For a hungry software vendor, fear and greed can be wonderful things. At least when it comes to the attitude of prospective customers. What else is going to prompt companies to start investing in new applications for key supply-chain processes?
The question is one that constantly occupies vendor executives like Peter Scott, vice president of supply chain solutions with Exostar. The recession has put a damper on IT expenditures, but he believes things are finally loosening up. The reason? See the above paragraph.
The fear factor stems from the retrospective awareness of many businesses "about just how risky their supply chains were," Scott says. The latest economic crisis has caused the failure of thousands of suppliers, and cast doubt on the financial viability of the survivors. Companies are now scrambling to identify alternative sources of supply, while spending tons of time and money in order to get a better handle on supplier stability. One clear lesson learned by supply-chain managers in recent months, in Scott's words: "I've got to get better real-time visibility into my supply chain in order to manage the risk that is there."
Up to now, companies have tried to achieve that goal mostly through the use of manual or legacy systems. But here's where the "greed" part comes in. As executives detect a glimmer of economic recovery, they want to be in the best possible position to capitalize on it. And the ones with outmoded processes and technology are likely to be left in the dust. "It's this ability to gear up your supply chain quickly enough, to scale your business, [with the] understanding that you're not just going to be able to hire a ton of people back," says Scott.
So what to do? Scott and his ilk hope that the answer is "buy new software." But beyond the obvious needs of vendors whose survival depends on stirring up fresh demand for their products, there's the very real issue of managing a globalized supply chain in uncertain times. What's the optimum number of suppliers to keep on hand? Who are the best partners? Who are the losers? And how do you know that product is moving through the chain according to plan? The answer lies in that magic word: visibility.
Easy to say, hard to achieve. Scott says companies typically go through three stages as they travel the "maturity path" toward technology and process change. First is the pursuit of "transactional value" - automating the flow of simple kinds of information. You pare down manual tasks, put a stop to business by fax and e-mail, and strive to slash order cycle times.
Next comes the quest for "process value," where you begin to collaborate (another loaded term) with suppliers. You outsource logistics to trusted providers, launch vendor-managed inventory programs, and begin to partner with suppliers on forecasting. Here, new technology helps you to create tolerances around key processes, set performance measures and manage by exception.
Having surmounted those first two hurdles, you reach the promised land of "information value," where supply and demand data flows smoothly between buyer and supplier, and you begin to apply complex analytics to transactions. In the process, you become able to execute fulfillment on a daily basis, while simultaneously tracking performance and identifying long-term opportunities for improvement.
So how far along are most companies on this yellow-brick road to maturity? Not very, admits Scott. He expresses surprise over the inability of organizations to get started with meaningful supply-chain initiatives. The desire isn't lacking; Exostar has seen a "quadrupling" of inquiries about its supplier-management tools over the last 12 months. "Yet there still seems to be an incredible level of difficulty in actually getting started."
What is an organization, after all, but a group of discrete departments whose self-appointed task is to frustrate each other's progress? Any major initiative must first get on the corporate agenda, then win a high-level sponsor who can figure out how to deploy it across the various lines of business. It must be properly budgeted, with the imprimatur of the COO and CFO, not to mention IT and the underlying departments that the effort is supposed to benefit. Scott describes the dilemma as "the whole village green thing" - how to undertake an effort that is viewed as a corporate asset, while accounting for the unique needs of individual business units.
He is nevertheless hopeful that businesses are making the necessary moves toward meaningful change. They are driven by a combination of external events and the prospect of better technology. Systems today offer more computing power and the advantages of hosted delivery, with nearly every type of application available in a software-as-a-service mode. Social networks, too, provide an example of how businesses can craft tighter relationships with their supply-chain partners. The opportunity exists to place a vast network of suppliers, ranging across multiple tiers, under a single system for day-to-day communications, visibility and data exchange. Companies are actively pursuing online supplier portals to manage those tasks. "People out there are starting to stitch these things together," says Scott.
"I do think budgets are starting to loosen up," he adds. A little fear and greed never hurt anybody.
- Robert J. Bowman, SupplyChainBrain
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