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Key IT Issues Decoded for Supply Chain Professionals
During the past year, several co-authors and I have published a series of articles in the supply chain-related IT space for LQ in the column "Technology Toolbox." We intend to dovetail on those pieces and give more detail on the key IT issues that supply chain professionals should be aware of in language that we hope is easy to understand.
This piece is intended for any supply chain manager who:
The IT space changes rapidly and therefore, we intend to give you some perspective on the biggest trends/issues in IT that impact or are impacted by supply chain management. In today's competitive landscape, collecting data is not enough; the better company transforms that data into useful information and uses it in innovative ways. All of us have experienced the common pitfall of collecting vast amounts of data and then suffering from information overload.
We will cover the following issues/trends in the IT space that affect supply chain management:
Agility is the "buzz" among leading companies. It requires having access to timely information. In the supply chain -- demand becomes not just a monthly forecast but daily and hourly information and it references the importance of the customer and the importance of orders to the relationship with that customer.
Your customers demand customization, choices, and on-time, accurate orders -- today. The right IT solution mix can provide the agility and flexibility needed to meet these demands to compete effectively. For example, when store operations are linked to manufacturing, labor and distribution, purchases can act as the trigger for inventory replenishment through the chain to the supplier. This creates a more efficient, agile, customer-driven system in comparison to the traditional 'push' model.
Since no two supply chains are alike, you can only achieve your true potential when you have the tools to adapt operations easily, quickly and cost-effectively to new requirements and opportunities. Adaptable supply chain solutions make this possible via an IT architecture that flexes with each customer's changing needs. This IT self-sufficiency enables rapid growth and the ability to implement cutting-edge processes and business models that the customer might not have considered with other, more traditional systems.
An effective IT solution with highly configurable workflows allows you to make process changes as quickly as they present themselves. An IT solution directly linked to your partners, suppliers and customers can more quickly react to constraints and/or hiccups in the material flows of goods.
Before You Select an IT Solution --
Check Business Processes for Repair
Your IT solution should support the company strategy and desired processes rather than operations having to change to accommodate specific IT requirements. Instead of finding the right tools for improving specific competitive gaps, businesses have often made huge investments intended to address all processes and have often failed to address the original problem. Frequently, selected IT products/functionality have forced companies to revamp their processes/operations to accommodate the software rather than supporting your processes. In addition, be sure to validate that the relationship between your processes and the IT solution is in line.
You must identify which part(s) of your business process is (are) not competitive, understand which customer need (s) is (are) not being met, establish improvement goals, and rapidly implement necessary improvements. Without a standard way to measure process performance and the without a common means to describe your processes, your IT solution is typically difficult to select and usually expensive as a result.
We suggest capturing the "as-is" state of each supply chain process or operation and derive the desired "to-be" future state. Quantify the operational performance of similar companies and establish internal targets based on "best-in-class"results. Then characterize the management policies, practices and software solutions that result in "best-in-class" performance. A difficulty in this stage is that it requires "out of the box" thinking. Personnel currently handling the processes often find it hard to think beyond the small issues that trip them up; instead, they should consider a more efficient process that might be a significant improvement rather than a set of tweaks.
To be successful in your search for the best supply chain IT solution, you need to get the foundations right including the right business process model and management practices, identifying/hiring skilled people and a strategically designed technical platform. Once you have the processes improved and aligned, you can then look at technology opportunities in the supply chain space.
An Aid to Supply Chain Collaboration:
Service-Oriented Architecture (SOA)
Performance improvements in technology components over the years have enabled a series of architectural shifts from centralized mainframes (60's); to client-server (70's); to personal computers (80's) and the Internet (90's). Each change has created a more flexible deployment of resources. In fact, we believe we are on the cusp of another major shift in the IT space-shifting toward a true distributed service-oriented architecture (SOA) delivering more flexibility and fluidity through rapid deployment of innovative new components. To attain truer collaboration in integrating with partners, seamless integration with partners should be sought.
In selecting a software solution, functionality isn't the only consideration. The ability for your system and partner systems to integrate with the new solution is almost as important. In the past, integration often required significant hard coding to allow data transfer between applications. A concept designed to ease integration issues, service-oriented architecture (SOA), is gaining popularity and acceptance. SOA allows "plug and play" of various applications into a central "backbone" without the traditional issues of significant hard coding to enable data transfer between applications. SOA is a form of distributed architecture with emphasis on "loose coupling" and business semantics for interfaces.
Deploying a company-wide SOA is not just about developing and implementing components and services -- it's about changing the DNA and culture of your IT organization and it is certainly not a six-month effort. The focus should be on a core set of reusable frameworks, components, and services that each business group can leverage. As with any initiative, it all comes down to delivering on your promises -- defining and meeting realistic interim goals.
