Enterra Insights

Life a Hundred Years from Now: Part 2

In part 1 of this two-part series, I discussed predictions, published in 2006 and 2008, about what the world would look like a hundred years from now. As I noted in that post, it is relatively easy to extrapolate the past into the future at the macro level (i.e., easy to predict that life expectancy is likely to increase, communications will improve, transportation will change, medical care will evolve, and new products will be invented). Today I would like discuss the article that started me thinking about this subject. I found the article in the New York Post ["Life in the year 2100," by Michio Kaku, 31 March 2011]. The article is based on Kaku's book Physics of the Future. Kaku writes:

"If someone from 2100 could visit us now, how would we view them? Probably like the gods of mythology. They would command everything around them by wishing for it. They would have perfect and ageless bodies. And they would ride across the universe in magical chariots. In the past, we feared the gods of mythology. In the next 100 years, we will become them. Based on interviews with 300 of the world's top scientists, I've put together some predictions for what that world, 100 years in the future, will look like. This is not a work of science fiction, since prototypes of these inventions already exist, and all of them obey the laws of physics."

With that introduction, Kaku provides ten predictions drawn from his book. The first prediction concerns the internet. He writes:

"1. The Internet will be in your contact lenses. Imagine blinking and then instantly going online, accessing your home office or home-entertainment system anywhere or anytime. We will be able to download any movie, song, website, or piece of information off the Internet directly onto our Internet-enabled contact lenses. These lenses will also be able to identify people's faces, translate their comments, and provide subtitles, so that we will always know exactly with whom we are speaking and what they are saying in any language. We will live in a cross between The Matrix and real life."

My suspicion is that most people will prefer glasses to contact lenses, but I certainly won't argue that the ubiquitous Internet (or as my colleague Tom Barnett has referred to it -- the Evernet) is coming. Kaku believes that most people will welcome this connectivity because it will usher in enhanced reality. Even aging generations will warm up to this technology since "people suffering from illnesses, like diabetes, ... will have immediate readouts of their heart rates, insulin levels, and other important conditions within their own bodies." Additionally, I predict this information will available to medical personnel over secure networks. Technology may become so sophisticated that you may be automatically alerted to take an aspirin before a heart attack occurs. Kaku's second prediction is that computers will disappear like slides rules did a generation ago. He continues:

"2. Computers will disappear, as will cell phones, clocks, watches, and MP3 players. Chips, costing less than a penny apiece, will be hidden by the millions in the environment. We will be able to command these hidden computers telepathically, directly via the mind. ... So we will be like the gods of mythology, mentally manipulating the world around us. We will also be able to conjure up almost any object just by wishing for it. This will be done via 'programmable matter,' which will consist of millions of microscopic computer chips that will be intelligent and capable of being programmed to suddenly rearrange themselves into any shape or object on command, so that we will be able to create almost anything we can imagine. (This is very similar to the replicator from Star Trek)."

Kaku may have taken this one a bit too far. The replicator on Star Trek was able to conjure up food. Edible microscopic chips don't sound very appetizing to me! There is also the problem of durability. It's hard to imagine self-assembling computer chips strong enough to replace a titanium bracket or blade in a piece of machinery. But, you never know. Kaku's third prediction agrees with one of Prof. P. A. Varghese's predictions noted in the previous post (i.e., pilot-less transportation).

"3. Cars will be driver-less, using GPS to navigate without the help of an alert human behind the wheel. These cars will also fly (finally!) by floating on a cushion of magnetism. With room-temperature superconducting magnets, our cars and trains will glide effortlessly in the air, without bumps or potholes to worry about since the crafts hover above the treacherous road. Traffic jams and accidents will be a thing of the past as a central computer will be able to track the motions of all the cars on the road (or in the air), while each car will use radar in its fenders to sense obstacles and take emergency measures as soon as it senses an impending accident. Best of all, we will hardly ever need to fuel up, since there will be almost no friction to slow us down. This will also solve the energy crisis, since most energy is wasted, strangely enough, on overcoming the friction of the road."

Hurrah! If Kaku is correct, we will finally get to be like Dick Tracy and his cohorts who used to fly around the city in anti-gravity buckets! It's a good thing that computers will be used to direct traffic both on the ground and in the air in the future. With all the current reports about air traffic controllers falling asleep on duty, increased air traffic via flying cars could make the skies a nightmare without automated systems. Kaku's next prediction is about a subject I've addressed before -- growing replacement body parts [see my post entitled The Wild World of Medical Science]. Kaku continues:

"4. Doctors will be able to grow 'spare parts' for our organs as they wear out. This will create a 'human body shop.' We will never need organ donors and will never die of organ failure. Even the typical doctor's visit will change. For a routine checkup, we will talk to a robotic software program that will have a complete record of our genes. This robotic MD will be able to correctly diagnose up to 95 percent of human ailments. If the robot can't help, then the patient will move on to a living and breathing doctor who can help figure out rarer diseases that take a more refined and sophisticated mind. By mid-century, doctors and scientists may be able to construct an entire organism using its genome alone. As this genome science progresses, researchers may be able to carry a small kit around with them and, in mere minutes, sequence the entire genome of any life-form they encounter. We will then be able to resurrect extinct life-forms, such as the mammoth, dodo bird, and even the Neanderthal. (There are ethical concerns with the Neanderthal. As one scientist asked me, 'Do we put them in a zoo or put them through college?')

It seems to me that stem cell or gene replacement therapy would be preferable to organ transplants. If this technique can be perfected, an injection at the site of damaged tissue could clear up a problem before transplantation would be necessary. The rub to all this medical science is cost. Unless costs are somehow dramatically lowered, only the super rich will be able to afford these kinds of treatments. Cost will also affect the next of Kaku's predictions.

"5. The human life span will be extended. Aging will be slowed down by attacking it at the molecular and genetic level. We may be able to 'cruise' at the age of 30 almost indefinitely by growing new organs as they wear out or become diseased, ingesting a cocktail of proteins and enzymes, using gene therapy to alter genes that may slow down due to aging, and following the old adage of maintaining a healthy lifestyle. Genetic engineering will also allow us to create 'designer children,' so parents can choose the physical (and perhaps even intellectual) characteristics of their children. (Laws will have to be passed to regulate this powerful technology.) Some of these children will be designed to have 'superhuman abilities' or become stronger, more intelligent, and happier than people are now."

Extended life (even immortality) is a common threads running through many long-term future predictions. As I pointed out, cost of such treatments (and of extended life) will probably be enormous. Only the richest of people will be afford to live a long time. Do people really want to live forever? I guess if I live to be 150 years old, I'll know. Kaku continues with two more health-related predictions:

"6. Molecular 'smart bombs' circulating in our blood will home in on, zap, and kill cancer cells. Nanoparticles the size of molecules will seek out cancer cells and destroy them years before they become a problem, by either poisoning or rupturing them. We will view chemotherapy as we now view bloodletting and leeches, a painful relic of our ignorant past. Cancer will not be cured: There are too many types of cancers that mutate too quickly, so the disease will persist; however, doctors will be better equipped to diagnose cancer early and treat the disease successfully.

"7. Our toilets and bathroom mirrors will contain DNA sensors, capable of detecting proteins emitted from perhaps a hundred cancer cells in a cancer colony, 10 years before a tumor forms. We will have a complete medical checkup every time we go to the bathroom, which will contain more computer power than a modern hospital. The word 'tumor' will disappear from the English language. Even our clothes will contain these cancer-finding chips, but these chips will also multitask, and will be able to independently call for an ambulance in the case of an accident, upload our medical history to nearby hospitals, and sense irregularities in heartbeat, breathing, and brain waves. In the future, it will be difficult to die alone."

Kaku moves next into the industrial sector where he predicts the rise of the machine.

"8. The robot industry will dwarf the size of the current automobile industry. Robots will be everywhere, performing dangerous and tedious tasks. They will have emotions. They will be friendly, polite, helpful (and with fail-safe devices to prevent accidents). Many robots won't be human-shaped but will be hidden from view, the size of snakes, insects, and spiders, and will undertake various unpleasant and dangerous tasks in place of humans. They will also be used as cooks, surgeons, musicians, pets, store clerks, and so forth. By the end of the century, robots will be nearly as smart as humans and may replace many jobs. Among the worse off will be blue-collar workers who perform repetitive jobs that are easily replaced by robots."

During the current nuclear powerplant crisis facing Japan, workers have been asking, "Where are the robots?" Although there have been some robots used, the heroic workers that have been sacrificing their health and lives to mitigate the disaster might have been spared had the right robots been available. In the future, the real trick will be finding the right balance between robot and human employees. Kaku next joins Patrick Moore (see yesterday's post) in predicting the construction of a space elevator. He writes:

"9. Tourists will soar into outer space via space elevators. We will push the 'up' button and the elevator will climb a long carbon-fiber cable that will extend thousands of miles into space. This will open up the solar system to wealthy tourists and the outer-space-obsessed. The key is to use nanotechnology to create superstrong cables made of carbon. In addition, scientists will be preparing the first starship capable of leaving the solar system and visiting the nearest stars. New propulsion systems, perhaps involving antimatter or fusion engines, will take us there. By the end of the century, we may have a small outpost on Mars, but an overwhelming proportion of the human race will still be on earth. For decades to centuries to come, space travel will be for astronauts, the wealthy, and maybe a handful of hardy space colonists."

Kaku concludes his look into the future with a prediction that is as much warning as vision. He concludes:

"10. With advanced technology also will come advanced dangers, especially biological warfare, nuclear proliferation, and global warming. Science is a double-edged sword. One side can cut against poverty, disease, and ignorance, but the other side can cut against people unless it is properly controlled. Global warming will become even more disastrous, as rising sea levels inundate many American coastal communities, and some cities, such as New York, take refuge by surrounding themselves with seawalls."

Technology, of course, doesn't come with moral biases. How humankind puts technology to use determines how we view it. The big questions surrounding technology is not whether it will continue to advance but whether humankind will be able to adapt quickly enough to regulate the moral dimensions of its use. Historically, technology has always won the race and I suspect that pattern won't change. Politicians, even with the help of scientists and ethicists, aren't smart enough and the regulatory processes they employ are not fast enough to keep up with technology's potential applications. That shouldn't shock anyone since inventors are often surprised at how their technologies are used. One thing I can predict with confidence -- the world will remain an interesting place in a hundred years. Want to look even further into the future? Watch the attached video to see one individual's view of how the future will unfold from 2100 AD to 4000 AD.

Life a Hundred Years from Now: Part 1

Earlier this year I posted a few blogs dealing with short-term predictions about the future. A few daring souls have taken the long view and predicted what life might look like some hundred years from now. The thing that always strikes me about early science fiction movies that depict the future is that completely missed miniaturization except perhaps for "ray guns." So I'm not too sanguine about anybody's ability to predict things very far into the future. Before looking forward, however, let's look to past. A hundred years ago:

• The average life expectancy in the United States was forty-seven.
• Only 14 percent of the homes in the United States had a bathtub.
• Only 8 percent of the homes had a telephone. A three minute call from Denver to New York City cost eleven dollars.
• There were only 8,000 cars in the US and only 144 miles of paved roads.
• The tallest structure in the world was the Eiffel Tower.
• The five leading causes of death in the U.S. were: 1. Pneumonia and influenza 2. Tuberculosis 3. Diarrhea 4. Heart disease 5. Stroke
• Plutonium, insulin, and antibiotics hadn't been discovered yet. Scotch tape, crossword puzzles, canned beer, and iced tea hadn't been invented.
• Punch card data processing had recently been developed, and early predecessors of the modern computer were used for the first time by the government to help compile the 1900 census.

Based on what has happened over the past hundred years, it doesn't take a seer to predict that life expectancy is likely to increase, communications will improve, transportation will change, medical care will evolve, and new products will be invented. Specifics in each of those areas are much more difficult to predict. In this first part of this two-part series, I'll look at articles written in 2006 and 2008 -- before the Great Recession. The first article I discovered doesn't just leap a century ahead; rather, it provides headlines along the way. ["What will life be like 100 years from now?" by Patrick Moore, The Independent, 8 November 2006] "Speculation can be dangerous," Moore writes, "especially when science is at the mercy of power-drunk politicians. I have done my best here to indicate what I think may happen, provided that there are no more global wars." He also notes that no one can predict when natural disasters may hit or the consequences that may follow. By looking at events Moore predicted were going to take place between 2007 and now, he demonstrates how difficult it is to predict the future -- even the near-term future.

