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Having attended way too many business conferences, I empathize with the audience when a presenter drones on and on about “big data,” “synergies,” and “digital transformation.” What are we really talking about with all these buzzwords? If you ask me, there is one unifying factor: time.
I’ve had a long, steady career in supply chain operations, and the buzzwords run rampant. The latest culprit? Digitalization. Let’s take a close look at what this really means.
Here’s a safe rule of thumb in the supply chain field: if the physical goods flow faster than the information about them, then it may be time to digitalize. Why? It’s about time – specifically about having timely information on hand to move (and change course) fast enough to meet expectations. These expectations include the demand for high-quality goods delivered at a reasonable price without delay no matter what’s happening out there in the world of supply and demand.
To meet these expectations, digitalization can’t be about simply going paperless (and for the record, planners went paperless 20 years ago). Spreadsheets shared by e-mail, overnight MRP batch runs, someone running around the factory with a laptop checking stock levels and revising the plan – this is not digitalization, at least not the way I envision it.
What’s needed is relevant data delivered in – you guessed it – real time. But because supply chain extends across so many different phases and silos – from design to manufacturing to logistics to operations and back again – getting relevant data in real time requires interoperability.
Not long ago, I participated in a session on the topic of synchronizing supply chains across financials, planning, operations, and execution. A planning manager challenged the presenter with a question: “What’s the business value of integration?”
The presenter was suitably aghast. How could an educated senior planning manager not “get it?” But it’s a fair question. The fact is, there’s integration . . . and then there’s integration.
An integration project focused on a particular scenario and designed as a quick win may be OK. But on the other hand, it may benefit one group to the detriment of others. It may be OK to interface numerous solutions on different platforms. But on the other hand, you may need bottomless IT support to maintain interfaces and synchronize master data. Do the gains outweigh the costs? This is an important question.
The important thing to keep in mind is that it’s about time – or at least it should be. By “time” I mean the time (or speed) of the end-to-end process at the heart of the business, not the efficiency of one department or another.
I like the example of motorcycle manufacturer that builds custom motorcycles. This company follows a “lot size of one” production model – meaning that it allows customers to configure their bikes online (color, trim, etching, and more). The goal is to build the bike in an eight-hour shift.
The system landscape supporting this process involves many parties. The sales configurator must communicate to the production MRP or configurator, which in turn must communicate the order and materials to the shop floor system (MES). The MES then needs to ensure the correct routing and materials are consumed for that one order.
All of this must then be reconciled back to the design configuration – and let’s not even discuss inbound and outbound delivery. If the interfaces between these systems require overnight batch runs (as is the norm), then you have a minimum of two days to even get the data in the correct state to execute on the production end.
Mission not accomplished.
If the question is about the value of integration, then look no further than this scenario. If our motorcycle manufacturer had truly integrated systems communicating in real time, then building a bike in an eight-hour shift would be doable. What integration does, in other words, is enable organizations to deliver as customers expect through total visibility and interoperability.
Interoperability needs to extend across all phases of production. Passing spreadsheets by e-mail (let’s call it primitive digitalization) or with custom interfaces don’t do the trick. What’s needed is higher order automation and cross-enterprise digitalization to connect all parties and all process steps with zero-latency visibility into data as needed.
Businesses can’t afford to integrate and maintain old and disparate manufacturing systems that will never support the business models that customers expect. What’s needed, then, is true “digital transformation.” I know this is yet another buzzword, but that’s OK. What we gain is total visibility, interoperability, and innovation that drives speed and agility. Remember, it’s all about time.
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