Discussions focusing on supply chain innovation are not always as innovative as they promise, however, recent research and analyses from Gartner has opened the door to a very new conversation. Gartner's latest line of inquiry is providing real insight into a truly disruptive shift: the rise of federated approaches to supply chains. To understand these insights better, EBN spoke with Virginia Howard, Supply Chain Research Director and author of the research.
“High-tech businesses are no longer relying on proprietary product features or service capabilities for competitive advantage,” Howard said. “In an increasingly competitive world, they, and the supply chains that support them, are focusing on orchestrating solutions as a means to create value and support growth.”
Howard offered a number of deeper points contributing to the ongoing shifts along the high-tech supply chain. One core driver of change is organizations' search for profitable growth that will meet their customers' expanding and increasingly customized demands, Howard explained. Her research revealed that corporate leadership has shifted focus to innovation over continuous improvement. In doing so, CEOs are strategically exploring deeper views into the value added capabilities of not only their organization but importantly into the greater value add when supply chain partners collaborate to provide solutions that span their collective capabilities.
The reason these innovative and collaborative solutions are now possible, and hence truly a shift along the supply chain, is due to the maturation of digital business capabilities within and across organizations. As Howard's research shows, once new, the technologies (IT) that were implemented to facilitate digital business are now leveraged to bundle corporate assets with those of partner companies from whom they procure. These collaborative, or federated, solutions are providing much greater value, and seeing increased demand from customers because the sum of the parts is a far more compelling solution than iterative solutions by singleton supply chain partners. As Howard explained:
M&A are traditional methods to incorporate and build, but these [supply chain solution] innovations are trying to integrate across divisions and services. […] Companies are working with partners to deliver differently. Companies aren't so complex and vertically integrated, but can influence and manage a more federated approach to supply chains. Truly, that is where more profitable growth comes from. […] I think about the concept of trust and concepts of alignment around processes. To be able to sync processes and then to look to technologies and think, 'How do I want to do this?'
As discussed, the enabler here are the IT infrastructures and new digital business technologies that have not only promoted internal visibility as well as transparency and visibility in B2B situations, but are now extended to include wider circles, forming what Howard calls the new ecosystems. This is a real shift in how supply chains are organized, moving from a more linear or iterative relationship and flow-down of business events, to a clustering pattern wherein more holistic solutions are developed, strategized, and executed among partners who may be in co-optive relationships, yet come together to realize collective gains.
Managing these ecosystems in and of themselves pose real challenges to solution providers. Anchoring the solution capabilities are the IT advancements that enable companies to move past the traditional corporate silos, as Howard explained, and leverage their co-optive, solution-centric supply chains to provide truly unique value. Furthermore, Howard noted the influence of a deeper shift among today's next generation of supply chain leadership. The current generation of leaders, and those coming up in the ranks, are bringing with them their very different business culture, namely one rooted in the “sharing” or “collaborative economy.” This does pose some internal management tension, because the existing and older generation of supply chain leadership is not as familiar with deeper collaborative endeavors, rather, the older generation came up the ranks under a more “command and control” type of supply chain and intra-organizational structures.
There are many important and insightful facets to Howard's research on the innovations happening along the high-tech, solution-centric supply chain. Understanding the heart of this truly disruptive shift underscores the validity of her analysis and provides a means for reviewing the capacity of companies to succeed along this new growth opportunity. As Howard offered, “the feasibility of [success] is related to high-tech: it's about embracing the technology.” In commenting on the success of these new solution-centric supply chain approaches, she commented, “[For] supply chain leaders, […] it comes from our basis of strength: managing relationships and interactions to create and capture value. Now, we're just doing it a little bit differently. I think we stand poised to do it, it's a question of if we're aligned and if we'll build a network.”
Given the challenges faced by the industry to grow in 2015, Howard's understanding of how and where new growth potentials are being developed ought to spur more organizations to consider a federated approach to supply chain collaboration. Success may now demand that we look seriously at how to leverage existing IT infrastructure investments, align strategically with other supply chain companies, then collaboratively manage expectations and processes to provide real value to customers and to the organization.