Tag

supply chain

Accenture and Genpact Making Big Plays In Supply Chain Digital Transformation | Sherpas in Blue Shirts

By | Blog, Digital Transformation

The supply chain function is an area crying out for a digital platform or utility. In fact, I believe it’s ripe for digital disruption. Digital technologies such as automation, advanced analytics, AI, cloud and the IoT can make a huge contribution to rationalizing and managing the supply chain for companies in the North American market and globally, so it’s a prime candidate for transformation. Companies such as Amazon and Walmart are building logistics and supply chain digital platforms for themselves, but they seek to shape the space and disadvantage other companies. So, several vendors are pushing to provide supply chain platforms. It’s clear that especially Accenture and Genpact, also believe in the coming disruption, as they are making very big plays to compete against Amazon in the supply chain space.

Read more in my blog on Forbes

Digitalization Levers Take Center Stage in Addressing Supply Chain Issues — Everest Group | Press Release

By | Press Releases

Enterprises must leverage analytics, cloud computing, control tower technology, IoT and MDM solutions to control cost, remove process inefficiencies, manage risk, and address uncertain customer demands.

Enterprises drove 15 percent growth of Supply Chain Management (SCM) Business Process Outsourcing (BPO) in 2017 as they sought to reduce high operating costs, address evolving customer demands, and manage risk and compliance. The solution to much of these problems, according to Everest Group, is digitalization.

“Enterprises can struggle with broken supply chains for many different reasons, not the least of which are siloed operations, inefficient processes and lack of visibility” said Vikas Gujral, practice director at Everest Group. “Enterprises that adopt digital solutions to combat these challenges are achieving better supply chain efficiency at lower cost. We have identified analytics, cloud computing, control tower, Internet of Things (IoT) and master data management (MDM) solutions as the emerging drivers for success in the SCM BPO market.”

  • Analytics: Analytics capabilities will help streamline supply chain operations through actionable insights to enhance visibility and control. However, despite the growing adoption, analytics penetration within supply chain remains low when compared to procurement.
  • Cloud: Cloud is becoming a major disruptive force for seamless supply chain operations, because it enables agile operations, cost containment and increased collaboration. Cloud ties all underlying pieces and technologies together, forming the basis for the supply chain of the future.
  • Control tower: Control tower—a central platform which tracks, monitors and directs activities across the supply chain—provides better visibility, cost benefits through accurate demand forecasting and inventory management, and reduced cycle time. Organizations have started realizing the benefits of control tower solutions, leading to cases of increased implementation.
  • IoT: IoT, coupled with other technologies, forms another key building block of efficient supply chain operations. IoT is valuable in numerous applications for alleviating supply chain woes and preparing enterprises for the future.
  • MDM: Demand for visibility, efficiency and smarter organization is increasingly creating the need for better data management. Consistent increase in MDM FTEs indicates greater focus on data management services

These results and other findings are explored in a recently published Everest Group report:  “Supply Chain Management (SCM) BPO—Annual Report 2018: Moving Toward a Digital Supply Chain Ecosystem.” In the report, Everest Group analyzes the global SCM BPO market in 2017, focusing on the state of the market, market size and adoption trends, and the service provider landscape.

Key Adoption Trends:

  • Market size and growth: The SCM BPO market is now estimated at US $1.5 billion and is expected to grow at a similar pace in the future.
  • Geography distribution: North America is the key geography in terms of SCM market share, followed by Europe. Asia Pacific registered the highest revenue growth in the market.
  • Industry adoption: While manufacturing still leads the adoption in SCM outsourcing, newer industries such as travel & logistics have seen an uptick in adoption.
  • Buyer size: Although large buyers still form the majority, SMBs and midmarket buyers have awakened to the benefits of outsourcing.
  • Pricing: FTE-based pricing witnessed the maximum inclusion, very closely followed by hybrid pricing.
  • Sourcing dynamics: Although onshoring has seen an uptick from past years, offshore/nearshore delivery still forms the major chunk of the SCM BPO market.

