Guiding principles for rationalizing supply chain entropy.
Photo credit: AT Kearney
The decentralized nature of outsourced platform innovation demands orchestrators to manage end-to-end value chain entropy. As such, outsourcing convergent platform innovation requires the presence of five elements of success. The ability to see past the day-to-day demands of markets and operations toward a vision of the future; and the development of agile cultural and internal decision making processes are two elements of success. Best-in-class orchestrators systematically execute against a set of guiding principles to check value chain entropy as highlighted in Figure 6. Some of those guiding principles include:
- Common Technology Consolidation—Whenever possible, find multiple uses for standardized technologies, across as many activity areas as possible. Retailers, for example, shouldn’t have five different POS systems just because they operate five different formats. Standardize and simplify everything beginning with component and sub-component specs.
- Cross-Technology Consolidation—The same is true when it comes to vendors. Avoid having multiple vendors working on the same types of technology. Leverage fewer partners with broader capabilities and technology coverage. Conduct up-front due-diligence in assessing and scanning the upstream value chain “technology and capability” market to map your platform technology requirements against your partner and supplier base.
- Propagate System Wide Adoption—Encourage all your partners to mirror your approach and reduce their own supply chain entropy. Seek out those who share your vision for managing complexity and reducing entropy
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Sean Monahan, a partner with A.T. Kearney and based in New York, can be reached at firstname.lastname@example.org. Mark Van Weegen, a partner with A.T. Kearney and based in Atlanta, can be reached at email@example.com. Michael Hu is a consultant with A.T. Kearney and is based in Chicago.