Streamlining Your Supply Chain with Software
By Katrina C. Arabe
Maintaining a competitive edge in today’s marketplace requires a lean and mean supply chain. With the recent proliferation of software solutions, find out which one is the best for you.
Despite the tightening of technology spending, AMR Research estimates that companies will spend about $7.8 billion this year buying and installing supply chain management software. The anticipated boom in spending can be attributed to a surge in interest in Internet-enabled supply chain technology. The reasons are evident: to cut back on inventory, improve forecasting, and reach new heights of customer service. By working more efficiently with suppliers, companies can streamline their supply chains, thereby getting products on the market quicker. This sort of speed and efficiency is paramount if a company is to remain competitive. In the words of Warren Hausman, Professor of Industrial and Engineering Management at Stanford University , “Competition is not really company vs. company but supply chain vs. supply chain.”
In the past decade, US companies have been focused on developing core operations, and have outsourced their peripheral operations in an effort to reduce the lead-time in communicating with suppliers. The necessary buyer-supplier transactions, such as ordering, were usually conducted through the use of Electronic Data Interchange (EDI). Then came the Internet and its promise of simultaneous communication with multiple suppliers. In its wake, a host of software firms have appeared, each offering its own solution to managing supply chains via the Internet.
The objective of supply chain management software has always been to show, in real time, the operational data of every area in the supply network; including partner’s sales information, warehouse inventory, production plans, and shipment schedules. From this information, reliable forecasts can be calculated to schedule production. Among the benefits realized by those who have successfully incorporated this management software is the ability to cut back on inventory by as much as 60% per year.
Of course, there are many points along the supply chain and, though many software firms position themselves as an end-to-end solution, the fact is that companies will most likely have to combine software from a number of vendors to achieve a fully automated supply chain. Supply chain management software can be said to fall into one of five general categories, each with its dominant vendors. These categories are:
- Customer demand analysis
- Purchasing supplies
- Factory scheduling
- Order tracking
- Market research/ Product design
With every possible angle of supply chain management covered, what would keep a company from rushing to install a vendor’s software? In a nutshell, installing quality supply chain management software is expensive and comes with a number of pitfalls, chief of which is negotiating the possible lack of connectivity between the software solution and the company’s legacy systems.
In making the transition to fully e-commerce-enabled supply chain management, companies would do well to keep in mind one golden rule. In the words of AMR Research Analyst, Kevin O’Marah, “Baby steps work, big bangs don’t.” Installing supply chain software is a cautious procedure and should be carried out incrementally. Companies installing management software should do so cautiously, thoroughly testing each section before moving on to the other. Consultants in this field have generally advised that each component of a supply chain management system be installed and allowed to run for six to nine months before moving on to the next step of installation. It has been predicted by analysts, such as Karen Peterson of the Gartner Group, that a mad scramble to install supply chain management software could result in lost profits or a public relations disaster for 1 out of every 20 companies that attempt to do so. Companies can avoid being one of these tragic statistics by taking the time to test their software’s usability each and every step of the way.
Source: The Missing Link
Ian Mount and Brian Caulfield
eCompany, May 2001
