If you create, manufacture, transport, or distribute a physical product, obsolescence – the end of a product’s shelf life – is a challenge and a constant concern. To the end consumer, obsolescence looks like a ripe banana or yesterday’s jeans. To a manufacturer or a wholesale distributor, obsolescence is invested capital that will be difficult to recover. To a retailer, who has absorbed 100% of the landed costs to get that product to the point of purchase, obsolescence means markdowns. Unless you’re an end consumer looking for a bargain, obsolescence is a common source of stress, and – more than likely – the reason there’s a giant-sized bottle of Tums on your desk.
Does Information Spoil?
While the impacts of product obsolescence have been well documented over the years, we rarely discuss the impact of old, obsolete or even spoiled information: information or data that is no longer actionable or negatively affects outcomes as a result of being out of date. As the supply chain continues to compress, the importance of timely information in the hands of vested stakeholders will continue to grow at an exponential rate. Imagine if – unbeknownst to you and your next Uber driver – the routing information you were accessing was 1 hour behind?. What about the financial markets? What if brokers only had access to yesterday’s information when making large, complex trades. While dated or spoiled information is unacceptable in many sectors of our economy, it remains sadly commonplace in supply chain.
Wilhjelm Says... |
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| It's easy to see how providing fresh and timely information to vested stakeholders in a proactive manner can positively affect supply chain performance for all parties involved. |
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Trading Inventory for Information
In the late 1990s, a common battle cry of supply chain practitioners was to “trade inventory for information” as information was infinitely cheaper. We’ve all heard conference presentations about Airbnb and Uber and how they are leading their respective categories while owning no inventory. The assumption has been that traditional supply chain can’t be far behind. While I see vast improvements on the horizon, I believe we a far from the holy grail of “trading inventory for information.” AI and machine learning hold great promise, but are probably years away from scaling across the industry. So what is a practitioner to do in the meantime?
Not In Our House
Does information spoil in your enterprise? Does it get to the right stakeholders – internal and external – in time to affect behavioral change and improve performance? Or does the information reside in the core execution system of a siloed department only to be accessed on an ad-hoc basis or in response to a “fire drill”? Ask yourself if the speed of your information is faster than the speed of your inventory flow? If the accurate information is outpacing the flow of goods, then you can make proactive decisions that improve performance. If not, then your enterprise is forced to react to incoming shipments. Consider the following examples:
- Do ASNs (advance ship notices) show up before or after the physical shipments arrives? ASNs arriving after the receipt occurs more often than you think, particular on the west coast where vendors and retailers are geographically close.
- Do your suppliers learn of their mistakes the morning after they occur so future shipments can be corrected immediately, or do they turn up 6 months after an audit?
- Do your customers discover short shipments by automated notification or by opening the carton?
- Do your vendors get monthly scorecards highlighting their areas of supply chain excellence and opportunity, or are they just getting recurring chargebacks?
It's easy to see how providing fresh and timely information to vested stakeholders in a proactive manner can positively affect supply chain performance for all parties involved.
The Future
I attended three major supply chain conferences in 2018: CSCMP, RILA, and RVCF. My big takeaway from these experiences is that the future of supply chain will be more data and information driven than ever before. It’s not that information will replace inventory in the near future: rather accurate, timely information will reduce variability and improve overall operation performance like never before. Let us just say, it’s an exciting time to be in supply chain.
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