Moore predicted, for example, the "discovery of a Neptune-sized planet far beyond the Kuiper Belt" in 2007 that would explain "the Pioneer Anomaly - the unexpected deviation from the expected trajectory for very distant spacecraft - as well as the highly eccentric orbits of certain minor astronomical bodies such as Sedna." It didn't happen. He predicted that in 2008, "dark matter" would be "partly explained." It didn't happen [see "Ambitious search fails to find dark matter," World Science, 11 April 2011]. He predicted that in 2010 "Britain's newly elected government looks at restoring the Royal Greenwich Observatory" and that a consortium of developed nations would build "the Incredibly Large Telescope." Britain did get a new government, but the other predictions didn't happen. Although Moore gets off to a shaky start, we will bravely press on with the rest of his predictions:

• 2016 Preliminary lunar base set up in the Mare Frigoris of the Moon, in preparation for permanent human habitation; first a medical centre is established there. The first radio telescope is set up on the far side of the Moon, where conditions are totally radio-quiet. It soon begins to identify quasars and starburst galaxies at distances of over 13.6 thousand million light years away from Earth - objects from a time not that long after the Big Bang.
• 2018 Completion of the ILT set up at the Fred Hoyle Observatory in Tibet. During initial testing it identifies Earth-mass planets around the stars Epsilon Eridani and Delta Pavonis, providing direct images and showing that their atmospheres are oxygen-rich. The presence of oxygen is a strong indicator of the presence of life.
• 2019 Rho Cassiopeiae explodes as a hypernova and peaks at magnitude -8. X-ray emissions and neutrino showers are picked up by observatories on Earth, in space and on the Moon. A search for gravitational waves is initiated - they were predicted by Albert Einstein's General Theory of Relativity in 1915 but remained largely theoretical. In most northern-hemisphere observatories, routine work is suspended so that attention can be focused upon Rho Cassiopeiae.
• 2022 Gravitational waves detected. Theorists in London, Cambridge and Tokyo show that the acceleration of the expanding Universe is due to slight variations in the value of the gravitational constant, and that the present phase of expansion is likely to be succeeded by a period of contraction ending in what may be called a new Big Bang.
• 2028 Nuclear device deliberately exploded close to the asteroid Apophis, in order to divert the space-based object and prevent its collision with the Earth in 2036. Though this experiment is successful, the future movements of Apophis will be carefully monitored by the Lunar Observatory and by the VLT and ILT. Apophis seems to be a monolithic body, making it even more of a threat.
• 2033 First manned expedition to Mars; there is a controlled landing on its moon Deimos (a natural space station) followed by the astronauts' descent to Mars itself in the Martian Module. Rovers Spirit and Opportunity found to be fully functional once given new batteries. Solar radiation levels are found to be tolerable.
• 2039 Onset of prolonged solar minimum with few sunspots or coronal mass ejections (CMEs). This marks the start of the end of global warming on Earth. Theory predicts an interim period, followed by a phase of global cooling. Conditions similar to those of the Little Ice Age (1645-1715) are expected towards the end of the century.
• 2060 First major 'city' on Mars (Port Lowell) leads to plans for new settlements. Life is found in newly discovered seas below the Martian surface. The most advanced life forms resemble jellyfish that were common in Earth's oceans hundreds of millions of years ago. Tests show that the Martian jellyfish are not poisonous; indeed, they are, in fact, edible - a rich source of nutrition for the human colony.
• 2064 Manned landings on Halley's Comet at the time of perihelion - its closest approach to the Sun. No bacteria are found, weakening Fred Hoyle's argument that new diseases and epidemics on Earth could have been spread by rocks entering the Earth's atmosphere from space. Transmitters attached to the comet will allow tracking all around its orbit; recording devices will send back data about Kuiper Belt objects and the remote planet Thanatos, with its three known satellites.
• 2075 New settlement completed in the Hellas basin on Mars (Port Antoniadi), including an observatory equipped with the ULT (Unbelievably Large Telescope). Martian scientists receive the first artificial signal from space found to come from a planet orbiting Epsilon Eridani. Attempts to interpret the signal are not successful. Reply sent.
• 2099 Space elevator completed and linked with the orbiting ACS (Arthur Clarke Station). Fossil fuels are now almost obsolete and monitoring by the ACS shows that atmospheric pollution has been dramatically reduced.
• 2107 Celebrations to mark the 150th anniversary of the start of the space age (4 October 1957 according to the Earth calendar) are followed by hostilities between the American Federation and the Sino-Japanese Confederacy. The crisis was sparked by a dispute regarding the issue of licences for mining rights of asteroids. Martian colonists declare a UDI (Universal Declaration of Independence).

Frankly, I'm not sure that the rest of Moore's predictions have any greater chance of coming true than the predictions he made about years past. He is not alone, however, in predicting things like space tourism and space elevators or the continuation of conflict.

A couple of years after Moore made his predictions, a site called Shvoong.com, which advertises itself as "the global source for summaries & reviews," published a summary of predictions made by Professor Prof. P. A. Varghese ["Life After 100 Years!"] The summary starts out with a prediction with which Moore would probably agree. "In about 100 years, organized tours will be frequent to the space and moon." On a more pragmatic level, Varghese predicts that "the internet would have already taken every nook and corner of the earth in detail to the drawing rooms of peoples' homes." I don't really have a problem with the latter prediction. I believe the Internet will reach all corners of the earth sooner rather than later and it will probably be delivered through a smartphone or other personal communication device rather than a PC.

Varghese sees a very dark future for the nuclear family. He believes that women will spearhead this decline as they opt out of traditional marriage arrangements and forego child bearing. As a result, Varghese predicts that in a hundred years "the population will dwindle in all the advanced countries." That's a pretty safe prediction since we are already seeing that trend unfold. Most demographic forecasts predict the global population will stabilize or start decreasing around 2050. Another development that he believes will accelerate the decline of the traditional family and marriage is the widespread use of "gene banks" that will help create "super-intelligent and disease free kids." In a hundred years he believes that scientists will have perfected "genetic engineering."

Like Ray Kurzweil, Varghese believes that over the next century "biomedicine and biotechnology will advance fast. Man would have succeeded in conquering the ageing process and the average age of man will cross hundred and ten in all the advanced countries." For more on Kurzweil's thoughts about the future, read my post entitled Looking towards the Future with Ray Kurzweil. When man finally conquers death, something both Varghese and Kurzweil think possible, Varghese believes that organized religion will collapse. As he writes, "The moment man conquers death, the death of god is certain."

When it comes to financial activity, I believe Varghese's predictions are already outmoded. He predicts that "credit cards will replace the medium of exchange. Currency notes will be on the wane." In many developing countries, cellphone transactions are already replacing many traditional currency or credit card transactions. Varghese apparently believes that scientists and agronomists will figure out how to feed the global population. He predicts:

"A revolution can be expected in the food habits and food production. The elaborate cooking now seen commonly will be gone. Ready made foods that will tickle the taste buds of man will replace the traditionally cooked meals. Food making and consumption will undergo drastic changes."

One prediction that surprised me -- and with which I strongly disagree -- is that "the poor nations of the world will be still be a century or two behind." I'm not willing to concede that poor nations are currently "a century or two behind" let alone that they will be in a hundred years. It is hard to find a place on the planet where cellphones are not already present. Most analysts see a much better world for emerging and frontier market nations. On a brighter note, Varghese sees a greener world. He writes:

"Solar energy would have replaced conventional fossil-fuel based sources. Wind energy would be tapped too. Attempts would be made too at the tidal resources. The roads would be less polluted with solar powered automobiles. Homes would be using solar power. No appreciable climate change is expected as this large earth has the resilient power to absorb minor changes in the content of its atmospheric gases. There will no serious warming nor any flooding of low areas. The eco system will go on undisturbed. Some more species will go extinct and new ones would be discovered."

When it comes to forms of transportation other than automobiles, Varghese predicts, "Pilot-less aircraft, submarines and ships will ply in their respective areas." Finally, he doesn't see an end to war or the emergence of world government (conspiracy theorists rest easy!). From my perspective, Varghese goes too far in some of his predictions and not far enough in others. Often he is so vague or general that he reminds me of Nostradamus. In the second part of this two-part series, I will look at a more recent article that provides predictions that the author claims are based in proven principles of physics. Perhaps surprisingly, you will see some of the predictions mentioned above mentioned again.

More on Social Media and the Supply Chain

In a post entitled Social Media and the Supply Chain, I examined the views of a number of analysts who concluded that the future belongs to social commerce. At the end of that post, I indicated that I would, at a later date, discuss why some analysts believe that full-blown social commerce may be further in the future than some anticipate. What prompted me to reflect on this subject was an article in The Wall Street Journal ["Facebook Won't Become E-Commerce Force, Analyst Says," by Stu Woo, 7 April 2011]. One cannot discuss social media and not mention Facebook; so it seems natural that Facebook would also enter the conversation when talking about social commerce. In my previous post, I quoted supply chain analyst Lora Cecere who wrote, "Now we have channel proliferation with M-commerce through mobile [phones] and social commerce through Facebook." So why would Forrester Research analyst Sucharita Mulpuru, the subject of Woo's article, insist that Facebook isn't going to be a major e-commerce player? Woo reports:

"Mulpuru lays out her case in a report ... titled, 'Will Facebook Ever Drive eCommerce?' Her firm interviewed nearly two dozen technology vendors, retailers and marketers and found that they received little benefits from Facebook and other social networks. A social-network presence, she found, was less effective at customer acquisition and retention than e-mail and paid search. The study found that the average Facebook metrics are a 1% click-through rate and a 2% conversion rate. E-mail marketing, by comparison, has an 11% click-through rate and a 4% average conversion rate. Facebook's problem, she said, is that few people go there for shopping-related activities. 'You go to Facebook to find other people, not to find a product,' Mulpuru said in an interview."

I will grant that "today" few people think about Facebook when they think of online shopping, but the same could have been written about Amazon when it first started as an online bookseller. You went to Amazon looking for books -- today you go to Amazon looking for everything. Mulpuru, however, isn't alone in her assessment. "Brands are still flocking to Facebook and its share of display advertising spending is rising fast," writes Tim Bradshaw, "but finance directors are questioning the value of accruing thousands of fans and followers. Unlike search-engine advertising, where calculating the net gain or loss from each click is relatively straightforward, demonstrating the return on investment of many social media campaigns is proving a challenge." ["The fickle value of friendship," Financial Times, 30 March 2011] Despite questionable results, Bradshaw reports:

"A survey of members of the World Federation of Advertisers, a grouping of multinational brands, by Millward Brown found that 96 per cent were spending more of their budgets managing Facebook pages, Twitter accounts and other social media, racing to accrue fans, retweets and that elusive but ubiquitous quality: engagement. 'The hype vessel is at full throttle, and largely without a rudder,' says Michael Maoz, an analyst at Gartner, the research company. 'Social media is like the surgeon's scalpel – a valuable tool in the right hands but potentially dangerous.' ... It is not hard to find examples of social media having a positive impact on a brand. Starbucks, the coffee chain, says it boosted UK sales of Christmas drinks by 15 per cent last year by inviting its Facebook fans to choose seasonal flavours. But the Starbucks example also reveals that it is not having lots of Facebook friends that counts – it is what companies do with them and how they engage them that can translate into increased sales. 'To be completely up front about it: there is no ROI for any social media programme,' says James Whatley, marketing director at 1000heads, the social media agency. 'However, there is definitely provable ROI for social media programmes that are set up to do something. It's all about setting a clear objective.' Attempts to pin a dollar value on a Facebook fan have largely been abandoned because it varies depending on whether the brand's page is trying to sell coffee, cars or simply create a community to monitor for complaints and feedback. Estimates suggest 10-15 per cent of Facebook posts are seen by their intended recipients and click-through rates are little better than for traditional banner advertisements – fractions of a percentage point."

