CSCMP's Supply Chain Quarterly
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November 18, 2018
Strategy

A blueprint for successful supply chain innovation

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How can you foster innovation within the supply chain? The four principles put forth in this article can provide a foundation for implementing new ideas in a way that is successful and can be replicated across the business.

The rapid pace of technological advancement and adoption means that innovation is taking place all around us, from the way we communicate to how we get around cities—even to how we shop for groceries. In particular, the supply chain is ripe for innovation. Indeed, it's a focus area for many companies to help them do business more quickly and efficiently—particularly as emerging pressures, like the demand for e-commerce, force them to rethink their current models.

However, any change to the supply chain requires a certain degree of due diligence. Because the supply chain is in many ways the backbone of a company, any major change can have a widespread impact throughout the organization. Consequently, the expectations of innovation in the supply chain are high, but full deployment of new technologies and processes are necessarily slower, as organizations take their time to weigh the impact.

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[Figure 1] A blueprint for successful supply chain innovation
[Figure 1] A blueprint for successful supply chain innovation Enlarge this image

So, what does it take to bring innovation to the supply chain so that it's successful and can be replicated across businesses? At the Council of Supply Chain Management Professionals' (CSCMP) EDGE 2017 Conference, supply chain leaders from companies like Coca-Cola, Chervon Technologies, Georgia-Pacific, Kids II, and Sealed Air gathered to discuss the drivers and roadblocks around supply chain innovation in their organizations. Ultimately, four key themes arose from the discussion. (See Figure 1.) These themes, or general principles, can serve as a "blueprint" for companies to follow in order to thoughtfully but successfully drive innovation in their supply chains:

  1. Stop thinking of innovation only as adopting emerging technology.
  2. Break down silos across the organization to foster collaboration amongst peers
  3. Make an investment in innovation—without some risks, companies won't see returns.
  4. Learn from Amazon, but don't try to be it.

For each theme, there are practices you can implement today to help push the innovation needle within organizations.

More than emerging technology

Emerging technologies such as the Internet of Things, drones, driverless trucks, and robotics all suggest endless possibilities for innovation—particularly to members of the C-suite. But it's important to recognize that while these technologies will have a massive impact on the supply chain, the changes won't happen today—or even the immediate future. Indeed for most companies, "innovation" means altering existing processes or the current business model to improve the company's bottom line. In fact, 85 percent of supply chain leaders defined innovation as "process improvements" or "business model innovation."1

Business leaders need to remember that definition as they think about what innovation can mean to their supply chain. Innovation is more than technology buzzwords; it's a continuum of improvements and goals that advance the business to the next level. Some of those goals can certainly include adopting and implementing an emerging technology like wearables, but "adopting emerging technology" shouldn't be the singular innovation goal of the organization.

While companies shouldn't ignore the ever-changing technology landscape, there are many smaller opportunities for companies to innovate that can be as impactful to the business. For example, Kenco Innovation Labs pursued one such smaller innovation idea when it created LoadProof, a photo app for smart devices that allows managers to record the condition of shipments to improve compliance and reduce costs. While the solution seems simple, it helps to solve a major challenge that many of Kenco's customers were having with retail chargebacks. The app was prototyped and launched as a 90-day pilot program that produced results, which led to a wider implementation in over 35 facilities.

To get started finding your next innovation opportunity, identify a supply chain process improvement or business model innovation that can be unilaterally tested and proved within 30 to 90 days. The success of this test can be used as a proof of concept to persuade management to rethink broader organizational processes. It's up to those of us within the supply chain to identify these opportunities and show how smaller improvements over time can have a big impact on the business overall.

Break down barriers

Too often, organizations fall into the bad habit of communicating ideas or process improvements solely within their core groups, creating silos that inhibit collaboration. If your organization is operating in a siloed environment, it's time to break down those barriers to enable idea and information sharing that will improve customer communications and ultimately, create better partnerships.

Opening up communications across teams can breed innovation in many ways including streamlining processes, identifying business challenges that can be better solved cross-functionally, and creating better ways to accomplish tasks.

Nevertheless as you work to bring corporate innovation to the forefront, there will be some barriers to overcome. While you may have the freedom to investigate new technologies or solutions to address a customer challenge at hand, and perhaps even develop a prototype, the biggest hurdle is securing buy-in from management. This includes the information technology (IT) department and senior leadership. However, buy-in can come more easily if there is customer support; working closely with the customer to build the prototype can allow for earlier discussions with the IT team or senior management enabling earlier input from all parties. This way, the end prototype becomes a collaborative effort that each party will see value in launching on a greater scale. Connecting to the necessary leaders within your organization early in the innovation process will help the innovation not only happen more successfully but also secure full support from the business from start to finish.

Take risks

Innovation is an investment that takes time, money, and talent. As with all investments, innovation involves some amount of risk and, often, the greater the risk, the greater the return. In order for innovation to be successful in the supply chain, we all need to move beyond the fixation on cost and instead focus on the reward opportunities for both for the supply chain and for customers.

Most supply chain innovation involves two or more parties working together—either inside or outside the four walls of the organizations. As with all partnerships, an innovation partnership needs to be equally valuable and rewarding for all parties involved. Ideally, a true trusted innovation partnership will require both parties to be equally invested. These investments will push innovation projects to the next level, while holding all accountable to accomplish tasks and understand the importance of the work.

But currently, finding an innovation that both supply chain leaders and customers are willing to fund is tough, almost nonexistent. The two parties need to work together to find a solution that helps fund innovations with the least risk. One possibility could be to create an industrywide consortium of supply chain leaders to pool together funds that support specific innovation projects. There are many different opportunities to work together to innovate in this space to create disruption.

You don't have to be Amazon

The "Amazon Effect" can be felt across all industries, particularly in the supply chain. Amazon has altered customer expectations of when they should receive shipments and how warehouses "pick and pack." What Amazon has accomplished is significant, and much of its success stems from its ability to overcome many of the industry's current innovation roadblocks. However, not every company should try to become the "next Amazon."

Not everyone can innovate to the scale of Amazon, nor should they necessarily aspire to do so. Instead, supply chain leaders should work together to create the next innovative solution or process that will set the bar higher. This solution should be dictated by their own ideas on what the future of the supply chain looks like and not Amazon's or their competitors'. Instead of imitating Amazon, they need to analyze why and how Amazon has derived success from recent innovations, and then take those learnings and apply them to how they can iterate the next innovation in the industry.

As noted earlier, innovation is a collaborative effort, and where we can, the supply chain leaders of today and tomorrow need to share the knowledge gained from our own successes as well as failures. For example, CSCMP and similar industry networks and consortiums provide a neutral platform to help companies collaborate and share knowledge that will help the industry continue to innovate, create new opportunities, and grow in ways that are beneficial for both our organizations and our customers.

To breed innovation, we as supply chain leaders need to continuously nurture and grow with it. The future of the supply chain will require collaboration across teams within organizations and across the industry. However, most importantly, to see truly successful innovation and positive impacts in the supply chain, we all need to remain resilient and open-minded.

Notes: 1. Kenco Logistics, "State of Supply Chain Innovation Survey," 2017.

Kristi Montgomery is vice president, Kenco Innovation Labs. Kenco is a provider of third-party logistics and warehousing services.

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