Bebo, hi5, Facebook, Linkedin, MySpace,Orkut, Socialcast, Twitter.... The names go on and on.  And, the impact becomes more and more evident, and important!

 

For most supply chain leaders that are not in the mainstream of this evolution, it may seem like noise; but for the astute, they will realize that there is a revolution going on.  Supply chain leaders need to care about the evolution of social media, because it is becoming social commerce; and it will redefine supply chain management.

 

Five Reasons to Care

 

While there are many reasons to care, five quickly rise to the forefront for me:

 

It will shift power. 

The power is shifting in consumer supply chains from the supplier to the retailer to the consumer.  Media reach has defined the power structure.  As this shifts, the relationships in the consumer value chain will shift with more focus on reaching the shopper where they shop. POP (Point of Presence through GPS mapping) +POS (Point of Sale) will redefine how we go to market.

 

Understand what your TRUE customer thinks.

Last week, the Nestle Facebook site was attacked by the Greenpeace movement.  Little did United know that damaging a guitar would cause so much havoc. PriceRitePhoto is no longer in business.  Increasingly, companies will build systems to sense true customer sentiment and harness the power of loyal customers. This horizontal process of customer sensing will be tied to warranty management, returns and new marketing programs.

 

Improve demand shaping. 

Best Buy is a leader.  They know that 90% of their customers start their shopping experience on-line. They have tied their loyalty programs to their on-line applications and enable the purchase of the item in their store through their iPhone application. Over 600,000 customers have downloaded the best Buy iPhone application in six months.  This allows them to send these customers tailored offers and to have an in-store experience with the users of their mobile application.  Coming soon is guided shopping in the store with customized offers, cross store price and inventory checking. This will increase the need for immediacy and accuracy of inventory data.

 

Redesign open design networks.

It is proven that companies that use outside-in innovation techniques have faster time to market and increase market share.  Open design networks powered by social media have the power to connect real time with customers that matter on the design and launch of products.  Social networks and private hosted communities through technologies like Lithium and Jive can make this happen.

 

Flatten supply chain organizations.

It is called Open Leadership (read the new book by colleague and friend, Charlene Li). It is the ability to use social media techniques to reach organizations in a new way.  It improves collaboration and can help shape global programs for Supply Chain Centers of Excellence. Try it, you may like it!

 

These are my five starting reasons (written late at night by a jet-lagged traveler in India).  What do you think?  How do you think social media can shape supply chain management? Do you think people should care?

Yes, we got what we asked for. Efficient supply chains that snap and break under stress.

 

Recently, I had a fascinating dinner with two wonderful thought leaders.  I sat between John Hagel (@jhagel on twitter), and Valdis Krebs (@orgnet on twitter). John is finishing his book From Push to Pull (http://http://www.johnhagel.com/view20051015.shtml) and Valdis has spent his life researching networks (all kind of networks from terrorist cells to the networks of nature).  Over great seafood in Austin, we discussed what nature teaches us about networks. Networks with the greatest resilience -- ability to stand the test of time-- are not the most efficient. In fact the least resilient networks in nature are the MOST efficient.  Instead, the most resilient networks have two characteristics:

 

  • Redundancy:  In nature, the networks that last over the generations are those that have the right amount of redundancy.  Excess capacity, extra nodes, and bypass routes.  The efficient network with minimal capacity, node-to-node connections, and no parallel routes fail.  This is especially true in push environments.
  • Dynamic reconfiguration:  Likewise, in nature, the networks that stand the test of time have the ability to reconfigure under stress.  Networks with the most centrality have the greatest failure rate.

 

I used to install supply chain planning software.  I was always amazed that when I asked a client to define an objective function for an optimization program that they struggled for an answer. They were not sure what good looks like.  However, when I asked if the output needed to be efficiency, they would always nodd their head.  In fact, ask anyone if they want an efficient network--especially a financial controller--and you will get a rousing YES!!!  But, ask if they want a network that will snap and break under stress and you will probably get an emphatic NO.

 

The problem is that most companies do not realize that they have designed networks that are not resilent until it is too late. Yep, you got it.  We designed supply chain networks with the wrong goal. We defined supply chain excellence as a set of efficient networks with a high level of centrality and little redundancy.  It is time to consult mother nature, because she got it right. I am afraid that most have gotten it sadly wrong.

 

 

 

SNAP, CRACKLE. POP.

No worries.  It is probably an efficient supply chain network breaking somewhere. It will happen frequently as the recession rebounds out of recovery.

This is our dilemma.  Enterprise Resource Planning (ERP) and Advanced Planning Systems (APS) were installed with efficiency as their goal.  Too few companies have designed redundancy, and less than 1% have dynamic reconfiguration capabilities.  It will make for great stories on the Wall Street Journal because it is time to listen to Mother Nature.

 

 

What do you think that we need to do to redirect the course and change the tides?

 

Check out my other blog posts at www.supplychainshaman.com.

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