Supply Systems

Updated: Aug 7, 2020

This paper presents an analysis of today’s global supply system, looking at the key structural changes required to move towards a more sustainable model. We look at the current transformation from the closed centralized model to the business ecosystem model; from linear production processes to the circular economy and how new decentralized computing technologies such as blockchain and IoT networks can provide the critical infrastructure enabling this next generation supply network.

The world’s supply chains are now at the epicenter of a sustainability crisis, that demands huge structural changes along many dimensions; in this respect, it is safe to say that we will learn to swim or sink depending on our capacity to transform the structure and nature of our supply chains over the coming decades. In this new context, companies will be increasingly defined by the capacities of their supply chain, those that can transform them will be able to build new digital and sustainable business models on top of them that ensure their relevance.

However, doing this will require a very different kind of supply network infrastructure, one that is transparent so that it can be easily restructured; one that incorporates the full set of values – social, environmental, economic – so that it works to systematically combat the negative externalities that are created today; one that is collaborative and networked so that it works for all, both large and small organizations; one that is flexible and agile, that can surface risks and adapt to a changing environment.

This is though, a long way from where we are today and getting to a new paradigm will not happen through incremental improvements within the existing structures; it requires systemic change. Instead of looking at new technologies and methods that will make existing models go a bit faster, we need to firstly look at the structure of the system and ask how can that adapt and evolved; this is where system-level innovation lies and the potential for radical leaps in outcomes.

The key structural change that needs to come about is the shift from a hierarchical linear model to supply chains to a more horizontal network form; from the vertical supply pyramids of today to the networks of tomorrow. We live in a world of hierarchical supply chains with different tiers, where linear flows create silos, bottlenecks, and lack of information exchange. Supply happens within silos and lines locking up resources and capabilities, creating huge redundancies when taken as a whole.

Today’s supply systems are held down by the gravity of a paradigm and set of dynamics that favor ownership and control within linear supply processes. Fundamental change will require shifting this underlying dynamic to one that gravitates towards openness, partnership, and co-creating value. What is needed are no longer closed organizations and linear processes but open ecosystems where anything can be accessed on-demand. With the reduction in transaction cost value is shifting from creating things to facilitating connections, from linear production process to networks of dynamic exchange.

We need supply chains that are integrated, transparent, sustainable, secure and agile. In the previous section, we outline some of the major structural changes required to get there – most notably moving from the linear siloed and fracture supply chains of today to the open networked ecosystem model of tomorrow. Realizing these changes will require the development of new business models and the capacities of a new set of information technologies.

Information technology now allows us to look at any sector and ask how connectivity and exchange can be facilitated in so doing the enterprise extended beyond its traditional confines – from silos to systems, from a focus on individual organizations interacting in a piecemeal fashion to dynamic on-demand supply networks.

Organizations are today in the process of a huge transformation to become something that we have not yet seen in the history of commerce, hyperconnected business networks that look and act more like a complex multicellular organism than the single-celled organisms we know today and these new network companies will win precisely because of collaboration within their network, their ecosystem.

Supply Networks
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