Wednesday, April 8, 2020

Disruption Driving Transformation Of The Supply Chain

 
Disruption displaces an existing market or industry to produce something new and more efficient and worthwhile. It is at once destructive and creative. Disruption in the marketplace is driving a transformation of the supply chain into a more efficient and flexible framework that can support the continuous disrupting forces. This transformation of the supply chain is driven not only by reaction to disrupting forces in the marketplace but also from the enabling technologies developing at a breakneck pace.

Historically, supply chain disruption has been described as a major breakdown in production or distribution nodes that comprise a supply chain. This definition of disruption implies an event within the supply chain that interrupts the normal process and flow that must be overcome to return to the pre-event state. However, technologies, especially eCommerce technology, coupled with improvements in network capabilities that are driven by consumer lifestyle demands have redefined disruption into a break that will never return to the pre-disruption normal, the disruption creates a new normal.

NOTE: The COVID-19 disruption is another example of disruption driven by consumer demands, in this case though there are additional disrupting factors that add to the equation. These factors include disruption in the manufacturing capabilities and also, more importantly, business continuity disruption that has highlighted the brittle nature of the pre-COVID-19 extended supply chain.

This process of recovery into a new normal is what makes up innovation and new capabilities for the market. Rather than a recovery to the pre-disruption state, the disruption produces a recognition of a need for innovation and change based on the market demands for innovation in the process. Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing companies. This innovation cycle is now driven by consumer lifestyle demands colliding with the existing market practices creating an innovation cycle. This innovation cycle disrupted the continuous improvement cycled to a continuous innovation cycle and the market leaders recognized and adjusted to the change.

Currently, the waves of innovation in the market are driven by supply chain participants recognizing and developing features and functionality designed to meet customer expectations, partner needs and financial requirements. Supply chain disruption is the repurposing and realigning of existing capabilities to support changing consumer lifestyle demands. Then, just for good measure, the great disruptors add new supply chain capabilities to enhance the innovation.

The best change agents in the extended supply chain implement these features and functionality before the consumer recognizes the need. This drive to experiment based on sensing a market shift that creates the demand for goods and services is the actual driving force of disruptive innovation in the market. Disruptive innovation in the supply chain is a leading influence in remaking the market to meet consumer demands. Consumer demands are being driven at an enormous speed and this velocity of change requires robust tools and practices to react. I believe the supply chain is particularly ready and capable to develop these required tools and capabilities because of the history of disruption within the supply chain.

Shifting demands from all corners of the market—ranging from product and consumer services to supply chain partners—contribute to supply chain disruption and in turn are driving innovation in the supply chain as a reaction. Consumers as the ‘Great Disruptor’ in the marketplace and are driving the supply chain to innovate in capabilities and flexibility in order to react to the disruption. The supply chain innovators are driven by a spirit of experimentation that in turn allows them to innovate in the face of the discontinuous disruption. The best of the innovators incorporate the continuous improvement (PDCA - Plan, Do, Check, Act) practice to support the innovation cycles driven by the disruption.

This transformation will only increase in speed as disruption drives new disruption. We have entered an age of disruptive transformation driven by the demands of the market that is no longer accepting the status quo. In order to survive in the age of disruptive transformation the market partners must also embrace a practice of experimentation based on flexibility.

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