There has been much talk about Industry 4.0, of how digitalisation is a critical element for the evolution of traditional supply chain. As the industry moves into a ‘smart factory’, we see the adoption of Big Data, AI, Internet of Things (IoT) and a host of other technologies on the rise, to a point that digitisation has become synonymous with new-age technology. However, is it sufficient for supply chain to purely catch up with innovative new digital initiatives? Or is there more than meets the eye in our increasingly complex and global environment?
What we are seeing in the supply chain realm is a convergence and maturation of a variety of technologies and processes. At the science-based company, 3M sees technology as a stabiliser rather than a risk. We adopt a coming-of-age technology, but that does not mean we abandon current supply chain practices. To close the gap between what supply chain provides and what the company needs, 3M – routinely ranked amongst the world’s most innovative companies – adopts a bimodal efficient growth model.
The 3M Approach: Bimodal ‘Efficient Growth’
A bimodal approach, as the name suggests, is made up of two modes. Mode 1 centres on the delivery of well-established supply chain where factors such as productivity, security, and reliability take priority. This mode leverages on established and empirically proven but incremental approaches. Mode 2, on the other hand, explores new and potentially transformative but unproven approaches. This mode involves exploring new markets, new processes and new technologies such as AI, machine learning, and IoT.
Being bimodal requires the ability to integrate and complement the two modes rather than compartmentalising the two. The main challenge for organisations looking to go bimodal is how to integrate the two seemingly disparate modes together.
Here’s how 3M defines the bimodal approach. To fulfil efficient growth, mode 1 serves to deliver cost savings to customers and shareholders. Mode 2 then builds on mode 1 to further fuel the growth via breakthrough innovations.
Undergirding the bimodal approach are three key elements to fuel 3M’s efficient growth strategy. Reminiscent of mode 1, the first key element is to harmonise global processes to deliver world-class productivity, working-capital management, and asset utilisation. The second key element, which bears resemblance to mode 2, involves accelerating disruptive technologies to deliver even higher quality, lower cost, and more innovative products to customers. The last key element, involving the synthesis of mode 1 and mode 2, is where 3M regionalises its supply chains to reduce complexity, amplify operational impact, enhance customer service and build high-performing talent.
3M re-inventing supply chain practices
Beyond digitisation, 3M has also adopted new practices in the face of disruption. Today, many companies are using the Integrated Business Process (IBP) to drive longer-term demand and financial planning/forecast but at 3M, we are investing in business transformation. We see a need to move beyond IBP and Global Demand Planning in the supply chain arena as companies continually re-invent themselves.
Out with IBP, In with Business Transformation
To champion forward-thinking supply chain practices in 2018, 3M sees business transformation (BT) key to its operational efficiency and productivity. Defined as changes in processes and internal/ external service delivery, BT allows 3M to move to more efficient business so as to serve customers with greater speed and efficiency.
Starting and ending with our customers; BT is a network of mutually reinforcing systems, processes, and organizational structures. Within BT, supply chain is interwoven into each of these components. At 3M, we deploy a common systems backbone that provides end-to-end visibility so as to simplify and accelerate decision making.
Through BT, 3M seeks to increase trust across all the internal information handoff points. This is applicable to not just the supply chain teams – production and logistics – but also finance, sales, and marketing and other groups as well. In addition, the information hand-offs encompass different planning horizons such as daily plant scheduling /functional tier review, weekly production planning, monthly integrated business planning, quarterly communication with financial stakeholders as well as longer-term strategic and capital planning.
Leveraging on a Geometric Network
Traditionally, the supply chain is dependent on global demand planning for strategic asset investment ahead of demand and utilization for cost competitiveness. Digital tools such as a Demand-driven Value Network Planning (DDVN) work on a broad-spectrum supply chain process to anticipate demand and source so as to deliver materials in a more efficient manner. The ‘just-in-time’ inventory is one feature of global demand planning. However, this traditional method of baselining future demand on historical data no longer offers a competitive edge.
Reality is now more complex than placing inventory as close to the point of consumption as possible. It is not just about getting the goods to the customers quickly, but also to respond to them faster so that the end consumers will benefit the most. As such, 3M is trying to establish a ‘geometric network’ as opposed to a linear supply chain through digitisation.
A geometric network offers several benefits. Firstly, digital systems facilitate direct communication between 3M and the suppliers which make the two-way demand chain transparent. More importantly, a geometric network helps secure and protect supply even when unexpected demand occurs. As a whole, a geometric network has proven a statistical track record in establishing trust between suppliers and 3M, as well as 3M and its customers. Lastly, supplier collaboration and sustainability can potentially drive innovation and growth in top supply chains even though only 43 per cent of suppliers feel fully empowered to collaborate with their partners.
Industry 4.0 does not mean abandoning current supply chain practices
In 2018, supply chains have to be innovated to remain successful. To create digitised supply chains, supply chains should traverse both modes to achieve growth, efficiency, operational improvements, innovation and cost management. The key to this practice lies in creating a bimodal supply chain based on reliability and agility