|Is Technology the Best Source of Supply Chain Improvement?|
Below is an extract from GRA's Adam Kidd's article 5 Supply Chain Myths to Bust to Outperform your Competitors
Another common myth that prevails is that the latest and greatest piece of software is the primary source of innovation or advancement available to drive optimised supply chains.
In simplistic terms, supply chain capability can be conceptualised in terms of People, Process, Systems and Data. To rely solely on the Systems element of this model to improve performance is naïve at best. Technology will not optimise your business in isolation of these other elements – especially as software needs to be configured to reflect strategy and business rules and supported by appropriate processes. And as discussed earlier, having the right people can be a source of significant innovation. In addition, even the best system will not help your organisation make decisions regarding exceptions such as capacity constraints, out-of-stocks or delivery delays. These decisions should be driven from your supply chain policies, which in turn are guided by organisational strategy. Software should be configured to highlight rather than be expected to solve these issues.
Decisions around software should, again, flow from your strategy and the level of service and response required by your customers. As was succinctly summarised in a recent blog: “The IT piece follows; it does not lead… you have to first figure out what is the reaction time you require to make your revenue and profit model.” (Supply Chain Brain).
From our experience, where we have seen the best results from software being used as source of competitive advantage, is where organisations have identified Best-of-Breed tools – be it demand planning, network modelling or warehouse management systems – that support their desired supply chain model. When compared to generic ERP modules, these tools have the ability to drive greater performance - but again, only if appropriate to your organisation.
For example, should you decide to focus on inventory, a successful ERP implementation may deliver a 5% reduction in inventory while maintaining service levels, whereas through integrated, constraint optimised planning, a Best-of-Breed Advanced Planning System (APS) could deliver a further 10% in inventory reductions while also increasing service levels by roughly 2.5%.
However, this only paints part of the picture. To return to the earlier model of People, Process, Systems and Data, where APS implementations are complemented and reinforced with process and culture reform, these benefits are almost repeated. That is, we have observed that the benefits from software can be matched by the benefits of improving processes in tandem with the software implementation, with a particularly significant impact on excess or obsolete stock. By solely focusing on a software project involving the implementation of the tool, and neglecting the opportunity to review and revise related business processes, is to by-pass many potential benefits that the software brings.
Read Adam Kidd's entire article “5 Supply Chain Myths to Bust to outperform your Competitors” to uncover the following supply chain myths:
- Myth#1: Supply Chain is all about lowest cost - we need to be more efficient
- Myth #2: Supply Chains Managers must be exceptional technical experts
- Myth #3: If we just get our forecasting right, we’ll be able to execute perfectly and solve our supply chain issues
- Myth #4: Technology is the best source of Supply Chain Improvement
- Myth #5: It’s all about Trucks and Sheds