Daily Archives: September 6, 2006

How dependent are you on your supply chain?

This summer, Supply Chain Management Review ran an article entitled Ready for the Digital Future based on an interview with M. Eric Johnson, the Director of the Center for Digital Strategies at the Tuck School of Business at Dartmouth College. Re-reading it closely, I was struck by the quote “a lot of interesting learnings emerged from this research [on supply chain risk]. One that really caught my attention was that supply chain managers, and many managers in general, don’t fully realize how dependent they are on information flows and on others in the supply chain“.

You’re not just dependent on the manufacturer you get your components from, the third party logistics firms that handles transportation from the manufacturer’s warehouse to your plant, and the third party logistics firms that handles transportation from your plant to your customers warehouses, but the individual carriers on which they depend, the service providers that provide the systems that connect you with your suppliers and distributors, the telecommunications carriers that provide the backbones on which their systems run, the feeds from your customers indicating current and forecasted demands, the feeds to your suppliers indicating your current and forecasted demands, etc. Dozens of events could knock out part of your supply chain, and even a single point of failure could have wide reaching repercussions. In fact, that’s why most companies would not be able to articulate the dependencies until they really start digging down deep into the details of their supply chain operations and why you should be doing regular supply chain audits.

Another quote that caught my attention, and a point that is not often addressed well enough in articles about supply chain risk, is how do you protect intellectual property in your supply chain and with your partners. The research documented that all extended enterprises are leaking information all of the time. And they are leaking in ways that many managers would not believe unless I showed it to them. Now, sharing is important, as it is the basis of collaboration, but so is security. Make sure your collaboration systems are secure, your partners under NDA, and that you only share information with a third party that is relevant to the collaboration – in other words, don’t open your whole system when you are only collaborating on a couple of products, restrict access to information that relates to those products. Furthermore, make sure collaboration is based on trust and a common understanding that everyone’s IP needs to be protected. This will be just as effective as any security protocols you can put in place.

There are a number of other really good points in the article, which I highly recommend you read, but the last one I’m going to reflect on in this entry is his definition of a good digital strategy. A good digital strategy is:

  • aligned with the business strategy,
  • designed to harness the organization’s unique competencies, and
  • enabling of new levels of agility, trust, and collaboration.

In other words, supply chain technology is only useful when it aligns with the business. Your business should not have to align to the technology. This is why on-demand software-as-a-service solutions are great – you don’t have to revolve around technology, only solutions that serve your business. To that effect, I’d like to point out Tim Minahan’s recent entry on SaaS, A Tale of Two Articles, which notes that the center of power for enterprise application decisions has shifted from the CIO to the line-of-business executives and that SaaS makes this possible. With SaaS, you can choose the applications that best suit your need, and not the applications your IT organization is configured to support.