Innovators Don't Always Produce Breakthrough … 5 - Innovation Lab/T5S8... · – Zara Fast Fashion ... Outsourcing. near-market ... Portfolio approach. Production. Planning. Shipping

Innovators Don't Always Produce Breakthrough Organizations

TRACK 5: SESSION 8

• Email: [email protected]• Phone: 617.258.8584• Website: https://ctl.mit.edu/

Jim RiceMIT

Deputy Director – MIT Center for Transportation and Logistics

22 0 1 7 M a t e r i a l H a n d l i n g & L o g i s t i c s C o n f e r e n c e S p o n s o r e d b y D e m a t i c ● P a r k C i t y , U T

mailto:[email protected]

https://ctl.mit.edu/

Abstract

Innovation requires more than just great ideas and out-of-the-box thinking. It also requires persistence, hard work and a laser-sharp focus that factors in roadblocks, but that doesn’t let those obstacles get in the way for long. Even the most innovative companies stand to lose market leadership as new competitors rise and take over the market. And, the same practices that lead the business to be successful in the first place can eventually result in their eventual demises. In this session, you'll learn how innovators don't always generate breakthrough organizations and take away sage advice on how to take your company to the next level.


Agenda

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• The Cool and Sexy Stuff• Problem and Issues• Let’s Get Clear• Supply Chain Innovation, Sustaining and Disruptive• Substitution and Combination• Key Takeaways• Conference Cloud• Questions?


The Cool and Sexy Stuff

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Industrial Internet of

Things


Cognitive Analytics

Autonomous Vehicles

Additive Manufacturing(3D Printing)

Digitization

ReshoringBlockchain

Self-Assembly (4D Printing)

PredictiveAnalytics

Prescriptive Analytics

Descriptive Analytics

Virtual Reality

Mixed – Augmented Reality

What are these?

Sharing Economy

Digital Supply Chain

Omni-channel

Wearable Computing

Drones

Social Media

Robotics

Automation

Artificial Intelligence

Machine Learning

Part of the Problem: IBM’s Innovation Man

62 0 1 7 M a t e r i a l H a n d l i n g & L o g i s t i c s C o n f e r e n c e S p o n s o r e d b y D e m a t i c ● P a r k C i t y, U T

I’m here to fire you up about Innovation.

Are you fired up about Innovation?Yes, sir!

Why are you fired up about

Innovation?

Uhh, I don’t have any idea…

Ahhhh!

Ref.: IBM Innovation Man: https://www.youtube.com/watch?v=xXrIoF-sVi8https://www.youtube.com/watch?v=MudaxA80eI4

https://www.youtube.com/watch?v=xXrIoF-sVi8

https://www.youtube.com/watch?v=xXrIoF-sVi8

https://www.youtube.com/watch?v=MudaxA80eI4

Some of the Issues

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• Product or process innovation?• Invention or innovation?• Big or small?• Fast or slow?• Disruptive or incremental?• New or rehash?


Let’s Get Clear on Product & SC Innovation

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Product Innovation ≠

Supply Chain Innovation


Product Innovation

Process (Supply Chain)

Innovation

Dominant Design Emerging

Rate of

Innovation

time

*Graphic based on Utterback, Mastering the Dynamics of Innovation 1996 / Utterback and Abernathy, 1975, 1994

What’s the difference between Product Innovation and Supply

Chain Innovation?

Let’s Get Clear on Technical Invention & Innovation

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• Technical Invention ≠ SC Innovation

1. Invention: Something originated by experiment, etc.; new device or contrivance***

2. Innovation: The use of a new idea or method*


• Technical Inventions1. RFID2. Drones3. 3D Printing4. Autonomous Vehicles

Scope, Speed, Impact and Newness

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• Scope requirements – does it have to be big?• Speed requirements – does it have to occur quickly?• Impact requirements – does it have to be disruptive?• What constitutes ‘new’?


So how would you define supply chain innovation?

What is Supply Chain Innovation?

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• My proposed definition: SC Innovation is the combining and application of a mix of inventions, existing processes, and technologies in a new way that achieves a desirable change in cost, quality, cash and/or service. Important attributes:– Created by applying and adopting desirable change

– No distinction on time to achieve

– No distinction on impact (i.e. sustaining or disruptive)

– No distinction on what is ‘new’

• Key Success Factor – applying the mix in creative and clever ways, and focused application that can be brought to scale.


Sustaining SC Innovations

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• Sustaining SC innovations maintain the primary structure of the existing supply chain but provide incremental improved performance in one or more areas: cost, service (cycle time), quality, financial resource requirements.


• Common Initiative Examples:– Kaizen– Business Process

Reengineering– Continuous Improvement

• Examples:– Dell smooth demand, tailor PL– P&G Continuous Replenishment – Intel Copy Exact!– UPS standardization– Niagara & Bottle configuration

•

Sustaining SC Innovations – One Example

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• A discarded idea – initially too small and risky to pursue – But a small competitor saw promise

• Numerous tweaks, initiatives, downstream collaboration• Wins all around!

– Lower transportation cost/unit for shipper– More product in same shelf space for retailer– Fewer packing materials lower cost for shipper, less waste for retailer– More stable package, less damage for all

2 0 1 7 M a t e r i a l H a n d l i n g & L o g i s t i c s C o n f e r e n c e S p o n s o r e d b y D e m a t i c ● P a r k C i t y , U T•1

Disruptive SC Innovations

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• Disruptive SC innovations change the dominant design of the existing supply chain and offer potential improvements in one or more areas: cost, service (cycle time), quality, financial resource requirements.