Whatley makes a profound point when he states that social media sites must be "set up to do something." Unless you offer specific and tangible benefits for someone to "like" your company, social media sites do appear to be a waste of time and money -- that is, unless they are established specifically as an honest effort to gain customer feedback and to respond to complaints. As Whatley says, a company must have a clear objective. Take, for example, a company called Bill.com. Inc., a provider of bill-payment services. The company "is trying to market itself on Facebook. But even though the venture-backed company has more than 10,000 clients, it has so far managed to secure only 67 'friends' on the social-networking site." ["For 'B-to-B' Companies, Finding Facebook 'Friends' Can Be a Struggle," by Sarah E. Needleman, The Wall Street Journal, 20 October 2010]. Needleman continues:

"These days, even small 'business-to-business' concerns like Bill.com are experimenting with social media, perceiving the popular online hangouts as low-cost, easy-to-use venues for attracting new customers and retaining existing ones. But unlike their consumer-focused counterparts—retailers that sell smartphones, jeans, games and other personal products—so-called B-to-B businesses seem to be having a harder time connecting with their target audience. Facebook 'is so consumer dominated that it takes time to find a voice that cuts through what's already out there,' says René Lacerte, founder and chief executive of Bill.com, which is based in Palo Alto, Calif. A survey released last month of 230 B-to-B companies shows that 24% are using Facebook Inc., Twitter Inc. and others for marketing, and another 36% plan to try them in the coming year. 'It's certainly something that has taken off in the last six months,' says Michael Greene, an analyst at Forrester Research Inc., which conducted the study. In general, he says B-to-Bs tend to be slower to adopt new marketing technologies than business-to-consumer companies. But now that they're catching up, it appears that many are having a tough time gaining followers. 'B-2-B isn't sexy,' says Mr. Greene. 'It doesn't have that same immediate attraction that consumer brands do.' Bill.com so far has only about half the number of Facebook 'friends' as the average user, and far fewer than many of its consumer-focused counterparts. For example, LegalZoom.com Inc., a small business that helps consumers file legal documents such as wills and divorce papers, has more than 10,000 Facebook friends."

Needleman goes on to write that "making fans of other businesses, as opposed to consumers (or actual friends), may seem counterintuitive to social networking." She reports that is why they are looking "to interact with workers who make buying decisions on behalf of the companies they target." Frankly, that sounds more like what LinkedIn was set up to do than Facebook. In fact, Needleman reports, "Some small B-to-Bs say they prefer to market themselves on networking sites specifically designed for businesses and professionals such as LinkedIn.com." She goes on to note that some B2B firms use as many social media outlets as they can. She continues:

"For example, Eloqua Ltd., a marketing-software company in Vienna, Va., charges between $15,000 and $800,000 a year for its technology. Regularly posting status updates about industry trends and related topics to its Twitter, Facebook and LinkedIn Corp. profiles helps it stay 'top of mind' among clients, says Joe Payne, chief executive. 'There's no question what we do in the social world generates leads because it drives people to our website,' he says. 'We can see where they're coming from.' Sharing information or advice on social-networking sites is also a way for B-to-Bs to show off their expertise, says John Lopez-Ona, president of Six Sigma Qualtec Inc., a business-consulting firm in Princeton, N.J., that uses Twitter and has its own blog. 'It's about building relationships,' he says."

"Posting status updates about industry trends and related topics" for established customers or potential clients is probably a good use of such sites, but still less effective for securing business than face-to-face contacts or more traditional advertising. That may change as people's habits change; but, analysts appear to be skeptical.

Sometimes social media sites are monitored, Needleman reports, "to find out what's being said about them online, as well as gather competitive intelligence and keep up with industry trends." In fact, Eric Bradlow, a professor at the University of Pennsylvania's Wharton School, told her that "listening" was the principal value of social media sites. Companies like PepsiCo appear to believe that is the case. The article by Tim Bradshaw cited above, begins this way:

"In a glass box in the middle of a PepsiCo marketing department, five people are staring at a huge bank of screens showing a constantly updated river of tweets, 'likes', praise and damnation from consumers of Gatorade, the company's sports drink. 'Doing it in a glass room means every single person in the marketing organisation is seeing the insights brought to life in real time. It reminds them how important it is to know the heartbeat of the consumer,' says Bonin Bough, global director of digital and social media at PepsiCo. 'I really feel like it is the future of marketing.' A similar scenario is playing out in marketing departments around the world."

Because "listening" has become such an important part of the supply chain -- analysts often refer to it as making the supply more visible or transparent -- social media sifters have become a hot commodity ["Wanted: Social Media Sifters," by Ryan Flinn, Bloomberg BusinessWeek, 21 October 2010] Flinn reports:

"Companies are expected to more than double the amount they're spending for online data, to $840 million in 2012 from last year, according to marketing consultant Winterberry Group. The prospect of such fast-growing revenue is one reason social media monitoring outfits are being snapped up by larger software and market-research firms intent on improving their ability to use Twitter, Facebook, and blog postings as windows into the thinking of consumers."

Sifting through terabytes of data may sound cold and impersonal, but Philip Delves Broughton reports that many data sifters see themselves as helping customers and retailers get to know each other better ["The added value of good information," Financial Times, 7 March 2011]. He writes:

"Long before focus groups or marketing surveys or loyalty programmes, businesses knew their customers because they saw them face to face. The corner shop owner knew who liked a particular brand of jam and kept it in stock for them. He knew when people tended to come in and kept his shop open to accommodate them. Stuart Aitken, the chief executive of Dunnhumby USA, a leading force in the growing field of data analytics, says he keeps this vision in mind as he uses the latest technology to provide companies with insights about their customers. 'This is back to basics,' he says. 'What we’re seeing is that businesses have driven out costs, they’ve got the scale in their operations, but they've forgotten who their customer is. What we do is allow businesses to reconnect with their customers, to become the corner store on a large scale.' Data management might sound like a dry field, where statisticians and computer programmers haggle over terabytes and p-values. But as it becomes more sophisticated and yields ever richer portraits of customers and their behaviours, helped by social networking, it is increasingly becoming central to executive decision-making."

That brings us back to first blog I posted on this subject and the primary conclusion about social commerce offered by supply chain analyst Lora Cecere. She believes that social commerce has "the power to redefine the shopping experience allowing companies to anticipate, personalize and energize the shopping experience in new ways. Untapping the potential of this technology shift will make the vision of customer-centric value chains today's a new reality. ["The Rise of Social Commerce," Supply Chain Shaman, 15 October 2010] In the information age, data is power and social networks provide access to mountains of data. That is why I'm not writing off social commerce as phenomenon to watch in the coming years.

Can Developed Countries Increase Manufacturing?

As we all know, economies of most countries change over time. The general vector of this change is from agriculture to industry to service. This change has been more focused and accelerated since the beginning of the industrial revolution. During the colonial era, imperialist regimes sought to conquer countries that could supply the motherland with raw materials. These raw materials were used to manufacturer goods that could then be sold domestically, to other developed countries, and to their colonies. Many colonists obviously found this subservient situation intolerable and, like the United States, rebelled. My colleague Tom Barnett likes to point out that America was once an emerging market economy with a reputation much like China's today. Workers in Europe were no happier to lose manufacturing jobs to Americans than Americans now are to lose manufacturing jobs to Chinese workers. The question is: Can this historical cycle be broken? Can developed countries staunch the flow of manufacturing jobs leaving the country? Some analysts don't think they can and they point to the work of Joseph Schumpeter as the reason why.

Schumpeter was an Austrian economist and the best known proponent of the historical cycle described above. In The Process of Creative Destruction (1942), he wrote:

"The opening up of new markets and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ... [The process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood on the hypothesis that there is a perennial lull."

The Great Recession caused a number of analysts and policymakers to reconsider the wisdom of this "perennial gale of creative destruction." ["How to Build Again," by Rana Foroohar, Newsweek, 10 July 2010]. Foroohar writes:

"Ever since the financial crisis hit, policymakers around the world have been talking about how to 'rebalance' their national economies. In rich nations, this mostly entails reducing debt. But it also involves reassessing the mix between the service sector, which represents about 70 percent of the U.S. economy, for example, and manufacturing, which makes up just 11 percent. In the U.S. and the U.K. in particular, there's a sense that overreliance on dodgy financial services is no way to create decent jobs for the masses or to build a more stable economy. In these and many other countries, like France and Germany, influential voices are calling for a return to the business of producing real goods."

The question is: what do you produce? Consumers have demonstrated time and again that price trumps most other considerations (including where a good is manufactured). Since it is difficult to compete on price while producing goods also manufactured in so-called "low cost countries," there seems to be a growing consensus that developed countries need to concentrate on creating entirely new goods to be manufactured. That is one reason that many policymakers have stressed the importance of developing strong cleantech, biotech, and nanotech sectors. Foroohar reports, "A new report issued in late June [2010] by the Council on Competitiveness and the consultants Deloitte Touche Tohmatsu should give America and some European nations like Germany reason to hope they can stay in the global game." She explains:

"The report surveyed 400 global CEOs, tallying their views on the key factors that drive manufacturing competitiveness. The most surprising finding is that it's innovation, not how cheap or expensive labor is, that determines whether a country will be successful in manufacturing. Contrary to conventional wisdom, manufacturing has not become a race to the bottom. That's why the U.S. still ranks as the fourth-most competitive nation after China, India, and South Korea, despite vastly higher labor costs. Germany, Japan, and Singapore also hold positions in the top 10. The skill levels of their workers more than offset their costs (U.S. workers are twice as productive as those in the next 10 leading manufacturing economies). Skills are particularly critical in the lucrative high-end manufacturing sector, which accounts for about half of all new innovation within an economy. 'Talent will be the oil of the 21st century,' says Council on Competitiveness president Deborah L. Wince-Smith."

That's both good and bad news for countries like America. The good news is that developed countries can still compete. The bad news is that so-called "blue collar" jobs aren't likely to return. The skills required for lucrative high-end manufacturing are only obtained through education and training -- and most people agree that education is in a semi-crisis state in the United States. Foroohar says that there is other bad news for the U.S.

"Cost of energy and materials ranked third, right after talent and wages, as a determining factor in where to locate manufacturing operations. That's bad news for America. Unlike China and many nations in Europe, the U.S. has no coherent national energy policy, and has yet to spark a green-jobs revolution. The international CEOs surveyed believed that America would drop a spot in the competitiveness rankings within five years."

There is another side to that story. With some analysts predicting that a barrel of oil could soon cost over $170, some manufacturers now believe that the higher costs of domestic manufacturing are being offset by the higher cost of transportation. The greater the distance a good has to be moved the higher the cost. Returning the "highly-skilled worker" conundrum, Foroohar writes:

"There are measures the United States can take to shore up its position, though predictably, they aren't easy. While it's not politically correct to suggest that perhaps every citizen shouldn't aspire to a university degree, high-end technical schools that can turn a $16,000-a-year dishwasher into a $60,000-a-year welder may in fact deserve as much private and public money as mediocre four-year liberal-arts colleges churning out students with relatively useless degrees. That idea has worked in Germany, though the Germans have also done a good job producing top-level engineers—another area where the United States lags. A much stronger K–12 focus on math and science would help the U.S. greatly."

Let's face it; in the current political climate we're not going to see any new government plans that foster the re-skilling of workers. Foroohar concludes:

"Immigration policy can also play a key role in ensuring competitiveness. As Secretary of Commerce Gary Locke points out, 'So many firms that we view as American icons were actually started by immigrants.' It’s an oft-quoted fact, but one worth remembering as the Obama administration struggles to push through meaningful immigration reform. (This writer is for stapling a green card to the diploma of every foreign student who obtains a Ph.D. in the States.) After all, the most talented people in the world now have other places to seek work—namely their own countries, which will be the source of the majority of the world's new jobs in the foreseeable future. If talent really is the new oil, it will pay to keep it here."

Steve Minter, editor of Industry Week, doesn't buy into Schumpeter's creative destruction argument. ["The Case for Investing in Manufacturing," 17 February 2010] He writes:

"Many are content to see basic industries leave the United States, assuming that there is an inevitable evolution in a developed economy toward high-tech industries. They see the drop in manufacturing employment over the past decade as a necessary byproduct of globalization and increased efficiency. The answer is to pursue new manufacturing opportunities such as electric cars and wind turbines, and to focus on the service sector. But as National Institute for Standards and Technology (NIST) economist Gregory Tassey argues in his provocative analysis of the United States' competitive status in manufacturing, the nation must see manufacturing as a series of complex supply chains rather than individual industries and dramatically change its policies to encourage research and development."

The most fascinating thing I find in that statement is the assertion that "the nation must see manufacturing as a series of complex supply chains rather than individual industries." This coincides with an argument that I've made before that it is supply chains that compete not companies. For more on this subject read my post entitled Transforming Global Supply Chains and a column I co-wrote with colleague Thomas Barnett that was published by World Politics Review entitled "The New Rules: Managing Global Supply Chains a Key U.S. Advantage." Minter continues:

"Tassey makes a compelling case in 'Rationales and Mechanisms for Revitalizing U.S. Manufacturing R&D Strategies' that the U.S. economy's future depends on a strong manufacturing sector. He notes that 'the high-income economy must be the high-tech economy' and that manufacturing is a necessary element, as it supports 70% of industry R&D spending. He also points out 'the majority of trade is still in products,' and the United States cannot fix its huge trade deficit by relying on services. Moreover, he says international competitors are targeting high-tech services. With the advent of the Web, many of these services can be provided from Bangalore as easily as from Boston. High-tech manufacturing and services are closely tied together, and the competitiveness of one is hampered by the absence of the other."

