The Supply Chain Challenge Never Ends

I spent an extremely entertaining and informative day with Kinaxis at their user conference last month, and it struck me how much supply chain management seems to be stuck in the past, even as it increasingly occupies one of the hottest of hot seats in the corporate world, and even as companies like Kinaxis strive to bring the supply chain into the future.

And if you don’t think supply chain management is in the hot seat, ask the world’s disk drive makers about what’s happening in Thailand, or the Japanese automotive manufacturers about what happened with this year’s earthquake and tsunami. Or Boeing and their many delays and problems getting the Dreamliner out the door. In the globally interconnected economy, it’s the supply chain that rules.

Not that Kinaxis is guilty of living in the past – though it’s been decades since I heard a vendor talk about the virtues of a hierarchical database. Au contraire. It’s the rest of the supply chain market that seems to be relying on older business and technology models, to the detriment of the big enterprise software companies and to the benefit of best of breed vendors like Kinaxis.

This living in the past problem was evident at multiple points during the day, most obviously when it came time for Kinaxis’ customers to stand up and tell their stories. As is common at a best of breed vendor show, the customer stories were replete with references to the SAP and Oracle software that these customers still use, even though the core strategic supply chain functionality they were touting that day belonged to Kinaxis.

What every user story boiled down to was the following formula: my company still uses [insert big enterprise suite], but for this core function [insert S&OP,  demand-driven planning, outsourced supplier management, advanced supply chain analytics], we’re going with Kinaxis.

And every justification for going with Kinaxis contained a similar formula.  While [insert big enterprise suite] is still my system of record, it’s too [slow, ignorant of how to manage outsourced supplier, not good enough for S&OP] and we couldn’t wait around for them to [add the functionality I need, make it cost effective, make their user experience more user-friendly, put the resources into my company to make sure my needs are being met].  And so Kinaxis’ supply chain best of breed story goes.

What’s amazing about these stories to me is that I heard a similar set of stories – including some of the same customers and suite vendors – when I attended an E2open conference three years ago. And when I toured Silicon Valley’s top manufacturers in 2005 as part of a supply chain research project, stories such as these were the order of the day at every company I visited. In a recent visit to E2open, one of its executives reminisced about discussing these issues when he was Oracle in 2000.

What’s up with that?

Part of the problem is clearly the rapidity with which business models are changing.  And the breadth of what constitutes supply chain management keeps shifting as more stakeholders become involved and more data becomes available to do more complex analysis and build more comprehensive supply chain plans.

Even new product introductions are changing: One of Kinaxis’ customers is Barnes and Noble, which introduced its Nook reader in 2009 to great fanfare. There were two problems with this NPI for Barnes and Noble: the first was that the company is a novice at manufacturing supply chains, being a book distributor doesn’t really prepare a company to be a consumer product manufacturer. The second, most importantly, was that the Nook is part of an entirely new wave of tablets tied to a retail distribution company, not a traditional consumer electronics company: how could Barnes and Noble do supply chain planning the old, rear-view-mirror way when there is little or no comparable product on which to base a demand plan for the Nook?

So Barnes and Noble signed up for a new point-of-sale-based, demand-driven supply chain run by  Kinaxis software. Turns out this is a bit of a gamble, as Kinaxis has never tried to wire up over 10,000 POS systems, and Kinaxis’ pricing structure for its software wasn’t designed for this volume of end points either (let’s just say at list price, 10,000 POS systems would have made this one of the most expensive supply chain management implementations ever – safe to say Kinaxis and Barnes and Noble managed to come to an agreement on a more reasonable price.)

The other reason the supply chain management status quo seems stuck in the past is that really transformative supply chain management is as much a business process journey as it is a software journey. That’s hard, very hard, and even harder in companies that don’t understand how strategic their supply chain needs to be. In my wanderings about the supply chain world I have often been amazed at how good enough keeps being good enough, despite the fact that at a corporate competition level good enough is usually the domain of losers and also rans. This fact alone often relegates true supply chain transformation to those renegades and rogues that dare think out of the box. And lucky for them, there’s products like Kinaxis RapidResponse that allows these transformers to do their thing and still keep the big ERP suite advocates in their jobs too.

The good enough syndrome turns out to be a major conundrum for any big enterprise software vendor. Becoming an entrenched interest at a customer site often leads to – or is a leading indicator of – a good enough mentality that helps maintain incumbency at the cost of innovation. This makes it hard for the SAPs and Oracles of the world to be identified as the innovators among their core, entrenched user communities, and it makes it easy for a Kinaxis to appeal to those who don’t mind upsetting the good enough, entrenched thinkers and driving a little innovation into the enterprise.

One more comment about Kinaxis that bears mentioning: their user conference was downright fun, and they managed more than once to make supply chain leadership funny. Yes, as in LOL funny. Hats off to Bill Dubois in particular for playing the role of talk show host and stand up (really sit-down) comic so well that I had to wonder why he ever left Broadway or whatever the Canadian equivalent would be to become the Pied Piper of supply chain geekdom. Okay, maybe I’m impressed for the wrong reasons, but a company that is comfortable enough with its products and customers to make it fun and funny has a lot going for it. That was a best of breed show if I ever saw one.



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