The period between 2001 and 2003 was a rough time for ViaSat Inc. For the first time since its founding, the Carlsbad, Calif.- based maker of satellite communications equipment reported a loss. Business fell off as the electronics industry went into a steep downturn. And management decided to shift more manufacturing to outside contractors.
A perfect time to start spending money.
Ray Barger, director of procurement with ViaSat, admits the company's timing was problematic. But he insists that a boost in spending on information systems and business-process change was necessary. For one thing, ViaSat's various business units, some recently acquired, were running different systems for managing financials, orders and inventory. Management wanted to standardize on a single enterprise resource planning platform, that of Oracle Corp. At the same time, it needed to get a grip on product lifecycle management (PLM). And a greater reliance on outsourcing called for better systems to link ViaSat with its suppliers.
"We did a lot when business conditions were adverse," says Barger. "But making those tough decisions put us in a much better position to meet customer requirements and growth."
The economic downturn and high-tech crash have forced many companies into a defensive posture, with an obsessive focus on cutting costs. The problem is especially acute for publicly traded companies, who face relentless pressure from shareholders and Wall Street for uninterrupted growth and immediate profits. "The public company is a slave to the market," says Shoshanah Cohen, a director of Pittiglio Rabin Todd & McGrath (PRTM), a management consultancy. "It's very hard to make long-term investment decisions that require short-term hits."
But ViaSat, whose shares trade on the NASDAQ, knew that money spent now would translate into big savings later. By converging on a single instance of ERP, it could standardize key business processes. ("That cost us in the short run," recalls Barger. "I probably got a few gray hairs in the process.") The new supply-chain control system would allow the company to forge better links with contract manufacturers and capture more accurate data. The hosted software package, from Irvine, Calif.- based RiverOne Inc., helped ViaSat to avoid a big increase in direct spend on purchase-order and inventory management, Barger says.
ViaSat wouldn't have opened its checkbook without a strong business case. In the 1990s, all it took was a fancy new acronym and PowerPoint presentation to convince companies to load up on software "solutions" for every possible link of the supply chain. Then, with the end of the dotcom craze, IT spending came to a virtual halt. Today, with the U.S. economy slowly recovering, executives are still reluctant to allocate money for new projects without good reason.
|"Companies need to balance cost with meeting service requirements."|
- Gary Godfrey of Accenture
|Taking a Strategic View of the Supply Chain|
|Companies that realize the importance of an efficient supply chain are far more likely to make investments in its long-term health. Shoshanah Cohen and Joseph Roussel, partners at the management consultancy Pittiglio Rabin Todd & McGrath (PRTM), have written a new book which highlights the supply chain's strategic importance. In "Strategic Supply Chain Management: The 5 Disciplines for Top Performance," they outline five ways in which executives can transform their supply chains: view the supply chain as a strategic asset, develop an end-to-end process architecture, design the organization for performance, build the right collaborative model, and use metrics to drive business success. The book includes "best-in-class" performance data from leading companies, including Eli Lilly, Avon and General Motors.|
"If you only think about changing your supply chain when there's a problem," the authors say, "chances are that you don't see it as a valuable asset that can give your company a competitive advantage. And if this is the case, you risk being blindsided by companies that use their supply chain as a strategic weapon."
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