“Dynamic Value Networks”

The logistics industry continues to rapidly evolve, yet the terms being used are anachronistic. The rapid advance of technology, new models of production and continuous disruption require new definitions on where the industry is and where it should be striving to go.

Throughout history, the art of logistics has focused on the optimal movement of product or supplies between two points. The military supply lines of Alexander the Great, Napoleon, in World War II or the first Gulf War had a direct impact on victory or defeat. The industrial economy further refined logistics as an essential tool to support raw materials to manufacturing plants and finished goods to the consumer. Yet today, we need to ensure alignment as to where our industry is and where it needs to be. The visionary companies are already defining the solutions and creating new business models and we need to establish and agree on the new parameters. A truck driver plays an important role in the last mile delivery of product. If the trucker paints his vehicle with the words total logistics or supply chain management services the definition is not aligned with the reality. Our industry is rapidly evolving from logistics to the future goal of creating “Dynamic Value Networks”. The chart below provides a brief overview.

Traditional Logistics is the optimal movement of product between points and may combine shipping, airfreight, trucking, warehousing and freight forwarding. Different technologies are usually deployed across these services. It is the foundation.

Total Logistics combines these activities under an integrated visibility platform, which enables a more efficient movement of products and a more impactful management in the logistics process. A global freight forwarder would be a good example where they can integrate the various product movements and documentation into a more seamless and efficient process. Yet there are still many independent service providers across that network, with different systems and levels of visibility.

Supply Chain Management dynamically integrates all of the contiguous activities into a chain of activities separate but linked. The visibility and activity extends to raw material feeding into the factories, establishing minimum order quantities, determining consumer demand requirements, optimal production runs, financial flow issues (including labor costs and foreign currency risk), optimising the movement of product across the chain with integrated visibility and forecasting tools and determining the ideal release of product to satisfy consumer demand. It is a push factor. While the SCM model continues to improve with technology and human knowledge, it is already an outdated model from the past. Product should not be pushed to a consumer it should be pulled. The system frequently relies on powerful ERP systems for the manufacturing process linked to logistics and financial software, providing powerful visibility reports to manage processes.

Demand Chain Management takes all of the implied efficiencies from the SCM model and further refines it to anticipate the demand of the customer with stock available and to automatically replenish the product on a just-in-time mode. When a consumer takes a product off the shelf, it should automatically trigger replenishment. It is a pull model and further enhances consumer satisfaction and reliability. McDonald’s resupplies every restaurant in it’s network every 24 hours. As sales are taken at the register, the system already cross aggregates with other orders and triggers a re-supply. When product is taken off the shelf in a Walmart Store it automatically triggers replenishment.

Dynamic Value Networks is the model of the future that some innovative companies are already moving towards. The software platforms are designed to be integrated and adaptable with plug and play capabilities so if new technology breaks-out it can be rapidly integrated. The visibility platform and processes leverage the full power of Artificial Intelligence, predictive tools that extend into social media and across the internet, the Internet of Things and the Internet of Everything and maximum deployment of robotics where feasible. It combines fixed and virtual manufacturing centers, fixed and virtual warehouse space (that can be turned on and off rapidly). The chains are eliminated and are replaced with dynamic flows of product, inventory, capital and information each designed to unlock value across the network. The entire manufacturing and distribution center infrastructure is dynamic and constantly changeable. It will be further enhanced by partnering with or absorbing small “razor blade” tech start-ups who are constantly driving disruption along with new Blockchain technologies. Apple, Amazon and Alibaba are great examples of companies moving from demand chain into the early stages of the “Dynamic Value Networks” model. Social media and internet demographics provide more accurate detail on consumer demand by product and retail zone. AI provides more efficient predictive forecasting tools. Manufacturing is already virtual. Virtual Reality Tools for product design and the consumer shopping experience are already being tested and enhanced with holography. There are different types of companies, products and definitions in the “DVN” model and we are just at the early stage. It is a space where only a few companies have dared to enter, but where the future will be defined!

Summary

If a company is in logistics and claims that they are in supply chain management, there is a misalignment. If a company strives to become a leader in supply chain management in the future as an aspirational goal, they are already far behind. In order for a company to survive and prosper during the next decade they should already be efficient in SCM and moving rapidly into DCM, while already testing a few components of the DVN model. The companies that are already entering the early stage of the “Dynamic Value Network” model will have the greatest opportunity to be leaders in the future. Thousands of entrepreneurial tech start-ups will be attacking every aspect of the supply chain and logistics process. They will be unconstrained and narrowly focused. Many will not succeed but many others will. These entrepreneurial “razor blades” can do enormous damage to large companies that are in the comfort zone. Complex ERP legacy computer platforms that will make it difficult to plug and play with new technologies will also create less manoeuvrability. Understand the definitions of our industry from the past, present and future. Embrace the opportunities to explore and creatively leverage the “Dynamic Value Networks” that will redefine our industry and shape the next generation of leaders.