The Next Frontier of Supply Chain Innovation: Analytics, LEAN and the Power of Big Data
Ongoing breakthroughs in big data and advanced analytics are nothing short of revolutionary. Executives at Gartner have said, "Information is the oil of the 21st century, and analytics is the combustion engine." The excitement is not simply about the scale and speed of information generation. It is also about big data's potential impact. An example noted in a recent McKinsey Insight: McKinsey's Global Institute estimated that retailers exploiting data analytics at scale could increase operating margins by more than 60 percent. That gets your attention.
Achieving such gains has proven difficult for many organizations as they attempt to leverage big data, particularly those new to using analytics. Tools and techniques are now emerging to help companies realize the potential at the core of big data excitement. I see this potential in our work for supply chain optimization.
The increased pervasiveness and predictability of big data solutions give new strategic heft to the traditional what/if analysis, answering key questions such as:
- How do we get orders to customers most efficiently?
- Where should we make particular products?
- How many products should we make?
- Where should inventory be?
- From whom do we purchase raw materials? How many?
- What's the most efficient transportation mode to use?
- Which DC should ship products to particular customers?
- What if demand increases x percent?
A key development impacting project execution is the need for speed and global data access. Data collection and data integrity challenges have driven software tools to provide real-time data access, so that organizations like ours can conduct analytics and do more advanced modeling on data being captured at speeds and volumes unheard of a decade ago. Nobody wants to wait for a three-month supply chain project to receive strategy recommendations. They want to know now, and in an increasingly collaborative supply chain, they need to know now to respond effectively to change—a constant in business today.
North American manufacturers are increasingly finding that visualization of the current state of their supply chain from a data perspective adds intelligence to their strategic thinking. LEAN principles eliminate waste within processes and facilities, but LEAN thinking often is restricted to company facilities as discrete elements rather than being extended across the supply chain. This is failing to use a very powerful tool.
Our Extended LEAN® methodology of continuous improvement goes beyond your facility to combine advanced analytics with a key component of the LEAN toolkit—the Value Stream Map (VSM). Overlaying supply chain analytics onto a VSM of the entire supply chain helps companies understand the location of pain points, identify bottlenecks and prioritize the addressing of these challenges to improve supply chain efficiency. The result is maximum customer value through the removal of non-value-added activity from your end-to-end supply chain. Consequently, continuous improvement becomes a critical driver of supply chain and enterprise performance.
Previously, many companies engaged supply chain consultants for project work on a periodic basis: they would come in for three months, complete the project and go away until they were called in several years later to again make supply chain optimization recommendations. This practice is counterintuitive to the nature of big data, which is all about the continual generation and flow of information. Supply chain optimization is not something that can be effectively addressed in a stop/start fashion.
The confluence of faster data access, better analytical tools such as Insight Fusion,® our interactive business intelligence portal and big data solution that promotes timely and data-driven business decisions, and new methods such as Extended LEAN make it more likely that future supply chain optimization will be continuous. Rather than doing periodic network optimizations, companies are better served by continuous optimization—refreshing their models quarterly, for example, to provide more granular monitoring of supply chain performance and better visibility to make accurate strategic decisions.
That's the kind of approach that will really provide horsepower to the analytics engine.
Enterprise Logistics Provider Transportation Insight delivers multi-modal strategic carrier sourcing, freight bill audit and payment services, state-of-the-art Transportation Management System (TMS) technology and business intelligence solutions. John Richardson is Transportation Insight's Vice President of Supply Chain Analytics. Richardson has led the development of innovative supply chain solutions for over 15 years.