Unencumbered Assets in Future Supply Chains

The conventional asset in a supply chain is the one that delivers value through capacity utilizations, the cost accountant finds the value in cost per ton at the factory gate; as capacity utilization moves up this delivers more value. The old world therefore revolved around creation of large assets, larger they were the more scale advantages they could create. No wonder we saw every mill becoming larger, every assembly plant becoming several times larger than the previous one.

This almost clearly missed the point that the product’s utility came from the delivery to a customer and there could be many other costs involved in this process, including the value it could generate from the delivery process itself, being faster for example or being far less risky or being qualitatively different in its overall appeal or in the ability to tweak and transform as the needs changed.

The product itself could have changed over years, making a large plant and being anchored forever to a particular process itself could be far more risky as times have changed that keep churning new innovations year after year.

Being anchored to an asset that has a huge sunk cost would restrict and constrain the ability to innovate and transform so that the product offering could be improved. The same applies to being fixated on a technology investment that would chain you for several years, where the next technology is waiting to be unveiled any moment.

Thus the erstwhile assets could be your biggest liability if you do not see the future unfolding in many different ways and the supply chain construct in the future is changing the narrative altogether.

Think of 3D printing and you will understand this very easily how the supply chain configured in conventional terms would be quashed by the advent of 3D printing which would mean that the final customer would be able to produce the exact product wherever she chooses to do so which is currently being mass produced in the safe havens of your factory.

The 3D printer maker would be the biggest disrupter who will cut across a range of products and processes and be the next power center demanding a complete change in the design of your supply chain.

Think of the construction industry and the way the earlier assets were configured and how they are getting smaller and moving towards the market as that is the only way to reduce logistics costs, which happens to be the biggest cost element.

Think of the beverage cans and how the whole concept is changed to a circular offering, from one unused can to an used can the whole supply chain gravitates, instead of starting from bauxite in Australia and moving it to U.S. to produce alumina and aluminum and then rolling it down to can sheet and then punching discs from where cans would be drawn to be filled with the beverage in can filling plants that would be then sent across large distances. This whole supply chain has got reconfigured where the earlier actors got new roles to play with many new aggregators and affiliated participants entering the fray, disrupting the business models.

The asset in the supply chain may not be the producing unit at all. It could be the most unseen and the least understood entity.

In logistics space, for example, the real asset is the technology that will make you network with thousands of disparate and unconnected information systems that could be gainfully connected to make you crash time buckets and reduce cost simultaneously while throwing up new puzzles for the next solver.

The current driver, who is on the wheels and could be partnering to reduce cost, could well be replaced by technology that would direct him to be doing differently every time he is making a delivery move from one center to the other. In global supply chains it could be large distribution centers that would be working on optimization schedules that has new puzzles being constructed every minute.

The asset configurations of future supply chains will be based on metrics that the current assets do not have the ability to meet up to. The value of our assets are currently based on one single metric we have chosen to justify its existence, that could change if a range of new measures are put in that are based on market requirements that keep changing more often.

Understanding the utility of an asset in the future supply chains will not be based on fixed parameters, as the parameters could be changing over time.

Keeping the assets more flexible could be your best option and seeking to make the technology unencumbered could be the next best option, all you know.