[From iSource Business, April 2001]The ability to forecast the future is a pretty nifty trick, for anyone. In business, it's especially handy. Just take a look at Tehseen Ali, co-founder of Charlotte, N.C.-based Verian Technologies, who zeroed in on the potential for supply chain management seven years ago while attending the University of South Carolina business school. I found it was a space that faced many challenges and that current technology wasn't addressing them, he says. It was a ripe area for change.
His first stop was to found, along with fellow classmate Bilal Soylu, a consulting firm aimed at helping large medical supply companies automate their planning, forecasting, purchasing, distribution and warehouse management. In the process, they learned a valuable lesson: The real problems that clients faced lay in the way they purchased and managed goods. It was slow, inefficient and behind the times. Meanwhile, the Internet began to come into its own, offering Ali the perfect technology for addressing those complex procurement issues and automating the process. I could see that the Internet was the way to enhance the supply chain, he says.
In 1997, he and his partner founded Verian Technologies in Columbia (today they are headquartered in Charlotte). And in 1998, they introduced ProcureIT, a Web-based system to help mid-market companies cut the costs of goods, automate the workflow process and reduce and manage inventory. Like products from Ariba and Commerce One, it provides links to as many as 50 electronic marketplaces. Unlike those players, however, the $80,000 to $700,000 ProcureIT is aimed at companies with $100 million to $2 billion in revenues, the type of firm that typically faces lots of procurement headaches, but can't afford a higher price tag.
Ali won't disclose revenues, but says they have increased 100 percent a year; unlike most Internet companies, the 75-employee firm has always been profitable. This year will be an exception, thanks to the company's decision to plow revenues into growth.
For the first in a series of regular conversations iSource Business magazine will have with top executives from pure-Internet companies to brick-and-clicks, we talked to Ali about his views on the effect that technology is having on the supply chain and what the future may hold.
iSource: Tell us how your company is enabling the supply chain for your customers.
Ali: We help people plan and manage their purchasing and materials throughout an organization. Take a bank. It might have 100 branches, all of which are really small businesses with perhaps five to 10 people in each. If they all buy independently of one another, they don't get the aggregated value they would if they did their purchasing as a group. And not only do they miss that aggregated value, but they also will typically experience great inefficiencies in how they manage their purchases: They'll buy too much stuff, or run out before they know it, for example.
Our system helps individuals within organizations act as they would if they were buying for themselves, but with the power of the entire company behind them. So, for example, they can see the whole organization's purchasing and materials management patterns. They can decide whether to buy something from outside or get it from another branch. They can see what's available throughout the organization and, if it's there in-house, they can contact the right person without making unnecessary expenditures.
iSource: How do you think technology, in general, is helping companies' supply chains?
Ali: First, it helps put systems around processes that used to be done manually or informally. By institutionalizing systems, it formalizes the process and makes it much more efficient. In an informal system, the information needed to make the system work just sits in peoples' heads. With technology, you can standardize it so it's reproducible and manageable by other individuals within an organization.
You hear of supply chain managers who've been doing the job for a long time and know exactly where they buy from and how long it takes. But no one else has a clue. And if someone new comes in, he or she may be completely out of luck. Technology takes that person's brainpower and puts it into a system everyone can share.
iSource: What are the biggest challenges to implementing these systems?
Ali: Cultural adaptation and resistance to change. And, introducing the right training to remove that fear. When you have uncertainty, people get scared. It happens in any size company. The way we handle that problem is to try to make everything simple.
Here's a typical example: Senior management in a particular company makes a decision to automate the procurement process, but the people whose jobs are affected aren't really excited about it. So, they get anxious. Or they object to the system's design. Or they drag their feet. [An enabler must] step back and try to include everybody in the evaluation and installation. We want them to understand how the system will improve their lives. [The enabler should] hold a stream of meetings, presentations, and planning sessions during which we solicit everyone's opinions and input. Then filter it all into a document for everyone to review. What happens is, employees buy into the process and have a real sense of ownership. A successful implementation is the direct result of employees' psychological buy-in at the beginning.
iSource: What about training?
Ali: When we roll out the system, we find it's more effective to help the organization do the introduction, rather than assume control ourselves. When we train people, they remember maybe 20 percent. When we train our customers to train their own people, the results are much better. So, we do a combination approach. We'll train a few people within the organization, then they train everyone else. The employees feel much more involved. It's not a matter of, How will the supplier help us, but How do we help ourselves?
iSource: Technology lets players within a supply chain collaborate much more intimately than before. Let's talk about the risks and rewards of that collaboration.
Ali: The benefits are obvious. Less waste, better information. But the drawbacks are pretty big, especially when competitors are working together. It sounds really good: competitors teaming up. But what if the economy goes bad? Then the competition between rivals becomes more intense. One party might ultimately try to sabotage the other. The whole thing could fall apart and become really messy. They have a lot of your information and you have a lot of theirs. It could turn into outright war. If we get into recession, I see many of these collaborations falling apart.
On the other hand, for example, if a big department store partners with a manufacturer to help streamline processes, I see a lot of benefits. Employees can more easily view available inventory and plan more efficiently. I see that as all for the good.
iSource: What's your philosophy about technology enabling the supply chain?
Ali: The goal of supply chain management is predictability in the planning and management of business processes. But without technology, it becomes increasingly difficult to achieve any of that. Technology provides you with data that helps you get a high level of predictability and a higher trust factor. But remember: Technology is an enabler, not a problem solver. People solve problems; technology enables them to do that.
iSource: Tell us about the supply chain within your own company.
Ali: We have business processes. We have a corporate office and 10 satellite offices. And everyone sales, marketing, professional services, product development needs to collaborate with each other. Technology really enables us to communicate quickly with a high level of predictability through things like our internal Web site and e-mail.
A large manufacturer faces the same issues we do. Ours are just communication and knowledge-based, while theirs are product-information-based. Technology does the same thing for us that it does for anyone else, just in a different capacity.
iSource: Such a large company probably understands that the supply chain is something vital to the organization. But many smaller companies don't always feel the same way. Why do you think the supply chain is something that all companies have to take seriously?
Ali: In bigger companies, there's more money involved that's the bottom line. Bigger companies have bigger problems. So, there are more dollar savings from automation in large firms. But small companies have the same problems. They're simply magnified to a lesser extent. They just need a solution they can afford.
iSource: Are there other, significant differences between big and small companies? For example, are there differences in how they react to new systems?
Ali: As I said, the cultural adaptation problems happen in any size company. It's something that occurs whenever there are people working together. And the challenge that a bigger company faces is really no different from whatever a smaller business faces. It's just that, instead of removing fear from 100 people, they have to remove that fear from 1000 people.
iSource: What do you see happening down the line?
Ali: Organizations are going to become more and more Internet-friendly as they start seeing the return on their investment. They'll experience huge benefits in using Internet-based platforms to help manage business processes more efficiently. More than that, they'll need these platforms to keep up in the market and control costs. It comes down to this: question: Do you sell more stuff or spend less money? Every dollar you spend to sell more, you get back only a few cents in profits. But, every dollar you save through efficient operations goes directly to the bottom line. If you save a million dollars a year on supply chain automation processes, that's a million dollars that goes right to the bottom line. As companies realize that, the roadblocks will start to disappear.
Interview conducted for iSource Business by freelance writer Anne Field.