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Reflections from the 2019 Gartner Supply Chain Executive Conference

By Dr. Madhav Durbha  May 20, 2019

“Is Excel digital?” – the question came direct at the audience during a breakout session! It was one of the several reflective moments I felt at the recently concluded 2019 Gartner supply chain executive conference. To me, the answer lies in the bigger question of is “digital” the means or is it the end in itself? Before I share my view on this, let us walk through some cool examples of digitalization, i.e., use of digital end-to-end representation of the supply chain network to drive decisions in the physical realm, presented at the conference.

  1. Taking the trade wars head-on: A global petrochemical company’s lubricants division recently faced the brunt of the US-China trade wars which resulted in tariffs of 25% for products made in the US and shipped to China. To lessen the impact, the company built an end-to-end digital model of the supply chain and ran a number of scenarios. Based on the analyses, it decided to shift the sourcing for China from the US to Europe for several portions of its portfolio along with the necessary shifts in the capacity from the US to Europe. At this juncture, it caused issues with sourcing since their product flows went through radical shifts. The team, in turn, extended their digital model to include sourcing, and upon further evaluation, made changes to the “ship to” locations. By making these shifts in the product flows they identified US$20 million savings in tariff avoidance. However, they were not able to do this across their portfolio. For example, certain specialty lubricants were solely made in the US. Capacity expansion takes several years to ramp up due to the highly specialized nature of the manufacturing process. So, they were stuck with taking the hit on the tariffs for this part of the portfolio. But the savings they identified elsewhere helped lessen the overall burden.
  2. Going toe to toe with natural disasters: Stefano Zenezini, VP of Supply network operations for North America of P&G spoke about how an end-to-end digital model they built helped respond very fast to the disruption caused by the 2017 hurricane Irma, wherein it impacted several of its suppliers and its operations. However, the company was able to rapidly evaluate its options and enable response mechanisms in a matter of days and weeks and ensured no impact to supply. While this is a great example of short term responsiveness, they also built a robust digital model to evaluate the longer-term sustainability of the network. By taking advantage of sophisticated flow analysis, P&G in North America went from 36 ship points with 600 mile average trip with 40% of volume delivered with 1-day transit, to 6 mixing centers with < 400 mile average trip with 80% volume delivered with 1-day transit. This is a game-changing transformation.
  3. Digital transformation needs rethinking of the business: Razat Gaurav, CEO of LLamasoft facilitated a highly engaging and informative panel discussion with Dell, General Motors, and Grupo Bimbo taking part. Here are a few takeaways:
    • Performing complex tradeoffs requires connected crossfunctional data, a sentiment echoed by another comment I heard during the conference – “To connect the dots, you need to collect the dots”. For example, if one were to deal with border crossings, port congestions, and complex sourcing options, they will have to consider tradeoffs among sourcing, production, inventory, and transportation costs.
    • Offer set strategies such as Built to Order vs Built to Stock will need to consider the inventory optimization efforts concurrently with the overall design of the network. Without dynamically reviewing the tradeoffs, the answers will be suboptimal. Such offer set strategies cannot be one and done exercises but need to be frequently revisited.
    • Gathering data is easier than getting people to work together. Forming cross-functional teams with intellectual curiosity, problem-solving, and creativity, backed by solid executive commitment can do wonders!
    • Hype is better than myth! While AI is going through a lot of hype, it still offers promise as long as one can isolate the application of AI to tangible use cases that deliver business value.
  1. Wise investment of startup capital: In her keynote, Amber Salley of Gartner spoke about how a Swedish startup Einride, an autonomous trucking company is planning the building and placement of charging stations, accounting for a variety of constraints such as mileage per charge, distance between charging stations, equipment type, and associated charging time. The company is leveraging sophisticated optimization techniques to drive these decisions, thus significantly improving the sustainability contribution.

All of the aforementioned companies are leveraging an end-to-end digital representation of their network or some notion of what Gartner is starting to refer to as “Supply Chain Digital Twin”. This brings me back to the question raised at the beginning of my writeup. Is “digital” the means or the end? The above companies leveraged digital models to support the business objectives and end goals of their companies, making them the means to the end, rather than the end. While an end-to-end digital model enables visibility, intelligent algorithms when coupled with such model provide the necessary interconnected decisioning abilities as shown in all of the above examples.

Myself and our SVP of Customer Success Carlos Valderrama hosted a roundtable on the topic of how supply chain digital twins are enabling interconnected decisions. About thirty practitioners representing a variety of industries took part in the roundtable. It was a very lively discussion. While most attendees cited data availability and quality as the major impediments to enabling an end-to-end model of the supply chain along the organizational silos, everyone agreed that these should not be reasons to stall. Enabling a supply chain digital twin is not like flipping a switch. One can start within the domain of their control and then organically expand horizontally and vertically within the organization while demonstrating success along the way. All in all, a highly energizing and provocative session!

The event also was a moment of pride for all of my fellow associates of LLamasoft, as it marked the launch of our new corporate branding and our new logo. We have gone green! It signifies the evolution of our company into one that is helping organizations drive interconnected decision-making, building upon the strong foundation of supply chain design and optimization. This is a major milestone in the history of LLamasoft!

The conference is an annual reunion for me to connect with all the wonderful people I have come to know across my two-decade-long journey in supply chain. There sure were more grey hairs and a wrinkle or a few in some faces. But in every instance, we picked up the conversations where we left off from previous meetups. This event reminds me of how small the world of supply chain is! For me personally, it was by far the best and busiest Gartner event both in terms of the quality and the number of conversations I was able to engage in. There were so many places I could have been at the same time. Perhaps time to have a digital twin of my own!