The most compelling argument put forth by Tassey is that the majority of trade is still in products. That shouldn't change as globalization helps a new global middle class emerge. Those new consumers will generate a flow of money that savvy manufacturers will find a way to tap into. In many growing economies, "Made in America" still has some cachet. Commenting on Minter's column and Tassey's report, supply chain analyst Bob Ferrari laments that "the U.S. currently lacks a comprehensive manufacturing investment strategy, and more importantly a comprehensive supply chain strategy." ["One More Rant - The Case for Investing in U.S. Manufacturing and Supply Chain Capability," Supply Chain Matters, 22 February 2010] As a supply chain analyst, Ferrari zeroes in on what Tassey has to say about supply chains, which is:

“The modern global economy is therefore constructed around supply chains, whose tiers (industries) interact in complex ways. In the U.S. economy, one supply chain after another has been hollowed out by increasing foreign competition. Most of these losses have been in manufacturing. In spite of arguments to the contrary, partial domestic supply chains often have increasing trouble competing globally. This proposition is complex, varying among technologies and hence high-tech supply chain. However, it is a real phenomenon that is receiving little analysis.” ["Rationales and Mechanisms for Revitalizing U.S. Manufacturing R&D Strategies," by Gregory Tassey, National Institute for Standards and Technology, December 2009]

Ferrari makes his frustration known about the current state of things by concluding, "If an economy doesn't build value in the manufacture of goods, which in-turn drives the need for robust supply and value-chain capabilities, than we may as well all get in line for those few jobs left on Wall Street and the financial services sector." In a later post ["The Shifting Tides in the Outsourcing of Manufacturing," Supply Chain Matters, 22 November 2010], Ferrari concludes:

"Manufacturing outsourcing continues to be a delicate balance of multiple factors. Access to growing consumer-based economies, shifting and volatile currencies, higher transportation and quality control costs, and concern for intellectual property protection all interplay in the dynamics of outsourcing. From our perspective, two conclusions stand forth. First, outsourcing decisions will continue to involve dynamic factors, and the degree of flexibility and agility of manufacturing and supply chain networks will continue to be a key consideration in supporting outsourcing needs. That also implies the ability to analyze and assess all the various factors. Second, no country can claim to have an economic growth plan without consideration to the global competitiveness of its manufacturing and supply chain infrastructure."

Germans have demonstrated that, in spite of high labor costs and a strong currency, a developed country can compete in the manufacturing sector on the global stage. As an article in The Economist reports, "Germany is the world’s largest goods exporter after China despite high labour costs and a strongish euro. It is also stuffed full of durable companies that have survived hyperinflation and two world wars." ["Mittel-management," 25 November 2010] I don't claim to have any answers to this conundrum; but, two things are clear: first, manufacturing remains critical to a country's economic health; and, second, the supply chains that support manufacturing are just as critical.

IBM's Top Five Supply Chain Challenges

Tim Carroll, Integrated Supply Chain Vice President at IBM Corporation, wrote in the introduction to a 2010 study, "We're beginning to hear a new verse — a clear message about the overwhelming need to manage risk. A crisis in some far-flung country can now spread very quickly across the world economy, creating tremendous turbulence. As our supply chains have become more intertwined, none of us is immune. To deal effectively with risk and meet your business objectives, we believe supply chains must become a lot smarter." ["The Smarter Supply Chain of the Future," IBM Institute for Business Value, October 2010] Obviously, this was written long before the catastrophe occurred in Japan. If IBM consultants were just beginning to hear about the need to manage risk last year, that message must surely be coming in louder, clearer and more frequently today. The study introduced by Carroll was "based on face-to-face conversations with nearly 400 supply chain executives worldwide." When the results of these conversations were analyzed, supply chain leaders had identified five major challenges with which they struggle. The figure below shows what those challenges are and the numbers represent the percentage of respondents who indicated that the challenge "impacts their supply chains to a significant or very significant extent."

The report claims that "supply chain executives rank cost containment as their number one responsibility to the business — far ahead of enterprise growth and product/service innovation." It is important to note that supply chain executives indicate that cost control is the primary "responsibility" as opposed to their primary "challenge." The way that the analysts square this circle is by noting: "This intense focus on controlling costs is also quite evident in their activities and programs; two out of the top three types of initiatives are aimed at improving efficiency." In other words, because supply chain executives already focus so intently on cost reductions they feel they already have a fairly good handle on dealing with costs. The one area of cost control in which they do not feel so secure is commodity volatility. As analysts put it, "Supply chains can't keep pace with cost volatility." Bill McBeath from ChainLink Research agrees with the IBM analysts. He notes that "global dynamics ensure that commodity prices will remain volatile, with huge price spikes, for decades to come. Good hedging strategies are increasingly critical." ["Managing Supply Risk Part Three - Hedging Strategies: Cross-Functional Teams," ChainLink Research, 16 November 2010]. The IBM report next turns the subject that garnered the most hits: visibility. The report notes:

"At a time when, generally speaking, information is abundant and connectivity is more feasible than ever, supply chain executives still rank visibility as their greatest management challenge. Although more information is available, proportionally less is being effectively captured, managed, analyzed and made available to people who need it. Despite its top billing on the issue list, visibility — and the collaboration required to get information and make decisions with it — is not attracting much attention in terms of activities and programs. Supply chain executives are focused more on strategy alignment, continuous process improvement and cost reduction."

Another way of stating this is: Supply chain executives are not putting their money where their mouths are. IBM analysts correctly connect visibility and collaboration. Successful collaboration (which requires good end-to-end visibility) is not easy. For more on this subject, read my post entitled Supply Chain Collaboration. I begin that post by discussing an interview conducted by Dan Gilmore, editor of Supply Chain Digest, with David Johnston of JDA Software and Atul Pandey of Infosys Technologies. In that interview, Johnston and Pandey assert that supply chain visibility and collaboration "are critical drivers of ... profitable growth." ["Are Supply Chain Visibility and Collaboration the Key Drivers of Today's Profitable Growth?" 24 January 2011] As vendors, IBM analysts have some self-motivated interest in helping companies make their supply chains more visible and collaborative. Remember, however, that it was supply chain executives themselves who identified supply chain visibility as their greatest challenge. In another IBM study also released last October ["New rules for a new decade," IBM Institute for Business Value, October 2010], analysts concluded:

"As the number of supply chain partners increases, the need for accurate, time-sensitive information becomes more acute. But lack of collaboration and integration between supply chain and product development partners continues to be a major concern. Product lifecycle traceability in consumer products, pharmaceuticals and other industries is a growing requirement. Yet, despite continued technological enhancements, lack of visibility to worldwide, timely information to make in-stream decisions remains a significant issue. The bottom line is that the requirements for increased visibility require the dexterity to make fast decisions in response to constantly changing market conditions."

As president and CEO of a company that is also helping companies make their supply chains more visible and collaborative, I am pleased that our technologists are tackling a challenge that sorely needs attention. The IBM study next turns to the subject of risk. They write, "Risk management emerged as supply chain executives' second largest challenge — a surprisingly high ranking that at first glance seems more likely to be found on the CFO agenda." Interestingly, the report claims that heightened interest in risk management isn't the sole result of disruptions caused by natural disasters, but also the result of "thousands of recall headlines and a deepening realization that globalization and greater supply chain interdependence have not only elevated risk, but also made it more difficult to manage." They conclude, "In all areas of risk management, leading supply chains are pulling away from the pack." To learn more about this important subject, read my four-part post on "Supply Chain Risk Management and Disaster Mitigation" [Part 1, Part 2, Part 3, and Part 4]. The next subject to which the IBM consultants turn is customer intimacy. They write:

"Rising customer demands ranks as the third highest supply chain challenge, and two out of every three companies struggle to accurately identify customer needs. However, despite the obvious need for customer interaction, companies tend to focus more on their suppliers than their customers."

In a post entitled Building the Supply Chain of the Future, I noted that a number of analysts recommend building the supply chain of the future from "the outside in" (i.e., starting with the requirements of the customer's customer and working backwards translating the requirements to the suppliers' supplier). It's clear from what the IBM analysts write that many companies are still building their supply chains from the inside out -- which almost inevitably results in a supplier/vendor focus rather than a customer focus. The IBM analysts continue:

"Although technology has made it more feasible than ever to incorporate customer input, working directly with customers remains the least common supply chain planning practice. In fact, demand planning at one out of every five companies ignores customers entirely."

When the authors asserted that it is more feasible than ever to incorporate customer input, they were undoubtedly thinking about social media inputs. "Everyone, it seems, from your Aunt Millie to the corner grocer, to some of the largest corporations in the world, have Facebook, Twitter, or other social media accounts," writes Paul Teague ["Social media's time has come for procurement," Procurement Blog, 28 February 2011]. He continues:

"Many of your software suppliers have some visibility on Facebook. And, at least to a limited extent, direct-material suppliers like ArcelorMittal (employees have accounts), Dow Chemical, and IBM, as well as contract manufacturers like Flextronics, and distributors such as DigiKey have visibility there too. Maybe your own company has a presence on some social media site. Maybe you have a Facebook or Twitter account too. In business circles, there is plenty of talk about social media for marketing purposes. So, where are the stories of revolutionary procurement or supply chain advances due to social media? There are reports on the potential for using social media to get insight on demand, and, as Procurement Leaders recently reported, to encourage discussion about such important items as infrastructure. But there are many more possibilities. Procurement executives could use social media as one tool among others to check out suppliers, to collaborate with suppliers and other business partners, to facilitate benchmarking of best practices. No doubt, you can think of many more possibilities. ... But, as Procurement Leaders' Steve Hall says, having the technology and access isn't enough. You have to study it, decide on its advantages and 'want it' before you use it. The time has come to do the studies and start using the technology."

The final challenge identified by the IBM report is globalization. "Given the growing interdependence among economies worldwide," write the authors, "it's no surprise that globalization ranks as a top supply chain challenge." The kind of challenges that supply chain executives identify with globalization include: global sourcing, unreliable delivery, longer lead times and poor quality. Despite these "negatives," analysts insist that, so far, "the financial advantages of globalization of their markets and operations outweigh these negatives." With most analysts predicting that global economic growth will occur as a result of globalization's penetrating deeper into emerging market countries, companies that master the new landscape are the ones that will remain profitable and thrive. According to Ian Bremmer, "Emerging markets could propel a global boom comparable to the industrialization of the United States." ["Get Ready for a Growth Supercycle," Wall Street Journal, 2 March 2011] As I noted in a previous post, "If Bremmer is correct, a 'growth supercycle' could generate a flow of money that smart companies will try and get in front of."

Having identified the most oft-mentioned challenges being faced by supply chain executives, the authors of the study "envision a supply chain of the future that is far more" instrumented, interconnected, and intelligent. About the first of those characteristics, they write:

"Instrumented -- Information that was previously created by people will increasingly be machine-generated — flowing out of sensors, RFID tags, meters, actuators, GPS and more. Inventory will count itself. Containers will detect their contents. Pallets will report in if they end up in the wrong place."

For more on this topic, read my post entitled Two Views on the Future of RFID Tags. On the subject of interconnectedness, the authors write:

"Interconnected -- The entire supply chain will be connected — not just customers, suppliers and IT systems in general, but also parts, products and other smart objects used to monitor the supply chain. Extensive connectivity will enable worldwide networks of supply chains to plan and make decisions together."

That sounds a lot like the outside-in supply chain discussed above. This kind of supply chain has been given a lot of labels, such as: demand-driven; sense and respond; dynamic; living; and optimized. Whatever you decide to call it, it's connected. Concerning the final characteristic -- intelligent -- the authors write:

"Intelligent -- These supply chain decisions will also be much smarter. Advanced analytics and modeling will help decision makers evaluate alternatives against an incredibly complex and dynamic set of risks and constraints. And smarter systems will even make some decisions automatically — increasing responsiveness and limiting the need for human intervention."

To read more this subject, read my post entitled Supply Chain Analytics. In conclusion, the IBM analysts write:

"Building this kind of supply chain is a strategic undertaking; it implies a different role and set of responsibilities for supply chain executives. These executives must become strategic thinkers, collaborators and orchestrators who optimize complex networks of global capabilities. In their increasingly significant positions, Chief Supply Chain Officers have the mandate — and now the enablers — to create a Smarter Supply Chain of the Future."

