Visibility and Sensibility

by Hau Lee

Agility has been viewed as the competitive differentiation of world-class supply chains. Agility enables companies to respond to opportunities fast and effectively while mitigating problems with minimal detection delay. The foundation of agility is visibility. Visibility enables you to know what is going on, figure out what should be the best actions, and orchestrate and mobilize the appropriate members of the value chain to act accordingly. Companies should strive to have visibility so that they can truly do Sense and Respond. So, "sensing" is what leading supply chains focus on, as sensing gives rise to visibility, and visibility gives rise to agility, and agility enables you to win in the marketplace.

How can you be a great "sensing" company? I like to share my view on three core dimensions of Sensing - Sensitive, Sensible and Sentimental. In the Merriam-Webster dictionary, "sensitive" is defined as "quick to detect and respond to the slight changes, signals, or influences;" "sensible" is "chosen with wisdom and prudence;" and "sentimental" means "governed or marked by feelings, sensibility or emotional idealism."

Sensitive sensing in a supply chain would require a powerful sensing system to be in place. Such a system must be: (1) quick and accurate, without distortion and with reliable information flow; (2) information flow is comprehensive, including detailed physical attributes as well as soft attributes such as payment status, contract acceptance, and so on; and (3) information flow is end-to-end, covering the critical elements in a supply chain as much as possible. The ability to use technologies such as different IoT devices and cloud computing while leveraging advanced technologies such as sensors, visual machine learning and integrated systems is the key to sensitive sensing.

Data has to be turned into intelligence, and this is what sensible sensing is about. We have to "make sense out of the senses." Hence, we need the sensed signals to be analyzed, to deduce what exactly was behind the observed signals, to evaluate actions that are required and to have a direct link to the required planning and execution systems. In this way, sensing becomes actionable. Actionable sensing is the difference between being able to create values from sensing or not. The combination of sensitive and sensible sensing is the key to overcoming the bullwhip effect, the phenomenon that has plagued most supply chains due to information distortion.

Finally, the purpose of having great "sense and respond" can be more than just increased profitability and market value of the firm. The purpose can also be providing value and benefits to other member companies and associated workers involved in the supply chain. It can also benefit the communities in which our supply chain lies. It is a value to society. This is a noble, but not unrealistic goal.  Many leading supply chain companies have already been able to do that. We have seen how agile supply chains have been able to provide the most needed medical care and gear to healthcare workers as well as the vulnerable population during the COVID-19 pandemic. This is what sentimental sensing is about.

I have seen how companies mastered sensitive, sensible and sentimental sensing. My friends at Cloudleaf have helped pharmaceutical companies to have very sensitive sensing over all the vulnerable points of the plasma supply chain. Sensing is linked to actions, since the sensed data were then analyzed, with direct connectivity to planning and execution systems, so that the value of timely and accurate sensing can help reduce obsolescence or allow the plasma to be used at the most needed demand points. Improving sensing of the plasma supply chain improves the ROI of the companies in the supply chain, but most importantly, it saves lives, it improves the health status of communities, and it generates values to society that are beyond monetary measurement.

I hope we can all strive to have sensible, sensitive and sentimental sensing in our supply chains.

About the Author

Prof. Hau Lee is a Professor at Stanford University Graduate School of Business and Co-Director of the Value Chain Initiative.