Supply Chain innovation article posted on kencogroup.com by Kristi Montgomery. Permission to publish here provided by Greg Boring at Kenco Group.
Innovation is a team effort requiring collaboration and buy-in from all levels within an organization, and it’s especially true when it comes to bringing innovation to the supply chain.
While new and buzzworthy technologies like drones and robotics are consistently being introduced, innovation for the supply chain is truly a continuum of small improvements that make a greater impact – whether it’s improving processes or the overarching business model.
This idea was further confirmed when we held a roundtable discussion with the supply chain industry’s leaders at the 2017 CSCMP Edge Conference. Throughout the discussion, four key themes around innovation were revealed which we’ve compiled into a blueprint below that will help you bring innovation to your organization.
A Blueprint for Successful Supply Chain Innovation
The supply chain is the backbone of a company: strong, flexible and supporting so many parts of the business. But in many ways, they’re also fragile: too much change or pressure and they’ll fracture, with wide-spread impact throughout the organization. Like all parts of business, new technologies, new processes and new ways of thinking will make them stronger, more efficient and more powerful. There’s both an art and science to how we drive innovation in our supply chains and drive it we must.
At CSCMP Edge 2017, Kenco hosted a roundtable of supply chain leaders from companies like Coca-Cola, ChervonTechnologies, Georgia-Pacific, Kids II, and Sealed Air to work through the challenging but critical road ahead. While the discussion was set up to be open-ended, four key themes repeatedly emerged, outlining a blueprint for companies to refer to as they look to drive smart and meaningful supply chain innovation.
Successful supply chain innovation will only happen when the following actions occur within an organization:
1. We stop thinking of “innovation” only as adopting emerging technology…and get the C-Suite thinking this way too
It is so easy to get seduced by the latest buzzword – IoT; drones; driverless trucks. These technologies can and will have a massive impact on our work, but that won’t happen today. The real and meaningful impact will come from the widespread deployment of technologies and processes that have been proven and tested.
Successful supply chain leaders will pilot these bleeding-edge technologies as they get fine-tuned into maturity, and use those case studies to refine our roadmaps – but they will also focus on and celebrate the gains they achieve from process improvements and enhancing current technologies.
Case in Point: 85 percent of supply chain leaders define innovation as “process improvements” or “business model innovation.”
Innovation in Action – The Jel Sert Company Reduces Waste using Half Pallets
According to this Inbound Logistics article, The Jel Sert Company, a manufacturer of fun foods such as Otter Pops, used half pallets to ship mixed products for display in retail stores. They had significant damage and waste in the process resulting in customer complaints. By partnering with CHEP to create a better half pallet and pool the pallets, they eliminated product damage, avoided releasing 100K lbs. of carbon dioxide and reduced waste by 130K lbs.
Your Next Step: Identify a supply chain process improvement or business model innovation that you can unilaterally test and prove within 30-90 days. Use its success as a proof of concept to persuade management for a broader organizational process re-think.
2. We break down silos across the organization. Innovation and success can only happen when there is collaboration with our peers
Open communication across teams breeds innovation – from streamlining processes, identifying new opportunities, and simply creating better ways to accomplish tasks. By breaking down silos to enable idea and information sharing, supply chain leaders can create innovative solutions that not only impact the bottom line but also improve customer communications, leading to better partnerships.
Case in Point: Deloitte’s recent study on supply chain leadership noted that leaders are more likely to collaborate with other company functions than supply chain followers. The “lack of cross-functional decision-making can lead to misalignment of plans and sub-optimal execution.”
Innovation in Action – Walmart Lists their Keys to Successful Supply Chain Management
According to this Cerasis Article, Walmart clearly credits their cooperation and collaboration with suppliers as well as underlying technology that connects all associates and departments for the successful rise to one of Gartner’s top 20 supply chains year after year. They even built and deployed their own satellite system so their facilities and processes would be connected in real time and deliver on their low-price promise.
Your Next Step: Identify areas within your organization that can do away with silos by pinpointing a time where supply chain leaders and other members of the organization such as brand marketers can have a conversation that leads to collaboration. Ultimately, these conversations would drive improvements within companies to have an ongoing dialogue to streamline processes. The goal being a templatized strategy that can be implemented across the organization.