In selecting a supply chain software solution or solutions, having a SOA will enable your integration to be much easier and faster. It will allow you to select more on the functionality and less on integration compatibility of a particular solution. You can either build your own SOA or use one through a ERP/supply chain software provider to enable more true and seamless integration both internally and with supply chain partners.
Investing in Supply Chain Software:
Own versus Rent
Traditionally, software companies wanted customers to purchase licenses in order to use their solutions. However, this sales strategy shut out smaller companies with low IT budgets because the purchase prices were often too great. In addition, some larger companies have become more interested in outsourcing some or all aspects of their IT needs to save money and hopefully increase IT efficiency by have outside "experts" focus on IT for them. Therefore, even large companies might not want to make the investment in a full software license. Now, the Application Service Provider (ASP) or ASP model holds a solution to the license fee dilemma for both of these issues.
To best understand the differences between the software providers and application service providers (ASP) we must define each role. Application service providers possess all hardware and software on their secured site with access over the internet. Software providers place all hardware and software on your site with access granted through the terms of a software license. However, software companies have now bridged the gap to offer ASP versions of their software where the user pays by use (e.g. transaction) which is like renting the software versus the license purchase in which case the user owns access to the solution.
Software providers understand software programming and the management of critical information. They are in constant state of development and have the ability to manage and organize extensive amounts of data from a variety of sources. The one-time license fee incorporates the terms and conditions for the use of their packaged software. The implementation cost typically includes installation of hardware and software on-site. The software is versioned so additional costs are applicable when new versions are released or through a monthly maintenance fee.
A true ASP deploys, hosts and manages access to a packaged application to multiple clients from a centrally managed facility. The applications are delivered over networks on a subscription basis. This delivery model speeds implementation, minimizes expenses, eliminates capital investment, reduces risks incurred across the application life cycle, provides single point of contact and overcomes the chronic shortage of qualified technical personnel available in-house. The cost to implement selected software with the ASP involves three areas: setup, maintenance and usage. The ASP is accountable for updating to current technology, disaster recovery systems, security, and backups.
Now, ASP offerings of supply chain software can speed up the implementation process because the transactions are often handled outside a user's system. Reliability, application availability, software updates, security, disaster recovery and backups are your responsibility.
Typically, the following issues will determine whether a license purchase or ASP arrangement might be best for you:
Working With the IT Department to Ensure Software Selection and Implementation Is Successful
In today's world most IT organizations remain as two distinct software support groups: one serving administrative functions (IT, Finance and HR) and the other serving business operations (e.g. manufacturing, customer service, order entry and distribution). Every user of IT services expects to get their changes implemented immediately and, as a result, their request ends up at the bottom of an endless list of projects. Remember my suggestion in an earlier Technology Toolbox column to make friends with a "Technie" to have your requests completed faster.
We foresee the administrative support functions served almost exclusively by purchased software packages based on the functionality offered. This typically limits any change requests to what is already built into the software, but is not yet activated. These applications do not differentiate the enterprise in the marketplace and the need to customize them should be very limited. Although some applications accept feeds from or deliver to other systems, these feeds are typically non-real-time, batch transactions - the most simplistic and resource-light type of interface.
Another IT organization, Operations (i.e. hardware, operating systems, desktops, networks, etc.), is the component that you "see" every day as they go about their work; their effectiveness can be measured constantly. They also account for a major portion of the total IT budget. They are structured along the lines of what is needed to support the infrastructure IT.
A goal within any company is a better mutual understanding of the business team and the IT team. Too often, misunderstandings between these two groups cost time and money in resolving. There should be a deep understanding of the business by the entire technology team and a close knit relationship between the business strategy and the IT direction as well as a deep understanding of the IT strategy and operations by the business folks.
For supply chain decision makers, the world of information technology can seem daunting and confusing. However, by leveraging IT correctly, your supply chain operation can be enabled to run more efficiently at a lower cost. This article was intended to give you the ammunition to make better decisions in relation to IT investments without having to become entrenched in IT research.
We all know that new hardware, applications, networks, protocols and programming languages don't give us a lasting business advantage over our competitors.
Whatever we buy, they can buy. Whatever we build, they can build too-this isn't news, is it?
You've never been able to get a sustainable competitive advantage directly from IT. Yes, technology can cut costs. But real competitive advantage, just from technology? It never lasts, and barely exists.
You can, however, get real business advantage with technology. You just don't get it from products, services and information. You get it from processes, skills and execution -- the same things that let any business differentiate itself. When IT is used most effectively, (i.e. when it's really focused on the business it serves) it reinforces and amplifies that differentiation. It maximizes the advantages you get from your business model. It improves processes, leverages skills and streamlines execution in ways that help your business deliver on its unique strengths.