A rebirth of supply chain management
This blog was published on LinkedIn on June 19, 2018. The LinkedIn article contains all relevant links.
Yesterday the grand title “The death of supply chain management”[1] triggered my thinking, as it must have worried many that are currently working in some supply chain role. Re-reading the controversial blog on HBR a few more times, I first concluded that the title did not match the content (which is much more about a new era for the supply chain as increased algorithms and visibility come into play) but later realized that the perspective that is being sketched is different from what I think is happening. And current and past research on supply chain operations planning can help us better judge this.
Supply chain planners have decisional, informational and interpersonal roles
First, it is important to be aware how most supply chain planners are spending their time. Since many decision support tools (including Microsoft Excel as the most used tool for planning) have entered into the market over the past twenty years, the way a planner spends her time has more and more moved away from actually making decisions (their decisional role) to other key aspects of the planning role. These other aspects can be classified into two main categories [2]. The first one is informational. The informational role is about collecting relevant information that typically is not present in an ERP system. This could pertain to soft or ambiguous information (a promotion being in the pipeline but not yet decided upon, an estimate of the chance of winning a large tender, or a carnival week coming at a major supplier likely causing disruptions in supply), or simply data that are currently not linked or not visible. The second role is an interpersonal role. For instance, if a product is short on supply, a good planner will be able to call his “friends” elsewhere in the operation to speed matters up. Technically this implies that the lead-time parameter in the system may – sometimes but not too often – be expedited. Of course, this favor is kept in a mental account of the supplier’s planner. The supplier’s planner will expect this favor at some point to be returned. The interpersonal and informational roles start to overlap when others in the organization consult the planner on getting to know information about something that is not (yet) in the system. The planner usually knows best among his organization’s peers. And earlier work by my former colleague Ton de Kok has shown that even between the most advanced algorithms and the actual performance reached by planners, there is a gap – usually demonstrating the added value of the human planner in modifying the real supply chain beyond what a model can do. We have also done some work in a retail environment showing this added value of the human decision maker compared to state-of-the-art models [3]. For sure, there are many situations in which an algorithm may outperform a human, and our understanding of this is developing gradually.
Supply chain planners spend most of their time collecting, verifying, and disseminating information
As our research [4] and those of others have shown, planners spend (or “waste”- depending on the perspective) more than half of their time on the informational role. Typically they spend less than 25% (and a much lower number in manufacturing supply chains) on the decisional role: actually deciding on the plan, schedule, or replenishment. The AI impact is often presumed to have an impact on this decisional role. I would contest this for a variety of reasons not elaborated on here. The potential of big data and AI is actually in impacting the efficiency of the planner in the time she wastes on the informational role.
Interestingly, in the HBR blog, many examples refer to control towers and real-time information. In most supply chains real-time information is too late, as the information is in almost all cases only useful ahead of time when it is still possible to do something with this information. However, having more information readily available, well-searchable, and visualized in an intuitive way, brings great opportunities to increase the efficiency of the planning process. Not by eliminating the planners’ decisions, but by reducing the time they waste on collecting information.
This line of thinking is much less sexy than having all decision makers replaced by robots as is suggested by many. But currently replacing people by robots just leads to what I heard from a major global CPG manufacturer supplying to a European retailer that took its hands off the wheel. The CPG manufacturer now needs to monitor all orders to take out the “crazy” ones, call (!) their client to double check these orders, and then manually reset everything in the supply chain. This really would be the death of supply chain management.
[1] Allan Lyall, Pierre Mercier, and Stefan Gstettner (2018) The Death of Supply Chain Management, HBR blog, June 15.
[2] The actual classification of roles is more extensive, as planners typically also do maintenance tasks of master data and ensure the plan or schedule gets executed, but for the sake of simplicity I have grouped these under informational and interpersonal roles. If you are interested, read the early work by Sarah Jackson: Jackson, S., Wilson, J. R., & MacCarthy, B. L. (2004). A new model of scheduling in manufacturing: Tasks, roles, and monitoring. Human factors, 46(3), 533-550. This early work has been done in manufacturing settings, but much of these also apply to inventory planners in retail and transport planners.
[3] Van Donselaar, K. H., Gaur, V., Van Woensel, T., Broekmeulen, R. A., & Fransoo, J. C. (2010). Ordering behavior in retail stores and implications for automated replenishment. Management Science, 56(5), 766-784.
[4] Larco, J. A., Fransoo, J. C., & Wiers, V. C. S. (2018). Scheduling the scheduling task: a time-management perspective on scheduling. Cognition, Technology & Work, 20(1), 1-10.
This blog was published on LinkedIn on June 19, 2018. The LinkedIn article contains all relevant links.