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Supply "Chains"... Italian Style!!!

October 7, 2018

 

Why European Managers Have a Leg up On Us in Supply Chain Management

 

Beginning in late 2016, a shift was taking place in Europe. Organized by an Italian think tank, 25 to 50 Supply System managers of the leading fashion and luxury brands from Europe, Italy and the UK, began meeting every 3 to 4 months in Milan, Italy and exchanging insights on how the process and priorities of supply, and with this their roles, were changing. Today, they see themselves as part of a bigger picture, strategic planners and product development partners with suppliers and retailers...from upstream to downstream, end-to-end... and that this requires a new mode of thinking with a different set of values and a new language to accommodate it.

 

In such a milieu, the very use of a metaphor such as, "Supply Chains are only as strong as their weakest link" is passé… and counter-productive. "Supply Chain" is becoming an inaccurate description of the process of sourcing, supply and product development. It conjures up images of a series of linear activities supported by rigid dependent parts (links) each of which, unless there is a breakdown, are relatively unknown to the whole in which they perform and then requiring damage control.  This is no longer the reality of visionary supply managers. "Systems" thinking has arrived.

 

Systems thinking has been accelerated by Artificial Intelligence (AI) Machine Learning (ML) and Digital Twin (DT) imagining & modeling. Here suppliers become components in an interdependent system and their behavior is regulated by the software in the system. When a problem occurs,  corrective action is not only taken in real-time, where needed, but stored and enhanced by machine learning and made visible to all the partners in the system through enterprise-wide digital image-telling as to how the problem arose, how it was resolved and how to avoid it in the future...and, given that we are becoming more  a culture  driven by pictures and images rather than by words, it's all viewable  in a highly engaging animation!

 

To begin this cultural transformation, the first step is a commitment to collaboration... first among "competitors" as with these supply managers who meet in Milan exchanging insights, and then within the clusters of specialized suppliers. The efficiency and visibility of solutions within the system will even the playing field...execution not information will become the key competitive differentiator within competitive sets. In this world, innovation will focus on the former rather than on the latter. Finally, there will be collaboration between brand owners and suppliers. Suppliers must become partners rather than simply low-cost providers in bidding wars. The relationship with brand owners will go beyond contractual to relational as brand owners will commit to helping supplier partners grow. Trust will become the operative norm as vendor managed inventory and forecasting and replenishment cooperation will naturally evolve.

 

Secondly, managers in the system have to become adept at brand storytelling. These include branding the system. Ingredient branding (especially for unique value suppliers) which may include ecosystems and sustainability values and provenance branding of country or perhaps region of origin and locales, if supply managers can make a business case that these add consumer value to the product outcome.  Here transparency plays a key role by highlighting the elements that justify the price at retail and by laying the foundation for brand loyalty by fostering brand bonding at the earliest stage of the consumer's purchasing journey.

 

In 2018/2019, the Italian think tank is continuing to organize and facilitate the evolution of this revolution in the product development process...end-to-end. If we're not doing this, we should be... We need to replicate this in the USA!

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