Locating a business has become complex as the global marketplace grows and managers feel pressure to improve the supply chain with demands to reduce inventory, move goods faster, and spend less.
"The downturn has forced companies, regardless of size, to take a hard look at reducing costs and improving their cash position," says Stavros Stefanis, principal, Supply Chain and Operations Leader at KPMG. "Operating cost is a significant influencer of business performance, and supply chain management is the cornerstone discipline for cost improvements."
In response to the recession, "companies progressed from initial headcount rationalization efforts to more complex cost-reduction initiatives," Stefanis says. They reconsidered operating models, made products simpler in light of post-downturn expansion plans, and took a tactical view of the need to evolve the supply chain while reducing costs. This new view incorporated technology.
Technology as a Building Block
According to Stefanis, technology is an important building block in supply chain decision-making, and creates operational efficiency. "Recent advances in supply chain systems have enabled companies to reduce supply chain general and administrative costs through tool automation that allows organizations to manage supply and demand and product complexity more effectively."
Industrial firms seek to improve supply chain management with technology. But traditional enterprise management tools pose challenges.
"Traditional ERP systems like SAP and Oracle do not provide the necessary planning capabilities required to manage the service supply chain," says Tim Andreae, senior vice president of marketing for MCA Solutions. "In order for manufacturers to effectively take advantage of best-of-breed solutions, it's important that they are easy to use and deploy."
Using standard and certified adapters such as SAP simplifies integration. Businesses must streamline new technology implementation through such services as IT resources dwindle. On-demand, Software-as-a-Service programs allow for easy deployment without straining IT resources.
Choose the right software wisely, says Paul Myerson, managing partner of Logistics Planning Associates. "It depends on what specific software and functional requirements you're looking for," he says. "In some cases, if you do your homework, the software may need little if any customization, or it can be done outside of the software. In other cases, if you have very specific functional requirements, you may not be able to use the software as is. There are some solutions which are targeted for specific industries."
Getting an organization to embrace technology and implement it can be a challenge. Scott Miner, vice president of supply chain services for Fortna, calls it "fossilization." It occurs when supply chain practitioners are set in their operations and mindsets, which have succeeded in the past and are appropriate for a certain volume, product mix, competitive landscape, and time.
"This state of the supply chain is difficult to overcome and should not be ignored during a technology change initiative," Miner says. "Technology changes require that the people and processes in the organization re-learn and change in order to run the supply chain of the future."
Many companies ignore the operations transition phase. But it is critical not only for changing systems, but adjusting employees to a new process. Re-education is challenging, but the rewards of improved operations can motivate employees to make the new technology work.
"Global sourcing is ineffective without a linked-up supply chain," says John Vaughan, director of industry solutions at Patni Computer Systems. "How many times do you want to guess and get your shipments wrong and miss by an entire continent? Access to real-time demand with an accurate supply chain model showing transits, modes, markets, and production capacity is only possible with technology integration."
Access to timely information drives growth without ballooning costs. Vaughan says technology must aid innovation, product development, global sourcing, product quality, regulatory compliance, customer service, and logistics and transportation. Technology orchestrates a complex supply change that would be nearly impossible to manage otherwise. "Technology has become one of the best collaborators in the supply chain," he says. "Without it, your customers, factories, suppliers, carriers, 3PLs, 4PLs, sales force, accounting, you name it, can only hope for results and lose the ability to make a difference today. Technology is the glue that holds things together. It is the platform for all collaboration, negotiation, transaction, and customer service."