Tuesday, February 18, 2014

Start from the Beginning

What is the cost of major organizational change involving the supply chain? We see this in two major occasions: 

  • When an organization attempts to implement a new lean management process/the Toyota Production System, and 
  • When an organization looks to use data (or "Big Data") to change its processes and supply chain.

These two major changes, when implemented within a larger organization, tend to be very difficult to enact. When people hear "we're going Lean/TPS/Agile"-- often they hear, "you will become obsolete." Similarly, there is an increasing fear that data will take over enterprises. (No, I don't mean Data Takes Over the Enterprise...

I mean that big data, analytics and robots will take over large swaths of employment. However, often data driven supply chains can actually drive employment-- they make the supply chains more efficient, and allow for organizations to maximize profits and hire more people. (Lean/Agile/TPS can do this as well.)

The caveat? That the organization enacts this change well. 

I have seen two models of this: 1) a large corporation which has the ability to use economies of scale and large profits to implement what they want, and 2) a company that does this from the beginning.

For the first model, let's examine companies like Walmart or Target. Walmart is easily able to spend the amount of money required to build the supply chain infrastructure that now drives lower costs due to just in time ordering. Additionally, it has the sway to mandate that its suppliers use RFID tags, which can be costly. In fact, the RFID tags enable huge increases in sales due to a more efficient supply chain, driven strictly by data-- smaller companies may not have the ability to afford this technology, or the operational capacity to integrate it into their operations. In this way, Walmart 

But many companies fail in what Walmart does well: often, data in organizations is an amalgam of different documents, processes, and un-translatable information. Systems from 5 or 10 years ago could inform current processes... but the ability to use that data given the different systems from which it comes, is a huge challenge for organizations with years of changes under its belt. This is an experience found throughout business: 

Source:  http://www.advancedcomputersoftware.com/abs/blog/business-systems-too-much-of-a-good-thing/

So without economies of scale... it seems difficult to use data to drive a supply chain. What about the other option? 

Start from the beginning. A number of companies seem to address the ability to shift to lean processes or data-driven supply chains by doing this from the beginning. The advantage of companies that started in the 'data age' can be huge. Take Redfin for example. Redfin started in 2004, and uses data to inform everything they do: how they pay their agents, their software tools, etc. You see the story repeated throughout multiple start ups regarding Lean operations and data driven supply chains. (Zappos is the perfect example).

Are there companies that aren't huge or just starting out that are successfully shifting their supply chain with data, or moving to lean operations well? 

UPDATE: As a corellary: a company like Walmart didn't just start as big as it is-- at what size does a company reach 'critical mass' in order to begin taking real control of its data?

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