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Bridging a Gap: People and Digital Supply Chains

Wednesday December 7, 2016

digital supply chain
Supply chain is one of the battlegrounds where the objective, data-based logic of digital supply chain management collides with the subjective human mind. And this collision is part of the maturity path of future supply chain practice.

In this age of transparency and informed consumers, the work done by supply chain managers and a company’s supply chain itself is increasingly open to scrutiny by the public. The network of supply chain suppliers and partners should be the primary responsibility of supply chain practice. But public maps of supply chains, shared via social media, mean more people, organizations, and causes are looking over the shoulder of the supply chain manager.

According to Patagonia’s website, its company mission statement is to “cause no unnecessary harm.” As Erica Phillips in The Wall Street Journal reported on August 17, 2016 :

“In 2010, German animal-rights group Four Paws said it found evidence that farms supplying down feathers to Patagonia were force-feeding geese to fatten their livers for foie gras… And last summer, People for the Ethical Treatment of Animals posted a video online depicting grisly abuse of sheep at South American ranches that sold wool to Patagonia…Each revelation has caught the company—which promotes itself as the one writing the rules, not breaking them—off guard.”

These revelations resulted in new suppliers and reduced production, and are becoming a predictable form of supply chain management—albeit from the outside in. Such revelations sometimes occur because we don’t know our distant partners, including our subcontractors and brokers, but other people do know them.

It is no longer enough to trust that “Each of my suppliers and partners knows its critical suppliers, who in turn know their critical suppliers, and so on—so my supply chain must be safe.” But if we can’t be confident of this, what can we have confidence in? Perhaps we need more candid discussion among our distant supply chain endpoints.

In Computer Business Review on August 19, 2016, Alexander Sword asked, “Is Your Supply Chain Your Biggest Cyber Threat?” Using the US retailer Target and its 2013 hack (40 million customer records exposed and $10 million paid to victims) as an example, he suggested that numerous small and seemingly insignificant supply chain partners are a new threat. In Target’s case, Target network credentials were stolen from a heating, refrigeration, and air conditioning subcontractor.

“A couple of years ago medium-sized organisations would not think attackers would go for them…“What we’ve seen is attacks on the supply chain. SMBs that supply larger organisations can be a weak link in the chain. The harsh reality is that small organisations don’t have so many resources they can deploy.”

In IT data flow terms, a supply chain is the network of all third parties that enable a company to function. So, today, no vendor is too small not to be noticed.

A common element in both the Patagonia and Target cases is human perception and the risk it creates in an increasingly digital supply chain world. Some steps to address this might include:

  1. Develop and play out risk scenarios where an unsavory competitor or even a criminal organization studies maps of your supply chain to gain unfair advantages. If your organization were its primary target, the competitor/criminal might carefully study your most distant partners first, looking for weaknesses to exploit that eventually flow back to you.

  2. Include frank, candid discussion—both inside and outside your four walls—regarding risk and subjective human presumptions regarding your supply chain.

  3. Develop a model to accurately evaluate the cost of widely sharing versus not widely sharing the ever-expanding data in an increasingly digital supply chain world.

In many organizations, the initial outcome of these steps might be defensiveness, or cries from many stakeholders protesting that “You don’t understand.”

Phil Wainewright tackled this topic in his Diginomica article, “ClearChain wants to fix manufacturing’s flawed supply chain.” He suggests the current thinking is that smaller partners might be penalized by larger ones for “revealing” the larger partners’ previously hidden weaknesses. For example, a smaller partner may seem to reveal that it is holding more inventory than it should, and therefore appear to be an under-performer. But the smaller partner might be holding the “excess” inventory to make up for the larger partner’s poor forecasting. Such information may reveal the smaller partner’s good performance in covering up for a weakness in the larger partner.

Or, calls for more data sharing may reveal different competitive perspectives. For example, imagine saying to a large customer: “I know we are one of several suppliers you partner with. And we see those other suppliers as ruthless competitors—not friendly partners, as you do. If we openly share our data with you, we don’t want to risk our data ending up in our competition’s hands.”

Digital supply chain maturity advancement may depend on solving these very human perspectives of blame and liability; perspectives which technology may not understand. If we were to try, we might find some interesting insights; for example, that we are all in the same boat whether we are a top performer or only an average performer. Phil Wainewright wrote:

“What staggered me was that very good delivery suppliers have exactly the same problems. They’re filling their factories with stuff just in case, tying up capital, underutilizing capacity…

If an OEM manufacturer said, ‘Could I connect into your system,’ they would be shocked—they would be appalled at what they would see. At least 90% of high value-added manufacturing companies in the country have this problem.”

Where we don’t widely share data, we potentially slow the maturity and advancement of digital supply chains. How are the early adopters of digital supply chain technologies addressing these concerns? Does candid conversation with everyone, where possible, create initial confusion and distrust? But could it also eventually create a deeper and more effective understanding?

No matter the answer, as professionals we remain the ultimate authors and users of IT technologies. One measurement of digital supply chain maturity may be the rate of adaptation each side makes toward the other. But it might also include the rate of relationship development we make toward each other.

If it is indeed no longer safe enough to trust that each of our partners knows its partners, what can we really do about it? While this hurdle seems difficult to overcome, there may be new ideas coming to the rescue. APICS supply chain research continues to investigate this area. Confidence and sentiment surveys of our extended supply chain members may be a place to start. And possible new technical solutions may be appearing—for example, those that incorporate Internet of Things, big data, and democracy of devices that act independently of people.

Of course, the application of these technologies is also part of digital supply chain maturity and development. Which comes first? Perhaps it is we who need to act first in developing people-to-people relationships, instead of reacting to the technology. What do you say?

All comments will be published pending approval. Read the APICS Comment Policy.


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