3. We move beyond this fixation on cost: without risk, there is no return
Innovation is an investment for all companies; too often they are so fixated on costs that the process to innovate is halted, including identifying and supporting the teams’ talent to work on the creative process. We’ve heard the adage, “Fail Fast, Fail Cheap.” For companies practicing this, coming up with new ideas will happen sooner, leading to more innovation while requiring fewer iterations as the team will know what worked and what didn’t – saving valuable investment dollars. Ultimately, if the industry is truly being disrupted, innovation needed to happen yesterday to stay ahead of competitors.
Case in Point: Although more than half of Kenco Innovation Survey respondents expect their 3PL partners to invest in innovation on their behalf, a growing number – 32% as of 2017 – are interested in co-investing with partners. The 32% who are interested in co-investing are taking the first step to fostering a more valuable partnership to support innovation that matters most in the supply chain.
Innovation in Action – Kenco delivers innovation in a customer partnership model
In this Inbound Logistics article, Kenco, a leading third-party logistics company, delivers innovation around inventory tracking in partnership with their customer – sharing the risk and cost of a proof of concept three ways with the vendor to quickly prototype a solution in a low-risk, low-cost manner prior to full implementation. Delivering on the full rollout, the risk/reward was structured so that both parties benefit from the implementation.
Your Next Step: For organizations to see innovation grow, we need to help senior management focus less on how much more revenue innovation will generate today and get them to see innovation as a longer-term investment gain. Innovation breeds growth and growth doesn’t come cheap – we need to be taking the risks necessary and know that innovation is worth the investment, and we need to get this across to senior management by changing their perspective today. And we can do that in an effective manner by proving new processes, technology, and business models with small tests that are low risk and inexpensive to any one party. Collaboration between many suppliers and vendors can bring higher reward on innovation.
4. We realize that even Amazon has limitations
It’s impossible to ignore the impact of “the Amazon Effect” – but for supply chain leaders making it their goal to become more like Amazon or a company of similar magnitude, it’s time to rethink this strategy. Amazon’s innovation model, which supposedly has to have 4,500 employees focused on research and development of innovations, is an impressive approach, but it shouldn’t necessarily be your company’s end goal. Instead, we need to realize that Amazon is one model of what a successful, innovative supply chain leader looks like – not necessarily the blueprint and that there are other approaches to become as impactful.
Case in Point: Amazon’s entrance into the supply chain industry reshaped customer expectations on how soon orders should arrive, as well as the way it interacts with customers throughout the delivery process. In order for companies to keep up with Amazon, suppliers quickly realized the need to re-prioritize their supply chain strategy. In fact, 26% of executives say their companies are prioritizing “enhanced customer service” as their primary supply chain strategy. This is more than double the 11% who said so in 2015.
Innovation in Action – Indochino Innovates on Top of Amazon
Indochino, a made-to-measure online men’s clothing company, combined Amazon’s successes in delivery and variety with learnings from traditional brick-and-mortar store failings to shake up the retail industry. With their business model, customers make all purchases online. However, Indochino also has storefronts, but these are only for showcasing styles and working one-on-one with a stylist – customers must make their purchases online, safeguarding Indochino from managing in-store inventory. This model of picking and choosing key learnings shows how a company can innovate on top of Amazon’s approach.
Your Next Step: While not everyone can have the same impact as the “Amazon effect,” we still learn from the company’s innovations. We should analyze why and how Amazon has seen success from its recent innovations and impart those learnings into how we develop our next innovative solution or process. It’s also worth noting that not all innovations will come from Amazon and you may be leading the next big transformation for the industry. Innovation is an industry-wide, team effort. Where we can, we need to be sharing the knowledge gained from our successes, and even failures, to help each other push for innovation in the supply chain.
As supply chain leaders, we have the power to influence and transform the way innovation is developed, nurtured and implemented in our industry. The future of the supply chain is based on collaboration, connectivity and agility, and most important, being resilient. We need to work together to continue bringing innovation throughout the supply chain and ensure that it is fostered by all levels within companies.