By Alan Kosansky and Ted Schaefer
Is your supply chain technology driving increased profitability for your business? When supply chains are performing less than optimally, it is usually a sign of poor decision making. Having the right supply chain technology in place will enable superior decision making in a company's key supply chain functions and ensure an efficiently run supply chain. However, understanding what to reasonably expect, and what not to expect, from supply chain tools isn't always clear. At a minimum, supply chain technology should establish a foundation on which to operate world-class supply chain processes that enable people to make the best decision for the business. Only a few leading-edge companies are getting the most out of their technology by leveraging it to achieve maximum business profitability.
The Four Pillars of Supply Chain Technology
At a minimum, it's important for supply chain technology to provide four foundational pillars to the business. They are:
1. Data visibility. Supply chain tools are a window into what is happening in the business: What do customers want, how much and when? What can manufacturing sites produce and with what reliability? What are the costs for each stage of the supply chain from sourcing raw materials, through making the products, to distributing them to customers? Where are the bottlenecks in the supply chain, and how are the associated risks being managed?
When the data that represent all these activities are visible, people can respond in a timely and effective manner. In addition, having a common source of data for all the decision-makers allows coordinated and consistent responses. And having reliable data reduces the waste that accumulates when each person hedges for uncertainty in the system by adding "just a little" extra inventory, reserving "just a little" production capacity or holding back "just a little" on the sales forecast.
2. Data "slice- and dice-ability." Detailed data of supply chain operations can be overwhelming. Furthermore, different members of the supply chain team, accountable for different performance metrics, may want to see the data in different ways. That's why supply chain technology should be able to provide customized views into the data required to make decisions, at the level of detail pertinent to the individual decision-maker. For example, sales people may need to see customer forecasts and historical sales at a product-customer level in order to effectively create their sales strategies, while regional sales managers may want to see data aggregated to product or region.
3. Focus on the right problem area. Supply chain technology needs to support the critical decisions that affect profitability. There is an astounding array of supply chain support tools available in the marketplace, ranging from demand planning to supplier relationship management to transportation planning and vehicle routing, just to name a few. Which ones will have the biggest impact on improving profitability? Which ones would be a waste of money? The answers are different for each business.
Selecting the right technology depends on an understanding of the primary drivers of supply chain performance for the business. For example, in a long-lead-time supply chain, forecasting and planning may enable better preparation by having the right raw materials and production plan in place to meet customer orders. Effective inventory management technology can support critical decisions of where and how much inventory to keep in different stages of the supply chain. With short lead times, on the other hand, focusing on speed, flexibility and execution accuracy becomes more critical. Implementing effective production scheduling and distribution management tools that permit a dynamic response to fast-changing conditions is likely to be of greater value than a sophisticated forecasting system.