Down to business

Implementing a supply chain solution as a technology solution is a risky business, as many companies have found to their cost.

A company’s supply chain is a continuous flow of interrelated processes that extend from its suppliers to its customers. It is comprised of many smaller chains that work in unison to perform the major processes in the organisation.

Leading edge companies use their supply chain to help them gain agility in the market, increase their profitability, and enter new markets. To achieve this, all aspects of their supply chain have to be working at optimum levels – meaning optimised materials and information flow, maximum integration of processes across the organisation, and optimum production and related process cycle times.

The state of a company’s supply chain is directly related to its ability to deliver its offerings to the marketplace quickly, cost-efficiently, and with maximum quality. Maximising the efficiency and productivity of the supply chain is therefore of critical importance to revenue, profitability and customer satisfaction.

According to AMR Research the return on investment in supply chain management solutions can run from 30 to 300% . Hardly surprising then that so many manufacturing companies have turned to technology to enhance their supply chain solutions.

Unfortunately, this has not always proved successful and the marketplace is littered with failing and ailing supply chain solutions as a result. How has this happened?

A properly-implemented supply chain management solution – the supply chain environment – takes critical company processes into account, including raw materials procurement and manufacturing, storage and distribution. Materials and resources planning are integrated rather than sequential. Customers and suppliers are both included in the planning of the supply chain.

Companies have often approached these business-critical tasks by hiring technology-based companies to purchase application software packages, and to implement those packages in their business. Unfortunately, viewing and implementing a supply chain solution as a technological solution creates a number of new risks and dependencies.

What happens when core technologies change? Will the supply chain solution cope with the increasingly non-linear nature of the Web-based business world, or will it be found wanting? And how can the company ensure that its supply chain is designed for the business, rather than being built around the supply chain software solution?

A software-driven supply chain solution will tend to reflect the state of the company’s supply chain at a fixed point in time. Meanwhile, people, data, technologies, functions, business partners – a vast array of ‘inputs’ and ‘influencers’ surrounding the supply chain – are in a state of constant movement.

It is critical to keep a company’s processes changing at the same pace as the organisation, and in line with its supply chain as it broadens to include new business practices, customers, technologies, partners, and channels. The most effective way to implement a supply chain solution is to begin by recognising that supply chains are better viewed as business processes, rather than software applications or technology solutions.

By taking a business process-oriented viewpoint of their supply chain, companies are better placed to maximise ROI. They can then take a lifecycle management approach to the supply chain and look for an ongoing stream of benefits, which achieve higher profits and manage assets effectively rather than opting for a once-only, ‘big bang’ style implementation that delivers an impressive but one-off financial return.

To implement based on business processes, it is necessary to dissect and evaluate each aspect of the business and analyse how it relates to the overall supply chain. Fortunately, there are now tools and techniques in the marketplace that allow a company’s supply chain-related processes to be rapidly modelled and measured. The model then generates a blueprint against which the optimum supply chain solution can be developed and implemented. Because of its business process, model-based roots the solution will allow management to predict with much greater accuracy the expected return on their supply chain technology investment – before any implementation begins.

The company will have a more flexible supply chain management structure, with business processes that can be more easily adapted to changing market needs. And because of its business-oriented development the solution will provide process performance feedback, allowing the organisation to continuously improve the performance of its supply chain.

Mike Pearce is a senior consultant at IDS Scheer, a business process performance specialist working with manufacturing industry.

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