Final thoughts on Gartner’s supply chain conference

“Data is the oil of the 21st century.” So declared Gartner’s Senior Vice President of Research Peter Sondergaard during his keynote. Going through the notes of my conversations and the sessions I attended at last week’s event in Phoenix, it’s an apt analogy. The value of data – and the consequences of not having the right data – was a theme that tied them together.

In fact, I would revise Sondergaard’s quote, and say that data is the shale oil of the 21st century: We’re discovering that there’s more of it out than we ever imagined; its key to making the digital economy hum; and yet, like shale oil, we’re going to need a whole new set of tools, technologies, and processes to extract it from our systems and use it to optimize our supply chains.

Here are a few final thoughts from the conference.

No one knows the true cost of e-commerce fulfillment. As pointed out by Auburn University’s Brian Gibson, a regular contributor to SCMR, e-commerce represents about 7% of the sales of traditional retailers, but it’s driving the majority of their supply chain investments. More importantly, most traditional retailers aren’t making money on e-commerce; most would be happy just to stop the bleeding. What’s the solution? For many retailers, its to push the problem down to their manufacturing partners by having them drop ship e-commerce orders for their products, according to Burt White, vice president, industry supply chains for Chainalytics. The problem, White told me is “getting to the true cost of filling an e-commerce order. No one really has brought together the data to get a true cost of inventory, fulfillment, transportation, and returns processes.” Like Gibson, White says that retailers and manufacturers were more concerned about getting an online presence than making money from e-commerce when it was 7% of their sales. But, now they look forward and see that it’s going to be 30-to-50% of their sales in five years and realize “it’s not a sustainable model.” 

It’s all about the network: So said an executive from Cisco over breakfast one morning. That point was driven home in a presentation on a collaboration initiative at Brown Shoes presented by VP Jeff Kuhn. The initiative was launched five years ago as a call to action as Brown Shoes realized that it was working with old systems with limited visibility into data; it was slow to market; and there was “no new China,” meaning no new emerging market to improve efficiencies. “We discovered that 50% of our factory delays are tied to some kind of problem with raw materials,” Kuhn said. The collaboration platform enables a connected network of tanneries that provide the leather that goes into shoes; suppliers of key components; the contract factories manufacturing the shoes; logistics providers; quality inspectors; and corporate. The goal, a seamless process with visibility into data from design to delivery.

Intelligent fulfillment is coming: The supply chain management software industry has been talking about the convergence of planning and execution for about ten years, since Manhattan Associates acquired Evant back in 2005. Truth be told, however, planning and execution still largely took place in silos. That may be starting to change. JDA’s Prashant Bhatia talked to me about distributed order management (DOM) and the concept of “most profitable to fulfill.” That is the ability of the distributed order management system to analyze the most profitable way to fill an order given all of the potential distribution points and transportation options. “This is in its infancy, but we are taking steps to get there,” Bhatia said. A similar theme was echoed by Satish Kumar and Dinesh Dongre from Softeon , who talked about the convergence of planning and execution. Like JDA and Manhattan, Softeon is also pursuing the “most profitable to fulfill” concept.

The elephant in the room: Digital business may be the future of supply chain management, but the question of how we get there remains, given the Tower Of Babel that is most company’s supply chains. “The elephant in the room is data,” said Michael Schmitt, chief marketing officer for e2open. The challenge, he added, is that most companies today have four or five ERP systems that don’t talk to each other, let alone the disparate systems from their suppliers and customers. “You need normalized data to do the things that are so exciting in our industry,” Schmitt said. “Meanwhile, the average supply chain is fire fighting and struggling to get out orders.”

All of which brings me back to something I wrote the other day: Our industry really is on the cusp of a remarkable future. At the same time, most companies are still investing in technologies to give them a better handle on data about their inventory levels, demand, and warehouse and transportation activities so they can do a better job at forecasting. At the end of the day, warehousing, transportation, and labor aren’t going away.