To read more about what analysts are saying concerning the role of Chief Supply Chain Officers, read my posts entitled S&OP: Supply Chain's Foot in the Boardroom Door and Can Supply Chains Save the World? I agree with IBM analysts that supply chain executives must be strategic thinkers, collaborators and orchestrators. There is a lot more detail in the 72-page IBM report and it is worth reading in its entirety.

Brainstorming Lives On

In a previous post, I noted that many creativity gurus believe that anybody can become more creative if they are taught the right techniques. Like them I believe that normally uninspired people can help generate a range of solutions to challenges once they view those challenges from new perspectives. That is what the best creativity techniques do -- they help people see things differently. One technique that continues to receive support is brainstorming. Brainstorming is normally considered a group creativity technique. Its designed purpose is to generate a significant number of ideas for solving a problem in a short amount of time. According to Wikipedia, the method was first popularized in 1953 "by Alex Faickney Osborn in a book called Applied Imagination. Osborn proposed that groups could double their creative output with brainstorming." ["Brainstorming"] As it turns out, Osborn was wrong. Brainstorming was first proven not to work in 1958, "when Yale researchers found that the technique actually reduced a team's creative output." That research demonstrated that "the same number of people [could] generate more and better ideas separately than together." ["Forget Brainstorming," by Po Bronson and Ashley Merryman. Newsweek, 12 July 2010]. Bronson and Merryman continue:

"According to University of Oklahoma professor Michael Mumford, half of the commonly used techniques intended to spur creativity don't work, or even have a negative impact. As for most commercially available creativity training, Mumford doesn't mince words: it's 'garbage.' Whether for adults or kids, the worst of these programs focus solely on imagination exercises, expression of feelings, or imagery. They pander to an easy, unchallenging notion that all you have to do is let your natural creativity out of its shell."

The Wikipedia article confirms what Bronson and Merryman report about the traditional brainstorming technique. It goes on to reveal:

"Although brainstorming has become a popular group technique, when applied in a traditional group setting, researchers have not found evidence of its effectiveness for enhancing either quantity or quality of ideas generated. Because of such problems as distraction, social loafing, evaluation apprehension, and production blocking, conventional brainstorming groups are little more effective than other types of groups, and they are actually less effective than individuals working independently."

In a previous post, I noted several of the reasons mentioned above for the lack of brainstorming effectiveness. First, of course, is fear. People fear that others will think their ideas are stupid so they don't bring them up. A second impediment to brainstorming is even more significant. People have difficulty holding on to more than one thought. In most group settings, they have to hold on to a thought while waiting for their turn to bring it to the attention of the group. Only after they have let that thought go are they free to come up with other ideas. As a result, many people just ignore what's happening the in the group and write down all of their ideas so they don't forget them before rejoining the discussion. In other words, they turn group brainstorming into individual brainstorming. Despite the fact that brainstorming fails to live up to its billing, the term "brainstorm" has assumed a life of its own. It now represents the generation of ideas regardless of the setting or technique used. The imagery is great because it conjures up activity in the brain. According to the Wikipedia article, there are reasons that the technique has survived and continues to be used. It explains:

"Although traditional brainstorming does not increase the productivity of groups (as measured by the number of ideas generated), it may still provide benefits, such as boosting morale, enhancing work enjoyment, and improving team work."

The article goes on to note that there have been "numerous attempts ... made to improve brainstorming or use more effective variations of the basic technique. ... From these attempts to improve brainstorming, electronic brainstorming stands out. The positive effects of electronic brainstorming become more pronounced with group size." In previous posts that touched on this subject, I noted that two of my colleagues had extensive experience with electronic brainstorming. In that post, I wrote:

"There are systems that permit individual brainstorming and group dynamics to be used together. When my colleagues Tom Barnett and Bradd Hayes were professors at the Naval War College, they worked in a department that used groupware to capture ideas and foster discussion. Groupware permits participants to brainstorm individually (writing down ideas as quickly as they are conceived) and permits them to see others' ideas, which, in turn, can stimulate new thoughts as well. Groupware is not the end all and be all of creative thinking, but it has its place and has proved extremely useful when used to its full potential. One big caveat is that groupware, and the supporting IT equipment it requires, is not cheap and, therefore, not often available to most groups."

Kevin P. and Shawn T. Coyne, cofounders and managing directors of the Coyne Partnership, a boutique strategy consulting firm, agree that "most attempts at brainstorming are doomed." But they believe the technique can still prove useful, if you "start by asking better questions." ["Seven steps to better brainstorming," McKinsey Quarterly, March 2011] They explain:

"Traditional brainstorming is fast, furious, and ultimately shallow. By scrapping these traditional techniques for a more focused, question-based approach, senior managers can consistently coax better ideas from their teams."

As the title of the Coynes' article states, they offer seven steps that can help a company develop a question-based approach. They continue:

"All senior managers, at some point, experience the pain of pursuing new ideas by way of traditional brainstorming sessions—still the most common method of using groups to generate ideas at companies around the world. The scene is familiar: a group of people, often chosen largely for political reasons, begins by listening passively as a moderator (often an outsider who knows little about your business) urges you to 'Get creative!' and 'Think outside the box!' and cheerfully reminds you that 'There are no bad ideas!' The result? Some attendees remain stone-faced throughout the day, others contribute sporadically, and a few loudly dominate the session with their pet ideas. Ideas pop up randomly—some intriguing, many preposterous—but because the session has no structure, little momentum builds around any of them. At session's end, the group trundles off with a hazy idea of what, if anything, will happen next. 'Now we can get back to real work,' some whisper."

Admit it, they did a good job describing the traditional brainstorming session. Having observed over 200 projects at more than 150 companies, the Coynes assure us, "It doesn't have to be like this." The remainder of their article describes steps they've used in a "practical approach that captures the energy typically wasted in a traditional brainstorming session and steers it in a more productive direction. The trick is to leverage the way people actually think and work in creative problem-solving situations." They call their approach "brainsteering"; others have called similar approaches directed brainstorming. Although they warn that "it requires more preparation than traditional brainstorming, the results are worthwhile: better ideas in business situations as diverse as inventing new products and services, attracting new customers, designing more efficient business processes, or reducing costs, among others." They turn next to the first step:

"1. Know your organization's decision-making criteria -- One reason good ideas hatched in corporate brainstorming sessions often go nowhere is that they are beyond the scope of what the organization would ever be willing to consider. 'Think outside the box!' is an unhelpful exhortation if external circumstances or company policies create boxes that the organization truly must live within. Managers hoping to spark creative thinking in their teams should therefore start by understanding (and in some cases shaping) the real criteria the company will use to make decisions about the resulting ideas. ... A bank we know wasted a full day's worth of brainstorming because the session’s best ideas all required changing IT systems. Yet senior management—unbeknownst to the workshop planners—had recently 'locked down' the IT agenda for the next 18 months.' ... At a different, smarter bank, workshop planners collaborated with senior managers on a highly specific (and therefore highly valuable) definition tailored to meet immediate needs. Good ideas would require no more than $5,000 per branch in investment and would generate incremental profits quickly. Further, while three categories of ideas—new products, new sales approaches, and pricing changes—were welcome, senior management would balk at ideas that required new regulatory approvals. The result was a far more productive session delivering exactly what the company wanted: a fistful of ideas, in all three target categories, that were practical, affordable, and profitable within one fiscal year."

While that may sound like common sense, we all known that good sense is not as common as people would like to believe. I agree with the Coynes that having a clear objective is critical. I also agree that asking specific questions will lead to better solutions; which segues to the second step.

"2. Ask the right questions -- Decades of academic research shows that traditional, loosely structured brainstorming techniques ('Go for quantity—the greater the number of ideas, the greater the likelihood of winners!') are inferior to approaches that provide more structure. The best way we've found to provide it is to use questions as the platform for idea generation. In practice, this means building your workshop around a series of 'right questions' that your team will explore in small groups during a series of idea generation sessions. ... The trick is to identify questions with two characteristics. First, they should force your participants to take a new and unfamiliar perspective. ... The second characteristic of a right question is that it limits the conceptual space your team will explore, without being so restrictive that it forces particular answers or outcomes. It's easier to show such questions in practice than to describe them in theory. ... A health insurance provider looking to cut costs might ask, 'What complexity do we plan for daily that, if eliminated, would change the way we operate?' and 'In which areas is the efficiency of a given department "trapped" by outdated restrictions placed on it by company policies?'"

The Coynes recommend beginning brainstorming sessions "with 15 to 20 such questions" in your pocket. They stress, and I agree, that you should thoughtfully select and carefully word those questions. For example, one of the sample questions they provide for a consumer electronics company workshop is: "Who uses our product in ways we never expected?" An important follow-on question would be: "How do they use our product in unexpected ways?" You are likely to have a much richer conversation based on the second question than the first -- which could simply result in a list of customers. The next important thing you need to do is select the right people. The Coynes write:

"3. Choose the right people -- The rule here is simple: pick people who can answer the questions you're asking. As obvious as this sounds, it's not what happens in many traditional brainstorming sessions, where participants are often chosen with less regard for their specific knowledge than for their prominence on the org chart. Instead, choose participants with firsthand, 'in the trenches' knowledge."

On this point, the Coynes and I might have a slightly different viewpoint. Although I agree that you need some participants who work in the trenches, you should also consider including some decision-makers since ideas that don't receive executive support are dead. In addition, don't hesitate to bring in outsiders who know nothing about the company's day-to-day operations. The Coynes themselves noted the importance of changing perspectives if you want different answers. Sometimes it takes a smart outsider to help give you that perspective. The next step recommended by the Coynes is to divide large groups into small ones. They write:

"4. Divide and conquer -- To ensure fruitful discussions, ... don’t have your participants hold one continuous, rambling discussion among the entire group for several hours. Instead, have them conduct multiple, discrete, highly focused idea generation sessions among subgroups of three to five people—no fewer, no more. Each subgroup should focus on a single question for a full 30 minutes. Why three to five people? The social norm in groups of this size is to speak up, whereas the norm in a larger group is to stay quiet."

One of the interesting recommendations the Coynes make about deciding who should be in various groups is that "it's important to isolate 'idea crushers' in their own subgroup." This suggests, of course, that you have personal knowledge about each participant. In the "idea crushers" category, the Coynes place "bosses, 'big mouths,' and subject matter experts." Here's their thinking:

"The boss's presence, which often makes people hesitant to express unproven ideas, is particularly damaging if participants span multiple organizational levels. ('Speak up in front of my boss's boss? No, thanks!') Big mouths take up air time, intimidate the less confident, and give everyone else an excuse to be lazy. Subject matter experts can squelch new ideas because everyone defers to their presumed superior wisdom, even if they are biased or have incomplete knowledge of the issue at hand."

Be careful not to stereotype people. Not all bosses, talkers, and experts are idea crushers. The Coynes, however, believe in erring on the safe side because whether this group contains real idea crushers or not, they "will still be productive ... [because] they won't stop each other from speaking up." They recommend that each small group discuss no more than five questions in the time allotted. Their next recommendation involves controlling expectations. They continue:

"5. On your mark, get set, go! -- After your participants arrive, but before the division into subgroups, orient them so that your expectations about what they will—and won't—accomplish are clear. Remember, your team is accustomed to traditional brainstorming, where the flow of ideas is fast, furious, and ultimately shallow. ... Tell participants that if anyone thinks of a 'silver bullet' solution that's outside the scope of discussion, they should write it down and share it later. ... The going can feel slow at first, so reassure participants that by the end of the day, after all the subgroups have met several times, there will be no shortage of good ideas. ... One last warning: no matter how clever your participants, no matter how insightful your questions, the first five minutes of any subgroup's brainsteering session may feel like typical brainstorming as people test their pet ideas or rattle off superficial new ones. But participants should persevere. Better thinking soon emerges as the subgroups try to improve shallow ideas while sticking to the assigned questions."

One way to keep subgroups on task is to assign a group spokesperson (i.e., an individual who is going to report on the subgroup's discussion to the rest of the participants). The "spokesperson" will feel compelled to keep others on track without the others feeling that he or she was somehow placed in charge of the group. All participants should feel that their opinions are as important as any other individual's. The next recommendation talks about how to end discussions after you've stimulated them all day long.

