I had breakfast with a friend in New York City this morning who was recounting the odyssey he went through in the days following 911 just to buy a gallon of milk. He went to twenty-two places before he got his milk. Supply lines into the city had shut down, many of the stores had run out of essentials, it wasn’t clear if the attacks were over or just getting started. In times of crisis and uncertainty the pressure on our collective supply chain infrastructure spikes and everything turns upside down.
Here’s the hard reality: Our supply chains weren’t built to withstand terrorist attacks and tsunamis. How could they be? Who can predict the flood? Our systems were built for everyday operations – and with the assumtion that 98% of the time things go as planned, without surprises. We accept that when disaster strikes, we’ll be down, maybe down for days, and picking up the pieces for months and years to come. It’s the price we pay to enjoy 98% “uptime” with increasingly – and stunningly – efficient service and choice. Exotic fruit flown in from Thailand at discount prices, polo shirts stitched in Bangladesh and home-delivered, running shoes that you design on your cell phone – all of it delivered to you wherever you are, whenever you need it.
But as this vast and increasingly specialized “hyper” supply network tilts toward our every demand, we are becoming more dependent on it. The world isn’t just flat. It’s in the palm of our hands. It’s coming to us. It’s hyper convenient. My friend and his wife get their groceries and meals home-delivered to their Manhattan apartment in custom delivery windows they schedule from their cell phones. It’s frictionless.
And herein lies another hard reality: We don’t live in everyday 98% time anymore. Today, it isn’t just the occasional big disruption in our neighborhood that shuts us down, it’s the thousands of small disruptions in neighborhoods thousands of miles away, in countries we’ve never been to, that can shut us down. We’ve got the world in the palm of our hand, but that world is tethered to a billion points of failure – to the factories and merchants and designers and fields and ports –across the globe. We live in a hyper-connected world, and we’re a lot more sensitive and fragile than it looks when it’s in the palm of your hand.
Supply chain resiliency is the battle cry and the future of the companies that supply and sell the goods we need to run our plants and homes and cities.
It’s no longer enough to be up and operational in the everyday 98% time we assumed. Companies have to operate in the hyper-connected world of today, and now the equation is inverted. Things happen mostly not as planned. A small percentage of flow occurs without disruption. In the apparel/footwear sector, for example, it’s estimated that more than 90% of purchase orders placed with suppliers change after they’re communicated. In 2010, in a matter of months, the price of cotton tripled. In 2011, when the Thailand floods hit, PC makers all over the world went into war rooms to recalibrate and adjust plans to account for the sudden drop in the global supply of disk drives, which had been concentrated in that region. Commerce is inter-connected, inter-linked, and the little bumps happening far way magnify and affect costs and quality and service and uptime for everyone.
How can companies transform their businesses to operate in the inverted math of the world we live in today, where surprises and pressure spikes are the norm, not the exception?
Now more than any time in history, it’s an information game. Fast, up-to-date, detailed, complete, and reliably accurate information – plus the systems to share and collaborate around that information base, is the key. The best operators will use information systems built for sharing and collaborating across networks of companies, not just for sharing within their own companies. In this respect we are now talking about a radical departure from the IT systems we have been using for the past forty years or so, and on which most of the business world still relies.
Newer network-based information sharing systems were not possible until we had an Internet because they are predicated on a connected world. Traditional software isn’t. The enterprise resource planning (ERP) systems that help companies record their financial transactions and automate their supply chain processes were architected for a world that isn’t connected. They were architected for the single enterprise. That’s not the world we live in now.
Do we throw these out? No. Companies still need to automate and control their interior processes. But they must extend the scope and reach of their IT strategies to connect to their larger commerce community of trading partners and service providers. They need information systems that put all of their partners on the same page, looking at the same single version of supply chain truth, at once, so that when the little disruptions occur way up the chain, the operators way down the chain know – and can quickly and efficiently re-plan to keep things on track.
Cloud-based systems are especially powerful and game-changing in the area of supply chain management because they enable exactly this. By putting the full information base in the Cloud – by locating that single version of supply chain truth in a commons where the entire, inter-connected community can access and update and act on the information base together, in real-time – we suddenly gain the visibility and control we need to be responsive and agile in the face of constant change and variability.
We get our breaking news on Twitter, well before the evening news. We post our vacation pictures on Facebook and instantly our friends living thousands of miles away, continents away even, see them too – all courtesy of the Cloud. Why wouldn’t businesses take advantage of it too?
They are. Hundreds of leading businesses, across all verticals, from high tech to pharmaceutical and automotive and retail are putting their supply chains in the Cloud so that they can see and share and orchestrate across their networks and be agile in the face of constant change. For these companies, Cloud isn’t just a cost-effective way to access and use IT. It’s the ONLY way to connect their supply chains and mobilize their trading partner networks around a single version of supply chain truth. And it’s strategic. Cloud-based collaboration platforms turn single companies into networked companies. They enable the entire commerce community to see and respond and manage through the inevitable everyday disruptions while still giving us the uptime, service, and quality we demand.
It’s also a defining line for whether companies themselves will survive in this new world. The companies that cannot cross over the line to become hyper-networked and connected will not survive. The companies that can will thrive. It’s that stark. The future belongs to networked companies.
For them, the fragile supply chain becomes the agile supply chain. The networked company beats the single company every time.