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Commentary: Key supply chain innovation issues to consider in a world with VUCA

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For a couple of years now, I wake up each morning thinking to myself, “I wonder what insane thing happened while I was asleep.” Initially, it was an enervating experience. Now, I have become accustomed to it, and I do not feel the same sense of dread when I wake up, or of being drained of energy even before my workday has begun.

In the same way that I have adapted to a less serene world, people who buy, build or operate new technology and innovations for supply chains must adapt and adjust to a world that is characterized by instability and chaos.

This commentary will briefly touch on three approaches for adapting and adjusting. It is based on observations I made during the National Retail Federation’s Big Show 2019. At that event, Lisa Morales-Hellebo (who co-founded REFASHIOND Ventures with me) and I led nine different groups of visiting executives on tours of the expo hall to learn about innovations in supply chain that they might buy for their respective companies. Being a tour guide gave me a great opportunity to listen to them describe their problems in their own words.

What are the origins of the acronym VUCA, and what are its implications?

The term VUCA first appeared in the U.S. Army War College’s curriculum in 1987. Subsequent attempts to trace its origins in the curriculum suggest that it may have resulted from a synthesis of ideas in the book Leaders: The Strategies for Taking Charge by Warren G. Bennis and Burt Nanus.

VUCA is an acronym for a world that is simultaneously:

Volatile – change happens more often than usual and the accompanying swings become more extreme with the passage of time.

Uncertain – our ability to make predictions of any meaningful nature deteriorates dramatically.

Complex – the number of variables we have to track, analyze and interpret increases beyond our ability to synthesize the accompanying deluge of data and information for decision-making.

Ambiguous – even when we can synthesize data and information, it can appear to lead us towards meaningless and even contradictory conclusions.

It is debatable if the world in general is more susceptible to VUCA now than it has been at any time in the past. What is not open to debate, however, is that due to the evolution of information technologies, we now become more quickly aware of events around the world. The speed with which news of unexpected and destabilizing events travels contributes to our sense that the world we live in now is more unstable than it was in the past.

Observation #1: Supply chains are becoming less centralized, more distributed and more integrated.

The days of centralized distribution appear to be well behind us. The trend now is towards more decentralized and localized distribution, and less reliance on centralized and massive distribution centers. This is happening because companies want to increase their responsiveness to changes and disruptions within their supply chains. To accomplish this, companies seek to more tightly integrate local stores with one another, as well as to more tightly integrate existing centralized distribution centers with local stores. To accomplish this companies are looking for:

● Increased automation – freeing human experts to focus on complex cases and issues that arise in the supply chain.

● More sophisticated forecasting and network optimization capabilities.

● The potential to eliminate central distribution centers altogether, so that suppliers ship product directly to local stores.

Observation #2: Supply chain visibility is becoming a more pressing concern.

Supply chain visibility enables customers, producers and other participants in the supply chain to track and trace goods as those goods travel through the supply chain from a producer to a customer. Supply chain visibility is a problem of information creation, storage, transmission, retrieval and delivery. Supply chain visibility is also an issue of information security. It depends on data standardization between organizations. This is something that has been rather difficult to accomplish in the past. However, the push for supply chain visibility will only increase as former arch-rivals and competitors integrate certain aspects of their supply chain operations in order to collaborate more closely with one another.

Observation #3: Simplicity is a virtue to the users of supply chain software.

This thought occurred to me as I listened to the executives ask questions at each of the stops on the tour. The consumerization of enterprise software is now affecting people’s expectations of how supply chain technology should function.

What does this mean?

● First, people now expect supply chain software to be as intuitive to use as the software they rely on at home. They expect unnecessary complexity to be abstracted away.

● Second, people expect supply chain software to be always available, and ubiquitous. That is, it must be seamlessly available across computing platforms, with no degradation in experience or efficacy.

● Third, customization and personalization are key. In this context, customization means that the software is easily configured to match an organization’s unique business operations and structure. Personalization means that within that customized organizational configuration, each user has an experience that is further configured to that individual user’s role and responsibilities within the company, in a way that maximizes the individual users on-the-job effectiveness.

● Fourth, more so now than in the past, buyers of supply chain software expect speed, responsiveness and redundancy.

It is clear the trends I have described create an opportunity for early-stage startups building new software-enabled innovations to help businesses simplify and streamline supply chain operations. What remains unclear is the degree that switching costs will hinder the adoption of new software products from young startups in a world in which VUCA is the norm.

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Brian Aoaeh

Brian Laung Aoaeh writes about the reinvention of global supply chains, from the perspective of an early-stage technology venture capitalist. He is the co-founder of REFASHIOND Ventures, an early stage venture capital fund that is being built to invest in startups creating innovations to refashion global supply chain networks. He is also the co-founder of The Worldwide Supply Chain Federation (The New York Supply Chain Meetup). His background covers the gamut from scientific research, data and statistical analysis, corporate development and investing for a single-family office, and then building an early stage venture fund from scratch - immediately prior to REFASHIOND. Brian holds an MBA in General Management, with a specialization in Financial Instruments and Markets, from NYU’s Stern School of Business. He also holds a Bachelor’s Degree in Mathematics & Physics from Connecticut College. Brian is a charter holding member of the CFA Institute. He is also an adjunct professor of operations management in the Department of Technology Management and Innovation at the New York University School of Engineering.