Big Data and Innovation in Energy Supply Chains

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Big Data and Innovation in Supply Chains

ORTEC Consulting Group spoke with Professor Dr. Jack van der Veen about the latest developments in Supply Chain Strategy. Jack van der Veen is Professor of Supply Chain Management and holder of the EVO Chair for SCM at Nyenrode Business Universiteit sponsored by EVO, the Dutch shipper association. Also Jack is Cluster lead ‘Lean at SME’ at the Nyenrode Lean Education and research network (LEArN). Jack Specializes in: Social Innovation; Production & Logistics Management; Supply Chain Collaboration; Operational Excellence; Operations Research and Lean Management.

Below an edited transcript of the interview.

Today there is a lot of talk about big data and analytics how does big data influence the supply chain?

One of the key ideas in supply chain is, that if you exchange information between the various parties, everyone can improve their operations and create a better, faster, more cost effective and sustainable solution for the end-customer: the consumer.

Step one is sharing data. Step two is turning data into information. There are a zillion different consumers involved, each with its own habits and demands and within supply chains many other data points are generated. The amount of data available is ever increasing. That is ‘big data’. Turning this big data into valuable information for improving supply chains is the great challenge.

Innovation is a big theme, what innovations do you see in energy supply chains lately?

Of course there are exciting technological improvement that people are working on. New sources of energy and new ways to store energy – like batteries- are two important improvements. Breakthrough technologies in these areas, will have a huge impact on global supply chains.

Supply chain innovation is also about process innovations. These are not necessarily technical in nature but also include new ways of management and new ways to collaborate in the supply chain. Research demonstrates that 75% of the innovation comes from this ‘social innovation’; using your people and suppliers and customers to come up with ideas to improve the processes in and between organizations.

How do energy supply chains differ from other supply chains?

Energy and other supply chains have many things in common. But there are some major differences. Energy by its nature is a commodity and has a more or less continuous flow. Energy serves a primary need for people and businesses and within energy supply chains natural resources and geopolitics play an important role. And of course the environmental aspects are all important in energy supply chains. This unique combination makes energy supply chains stand out from other supply chains.

What are the criteria for a successful supply chain strategy?

Different organizations have different supply chain strategies; there is no one size fits all. There are however a few things that, no matter what exactly your strategy is, must always be taken into account.

Strategy is a matter of choosing: where do you want to excel? It is also a matter of differentiating: how do you want to compete? Strategy is supposed to give guidance to all day-to-day decisions. It is not something that you write on a piece of paper and stack on a shelf. Strategy really has to live throughout the supply chain organization. Strategy needs to be compelling: it should contain some greater goal that inspires the people. Strategy needs to be aligned, the strategy defines the specific roles of the various departments in an organization in achieving the company’s or the supply chain’s objectives. And last but not least: strategy needs to be customer oriented: how and where exactly do we add value for our customers.

Is supply chain optimization important for companies in the energy industry?

Optimization is absolutely key. In a high competition commodity market the end-to-end total cost leadership is and will stay very important. Optimizing the end-to-end supply chain in terms of delivery guarantee, quality guarantee and optimized cost is essential. However, this is all about making the existing supply chains better. Perhaps it is equally interesting to start investigating new types of supply chains too.

What are the latest trends in supply chain management in the energy industry?

There are two main trends: One is the increasing role of the customer. For a long time energy companies were not truly customer focused.  But of course the end-customer perspective, and the wishes and demands of the individuals customers and the customer process: when is energy used for what,  both in product and in service is all important and can no longer be denied by  – mostly inward looking – energy companies.

The second trend is the increasing number of energy sources. More and more individual households and  organizations generate small amounts of energy, e.g. by installing windmills or solar panels and these two trends might even be strengthening each other. Both developments have the potential to put the energy supply chain upside down. It appears that the traditional energy suppliers are not able to adapt to these developments. This trend opens up the possibilities for many new organizations with different business models based on other types of supply chains.

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