Innovation on my mind; innovation in my business

This is an excerpt of the original article. It was written for the January-February 2023 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2023

It feels like a normal holiday season. ”That was the report I got from the VP of global distribution at one of the country’s best known retail brands on the Monday before Black Friday. He added that the last time he felt that way was November of 2019. One of the perks of this job is that I get to talk to a lot of supply chain executives. In my conversations over the last year, I’ve learned two things. Operations, which was perhaps hardest hit at the start of the pandemic, has learned to operate in this new environment. Sure, there are still hiccups caused by absenteeism and inventory shortages. But those are situational—give them supply and…

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As we enter the 4th year of the Roaring 20s: decade of digitalization and disruption, there has been a lot of talk about innovation. However, more has been said than done. It’s time to stop talking about innovation and start innovating. Innovation doesn’t have to be an invention, a patent or a discovery. Innovation is simply a change that improves the status quo. Or it can be continuous improvement that makes incremental but positive changes to existing operations.

We’d like to explore two reoccurring innovation themes that we often discuss with business executives: (1) enabling an organization’s ecosystem; and (2) delivering improved decision making through digitized technology. These themes provide a clear demonstration of how existing and emerging technologies can move from concept to earned business value for an organization. Finally, we hope to motivate you to contemplate moving from innovation concepts to delivering business value from the transformation from a supply chain to a digital enterprise supply network (ESN) ecosystem (Figure 1).

Figure 1: Transforming from a supply chain toa digital enterprise supply network (ESN) ecosystem

Source: Authors

Emerging technologies are often the purview of market leading innovator companies that are constantly playing with new toys in their sandbox. We have been quite excited by some very futuristic possibilities that are gaining attention by early adopters. Some of the possibilities of note center on machine automation, such as flying drones and autonomous vehicles. Both of these are expanding from use case to pilot to select implementations, especially in the last-mile segments. Other exciting possibilities will provide more digital technology in logistics including warehouse and transportation simulation and modeling, warehouse execution and transportation forecasting.

Ecosystem enablement is a key driver

The ecosystem is a key consideration for organizations to capitalize on new innovative models for integration, collaboration and operations. The Ecosystem represents the interests of stakeholders in the core enterprise supply network including suppliers, manufacturers, distributors, customers and consumers. In the enabling network, stakeholder examples include customers’ customers, suppliers’ suppliers, logistics service providers, service centers and even competitors (very important). Stakeholder examples in the supporting network include financial institutions, government authorities, industry standards and regulatory organizations and insurance providers.

The enterprise supply network ecosystem model leverages digitalization to connect participants as well as providing support across the network (Figure 2). Operating as a connected community of commerce, companies will operate as a market ecosystem business model. One of the key considerations for ecosystem transformation is how decisions based on intended outcomes in one network can systemically result in unintended consequences throughout the network of networks ecosystem as experienced by the major disruptions from decisions made and lessons learned during and after the pandemic.

Figure 2: The enterprise supply network ecosystem model leverages digitalization to connect participants

Source: Authors

To achieve ecosystem commerce, companies embark on a journey that starts with a digital transformation and digital twin foundation, one of our highlighted technologies listed below. This journey progresses through stages of digital business 4.0 maturity. The stages chart the course across the ecosystem to grow from a visibility stage to empowerment of an ERP4 (ecosystem resource planning) across multiple stakeholders in the ecosystem.

Improved decision making for resilience

We specifically call out the theme of improved decision making as the increased velocity and network effect of change requires specific up to date information, alerts, reporting and the like to adjust to changes (including unintended) good and bad in all areas of the business environment, labor conditions, network interruptions and even into everyday living. Market leaders are identifying innovation opportunities that are delivering business value and significant competitive advantage now when it usually takes from three years to seven-plus years for an innovation to reach the early majority. Identifying innovations that can be implemented effectively in a timely manner will go far in improving your speed of decision making and both cost advantage and competitive advantage.

Capturing many of the benefits enabled through enterprise supply network implementation will continue to drive gains for your resilient and sustainable decision making. Improved decision making will also come from capturing and understanding deep insights from the underlying data provided by the right intersection of supply chain technologies. In our experience, it’s often the combination of emerging technologies that offers the value. Consider how GPS, location-based services, sensors and monitors and telematics are driving (pun intended) autonomous vehicles.

