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Advice and Information for Finance Professionals

Now is the time to reimagine supply chains

Guest Author

By Rick Jewell, SVP, Supply Chain Management Applications Development, Oracle

It’s safe to say that, in general, people take supply chains for granted. When a person or an organization purchases a product, they never really think about what it takes to get it from Point A—it’s source of production—to Point B—their home or place of business. With the universal disruption brought on by COVID-19, 99% of the world’s population probably now has the term “supply chain” in their vocabulary. That’s because everyone, at some point in the last six months, hasn’t been able to get something they wanted, when they wanted it.

At Oracle, my team of about 2,500 dedicated professionals are responsible for designing and developing our cloud applications across supply chain planning, procurement, inventory, product lifecycle management, manufacturing, maintenance and logistics. It might be easy to assume that there’s a new respect for the importance of supply chains in everyone's lives. But I can tell you from experience, supply chains were already under pressure prior to the pandemic. What we’re seeing now is acceleration of those pressures that is leading to a complete deconstruction of supply chains. Organizations have always placed a premium on supply chain stability and predictability. And, quite honestly, it’s no longer there.

The pervasive concept of, “make in the East, sell in the West” is now changing drastically—but it’s not as simple as just flipping a switch to, “make where you sell and supply where you make.” Supply chains are extremely complex. The new normal is more automation, resiliency, flexibility, and agility.

The orchestration of finance, operations, and supply chain

I recently participated in Agile Finance: Jump-starting Resilient and Reimagined Operations, the fourth webcast in a five-part series hosted by the Association of International CPAs and sponsored by Oracle, to help CFOs manage through COVID-19, with insights from McKinsey & Company. In this webcast, a panel of experts examined how finance leaders are better partnering with their colleagues in operations and supply chain to address disruption and build a supply chain that is resilient, flexible, and effective. Inherent to that discussion is how organizations are seizing opportunities today to digitize and leverage technology to reduce costs while addressing logistics and supply chain complexities.

CFOs and their finance teams are now compelled to understand that, in many cases, there needs to be a de-emphasis on efficiency and low cost as the primary definition of value within their supply chains. Instead, there is as shift to a much more multi-dimensional value framework that puts equal weight on risk exposure or supply alternatives, tax and tariff consequences, and reduced supply channel complexity.

Agility and speed are the new low cost. Organizations need to continually assess the case for making and selling at the point of consumption, how to do better forecast demand, and how to expedite product innovation. In parallel, there needs to be a shift in how talent is viewed, moving people from a product orientation to, what I call, “servitization”. Combined, this means making products more into services that achieve better margins and bring organizations closer to customers, suppliers, and partners. And digitization that drives connected intelligence—enabled by data, IoT, AI, and machine learning—is becoming more and more important to make predictions in an increasingly volatile world.

The acceleration of digitization

The most successful companies use a crisis as a catalyst for change, and in today’s increasingly virtual world that often translates to speeding up digitization. Look at how “born-digital” disruptors entering markets have succeeded in displacing long-time market leaders in in a number of industries. Every organization needs to look over their shoulders—and not with just a glance—to gauge whether they might be the next casualty of disruption.

While it’s true that much of the pressure on supply chains right now is being driven by the impact of COVID-19, we know that rapid change is here to stay. What organizations need for the future is to establish an intelligent supply chain that increasingly leverages Artificial Intelligence (AI) and Machine Learning (ML).

What does that look like? An intelligent supply chain provides smarter ways to detect problems and opportunities inside and outside the enterprise, deciding what the best course of action is, and then executing on that. Digital signals coming from a variety of devices and connected equipment from an organization’s business ecosystem. Things like social feeds, syndicated market data, customers, suppliers, and market intelligence. It all flows into a data lake which fills with a massive amount of structured, unstructured, and semi-structured data that is available, but needs to be analyzed. The organization’s own enterprise data is mixed in to contextualize the external data.

