows from the
customer’s customer to the suppliers
supplier through harmonizing and
synchronizing data. The goal is not
integration but interoperability and bi-
directional orchestration.”

The Celonis Approach

Wrap-up
We must learn to unlearn to
relearn.
What got us here is not today’s
answer.
Innovation makes much of
what we have today legacy.
We have the opportunity to
build better.

About Lora Cecere
Founder of Supply Chain Insights
“LinkedIn Influencer”
Guest blogger for Forbes
Author: Bricks Matter (2012), Supply Chain Metrics That Matter (2014), and Shaman’s Journal
(2014-19)
Partner at Altimeter Group (leader in open research)
8 years Leading Analyst Teams at Gartner and AMR Research
8 years Experience in Marketing and Selling Supply Chain Software at
Descartes Systems Group and Manugistics (now JDA/Blue Yonder)
15 Years Leading teams in Manufacturing and Distribution for Clorox,
Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter &
Gamble.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (18,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (9,600 followers)
• LinkedIn: www.linkedin.com/in/loracecere (318,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631
Who Is Lora?

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The Fallacy of Supply Chain Integration

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