Daily Archives: April 8, 2009

Information Technology Cost Management

Supply & Demand Chain Executive recently ran an article on managing information technology costs in a challenging economy that claimed right-sizing your IT budget and avoiding long-term harm to your company’s bottom line was a four step effort. Not sure it’s that easy, but it’s certainly worth some consideration.

The approach presented is as follows:

  1. Get a handle on the TCO of IT to the business
    Don’t overlook the “device propagation” that results every time a new application is added to the data center, the energy costs, and the support costs.
  2. Focus on the Cost Drivers
    Energy? Hardware? Software? Projects? Where’s the money going, and why? Treat the IT organization like it is a business and balance the supply and demand.
  3. Be relentless in Valuing IT services
    Examine the cost structure through the eyes of your customers and segregate functions and services into value-add and commodity categories and drive the associated costs accordingly.
  4. Be creative in meeting demand and sourcing work
    Examine the people, process, and technology infrastructure carefully to determine if there is a more cost effective way to deliver the necessary services.

I think this might be an over-simplification in some respects, as it does not address the identification of necessary vs. optional services, but one thing that I am sure of is that the answer, as the author points out, is not the typical five-step approach of (i) killing the capital projects, (ii) tossing the contractors out the door, (iii) deferring maintenance on existing systems (and letting the renewals laps), (iv) canceling training, and (v) slashing the travel budget to zero. That’s just a five-step plan to disaster.

Manufacturing Supply Chain Challenges and Opportunities

The increased complexity of today’s supply chain brings with it a host of challenges for manufacturers. These include:

  • brand identify protection
    major brands are a bad press — and litigation — magnet if anything goes wrong
  • recall efficiency
    if a health-risk is found, it can be a challenge to recall the product in time
  • counterfeit prevention
    the EU seized six million counterfeit personal care products and one point two million food and beverage products at the border last year and the problems in pharmaceuticals are even worse
  • supply chain disruption bypass
    when a natural disaster, energy crisis, or a political situation arises, a company needs to quickly divert its supply chain around the situation to avoid disruption

However, as pointed out in a recent Industry Week article, manufacturers are seizing opportunities across the supply chain by tackling these challenges head-on. Companies that recognize the complexity of the modern supply chain and adopt serialization solutions that enable greater visibility, increased agility, and improved efficiency see the following opportunities:

  • improved responsiveness
    a company with an agile supply chain can quickly respond to changing demand patterns and maintain near-optimal inventory levels
  • consumer demand capitalization
    a company with downstream visibility can gain insights into consumer demand and produce the products customers want before its competition and gain a greater market share
  • SLA enforcement
    traditionally, outsourcing led to reduced visibility … but modern visibility and serialization solutions help manufacturers insure that the third party they outsource to lives up to their performance obligations