The move to new business models based on the principle of Zero distance or RenDanHeyi, written by Danah Zohar, has never been more relevant to the concept of efficient, sustainable supply chain management than it is today.
Traditionally, the supply chain is all about time and distance. It is the subject of “how much, how far, and how long.” For example, we tend to think in terms of how long it takes us as an organisation to replenish the stock on the shelf that has been bought by a customer. The answer to this question varies considerably depending on the type of organisations involved in the supply chain as well as the product type and the market it operates in; so there is no one correct answer to the question.
Over the last 20 years, there has been an explosion of technology that has allowed us to become more efficient in our supply chains. These days, automatic stock checking in warehouses is possible, real-time electronic point-of-purchase data is available, and Eban systems can pull raw materials from suppliers. It is possible today for all participants in a supply chain to work seamlessly with the same data.
When I describe modern supply chains, it is easy to fall into the trap that all is well and there is not much else to do. But this would be a false argument. The truth is that we are further than ever from achieving the objectives we set ourselves.
Proximity is a keyword in the supply chain lexicon and one worthy of investigation, considering the statement I have just made.
Let us take an example where I can take this simple idea to an absurd conclusion by way of an explanation.
Data travels at the speed of light, which is 186,000 miles per second or 300,000 km per second. The Earth’s circumference is 24,901 miles or 40,000 km, which means that data can travel around the world in basically zero seconds; in other words, it is instantaneous. So the fact that sales data being transmitted to a manufacturer and then being acted upon can take days if not weeks in today’s world is a bit ridiculous. In proximity terms, a 5-day lag in information transfer and action is the equivalent proximity distance of 129,600,000,000 km or 80,529,700,000 miles; that’s further than Pluto is from the Earth. What we are really saying is that if little green men existed on Pluto who were expert demand planners and didn’t want to be paid, we could effectively employ Martians to do our supply chain planning and it wouldn’t be any worse than what we do today on Earth.
The reality is that in most of today’s supply chains, we are waiting for so long for our data that we place a huge importance on the idea of forecasting and forecast accuracy. If we stop for a moment to consider what we are really saying here, we will realize that the only reason we forecast is because our data is going beyond Pluto and back before we know what is happening, and therefore, we need to try and anticipate what is going to happen instead. What a ridiculous thing to be happening!
There is no reason why EPOS data cannot flow in real-time to all parts of a supply chain 24/7, and there is no reason why the planning cannot be done in real-time too with industry 4/5 capabilities now available in the likes of Azure. What I am, in effect, saying here is that if you are still forecasting, if you are still measuring service levels, if you are still worried about forecast accuracy, then you are still no further on in supply chain terms than we were at the dawn of ERP systems with LEO (Lyons electronic office) in 1951.
Your objective as an organization must be one of zero distance.
Proximity in data and proximity in the physical supply chain are of paramount importance. The longer it takes for anything to happen in a supply chain, the more waste there is because there are, by definition, more steps, more people, and more resources being expended on fulfillment. This is why time and distance are measured in proximity.
The real possibility of zero distance exists for us today. There is no reason at all why when a customer picks a product off the shelf, one is not picked a minute later from WIP in a store, and this, in turn, generates a demand on a plan somewhere which, in turn, amends a raw material purchase order. In effect, the 3rd tier supplier gets asked for one of the raw materials for this product that has just been bought, zero seconds after it has been paid for by the customer. There is very little reason why anyone or anything should be involved between these two points in this day and age.
When you consider this in reality, it means that most planning departments are not required, most procurement departments are not required. There is no reason why an order shouldn’t simply flow directly to the production line in question the moment a purchase is made, transport should arrive just in time and delivery should be as simultaneous as possible.
When we talk about the rise of AI and “The Great Acceleration“, this is the sort of thing we are talking about.