"6. Wrap it up -- By day's end, a typical subgroup has produced perhaps 15 interesting ideas for further exploration. You've been running multiple subgroups simultaneously, so your 20-person team has collectively generated up to 60 ideas. What now? One thing not to do is have the full group choose the best ideas from the pile, as is common in traditional brainstorming. In our experience, your attendees won't always have an executive-level understanding of the criteria and considerations that must go into prioritizing ideas for actual investment. The experience of picking winners can also be demotivating, particularly if the real decision makers overrule the group's favorite choices later. Instead, have each subgroup privately narrow its own list of ideas to a top few and then share all the leading ideas with the full group to motivate and inspire participants."

No one likes believing they have wasted their time, so the Coynes recommend that before dismissing the group you "describe to them exactly what steps will be taken to choose the winning ideas and how they will learn about the final decisions." Part of ensuring that participants feel like their efforts were worthwhile is getting back to them with results -- which is the Coynes' final step.

"7. Follow up quickly -- Decisions and other follow-up activities should be quick and thorough. Of course, we're not suggesting that uninformed or insufficiently researched conclusions should be reached about ideas dreamed up only hours earlier. But the odds that concrete action will result from an idea generation exercise tend to decline quickly as time passes and momentum fades."

The Coynes note that feedback is critical "even when an idea was rejected." They explain that "by respectfully explaining why certain ideas were rejected, you can help team members produce better ideas next time. In our experience, they will participate next time, often more eagerly than ever." Directed brainstorming is like the "deep dive" process that so-called "idea factories" use to help clients come up with solutions to challenges. The Coynes offer a lot of good suggestions that, if followed, will produce better results than traditional brainstorming methods.

Can Supply Chains Save the World?

"Five years ago," writes Kevin O'Marah from Gartner, "we published a book called 'Supply Chain Saves the World.' The idea was that at least three existential problems facing humankind — environmental sustainability, affordable healthcare and emerging market development — could be tackled with large doses of supply chain strategy and technology." ["Supply Chain Saves the World 2.0," Supply Chain Brain, 18 January 2011]. Since these are all topics that I've covered extensively since I began writing this blog, I was drawn to what O'Marah had to say. O'Marah asserts that supply chain professionals pursue these objectives in reverse order: wealth first (i.e., development); health second, and environmental sustainability last. He explains:

"The first dimension we work toward is wealth. In doing our daily chores to lean the inventory, minimize empty miles and eliminate waste, we're steadily bringing more stuff to more people at lower costs. Market saturation drives us to innovate either with better stuff or the same stuff at lower costs. Improvement in either means more income in the aggregate. When we reach what once were 'third-world' customers and make a profit doing so, everyone wins. For an exhaustive discussion of this dynamic, see C.K. Prahalad's 'The Fortune at the Bottom of the Pyramid.' The key, of course, is respect. Whether buying from or selling to, supply chain engagement in emerging markets creates wealth by finding partners, not victims."

As I've pointed out repeatedly over the past couple of years, most analysts believe that emerging and growth market countries are going to lead the world in economic growth over the next few decades. Companies are actively pursuing consumers in the emerging global middle class as well as those who the late C.K. Prahalad called the bottom billion. O'Marah next turns to health.

"Wealth begets health. But if the experience of the United States is any guide, paying for it seems increasingly problematic. Enter again the supply chain. I have argued that the productivity gains that run regularly in the 3-percent to 6-percent range in all other industries should be readily available in healthcare. At least from a systems engineering standpoint, this must be true. It's the same raw materials, same production assets and same distribution networks, so why not the same learning curve? Without touching policy and admitting that the demand drivers are different in healthcare, I still believe ... we can crack this nut. Call it faith in supply chain over politicians."

O'Marah is not alone in this assessment. Joel Haspel, CEO of international healthcare supply chain management specialists Sentient Health, believes that there is one area where healthcare executives "can take immediate action which will yield savings and increase efficiency and that's in supply chain management." ["CEO of Sentient Health on the NHS' procurement challenge," Procurement Blog, 30 March 2011]. He writes:

"A recent NHS [National Health Service] Confederation poll found that 63% of its members see cost savings and finances as their biggest challenge. ... [Because supply chain management is] not a sleek and sexy subject, ... it has tended to be overlooked during financially better times. But right now the gains that can be made from a modernised approach to ordering, stocking and distributing clinical supplies look increasingly attractive. ... It's not a panacea, but it does make a genuine difference. And what's more it's relatively easy and quick to achieve — and at the moment every healthcare provider must be yearning for some low-hanging fruit to pluck."

Finally, O'Marah turns to how the supply chain can help the environment. He writes:

"'What if everyone on earth consumed like Americans?' is often asked to clearly show how we're marching toward oblivion. I don't buy that. First off, who says everyone, including Americans, wants to consume like Americans? Check out The Biggest Loser on TV sometime to see how silly that notion sounds to the wise. Second, environmental sustainability boils down to resource efficiency, and whether the resource is water, oil, biomass or whatever, we've always learned to work around the bottleneck — and there's no reason to stop now. Carbon pricing, regulatory costs and even consumer behavior are changing the equation from earth as externality to earth as partner in the course of a single lifetime. Add the carrot of money to be made with venture-backed, clean-tech start-ups or corporate redirects exemplified by the likes of General Electric and IBM, and it seems more than likely we'll find a pony in this pile, too."

If you want read more about environmental sustainability, my most recent posts on the subject include: Going Green: Cradle to Cradle Supply Chain, and Supply Chains: Green and Sustainable, Part 1 and Part 2. Adrian Gonzalez claims, "Industry leaders of tomorrow will compete not only on cost, service, and quality, but also on 'greeness.'" ["'Green' Supply Chains: Beyond the Early Adopter Stage?," Logistics Viewpoints, 9 March 2011] He explains:

"We’ve come from the 'early' early adopter stage to the 'late' early adopter stage. In other words, there's been continued, steady progress in the number of companies that are getting involved in green supply chain initiatives, but the absolute number is still very small. According to the recently-published 'State of Green Business 2011' report by Joel Makower and the editors of GreenBiz.com, 350 of the S&P 500 companies responded to the Carbon Disclosure Project in 2010, up from 235 companies in 2006. And the number of sustainability-related reports filed by S&P 500 companies has also risen since 2005. But as the authors note, 'a smaller percentage of U.S. firms [compared to global peers] have board-­level oversight of climate issues, fewer offer management incentives to reduce carbon emissions, and they are less likely to view climate change as a regulatory risk.' The bottom line: The early adopters have continued to expand their focus and activities in this area, even during the recession, and more large companies have launched initiatives, but these active companies remain the exception rather than the rule.

"The conversation has moved beyond carbon emissions and climate change. And that is a very good thing. The link between carbon emissions and climate change was (and still is) a lightning rod for debate, especially in the political realm where heated discussions about cap-and-trade legislation and EPA regulations continue. While politicians remain anchored and hyper-focused on carbon emissions, many companies in the private sector have moved on, expanding their sustainability focus to other areas, such as water footprinting (see 'SABMiller: Water Footprinting the Beer Value Chain'). As I noted in that blog posting, 'Water is different than carbon. It's tangible, whereas carbon is not. Water impacts our daily lives: we drink it, bathe in it, fish in it, cook with it, etc. But an estimated 1.2 billion people in the world lack access to clean water. Mess with scarce water supplies, and you'll get a strong response from people.' Companies are also paying more attention to how they source and use other natural resources, such as rare-earth metals and 'conflict metals,' and sustainability is even making inroads in product development (see 'Sustainability Initiatives at GlaxoSmithKline'). Simply put, while carbon emissions remains an important factor in green supply chain management, it (along with climate change) no longer dominates the conversation.

"Transportation-related initiatives remain a low-hanging fruit opportunity for companies. As I noted back in December, a growing number of companies are using or testing electric and hybrid fleet vehicles. For example, BT in the United Kingdom is testing electric vans as part of its fleet. In November, General Electric announced that it was buying 25,000 electric vehicles by 2015 for its corporate fleet and to lease to customers. And just last month, UPS announced that it had purchased another 48 heavy tractor trucks equipped to run on Liquefied Natural Gas (LNG). With gasoline prices on the rise, companies will intensify their efforts to eliminate trucks and miles from their transportation networks. Some will invest in a transportation management system, others will use more rail and intermodal, and some will follow in the footsteps of Del Monte Foods and achieve transportation and sustainability benefits via packaging innovation (see 'Del Monte Foods: Packaging, Transportation, and Sustainability')."

In each of the areas discussed above, O'Marah argues that supply chain professionals can make a difference. He continues:

"Supply chain people are doing what no one else can: spreading the wealth. Scientists and engineers may find the molecule, material or mechanism that delivers goodness, but [the] supply chain gets it to everyone in volume. Marketers and salespeople may create and close the deal, but supply chain delivers and closes the loop. Every time you cut a day out of inventory or a mile out of the route, you're taking a step toward the healthy, wealthy world [that Hans Rosling describes in the following video]."

O'Marah concludes:

"The jumps Rosling describes in both health and wealth are mind-boggling, even if you look only at Europe and North America. More impressive, however, is the sudden shift of fortune from the Western economies, which had a near monopoly on the good life as of 1948, to the rest of the world, which has rapidly closed the gap on both dimensions. Still lagging, of course, is Africa, but even here the drum beats steadily, with the 13 January 2011 edition of The Wall Street Journal featuring a front-page story on the continent's surging consumer economy. The long view offered by Rosling's work provides a 'true north' to those of us looking for something bigger than a bit more margin."

O'Marah is not alone in his assessment that supply chain professionals can save the world. Lauren Bossers also sees supply chain professionals as superheroes ["The supply chain manager as superhero," The 21st Century Supply Chain, 12 January 2011]. She writes:

"For those of us who work in supply chain management and its related industries, it can be a real challenge to easily describe to others what we do. Despite the fact that supply chain management touches each of our lives on a daily basis, it can often be difficult for outsiders to grasp—and for the experts to explain in a way that is easily understood. Demystifying the industry, the Department of Supply Chain Management at Arizona State University’s W.P. Carey School of Business created a great series of videos to explain exactly what supply chain management is. The concepts are delivered in a way that is easily digestible (and humorous). The supply chain manager is repeatedly positioned as a superhero with a cape, someone that children aspire to become. This type of message is exactly what the industry needs to attract more people to the field of supply chain management, a challenge that only looms larger as we enter 2011."

Bossers' article provides links to all the videos. She goes on to note that "a December 27, 2010 Fortune magazine article calls supply chain management '2011's hottest job you never thought of,' in addition to stating that the industry currently has a shortage of qualified managers and 'a decidedly unglamorous image.'" If you'd like to be a superhero, check out the videos and see if supply chain management is the career for you. Who knows, the tag line for future television series might be, "Save the supply chain manager and save the world!"

Supply Chain Security

When the topic of supply chain security is raised, the two sources of insecurity that are mentioned most frequently in the press are terrorists and pirates. In two previous posts on this topic (Terrorism and the Supply Chain and Supply Chain Resilience and Supply Chain Security), I focused mostly on terrorism. The fact of the matter is, however, that terrorism and piracy aren't the greatest sources of disruption or loss in the supply chain. They draw the headlines because people fear them and fear sells papers. Another reason that terrorism and piracy grab headlines is because people expect governments to deal with them. If a company suffers a loss because its IT system is hacked or because it is duped by someone who forged documents, most people consider that a "personal problem" rather than a national security problem.

Cliff Holste, Supply Chain Digest's Material Handling Editor, asserts that supply chain cybersecurity is one area that companies simply can't afford to overlook. Last February he penned an article entitled "The Question Is Not 'IF' Your System Will Be Hacked Into, But 'WHEN'." [25 February 2011] In that piece, he wrote:

"Computing system security is a huge problem and ... security is everyone's business, not just your IT departments. That's a point worth taking the time to contemplate, because security is like a chain and those individuals bent on causing trouble will find and exploit the weakest link. 'The ZeuS Compromise' may sound like a great movie, but it's actually a newly uncovered, massive hacking network – and it's a doozy. According to a recent news report, it has already affected more than 74,000 PCs in 2,400 business and government systems around the world. The computers were infected with spyware called ZenS, which is freely available on the Internet. But worse, the security analysts who detected the underground network believe the criminals behind it aren't even after money. Instead they have built a secret underground network to rent out to gangs, cybercrooks, and even rogue governments. The threat is global and constantly growing. Toralv Dirro, a security strategist with McAfee, points out that there are 'a few thousands' of such networks (referred to as botnets). He said that, 'With 75,000 machines, The ZeuS Compromise is a big botnet, but we've seen much bigger, unfortunately.' According to Dirro, around 4 million new computers are being added to these botnets each month. Companies need to be aware that not just consumer machines but users inside corporate networks are becoming part of these networks. He hopes these latest revelations inspire companies to become more proactive about protection."

