The Coming Dominance of Information

The four processes underlying the visibility framework are information-managing steps. Each process increases either the quantity or value of information, until that information interrupts a decision to result in a different and better future for the supply chain. For this reason, supply chain visibility is often tied in our minds to supply chain technology or software. In their sleepless nights, supply chain managers dream of a future in which tomorrow’s technology is solving today’s problems.

This article is about the other half of that story, the ways tomorrow’s technology will challenge our supply chain managers themselves. It’s a story of the “gift of the golden touch”, in which an attribute we desire so much today (information) will become available, then surfeit, and finally so abundant it crowds out other areas of supply chain management.

What will information dominate?

Supply chain management involves coordinating three flows across enterprises: capital, materials, and information. This scope hasn’t changed in the last 30 years, the lifetime for the supply chain profession itself. But the relevant size of each flow has changed a lot. Information flow, by most measures, is increasing. Most of this increase is represented by IT transactional data volume. But other information categories emerged in the last 30 years as well. These included complex models for supply chain processes (SCOR Framework), capital exchange (VaR models, derivatives models), human resources (PMI certification, APIX, etc), strategy (Lean, Six Sigma, DC Bypass), etc. It’s hard to place figures on the supply chain flows. Qualitatively, we can make the following summary:

  • Material flows increased in distance and complexity since as early as the 1960s but really much faster since 1980 under the banner of outsourcing, globalization, and more sophisticated product design.
  • Capital flows increased at relatively the same pace as material flow. Some new sophistication arrived with technology enabling faster electronic exchange of capital, elimination of letters of credit, etc. Buying terms changed, but didn’t really grow in complexity. If anything, they became more stable and robust through progressive INCO normalization.
  • Information flows have grown enormously. We could break this down into:
    • Models, strategy, and other “human contained” knowledge. This area grew at around the same pace as material and capital flows.
    • Transaction, product specification, and other “computer-contained” information. This area grew at an exponential pace, doubling many times.

These three supply chain flows represent not just a handy way to talk about supply chain, but our professional lives. Knowing, managing, and improving these flows is what supply chain leaders spend their entire working lives focused on. An increase in the volume or importance of one flow is fundamentally a change in who we are as a profession. So, when I say that information will soon dominate the supply chain management field, I mean that it will become the premier aspect of our industry and professional formation. Our supply chain hopes will be around information flow, our fears will be about information failure, and our new leaders will devote themselves mostly to information management.

Why will information dominate the supply chain?

The rate of growth of information is beyond all potential limits for materials and capital. Think of a specific supply chain, such as the business of brining fresh milk to a convenience store. The doubling-time for information capture volume in this supply chain may be several years. But, at most, we would expect that the supply chain will double its rate of capturing data within 3-5 years. Will the supply chain produce and move twice as much milk after 3-5 years? Will it move twice as much capital? It is unlikely. In fact, for nearly every supply chain we would expect the long term growth of materials and capital to have a linear trend of some slope. But, information flows are growing exponentially.

The exponential nature of information growth is attributed to the fact that this area of supply chain overlaps with technology, which is inherently an exponentially growing phenomenon. In other words, supply chain is along for the ride, not the driver of the information growth.

Information will also dominate supply chain management because of its ability to enable the other flows. Material flows (such as boxes being shipped by UPS to customers) are made easier and more effective by a supporting information flow and process. But, it’s important to note that the reverse enablement between information and materials does not occur: a box moving around doesn’t make information flows easier or more effective. With this relationship, we should see that a 10% improvement in material flow will have no additional benefit to information flows. But, a 10% improvement in information flow will likely make material flows improved as well. Information is a multiplier for the other flows, and for this reason it is of greater inherent importance.

Now, consider how exponential growth combines with this enabling-effect of information in the supply chain. If information flows increased exponentially, but had no positive effect on the other flows, the result would be added complexity and a reduction of total value. Managers would spend more time on information problems, but that time would eat into their effectiveness at managing materials or capital flows. They would erode their own effectiveness dealing with growing informational complexity. Growth in tax law, for example, has this effect. It renders one part of a supply chain more expensive, without adding value to the others. It dilutes the value of the supply chain it effects.

But, information flow improvement does improve the material and capital flow. For this reasons, supply chain managers navigate themselves towards information-based solutions, knowing that they are capitalizing on a greater impact for their efforts. Over time, as a profession, we are also capitalizing on the fact that technology innovation is an external engine to the improvement of information flow management. We need only watch, select, and harness new technologies to improve informational flow, and then gain the cascading benefits to material and capital flows.

How far can this go?

In recorded human history, technology advancement pace has never been less than exponential. In some current situations, it appears to be at a double-exponential pace. So, our external engine of innovation in managing information is probably secure for the next 100 years or more. That leaves the question of “at some point, will information-based solutions stop cascading benefits to material and capital flow problems?”. The answer is that I have seen no signs that the cascading effect will cease. Today it is 2010 and I look ahead to 2020, 2030, and 2040 and expect to see a richly instrumented supply chain, using shared or private knowledge bases, and in which the majority of decision makers are non-human intelligences. An automation of some kind will be making material-flow manipulations more efficient based on information as long as improvements in information processing or quality can be delivered. Information-based solutions appear to be our trump card over purely physical or purely financial problems. They will become empowered even more so in the future.

Monday Morning Wrap-Up:

As with most articles, I’m ending this one with a summary of the points I believe are worth your time on a Monday morning in the office. Even if this article talks about a (not too distant) future, we should start addressing its implications for today. Consider now:

  • In its entire history, “supply chain management” has always defined its scope to include the coordination of material, capital, and information flows across partners.
  • But since 1980 the relative importance of the 3 flows has shifted towards information. Today, information flows are a hot topic for supply chain professionals.
  • Information-based solutions have a unique advantage in that they are driven by an external engine of technology innovation. That engine is growing at least exponentially.
  • Solving a material-flow problem doesn’t usually help the information flow. Solving an information flow problem often does improve the material or capital flow. This relationship should privilege information-based solutions over others.
  • For both internal reasons (the effect of information flow improvement on material and capital flow) and external (the “free” engine of technology growth), our future as a profession will be dominated by information management.

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