In the detect phase, tools monitor digital signals to establish trends and identify anomalies to make predictions. Next, in the decide phase, analytics—boosted by AI and ML—provide insights and causal analysis. That causal analysis brings sales and operations planning together with financial analysis and forecasting to perform fully integrated business planning across the enterprise. Then finally, all that analysis means nothing if you don’t have an integrated suite of capabilities to execute against this intelligence.

When it comes to visibility, it can’t be a black box. Everyone in the organization must have access to that information, across devices and mediums, to do their own analysis via dashboards, digital assistants, internal social channels, and the like.

The case for cloud

I’ve been with Oracle, focused on supply chain, for over thirty-one years. I’m seeing a remarkable shift enabled by cloud. 75% to 80% of on-premises software costs are spent just keeping the lights on—funding upgrades and maintaining hardware, software, and integrations. With cloud, those funds can be freed up to allow IT staff to become enablers of change and innovation for the business rather than simply maintainers.

As our customers successfully transition to cloud, they gain the opportunity to transform—reducing complexity, improving business practices, and preparing for the uncertain future. I advise our customers to not bother with just lifting and shifting their current processes to cloud. That approach will not deliver the innovation and cost-saving benefits of cloud.

I’ll offer two examples to illustrate the supply chain benefits cloud delivers. The first is Western Digital, which is now the largest disk drive manufacturer in the world. They are about an $18 billion conglomerate after acquiring two equally-sized rivals—HGST and Sandisk. The company decided to consolidate to a single system, Oracle Cloud, in order to simplify and scale future acquisitions. They now run ten to fifteen times the volumes on cloud that they could on their on-premises systems. And, perhaps most impressively, during the pandemic they’ve been able to pivot from on-site, in-person cloud solution rollouts to remote implementations, standing up eight new instances of Oracle Cloud ERP at new manufacturing facilities in Southeast Asia.  

The second example is what we’ve done here at Oracle. We now run our entire enterprise on cloud. When it comes to supply chain, I'm not sure everyone is aware that we have a $4 billion hardware business, everything from complex configured-to-order hardware and servers down to our MICROS point-of-sale systems and printers. We have more than one hundred suppliers and sixty collaboration partners that help us build thousands of products and fulfill tens of thousands of orders every year.

We implemented our cloud-based supply chain suite to increase our pace of innovation, improve our manufacturing and supply chain flexibility, and gain the agility to navigate changing marketing conditions. Cloud has enabled us to smoothly shift from manufacturing most of our products in China to other sourcing locations, as well as achieve some impressive benefits, including: a 20% reduction in time for purchase order approvals, 67% faster planning to confirm demand and supply plan changes, a 50% reduction in work order tasks, a 60% reduction in steps for document inquiries, and a 35% reduction in manual change transactions between service and purchase orders

A few final thoughts on cloud

I’d like to sum up the benefits that we and our customers have realized via moving to cloud.

 First, with our multi-billion-dollar annual investment in development, we’re investing more and more in AI and ML—things like blockchain, voice interfaces, and digital advisers. All our cloud customers get those expanded benefits via our quarterly updates to help increase innovation, speed, and agility across their organizations.

Secondly, a unified and integrated platform breaks data silos that exist in many, if not most, companies. Our cloud solutions provide end-to-end business flows that enable more automation and increase visibility across lines of businesses. Teams work more efficiently and effectively with a single view and point of attack.

Third, the built-in flexibility enabled with cloud allows people to outpace the business and business model changes driven by shifts in markets, products, M&A activity, and other areas. Adjustments are made via configuration changes instead of customizations.

And finally, cloud has made Oracle better equipped to support innovation and efficiencies for our customers. We've built an ecosystem to support 21st century practices and future-proof both our customers and our own organization, no matter what volatility is lurking out there.

It’s that commitment to our customers, along with my amazing team, that makes me—even after over thirty-one years—excited to go to work every day.

Watch the webcast series with AICPA, CIMA, Oracle, and McKinsey & Company.

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