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Point of View : Supply Chain Business Observability

Why Supply Chain Business Observability –

In the current dynamic environment supply chain is a critical factor for organizational success. Supply Chain performance impacts the financial performance of a company. Many companies have different systems in place to provide visibility into predefined KPI based on historical data.

In 2022 Gartner predicted “Through 2026, 80% of companies will suffer significant value loss due to a failure to merge their digital supply chain twin and control tower initiatives.”1

Gartner mentioned both these strategic and operational initiatives if kept separate neither initiative operates at peak performance.

I started exploring on this and objective of this blog is to share Point of View based on this exploration and initiate discussion.

With Omnichannel commerce and global sourcing supply chain has become complex system of interrelated components with many dependencies and need Realtime action.

Current approach of control tower, Dashboard, monitoring has 2 limitations –

  1. It does not provide real time overall view linked to granular insights to take corrective action critical to the current quick delivery environment.
  2. It does not provide capability to predict and make use of details for strategic purpose.

This limits ability of organizations to derive value. There is a need to think holistically and change thinking from Dashboard and control tower to basics like observability.

Considering Supply Chain business as system and picking up from control theory I see there is a need to start thinking in terms of improving overall observability of a system.

Objective of this blog is not to confuse with additional jargon but to explore its relevance.

Observability is a measure of how well internal states of a system can be inferred from knowledge of its external outputs.

Let me explain with example –

Revenue improvement is a critical goal which is external output. Fill rate improvement is important to achieve this. Fill rate is external output which is the result of input from several functions.  All the functions need to work in tandem to achieve this. Different functions in enterprise have own priorities and create own KPI monitoring solutions as shown below. Things become more complex when multiple vendors are involved –

Individual monitoring in isolation does not provide overall business context and contribution towards business Goals. Operational data gathered does not feed into strategy and scenario planning.

Observability is to think in terms of contribution of component measurements towards business Goal , enable measurement ,collect data from all the internal component sources, manage data and provide actionable insight related to external output.

Components of observability –

  1. Tools or capability to measure everything – Measurement should be automated at source. For example, use of RFID, machine visibility for inventory, use of visual scan for resource availability. Every component of business system needs to be measured. Every event needs to be recorded. Adding efforts for measurement is not sustainable.
  2. Context alignment – Every measurement needs to be aligned to context and domain.
  3. Flexibility – All the components can be realigned based on business context like revenue improvement, cost reduction.
  4. It should be user friendly to visualize aggregate and drill down data.

 

While focusing on data collection these challenges also need to be considered –

  • Data silos – Remove data silos in the functions.
  • Volume and complexity of data – Need of AI/ML tools to handle data.
  • Tools to collect data in Realtime – Need IoT, Machine vision, telemetry tools for data collection.
  • Challenge to get data from multiple parties – Organizational alignment to make data available.
  • Avoid noise from data – Use of AI /ML to remove noise from data.

 

How to move ahead –

  1. Develop goals and business context for observability along with relationship between various points. Involve all stakeholders in the discussion.
  2. Define what need to be measured first. It can be basic as cost, time, qty. Measurement should not only cover what was completed but also what was missed.
  3. Review current measurement available and align same towards business Goal.
  4. Develop plan for tools to include Realtime measurement.
  5. Develop AI model to identify data anomalies and cause effect analysis.
  6. Define User interface to decide how user will interact.
  7. Finalize on Platform like SAP Business Technology Platform to manage components, data, services.
  8. Develop Observability culture.

SAP Business Technology Platform with its ability to provide access to cloud services including machine learning, big data, and Internet of Things (IoT) capabilities.AI/ML and S/4 Hana ecosystem is great way to implement Business observability.2

 

What Organization with observability culture will look like –

C level executives will have a top-down view to see real time strategic Goal achievement with ability to drill down to any underlying problem.

Operational executives across functions will be able to see bottom-up view with individual health of component linked to top level goal.

It provides transparency and predict possible issues and opportunities in cross functional scenario with interdependency.

Availability of this data will help in strategic planning and decision making like entering new markets, new product.

Conclusion

To handle new challenges and maximize value there is a need to focus on observability of business systems It is not just a new jargon, it is a way of building business systems to make supply chain agile, responsive, and proactive.

I would be happy to know your thoughts, feedback, and comments.

Thank you for reading!

 

Vivek Karmarkar

 

References :

  1. https://www.gartner.com/smarterwithgartner/gartner-predicts-the-future-of-supply-chain-technology
  2. https://community.sap.com/topics/business-technology-platform

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