FOSC keynote: Companies should embrace optionality to manage uncertainty

Two men sitting in chairs on a stage and talking to each other.

Providing multiple options on how best to manage freight may be the optimal way for supply chain stakeholders to utilize the many streams of data that come their way, according to Michael Schrage, a research fellow at the Massachusetts Institute of Technology Sloan School of Management.

In a keynote address at FreightWaves’ Future of the Supply Chain summit in Northwest Arkansas Tuesday, Schrage, a fellow at Sloan’s Initiative on the Digital Economy, outlined reasons why optionality should be the goal for companies that are part of the supply chain. 

Optionality means considering various outcomes, as well as the many ways to get to those outcomes, instead of merely focusing on one solution. 

“My view is, how can we architect the best choices rather than the best answer? Because, as everybody in this room has lived through, when the best answer isn’t available, what the eff do you do?” Schrage said.

One reason companies should consider embracing optionality is that it lets them thrive, even during difficult and uncertain times such as a pandemic.

To develop options, a company can ask questions such as whom it can coordinate with to achieve a mutually beneficial income, what the two to three best options are given company constraints and who has access to the kind of data needed to achieve the desired outcomes.

“I am amazed and disappointed that [this line of questioning] doesn’t happen more often. And I’ll go so far to say that during COVID, when I was working with organizations during COVID, we saw a split [among] companies,” Schrage said. “The majority of companies tried to tread water and just make it through. We saw other companies that basically gave up … . And then there was that 15 to 20% of the companies that stepped up and tried to turn a bug into a future.”

A company can also “double down” on creating platform architecture that enables visibility, transparency and agility, Schrage said. 

“What is your road map for visibility? … Can you aid your clients or your customers’ visibility road maps? Are you having conversations about what visibility means at the end of 2023, rather than just for the next three to six months?” Schrage said.

He later added, “I really do wonder to what extent the supply chain of the future is going to leverage visibility around digital twins, visibility around simulation, visibility around modeling to make — on a risk-adjusted basis —  better decisions about shipping, supply chain management and risk.”

As companies consider optionality and incorporating data into various options, they should make sure that they are creating “architectures of interoperability,” which means scanning and running analytics on API data in a way that doesn’t silo the data or inhibit collaboration within the company, he said.

Many companies claim they are undergoing a digital transformation and taking data to the cloud, but what is actually happening is that “you take these unbelievably dysfunctional, unbelievably siloed systems, and you digitize it,” Schrage said. “So, you recreate all of your pathology and dysfunction in the cloud. You’re dysfunctional. You’re doing the wrong thing, but hey, you’re doing the wrong thing faster, better and cheaper.”

Companies should also consider innovative ways to cultivate optionality. For example, to help NBA basketball players improve their game, Daryl Morey, an NBA executive and co-founder of the MIT Sloan Sports Analytics Conference, worked with video game producers to make a video game in which basketball players could play with the performance analytic representations of themselves, according to Schrage.

“Nobody wants to be some algorithm’s bitch … [but] I think we’re going to be seeing more and more gamification simulation modeling [in the supply chain],” Schrage said. 

For instance, when assessing supply chain needs, people might ask, “what if all that sunflower oil in Ukraine is not available anymore? What do we do? How do we scramble? Who do we form communities with? What are the two best substitutes for sunflower, or what sunflower oil-intensive product could be redefined or reimagined if we use X?”

“Gee, all of a sudden, the supply chain people aren’t supply chain people anymore. They’re collaborative designers for next-generation, just-in-time products. Services. Experiences. I think that’s huge. I think that’s huge.”

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Source: freightwaves

FOSC keynote: Companies should embrace optionality to manage uncertainty