***Download a complimentary 10-page abstract of the report*** (Registration required.)

Blockchain: Making the Global Supply Chain Healthier | Sherpas in Blue Shirts

By | Blockchain, Blog

In 2015, Denver-based Chipotle Mexican Grill suffered a major crisis with an E. coli outbreak that left 55 customers ill. Sales plummeted, news stories and investigations shattered its reputation, and the restaurant chain’s share price dropped 42 percent, to a three-year low, where it has languished ever since. Why couldn’t Chipotle prevent or contain it? What triggered it?

The answer lies in an ever-present scenario companies face – dependence across multiple vendors and lack of transparency and accountability across complex supply chains. A radical solution, using blockchain technology, is rapidly emerging, and is being explored by a slew of startups and corporations.

Blockchain allows supply chain managers to attach digital tokens – a unique, negotiable form of digital asset – to intermediate goods as they progress along the production, shipping, and delivery phases among different supply chain players. This gives businesses far greater flexibility to find markets and price risks, by capturing the value invested in the process at any point along the chain.

Blockchain in Action

One example of blockchain in action is Walmart working with IBM and Beijing’s Tsinghua University to follow the movement of pork in China. Another is BHP Billiton, a mining giant, using the technology to track mineral analysis conducted by outside vendors. Everledger, a dynamic startup, has already uploaded unique data on more than a million individual diamonds to a blockchain ledger system, thus developing quality assurances and helping jewelry market associations comply with regulations barring “blood diamond” products.

“Smart contracts,” an application based on blockchain technology – buoyed by advances in chip and sensor technology – is an especially powerful option providing traceability and automation benefits. These contracts can grant different vendors special, cryptographic, and encrypted permissions, can be automatically executed by an autonomous system, and provide visibility on each other’s activity to all members of a supply chain community.

Smart contract definition

This kind of provable, transparent credentialing will be especially important for additive manufacturing, which is central to the dynamic, on-demand production model of the burning Industry 4.0 movement. For instance, operations and maintenance crew in an aircraft carrier need to have absolute confidence that the software file they downloaded to 3D print a new part is safe and not hacked. One of the most compelling arguments for blockchain is that it can help eradicate the trust problem in supply chains, without which the sophisticated, decentralized, IoT–driven economy many are projecting might be impossible.

Obstacles to Overcome

While the need for efficiency improvement and information aggregation suggest blockchain technology could deliver vast supply chain savings for companies everywhere, there are formidable obstacles to overcome first, such as:

  • Development and governance of the technology is a big concern, with two imperatives – global supply chains anchoring to a public blockchain (that no entity controls) to encourage free access and open innovation, and private or closed ledgers to protect companies’ market share and profits. This conflict leads to a couple of challenges:
    • Achieving global economic capacity for the most significant public blockchains, digital currency and smart contract platforms becomes constrained by divisions in open-source communities, making it difficult to agree on protocol upgrades
    • There needs to be interoperability across private and public blockchains, and this will require standards and agreements
  • There exists a complex array of regulations, maritime law, and commercial codes that govern rights of ownership and possession along the world’s shipping routes and their multiple jurisdictions. It will be extremely difficult to marry this old-world body of law, and the human-led institutions that manage it, with the digitally defined, dematerialized, automated, and denationalized nature of blockchains and smart contracts.

Despite these challenges, positive steps are being taken. For example, Hong Kong recently formed a Belt and Road blockchain consortium that seeks to bring a structure and order along with ICANN (Internet Corporation for Assigned Names and Numbers), an international, private sector–led global administrator and adjudicator.

While it might be too early to say that blockchain entirely solves the global supply chains issues, we believe any system that promises to enhance transparency and control for businesses and their customers, while also countering inter-commercial trading frictions, is worth exploring.

An increasing number of investors, businesses, academics, and even governments are starting to view blockchain technology as a much-needed platform…are you with them?

Supply Chain Planning BPO – Navigating the Continuum from “Transactional” to “Complex” | Sherpas in Blue Shirts

By | Blog

Supply chain planning BPO is a relatively new entrant into the global services arena. Organizations are now turning to specialist providers that can deliver a range of services across delivery, master data management (MDM), aftersales, and reporting & analytics. A number of leading broad-based BPO providers have developed capabilities in this area to complement finance & accounting and procurement outsourcing offerings.