Holste points out that cybersecurity must be an important part of any company's business continuity plan. "A key objective of any security system," he writes, "is to ensure that business processes continually function." Security in general must be part of any business continuity and disaster recovery plan. In another article, Holste writes:

"Security, whether you think it's too much or not enough, is front and center on everyone's mind these days, and for good reasons. If there's one crucial point to be made about security, it is that it can't be 'security-light.' You can't have the illusion of security, as in mounting cameras on your dock that you never turn on or view. Nor can there be just the perception of security, as in hand searching through carryon bags, and removing miniature pocket knives that contain a scissors, nail file and plastic tooth pick (I really hate having to give up such a handy, harmless travel aid!). Systems with the function of security must be real." ["Good Security Is All About Planning, Execution, And Paying Attention to Details," Supply Chain Digest, 10 February 2011]

A good security consultant can help your business determine what it needs to ensure robust security. Every business is different so trying to present a one-size-fits-all plan would be fruitless. I would, therefore, like to spend the remainder of this post discussing more general security issues, including terrorism, that continue to find their way into the media. Because international supply chains are affected by security policies and circumstances in different countries, supply chain professionals must be vigilant. They don't want their company or their processes to be the weak link in the chain that permits the unthinkable to happen. On the other hand, they don't want security procedures to be so onerous that they become a burden whose cost can't be borne. We all know that security doesn't come free; but Holste insists that it is a cost that must be covered ["Supply Chain Security – A Cost We Must Bear," Supply Chain Digest, 19 January 2011]. He writes:

"Security of the supply chain is an important concern for all trading companies small or large, domestic or international. ... Distributors, especially those with global reach, must become proactive in security planning. The increasing frequency of terrorism as well as security breaches occurring abroad and domestically has driven awareness to new levels. ... Supply chain security starts with an organization’s developing a security awareness culture. ... Employees at all levels should be educated on potential threats to the supply chain and provided the means to counter these threats. Conversely, organizations should solicit input from employees on vulnerabilities they see. Periodic security inspections should be conducted to ensure all within an organization are in compliance with security measures. ... Vulnerabilities in the supply chain cannot only cost a company monetary and human resources, but they can threaten the security of the nation. A well-coordinated and effective effort protecting our supply chains is a cost we must bear."

The challenge for supply chain professionals involved is that they deal with enormous quantities of goods. So, they not only have to deal with daily security challenges (like pilfering, theft, and fraud), they have to deal with consequences of potential challenges (like piracy, terrorism, and natural disasters). When assessing risk, analysts normally begin by looking at two factors: the likelihood that an event will occur and the potential consequences if it does. Often events that have the highest likelihood have the lowest consequences and events having the lowest likelihood have the highest consequences. That presents a real conundrum for planners. Holste has some thoughts along those lines as well. In the second of his articles noted above, he writes:

"Sometimes, good security is no more difficult than actually executing the plan. Maybe that's all that needs to be done; just develop a good plan and actually execute it. Attend to the details! We've been sloppy in the past, taking for granted that we are immune to attack or that a few billion dollars in 'shrinkage' is an acceptable loss. Now, a new report from FreightWatch International finds that truck cargo thefts in the US increased substantially in 2009, just as they did in 2008. ... Well, now we know better, but that doesn't mean we need to go overboard to improve security. After the shoe bomber – everyone has to remove their shoes, which are then put through a scanner; and, after the recent Christmas Day underwear bomber – everyone will eventually have to submit to a full body X-Ray scan, and once on the plane, there will be no lavatory privileges the last hour of the flight. Does this really make it safer to fly? Maybe all we need in airports, at cargo ports, truck stops and freight terminals, in warehouses and DCs is to analyze our vulnerabilities, develop a plan to eliminate or protect those vulnerabilities, and effectively execute that plan. The key word is effectively."

I don't believe that Holste means to imply that creating and implementing an effective plan is an easy thing to do. It isn't. In another article, the editorial staff at Supply Chain Digest lays out the enormity of the challenge in maritime shipping industry and the status of some of the government programs aimed at improving supply chain security ["The Complex World of Cargo Security and Government Programs and Standards," 2 November 2010]. The article reports:

"Approximately 9.8 million cargo containers arrived at US ports in 2009, and just a fraction received much in the way of inspection, with a multiple-layer security protocol in place to protect security that primarily relies on trusted partners and identifying shipments that may be worrisome through receipt of advanced information about who is shipping what where. The US Customs and Border Protection (CBP) is responsible for administering container security and reducing the vulnerabilities associated with the supply chain. But, the report notes, 'As it performs this mission, CBP maintains two overarching and sometimes conflicting goals—increasing security while efficiently facilitating legitimate trade.' This is especially challenging given the number of players and touch points usually involved in cargo movement from some part of the globe into the US. In turn, to enhance container security, CBP has partnered with Dept. of Homeland Security's Science and Technology (S&T) Directorate to develop performance standards and requirements that must be met by products to ensure they will function as intended relative for container security technologies. The report notes that in addition to a number of existing programs, there are four new programs involving new technologies and standards currently in some form of progress, as shown in the graphic below." (Click to enlarge image.)

The article goes to note that work progresses slowly because of the complexities and tensions involved. The challenges involved in air cargo security aren't quite as daunting as those facing the maritime arena, but they are nonetheless significant. ["Easing the Burden of Air Cargo Security Compliance and Reporting," by Cindy Yamamoto, Logistics Viewpoints, 3 March 2011]. Yamamoto, the Senior Vice President for Product Strategy at Descartes, writes:

"While governments around the world have become increasingly vigilant about air cargo security and compliance, freight forwarders and air carriers have always understood that these are critical areas of concern. Increased demands in terms of visibility and reporting requirements have led to far more complex processes and, without the right technologies and tools in place, these processes can become alarmingly inefficient. Today, freight forwarders are grappling with a number of process challenges as they strive to meet the performance metrics that their customers demand. Many lack real-time visibility into the status of their cargo shipments. Further, since their customers are the owners of the underlying supply chain data, freight forwarders face challenges in accessing, filing and amending regulatory filings in a timely manner that is consistent with the important confidentiality concerns of regulators and the customer. This is further complicated by the fact that freight forwarders can carry an administrative cost burden of between $2 and $9 a shipment associated with filing critical documents, which means any errors, omissions or delays can become costly."

Yamamoto goes on to suggest "some simple steps to address complex challenges." Her "bottom line is that on-demand logistics management solutions provide an affordable and highly effective way for freight forwarders to address the increasing challenges of moving cargo across borders while ensuring customer satisfaction." One the things that comes through clearly in all of these discussions is that improved information sharing is necessary to foster improved security throughout complex supply chains. The dilemma is that many stakeholders believe that increasing data sharing increases cybersecurity risks. Fortunately, there are new technologies that greatly reduce such risks (such as attribute-based access control and other secure information sharing techniques). As Holste asserts, however, good security starts with a good plan. It continues with good execution and attention to detail. I daresay that carelessness is the greatest risk that supply chains face.

Supply Chain Flexibility and Transparency

Flexibility and transparency are two terms that are oft-mentioned during discussions about supply chains. In an interview with Daniel Schäfer, Martin Raab, head of supply chain management at Capgemini, asserted, "A lot of companies are currently thinking about ways to make their supply chains more transparent and flexible by further centralising them and digitalising the relevant information ... as purchasing often adds up to 60 to 80 per cent of overall costs, this is something where you can save very much, very fast." ["A stronger chain of command," Financial Times, 11 October 2011] Saving money by becoming more efficient is obviously a desirable goal. Schäfer begins his article with the story of Barbara Kux, who, in late 2008, was hired by Siemens to head its newly created supply chain management organization. He continues:

"She soon discovered how badly her appointment had been needed. On evaluating Siemens' supplier base, she was astonished to discover that Europe's largest engineering company listed some of its 113,000 suppliers several times in its purchasing databases. The discovery laid bare the lack of transparency and the inefficiencies in the group's decentralised purchasing system. Ms Kux's experience will be familiar to many large and medium-sized industrial companies with gargantuan but cost-saving potential hidden in dispersed purchasing departments. While last year’s economic crisis forced companies to concentrate on short-term working capital reductions such as bringing down inventory levels, the recovery is prompting many to implement broader improvements in the supply chain. A recent global study by Capgemini, the consultancy, revealed that improvement of customer service and supply chain processes have replaced the economic downturn at the top of supply chain managers' agenda."

Clearly technology can play an important role in helping eliminate problems, like redundant vendor listings, and with making the supply chain purchasing process more transparent. Schäfer notes that "unlike the many plant closures or restructuring programmes initiated during the economic crisis, improvements in the supply chain do not take years to make a difference to profits." He asserts that board-level appointments for supply chain professionals "is unusual in a country where responsibility for supply chains is seldom represented at such senior level"; but Germany need not be singled out in this regard. For more on this subject, read my post entitled S&OP: Supply Chain's Foot in the Boardroom Door. Schäfer suggests that "Siemens' approach is ... a good example of supply chain reform." He reports that Siemens based it reform on "three main pillars" -- increased centralized procurement, increased low-cost sourcing, and a reduced number of suppliers. He continues:

"The first lever is to bundle a bigger amount of purchasing volume. ... The biggest and fastest synergies can be reaped by centralising purchasing of 'indirect materials' that are not directly used for making products. Siemens spends €11bn ($15bn) each year on such materials – from pencils to fork lifts – and it has recently appointed a senior executive responsible for centralising these purchases. When it comes to direct materials, however, the process is much slower and more difficult. At the start, Siemens defined 20 material groups, such as plastics, cables, copper, castings, metal and mechanical parts, and it is now simplifying and harmonising specifications for centralised purchasing."

If you decide to transform from decentralized to centralized purchasing, expect some pushback from those who feel that they are losing control over their programs. You need to be able to make a business case that demonstrates that their profit margins will increase as a result of the change. An IBM study also stresses that creating value is important ["New rules for a new decade," by Karen Butner, IBM Institute for Business Value, October 2010]. The report concludes:

"There is, and seemingly always has been, constant pressure for supply chain management and operations to create enterprise value. End-to-end supply chain cost and pipeline inventory optimization are predominant challenges, as well as the means for protecting margin and decreasing working capital."

The greatest challenge in creating end-to-end enterprise value, Butner asserts, is not implementing the right technology but hiring the right people. She explains:

"Securing and deploying the right talent and skills for global operations remains a critical concern. The talent vacuum is most acutely felt in emerging markets, with nearly nine out of ten executives citing this as a challenge. The business risks associated with insufficient leadership talent is exposed in decreased cost efficiencies, inventory deployment, and in managing regional and local operations with partners. Managing risks and disruptions with global partners at each node is increasingly important. As supply chains become more complex and interdependent, managers must find a way to offset growing complexity with increased flexibility."

When it comes to supply chain management, professionals must always keep in mind its three most important factors are: people, processes, and technology. Note that Butner specifically discusses the importance of flexibility and implies the importance of transparency (which is required to manage risks and disruptions with global partners). Turning to the second lever or pillar of Siemens' supply chain transformation (i.e., increased low-cost sourcing), Schäfer writes:

"Bringing purchasing closer to Siemens' markets is ... an element of the second lever: a further push into low-cost sourcing by increasing the purchasing value from emerging markets by 5 percentage points to 25 per cent in the medium term. 'We don’t call this low-cost sourcing but global value sourcing, because this is not only about costs but also about quality. There is a lot of value to be gained in places like China and India,' Ms Kux says. But to achieve this, Siemens is not only working closely with local suppliers from emerging markets. It also offers partnerships to some of its smaller German suppliers to help them gain a foothold in China, since many of them lack the resources to do so on their own."

The editorial staff at Supply Chain Digest noted last year that most companies expected "no sourcing changes, [but of those companies that did expect changes], many were looking to Mexico and Asia outside of China." ["Changes in Global Sourcing Plans," 18 June 2010] The staff offered the following graphic to back up its assertions.