• Focused Examples:– Warehouse robotics automated

fulfillment– Inspectorio mobile reporting– Bose JIT II In-plant Buyers– Calyx & Corolla Direct flowers

• Broad SC Examples:– FedEx Overnight shipping– SeaLand Containerization– Dell Make-to-order– Zara Fast Fashion– Uber open-source taxi mkt

So….

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There are not that many disruptive Supply Chain Innovations.

Agree or disagree?


Disruptive Supply Chain Innovation

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Do you REALLY want to disrupt your supply chain?

Consider the Innovator’s Dilemma….


Lets Look at some SC Innovationsaka The Cool and Sexy in Use (or Trial)


One-Hour Delivery

Pick-Pack Warehouse Robotics

GE One Piece Nozzle Design

DHL Delivery Lockers

Carbon-fiber Containers

that fold

Walmart Towers

Uber

UPS 3DP @ Stores

What’s new about each of these?

Crowdsourcing Demand

ABInBev Self-Driving Beer

Deliveries

Google and Levi’s

Garment Touchscreens

Dell MTOZara Fast FashionContainerizationFedEx Overnight

Hurricane Harvey Drone

Deliveries Musk’s HyperloopCrewless Ships

Flying CarsAmazon’s

Underwater Storage

Troubling Questions

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How is it that the core components of the cool and sexy supply chain innovations – are not really new?


The Secret is Substitution and New Combinations


Kanban

Containerization4DP Self Assembly

Cloud Computing

3D Printing

Overnight Deliveries

Invty Mgt

X-dock

JIT

quick response

CPFR

Kaizen

VMI

Real-Time SCM

POS systems

Dynamic routing

mobile platforms

EDI

JIT IIVendor Inplants

auctions

trade exchanges

Hub-and-Spoke

Prod Lifecycle

Mgt

Cybersecurity

Efficient Consumer Response

(ECR)

Continuous ReplenishmtProcess (CRP)

Make-to-Order

Postpone-ment

Direct sales

SC risk mgtStd process,

product , material, platforms

Dedicated fleet

IT integration

Customer/Supplier collaboration

S&OP

Outsourcing

Offshoringnear-market sourcing

Reshoring

SC Optimization

Vertical Integration

MRP

TMS

WMS

DRP

Portfolio approach

Production PlanningShipping & Distribution

Procurement Coordination & Integration

SC Design

BCP

Nearshoring

Intelli-sourcing

Disintermediation

Digital SC

Omni-channelMake-to-

stockDSD

Merge-in-transit

Mobile robots

Insourcing

Single, sole, multi-source

Resilience

Companies use different combinations for SCI

• Walmart – EDLP, Upstream supply management, store location impact on SCs• P&G – Efficient Consumer Response (ECR), Continuous Replenishment Process

(CRP), diamond customer teams, Streamlined Logistics, etc.• Dell – Make-to-order, sell direct, product line & SC tailored to mkt• Intel – Copy Exact!• UPS – IT integration across system, standardized and engineered processes• Lucent – Platform/component standardization, Margin Mgt in SN, shared risk• Zara – Integrated design and automated production, near-market production, near-

vertical integration• Li & Fung – 4P CM, extensive contract manufacturing


Companies use different elements for SCI

• Toyota – Toyota Production System, SMED (single-minute exchange of dies)• Cisco – supply chain risk management, monitoring & measurement• Citibank – back-office optimization• Ford – assembly line at River Rouge plant• Caterpillar – service parts availability via integrated network• FedEx – hub-and-spoke system enables affordable service offering• Beverage bottler – used competitor’s packaging innovation• Reebok – redesigned SC for rapid response using postponement instead of forecast

improvement to serve flash-demand for NFL jerseys• Low cost SC – redesigns hi-vol mfg ops based on insights from low cost SC


Product AND Supply Chain Innovation Together?

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Sometimes it is possible that an innovation serves as both a product AND a supply chain innovation.

Examples: FedEx Overnight ShippingSealedAir iBubble


Product AND Supply Chain Innovation Example


• Sealed Air iBubble Wrap– Product or Supply Chain Innovation?– Air-filled bubbles inflatable bubbles– Old bubbles + Postponement = inflatable bubbles,

nearly 50x more compact!– Product innovation (inflatable bubbles) enable

postponement (inflate at use point) lower logistics costs

Ref.: Images from WSJ July 1, 2015

Key Takeaways

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• Supply chain innovation is about improving the process by which you create and deliver your product and/or service.– Rarely is the supply chain innovation a product innovation too.

• Most supply chain innovations are sustaining • Pursuing disruptive supply chain innovation calls for

– Different skills & resources to imagine how to destroy the dominant design– A willingness to put existing near-term business at risk

• Successful supply chain innovators– Experiment a lot to get the right ingredients and application – Collaborate upstream and downstream (e.g. Niagara, Zara, Dell, Bose)


Conference Cloud

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• For additional writing and reference material, see:– https://ctl.mit.edu/research/current-projects/supply-chain-innovation– SCMR Innovation Strategies Column

• Useful book references:– “The Innovator’s Dilemma” by Clay Christensen– “Managing the Dynamics of Innovation” by James Utterback

Additional Resources


https://ctl.mit.edu/research/current-projects/supply-chain-innovation

Questions?

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Innovators Don't Always Produce Breakthrough … 5 - Innovation Lab/T5S8... · – Zara Fast Fashion ... Outsourcing. near-market ... Portfolio approach. Production. Planning. Shipping