The Move to "Intelligent" Supply Chain Decisions

Earlier this year I spoke with Bob Parker, the vice president of research who leads Manufacturing Insights, an IDC company providing business technology and solutions advice for the manufacturing industry. Parker shared with me the top 10 predictions that his consultancy was forecasting for the manufacturing sector in 2007.

The top prediction for the year was that that companies will need to adopt solutions — or better use the solutions they already have — to help them to make faster, better decisions. Business executives, Parker says, may be satisfied that their current IT systems have allowed them to streamline their processes to a great extent, but they are dissatisfied with the extent to which they are able to make active use of all the data being generated by those systems. "People want to know how they can use all this information to drive better decisions and improve the agility and flexibility that they can build into their decision-making," Parker explained.

Parker and his colleagues believe that while the last wave of business improvement focused on enhancing processes, the next wave will focus on improving decisions. To that end, Manufacturing Insights has done research into ways to build an "intelligent" decision model in the supply chain to link strategic, tactical and operational decision-making. According to this model, at the strategic level, decisions should be directed at the "portfolio" — that is, trading off risks and rewards to ensure that you have the right mix of plants, suppliers and logistics capabilities so that you can maximize profitability but also maintain sufficient resilience in the supply chain to deal with unexpected disruptions.

The choices made at the strategic level form the basis of the policies that guide executive decision-making at the tactical level, where optimization decisions are being made between service levels and costs. For example, at this level, a single enterprise operating different "platforms" — or supply network configurations targeted at different channels, markets or customers — can make the service level/cost tradeoff decisions, based on inventory requirements, necessary to meet the requirements of each platform. These choices, in turn, drive decisions at the operational level, which revolve around maintaining control over the actual execution of activities based on the policies created at the tactical level.

Current enterprise solutions do not fully support this intelligent decision model, Parker says, and the analyst points to the need for the convergence of several different kinds of supply chain and other enterprise solutions into a suite to support the model. "You have advanced planning, factory scheduling, transportation optimization, global trade management and risk management applications in a dense universe of specialty vendors with problem-specific applications — essentially operations research science projects that turned into products and companies." As Parker sees it, the supply chain solutions market today is at the same point where the transactional systems market was in the early 1990s, when software vendors offered discrete general ledger, purchasing and other transaction-focused applications — in the days before integrated, monolithic enterprise resource planning (ERP) suites rolled up these capabilities to handle all of a company's transactional interactions.