Supply chain analyst Bob Ferrari asserts that companies need flexible sourcing processes ["The Landscape for Sourcing in China and Other Countries is Once Again Changing," Supply Chain Matters, 10 March 2011]. He writes:

"There are some important considerations that readers should ponder in these quickly changing forces. First, sourcing and supply chain planning teams will need to have more sophisticated analytical tools to analyze their options. ... If there is one significant lesson that can be derived from sourcing decisions made in the past is that sourcing teams cannot just view direct labor costs as a sole determinant in any sourcing decision. There will always be a need to balance considerations for transportation with corresponding needs for servicing geographic fulfillment, including China itself. Another consideration is the speed of which the analysis, actual decision, and re-deployment takes place. The ability to shift sourcing quicker than the competition can be an important competitive advantage, while having flexible options may be another factor in assessing options and industry competitiveness factors."

Turning to the final pillar of Siemens' supply chain transformation strategy (i.e., reduced number of suppliers), Schäfer writes:

"While some suppliers receive such support, others have been dropped in an effort to streamline the supply chain. Ms Kux's teams have been combing through Siemens' supplier accounts in the past two years with the aim of reducing the number from 113,000 to about 90,000. The engineering group has also identified key suppliers for the future, with which it will work closely. 'The future will not be Siemens against other companies but the best networks competing against each other. The company that will have the closest relationships with the best partners will have an immense and sustainable competitive advantage,' Ms Kux says."

I have noted in several past posts that I believe the real competition is between supply chains not between companies. Apparently Siemens is coming to believe that as well. How to deal with suppliers is an important part of any company's business continuity/disaster recovery plans. To read more about how some company's do this, read my post entitled Supply Chain Risk Management and Disaster Mitigation: Part 3. Martin Raab told Schäfer that supply chain reform "can improve operating profit margins by up to 10 percentage points. "In extreme examples," he says, "a company can see its Ebit [earnings before interest and taxes] margin quadruple from 3 per cent to 13 per cent." There is a caution here. Analysts like Bob Ferrari warn that companies should be careful about trying to make supply chains too lean because it is easy to cut through the fat and start cutting into the muscle needed to keep a supply robust enough to be flexible and adaptable. Supply chain disruptions caused by the catastrophe in Japan has a lot of companies wondering if they haven't become a bit too lean when it come to sourcing and suppliers. Having said that, it is nevertheless looking at your supply chain to see if efficiencies are available that could help your company gain immediate and substantial savings.

Supply Chain S&OP Technology

In a post entitled S&OP: Supply Chain's Foot in the Boardroom Door, I referred to an article by Karin L. Bursa, Vice President of Marketing at Logility, in which she discusses the importance of people, process and technology in creating a successful S&OP program. ["A Foundation for Successful S&OP," Supply Chain Digest, 10 February 2011]. She writes:

"Although technology is an important enabler for S&OP, technology alone is not the answer to building a successful program. In a 2009 AMR Research report, Lora Cecere highlighted this fact when she wrote, 'Successful S&OP projects focus 50% of their efforts on change management, 40% on process alignment, and 10% on the implementation of technology.' This trio of people, process and technology, is the foundation for success."

In the post mentioned above, I primarily focused on the importance of people. In this post, I would like to focus more on technology -- what Bursa calls the "enabler for S&OP." She continues:

"I like to view technology as the glue that brings together the people and process. The right software solution can significantly improve the quality and integrity of data to create a comprehensive plan that can be evaluated based on multiple units of measure (financial, volumetric, etc.), provide visibility into the future and drive the ability to evaluate multiple scenarios. The right tools also allow you to close the loop on the process, to ensure the agreed upon plan can be easily incorporated back into the supply chain, be repeatable and yet flexible enough to evolve as the business grows."

Nari Viswanathan, Vice President and principal analyst at Aberdeen Group, insists that more and better technology is needed in the S&OP arena because too many companies are simply utilizing spreadsheets. ["S&OP Is Key Enabler for Managing Complexity within Global Supply Chains," Supply Chain Brain, 25 February 2011]. He writes:

"In 2011, expect to see a more rapid adoption of technology for automating S&OP-related processes. ... [An Aberdeen study revealed that] 84 percent of overall respondents ... are using spreadsheets to support the enablement of the S&OP process. Fifty-two percent of respondents indicate the usage of integrated ERP modules. Twenty-one percent of these respondents indicate the use of best-of-breed solutions whereas 31 percent still utilize custom legacy systems. Thirty-eight percent of respondents utilize business intelligence solutions. The variety of technology adoption approaches is due to the fundamentally inter-disciplinary and customized nature of the S&OP process for each organization."

Nick Allen, referring the Aberdeen study, laments the fact that "most companies still use an Excel spreadsheet to run their S&OP." ["Piecing together the plan," Supply Chain Standard, 1 February 2011]. He believes that companies can and must do better because "sales and operations planning is a critical process for most businesses - ensuring that corporate aims are put into effect." Allen continues:

"Gaining visibility of future demand and accurately planning to match that expected demand is one of the most challenging aspects of supply chain management. What has made this task infinitely more difficult in recent years has been the unpredictable nature of demand in a recovering global economy. Planning against previous years' figures is little use when markets have fallen away and demand is erratic. When cash is tight no-one wants to be caught out holding excessive amounts of inventory. But then, if demand picks up, no-one wants to miss the sale."

Technological tools can help move S&OP processes fully into the information age. Fortunately, Allen reports, "There is a growing acceptance of systems that automate this process and make the data visible across the organisation. A recent supply chain management survey, conducted by AMR Research, found that 88 per cent of respondents were already using or planning to deploy an S&OP solution in the next 12 months." Interestingly, the capability most desired by business executives, according to Allen, is the ability to conduct better "what if" simulations. For more on that top, read my posts entitled Modeling "What If" Scenarios and Examining the "What Ifs" in Life.

I suspect that one reason so many companies still use spreadsheets in their S&OP process instead of more sophisticated software solutions is because they have been stung in the past implementing software that promised and cost a lot without delivering a good return on investment. Supply chain analyst Bob Ferrari posted a two-part series about "How to Evaluate Technology Supporting Sales and Operations Planning" [Part One and Part Two, Supply Chain Matters, 20 and 22 February 2011]. Ferrari admits that there are mixed opinions about "whether an S&OP process can be implemented or effectively sustained without the support of dedicated technology." Nick Allen, for example, notes that Martin Green, managing consultant at Unipart Expert Practices, isn't "convinced that expensive software is entirely necessary for efficient S&OP." Ferrari seems convinced, however, that companies reliant on global supply chains can't possibly conduct beneficial planning if they don't utilize technology to help them deal with the complexity they face. He notes three characteristics of the modern supply chain that lead him to that conclusion. First, "many industry supply chains today are either highly outsourced for supply, or have key customers and markets spread globally." Second, "the clock speed and volatility of business has increased rather dramatically." Finally, "disruptions to business and supply chain activities have also dramatically risen." He continues:

"Within this 'new normal' of global based business today, there remains the four classic 'levers' for supply chain teams to manage supply chains. They are:

• Improving the overall visibility to what is happening at all levels of the value-chain
• Increasing the speed and accuracy of decision-making concerning inventory, production, capacity and other decisions
• Fostering more agility, flexibility and alignment among supply chain business processes
• Being more innovative and adaptable to changing business conditions and needs

"Supply chain teams [that] are considering whether technology augmentation is a requirement for their current or future S&OP process should context this need within the four levers noted above. Are your value-chain activities outsourced and manifested by constantly changing product demand or supply situations? Do you need to accelerate or improve decision-making across external trading partners, where product complexity, geographic distance or time constraints present challenges? Does the existing S&OP process need to be enhanced toward broader objectives and process participants? Finally, there is a new consideration that should be evaluated when evaluating technology assistance. In this new global and social-oriented era, more key data is unstructured in nature. What we mean by unstructured is information presented in email exchanges, S&OP related teleconferences or in-person meetings. Other key information can exist on the global web, such as long-term weather or climatic information, or information sourced in external trading partner sources. If these conditions described above are your challenge, than we recommend you consider some form of advanced technology augmentation."

I'm pleased that Ferrari mentioned the fact that much of the important information needed to manage today's supply chains comes in the form of unstructured data. That is one area in which my company, Enterra Solutions, does a lot of work. Ferrari concludes his introductory post this way:

"The good news in this area is that new developments in in-memory technology, cloud-computing and business intelligence tools have caused many software vendors to dedicate more development and applications specifically addressed to augmenting S&OP processes."

To learn more about the importance of business intelligence (or business analytics), read my post entitled Supply Chain Analytics. Having set the stage by discussing why technology is needed to improve S&OP processes, Ferrari, in his second post, offers "guidelines to help ... evaluate technology offerings, along with some guidance on weighting criteria." He continues:

"First and foremost, we recommend that you spend time to define the desired S&OP end state, the 'should-be' vs. the current 'what-is', but we also hasten to add that teams should breakdown the end-state into phased, incremental stepping-stones to the end state. Each phase should include the process, people, and technology enablement changes required to complete that phase."

I'm glad Ferrari's first guideline includes a reminder that S&OP isn't just about technology. He reiterates what Bursa told us earlier, the "trio of people, process and technology, is the foundation for success." Ferrari continues:

"When evaluating dedicated S&OP technology, teams should evaluate overall functionality needs in reference to the end-state, which addresses which technology vendors have the capabilities and resources that can support the achievement of the final objective. This also helps in the evaluation of overall cost vs. quantitative benefits desired. That stated, another important consideration will be the vendor's resources, flexibility, implementation and partner ecosystem capabilities to support each of the phases of transformation, without major disruption to existing processes. S&OP is not the sole purview of the major ERP vendors, and in many cases today, more of the technology innovation in this area has come from specialty vendors."

I know when we talk with clients that they are concerned about process disruption. That is why my company offers solutions that cause little or no disruption to operations and are ambivalent about any legacy systems that may be in place. Our solutions complement rather than replace existing IT systems. Ferrari continues:

"In the overall laundry list of desired functionality, we would submit that the most important criteria to weigh, aside to overall cost, will be application ease-of-use. We state that for a number of reasons. The S&OP process by its nature, involves a multitude of participants representing internal, and increasingly, external trading partners. Participants will not embrace technology if they perceive it is too difficult to use, too rigid and inflexible, or if they do not understand what the information represents. Each of the S&OP team participants, spanning cross-functional to executive level, will have their desired level of 'useability' criteria, and it is important for evaluation teams to weigh these criteria in the ultimate selection."

Ferrari makes a really important point. If a system is not user-friendly, it won't be used (or will be used by just a handful of specialists). As I have pointed out in past posts on S&OP, one of the benefits of a good S&OP process is that it enhances collaboration and breaks down silos. User-unfriendly technology can hurt collaboration and raise barriers -- just the opposite of what you should be trying to accomplish. Ferrari then provides a list of other "important criteria" he believes you should consider. They are:

• Role-based useability features, with the ability of a process participant to easily configure the application to their specific role or involvement within the S&OP process. It is rather important that the application include visualization tools to summarize large amounts of information or key-in on significant root-cause trends. Easily configurable dashboards or user screens are important.
• Bring multiple externally based data and information, such as demand, financial, supply, production, procurement and capacity, into the process, coupled with the ability of S&OP decisions to be executed within external systems. Information transfer should also include user-friendly means to transfer information among spreadsheets, files and databases, which is often required when including smaller trading partners in the process. Many S&OP decisions will involve specific products and/or customers and it is important that the application has the ability to support analysis, drill-down, drill-up, and decision actions at the item or SKU level.
• Perform scenario or what-if planning across a singular database of integrated information, along with the ability to create or track multiple scenarios helps S&OP teams to weigh and determine viable options to rapidly changing business conditions. These capabilities must be able to be performed in a near real-time speed, since teams will lose creditability if analysis takes multiple hours to complete.
• Assess and evaluate supply chain wide risk considerations, such as a major disruption in production, supply, or failure of a key supplier. Ability to asses a decisional impact on a firm's financial and asset performance goals, or the ability to perform ‘cost-to-serve’ or profitability analysis related to key customers is another important criteria.
• Documenting and tracking the audit trail of decisions, along with the assumptions related to certain decisions, helps teams to determine a context for prior actions or a trend in supplier, customer, facility or trading partner actions.

Ferrari claims that if you get your technology solution right it will "serve the needs for a broader, more integrative and externally focused S&OP process." Since he believes that fostering better S&OP processes is critical for future success, he concludes by recommending that "now is the time to position senior management for investment in the process." Nick Allen agrees that "S&OP has become an essential business process in de-risking the supply chain." So does Karin Bursa, who writes, "Sales and Operations Planning is critically important as executives try to strike the optimum balance between what generates the most profit and what will satisfy the company's strategic and operational goals." With so many analysts agreeing that companies need to move beyond spreadsheets, this looks like a good time to look into technologies that will propel your company into the future.