Advances in digital technologies such as the Internet of Everything, Deep Learning, 3D Printing and Big Data are disrupting business models and their respective supply chains.
As supply chains become more digital, they increasingly benefit from platforms. A set of common digital technology powered processes, tools and approach allowing users to create value by adding products and services in mutually synergistic ways.
Platforms create synergies in two ways. Firstly, platforms provide users with sets of standardized tools and processes. Secondly, platforms allow users to create and harness mutual synergy from each other. In the Google Android case, app developer benefit from increased tablet install base. Consumers in turn are more attracted to Android as more developers offer innovative apps. As platform grows in its number of users, the resulting synergistic benefits amplify and grow disproportionately.
We define supply chain platform as a set of digital and physical assets and corresponding rules of participation that brings together owners, producers, consumers for synergistic value creation. Platform owners manage the rules and governance for participation and value sharing brokerage. Producers provide the offerings and consumers buy or use the corresponding offerings. See Figure below:
In general two types of platforms are emerging in supply chains – Informational Supply Chain Platforms and Physical Supply Chain Platforms.
Informational Supply Chain Platforms
Informational Supply Chain Platforms are foundational sets of technologies and processes promoting supply chain information sharing and coordination. To illustrate, the Last Mile Delivery Marketplace is an emerging information platform for same day e-commerce home delivery. Time-pressed consumers use a smart phone to shop a broad range of products aggregated from nearby participating retail stores. Customer orders are “shopped” to nearby independent couriers for pick-up and delivery to the customer. It also facilitates frictionless confirmation, payment and consumer survey activities.
The platform unlocks increasing mutual synergies for its various participants as a function of its install base. Thus, greater retailer participation gives consumers broader assortment choices and increases the likelihood of finding the right inventory nearby. Connecting more couriers improves chances for same day order fulfillment and delivery. A larger mobile shopper base creates both critical density for cost effective delivery and valuable digital shopper information for platform owners around which to create additional “plug in” services and applications. Startup efforts like Deliv, Instacart, and Task-Rabbit are all variations of this type of platform. See Figure below:
Physical Supply Chain platforms
A Physical Supply Chain Platform is a foundational set of digital enabled or enhanced physical assets and technologies–warehouses, factories, robotics, sensors, material handling, etc. – which companies leverage to enable breakthrough physical product handling and flow performance. Consider the following future UPS “Printed Supply” business that illustrates how a Physical supply chain platform might operate.
In this scenario, business-to-business (B2B) companies requiring last minute critical production and manufacturing spare parts can easily search an aggregated digital catalog of products across the global supply base using a UPS orchestrated online repository. When an order is placed, UPS leverages its 3D printing facilities co-located with its hubs/ stores for Same Day delivery. Traditional parts Original Equipment Manufacturers (OEMs) simply have to make their product blueprints and CAD design available to UPS. They are paid a commission on subsequent orders. This hypothetical “print and deliver” platform replaces today’s multi-step supply chain with a simple one-step operations.
Adopting Platform Thinking
What is important for executives is not predicting the exact future supply chain platforms that will emerge in their sectors or across supply chain functions, but how to integrate platform and eco-system management into their future supply chain strategy design:
– Future Proofing: Incorporate tools for developing a “futurist perspective” on industries and markets. Also, develop flexible models for thinking about and designing supply chain of the future.
– Economic Analysis: Develop an understanding of the economic value-creation potential of high-priority, future supply chain platforms; assess top line (service, innovation, lead time) and cost savings impact the platforms will have on your current supply chain model as well as those of your suppliers, partners and even competitors. What is the end-to-end win-win potential
– Identity: Decide if you want to be a leader in managing and building the platform for others in the eco-system or whether will you be a fast follow. Specifically, what are the advantages and disadvantages of such actions?
– Value Sharing: Understand value-sharing dynamics between your company and other users of future supply chain platforms including platform switching costs and barriers to entry.
As digital technologies proliferate and embed themselves across supply chains, they will inevitably rewire and reconfigure existing firm centric models into industry platforms. The question is not “If” or “When”, but how best to anticipate and get ahead of supply chain platform disruptions.
An edited version of the above article appeared originally in CIO Review.
Michael Hu | BCG 