Duct tape and bailing wire. It’s the punch line to many a joke. It also describes how many of today’s supply chain systems evolved over time.
A provider in the supply chain starts a business, using a basic accounting program to manage transactions. However, as the business grows, other suppliers tap into the system, requiring a modified interface to effectively manage the transactions. As shipments go out, a transportation partner wants in, and more accommodations are made.
A new system is added to the accounting program and soon, the warehouse expands. Another system is added. And then another and another, until 12 different systems clumsily transfer data, from procurement to warehouse to transportation and back, using a jerry-rigged management tool designed to infinitely finagle the interfaces.
I don’t mean to make light of the situation, because there are good reasons systems evolve this way. But it does beg the question: ‘Is there a better way to manage the business? Would not a more integrated supply chain ecosystem, engineered to automatically transfer data—securely, seamlessly and intuitively—make more sense?’
It might. But first, let me address the incentive to carry on with business as usual.
Comfort in the status quo
There is a risk to overhauling the status quo. Stand-alone systems, already in place, create familiar comfort zones within an organization. New programs and procedures require change—and change, as scary as it may be, will percolate resistance.
What’s more, there is a cost involved in migrating from a series of disparate systems to an integrated supply chain model. Stand-alone systems typically don’t cost much to plug and play. Even the “interface finagling” can be accomplished at minimum expense.
However, programming an open, pliable enterprise solution that connects trading partners across various platforms can be an expensive proposition—not to mention the effect such a transformation can have on the people involved. All participating parties must agree to the design. As new systems and procedures are adopted, training becomes an expense and mistakes will be made. Before all is said and done, the data must be migrated, creating a fair amount of anxiety up and down the party lines. And consultants—especially the good ones—are never cheap.
All things considered, a good degree of inertia exists to leave well enough alone. However, well enough will not be good enough as our digital connected global marketplace takes shape.
Let’s say I have a dozen systems cobbled together in serviceable fashion. I send a purchase request to my supplier in China, expecting product to be available and shipped shortly after. But unbeknownst to anyone, within hours of my receipt, their warehouse in Shanghai goes up in flames and product becomes unavailable for several weeks.
In a stand-alone system, my purchasing agent must now contact customer service to research all customer orders related to the product. Do I have enough in stock left over to fulfill standing orders or I do need to offer a substitute? If I need to offer a substitute, do I have it in stock? If so, how do my customers want the exception handled? How do my supply partners want the exception handled?
The manual back work required to reconcile the situation could be more than maddening—it could be very expensive, even costing future business.
Value in a fully integrated environment
In a fully integrated supply chain environment, however, the system runs the traps. It instantly reports the incident to my supply chain partners, communicating automatically with my customers what’s in stock; what else is available; and requesting their preference on how they want their pending orders managed.
Based on their response, the system then automatically requests replacement product from appropriate warehouses throughout the network. Meanwhile, all paperwork, debits and credits register electronically; and every customer involved is sent an apology email with a discount offer good toward their next purchase.