Let’s Set a New Standard for Optimism

Finally, there’s something to make U.S. manufacturers more optimistic. This little ray of sunshine beamed through the conference line of my phone last week while listening to Helmuth Ludwig—and no, not while on hold with classical music piped in. Mr. Ludwig is chief executive officer of Siemens’ industry sector in North America, and he was leading a press conference sharing his 2014 outlook for the manufacturing sector. During Q&A I asked for his assessment of supply chain visibility in manufacturing. He explained how suppliers in the automotive industry are now being integrated into the design process.

“Today you can do that by making designs visual on an iPad and have very qualified discussions on the very latest designs and then make those available to develop the product,” he said. “There have been enormous advancements with product data management software, and they’re using more open standards so data can flow through the whole chain.”

As an example he mentioned how the automotive industry switched from proprietary systems to systems that allow them to use open systems with their suppliers.

What’s great about industry gurus is they’re never afraid to express an opinion, and Dr. Ludwig admitted there’s still room for optimization. But another guru whom I had asked about the state of supply chain visibility the previous day put it more bluntly than that. That would be Joe Andraski. Joe spent a good chunk of his career working on standards in the retail supply chain, and as far as he’s concerned, the great strides on the standards-making side have not been matched by many practitioners on the standards-using side—at least in the retail world. Joe is founder of Collaborative Energizer LLC, a consulting firm specializing in collaborative business practices.

Before that he was president and CEO of the VICS (Voluntary Inter-Industry Commerce Solutions) Association for eight years. He led the retail industry toward item-level radio frequency identification (RFID). But never mind about RFID, Joe believes many companies have yet to master the intricacies of Electronic Data Interchange. And in answering my question, he put on his Nabisco hat, a CPG manufacturer whose supply chain he managed as vice president for many years.

“After so many years EDI is a standard, but it really isn’t a standard,” he told me. “Retailers can make specific changes that only apply to their business.  Consequently, a supplier has to make adjustments to the EDI messages for that specific retailer.  So, just for fun, imagine a supplier has 200 customers and each has their own requirements.  Imagine the cost impact.  And to expect retailers to compensate their suppliers, should they ask, would cause laughter from coast to coast.”

Non-standard standards are still a big obstacle, and Andraski has many colleagues who agree with him on this point. In fact many were with Joe at one of the regional meetings last year where executives and academicians helped MHI set priorities for a material handling and logistics road map that they hope will lead industry to the year 2025. Guess what one of the Roadmap’s key agenda items was. That’s right, standards—or the lack thereof.

“The lack of standards for interoperability of the various applications used by supply chain partners causes inefficiencies within and across supply chains,” the newly published Roadmap document states. “Standardization to support collaboration is needed to provide plug-and-play capability between trade partners. End customers and consumers are increasingly driven by visibility-based decisions that reduce variability and time to deliver.”

So here we are at the bottom line, and these are the resolutions about standards that came out of these Roadmap meetings:

•  By 2025, most applications accessed by logistics and supply chain professionals should be cloud based and standards compliant.
•  By 2025, universally accepted standard data formats for all types of sensors should be established. As long as data are considered proprietary, sharing cannot happen.
•  By 2025, most supply chain data should be openly available for use. This might involve having shipments identified anonymously for the public (e.g., size, weight and destination) with a code known only by the shipper and the customer.

After you download the Roadmap report, consider this: the fact that a bunch of business people and academicians agreed on a common destination should make you optimistic—even if it’s cautiously.