Emerging technology combinations to watch

Capitalizing on capturing supply network efficiency by enabling digital hubs (web-based systems) involves linking supply network partners and competitors. The purposes of digital hubs are collaboration, trading or both. As multi-enterprise ecosystem commerce platforms mature, they will leverage business 4.0 technologies to enable ERP4. Ecosystem commerce platforms will optimize purpose-driven, ethical and responsive market ecosystem networks to efficiently manage variability.

Another benefit will be capitalization of the total ecosystem material flow paths from source to consumption to sustainability. Driven by a circular economy, value will be created for all participants in the ecosystem globally (democratization). We don’t compete on the transportation lane. We compete at the point of demand/order. Systems for innovative supply chain finance provide mechanisms in which the stakeholders can share in the total value to the community of commerce from collaboration. Some of the enabling solutions include the following.

Real-time supply chain visibility platforms, also known as control towers, provide increased transparency and visibility across the entire supply network by showing multiple dimensions including dollar value, product quantities and location history. Control towers provide instant communication and collaboration with ecosystem partners, including listening to the world outside the value network.

For a specific example, one of the world’s largest retailers has implemented supply network control tower capabilities to ensure visibility to shipment status and on-hand inventory across all its supply network operating nodes. Visibility of the network flow volume is provided with the retailer’s control tower capabilities. Proactive identification of workflow capacity utilization opportunities, or shortfalls and notification to when the forecast exceeds available capacity, is another substantial benefit the retailer relies on for competitive and cost advantage.

Last-mile delivery solutions are designed to overcome multiple existing challenges in delivering an organization’s product to the end customer, whether that’s delivery to a business or for home delivery. Typically, the network is multi echelon and intermodal, moves include both sensitive and regulated products and are subject to service-sensitive demands with channel shifting impacts compounding the delays and hurdles of last-mile delivery.

Some of the world’s largest logistics service providers and carriers, for example, have identified how best to identify and deploy new services utilizing non-traditional means such as crowd source delivery providers (democratization), autonomous vehicles, drones and parcel consolidation along with evaluating the build versus buy scenarios for last-mile market needs. Their innovation planning has led them to expanding their services portfolio to enable their business goal of new and organic growth so these services can now be offered to their customers.

Digital twins in logistics are software representations of assets and material flow processes that are used to understand, predict and optimize performance to achieve improved business outcomes.

They provide several venues for this optimization including:

1. enterprise supply network optimization;
2. scenario simulation digital twins for proactive planning;
3. producing scenario hypotheses and definitions; and
4. discrete event or system dynamic what-if analysis.

In our experience, there is considerable value in conducting modeling exercises that provide the intelligence and value from information and material flows by connecting inside and outside the four walls simulations.

By implementing multiple digital twin models, companies can model numerous scenarios to test predictive scenarios with multiple outcomes as well as modeling hypothetical what if scenarios. These scenarios leverage the technology adoption of new capabilities, multitudes of data sources (e.g., IoT, ECP, POS, legacy, social media and internet search), increased computing power and data storage and algorithms to provide simulations for understanding how minor to major changes will impact, grow and improve their logistics’ capabilities. Further, it is critical to note that the models are developed with a community in mind such as supply chain finance, planners or the chief operating officer’s organization. This community mindset enables users to capture the best value from the tools based on their specific needs.

Do more, talk less

The identified technologies are presented through a logistics lens to demonstrate how one can provide a realistic path to capture value from ecosystem commerce and resource planning (ERP4). The integration of data among the ecosystem communities of commerce, the ease of onboarding new participants and leading through a service focus and collaborative capabilities inherent in new innovations have clearly demonstrated a path to business value delivery to innovators and early adopters. But you will never know until you try.

Adding innovation planning and goal setting into operations performance metrics and evaluating technology hype cycles, best practices and ROI, both financial and competitive, are critical to business strategy. Not planning for the innovation, transformation and implementation of new processes and business models may relegate your organization to the past.

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