However, as is typical with a service that is not very tightly defined, supply chain planning BPO consist of completely different sets of underlying services, depending on the client context.

On one end of the spectrum, supply chain planning BPO services can cover relatively transactional activities such as:

  • Data management for inventory planning
  • Master data updates and validations
  • Status reporting and integrity checks
  • Basic conclusions from SAP/ERP data extracts to support planning activities

On the other end, supply chain planning BPO services have been seen to cover quite complex activities such as:

  • Forecasting and demand analysis
  • Inventory planning and scenario analysis
  • Network and distribution planning
  • Working capital management

Both sets of services have different skill set requirements, educational qualifications, staffing metrics, and talent management regimes. The transactional activities require basic numerical skills, some working knowledge of ERP systems, and good reporting capabilities. The complex manifestation of supply chain planning is much more judgement based, and requires operations planning skills, understanding of network planning/optimization tools, and excellent analytical abilities.

In a competitive or sole-sourced bid situation, any wrong assumptions could have significant implications on deal profitability for the service provider or pricing competitiveness for the buyer. Therefore, it is critical for both parties to understand and articulate where the specific service lies on the complexity continuum.

During the deal tenure, this poses additional challenges during a benchmarking or contract review/renegotiation exercise. We have often observed providers putting forth a “blended” rate covering the entire set of services, which limits the transparency and flexibility to objectively and accurately assess the pricing. Case in point: as part of a recent contract review, we had to go through the qualification and job description of each individual on the account to enable an apples to apples comparison. This led to the identification of significant value leakage due to a blended rate covering all kinds of supply chain planning activities that was higher than the fair market price for the complexity of the underlying services delivered.

It will be interesting to observe how the market evolves and service providers develop a tighter definition of these services to ensure there is no confusion during solutioning and pricing of contracts. If you were on the buy- or sell-side of a supply chain planning BPO deal, our readers would love to hear your experience!

Procurement Ups Its Game | Sherpas in Blue Shirts

By | Blog

A recent IBM study indicates that purchasing is attempting to become more strategic. It’s a very intriguing study. It shows that purchasing is not only trying to extend its influence but also recognizes some of its shortcomings – notably that it historically has been a tactical vehicle that deals with the simple execution of attempts at driving price down and is less adept at supporting transformational agendas that require fitting into a strategic plan.

As procurement garnered more and more influence across the services space, they often failed to understand the quality and strategic implications of the behavior that they drove. Their influence in driving down cost assumes that all solutions are equal and buyers can discriminate against them only based on cost. This results in sometimes optimizing for lower unit cost but higher total cost and at other times developing solutions that don’t meet business requirements as well as they could.

For example, they give less weight to a provider’s ability to drive transformation and more weight to the pricing. This sets up a situation where often the opposite happens. The buyer selects a lower-priced vendor that is less capable of driving transformation, which results in higher total cost and a less-effective implementation. Look at any ERP implementation if you want to see an example of this.

In attempting to step up to a more moderate strategy and even shaping and designing strategy in some instances, as the study points out, chief purchasing officers attempt to deal with one of their most vocal criticisms – that all they focus on is price and they often don’t align well with business needs.

When the context of driving down the cost of a supply chain is important to strategy, it’s natural that CPOs become more influential. But in the area of services, where services are an important ingredient to a change strategy and require deep understanding of the business and how to shape or manipulate the components to create a differentiated position as an advantage, CPOs are likely to struggle as the champions of change.

In the work we’re doing at Everest Group, we’re seeing business executives outside of purchasing starting to push back on purchasing to get them to stay in their swim lanes. They have become a very powerful entity in many organizations, but they’ve started to dictate in areas that are necessarily the provenance of those who drive strategy.

This new study indicates that CPOs are starting to recognize that as their influence has grown, their activities cast a much longer shadow and are more critical to the organization. By necessity, they must better align themselves with corporate strategy. The better aligned with the strategy they are, the more impactful they can be. This naturally guides them to want to be an active participant at the table where the business develops the strategy so that they can better align with it.

There is question about whether or not they will be allowed full access to those discussions or whether, like their companion the CIO, their influence will be turned back to be more and more tactical.