The case for holistic strategies
By Anne Millen Porter -- Purchasing, 3/18/2004 7:00:00 AM
Some of the greatest technological and mathematical minds in the world are developing and perfecting technology solutions that automate and optimize supply chain activities—from product design to end-customer delivery and everything in between. But the massive detonation in supply-chain technology options—many of which overlap functionally—has made it difficult to discern how a company's precious IT resources should be invested. Decades of cross-functional collaboration notwithstanding, the organizational silos responsible for supply chain inefficiencies are still largely intact. As our diagrams show, different supply-chain functions perform distinct sets of activities; corporate functions frequently compete for scarce IT resources, rolling out their own discrete sets of technology solutions.
But there's danger for corporations in taking piecemeal—rather than holistic—approaches to investing in today's hot supply chain technologies. Top functional executives need to be sitting down together, envisioning their collective futures, strategizing and rationalizing their optimum information flow structures, then systematically implementing point supply chain solutions with a clear understanding of how the various pieces will form an integrated—yet flexible—whole.
Before a single penny is spent, companies ought to be searching their souls for answers to these (and many more) questions:
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Where are the risks in our supply chain(s)? How do we rank these risks from high to low? Clearly, IT investment dollars need to follow the risks.
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Where are the cost drivers in our supply chain(s)? How do we rank these from most to least influential in terms of our short- and long-term profitability? If 80% of our cost is designed in, then doesn't PLM make more sense than e-auction?
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Where is the safety hidden in our supply chain(s)—the squirreled parts piles, the risk-related padding in suppliers' pricing, etc.—and how can use technology to minimize or eliminate these?
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Where do we have the most people (read, labor cost) performing the most manual work to compensate for a dearth of prompt, accurate information about things like expected demand, orders, inventory, and the inflow of raw materials and components?
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What are the performance demands being placed on us by customers? Do we need rocket science or will simpler, lower cost technology options work just fine?
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How will our supply-base composition change over the coming decade? Bigger? Smaller? Fewer? More? Domestic? Global? Accordingly, how will our logistics and inventory management requirements change?
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What will our model for design/manufacturing/marketing look like in ten years time? Will we go from build-to-stock to build-to-order? Will we shift design and/or manufacturing activities upstream to contract manufacturers, downstream to distribution channel partners, or offshore? What will be the demands of transitioning these activities? How will we collaborate with our new, increasingly critical supply partners?
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What is our real cultural attitude toward suppliers? How cooperative and/or secretive are we? Does this need to change?
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How dirty is our legacy? Do we have eight ERP implementations companywide and eight hundred thousand part numbers with God only knows how much duplication? A major scrubbing/standardization investment may be our first order of business.
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How flexible do we need to be over time? Do we need to be able to tear down and rebuild supply chains in record time? Or can we afford to sacrifice flexibility for the cost and speed efficiencies of increased integration with suppliers' information systems?
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How tech savvy is our supply base? Can we build a technology-enabled supply chain that exploits IT investments they've already made? How can we guard against cost shifting to suppliers?
Holistic approaches to creating technology-enabled supply chains will emphasize simplicity and information accuracy. They'll drive to the fewest possible instances of the same information; changes in design, demand, and supply data will reverberate correctly and instantaneously throughout the entire information network. They'll emphasize forward looking demand data and real-time access to performance metrics. They will strike the perfect balance between efficiency (gained through increased systems integration and automation of tasks) and flexibility so the company can always anticipate and react to changes in its markets.
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