Overcoming Global IT Challenges in Your Supply Chain

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A recent article in Strategy + Business that discussed a recent survey that found that information technology is a neglected asset in joint ventures, besides unearthing a very disturbing trend, attempted to outline the major roadblocks to IT recognition and some ways to overcome those roadblocks. In Global Partnerships Unplugged, the authors do a good job of providing some good advice that can help you insure that your global sourcing projects don’t get sidetracked, or, even worse, fail due to poor information technology alignment or support.

The article covered a recent survey by Booz & Co on Keeping IT Relevant in a Hyper-Changing Environment that found that information technology was shortchanged on a disturbingly regular basis at overseas joint ventures. This had a significant negative impact on costs and efficiency. Cheap (and often used) computers and software that don’t fit in with the current infrastructure or business processes don’t save money … they cost money. Not only are people less productive, but it takes a lot more IT support to keep an ad-hoc jumbled network running than a well-planned homogeneous one. Not to mention the security concerns and losses as a result of IP theft that can easily be extracted from unpatched and unsecured machines that the primary IT department is unfamiliar with, if they even know the machine is on the ad-hoc network to begin with.

Trying to get to the root of the problem, Booz & Co discovered that IT, because of the up-front investment required, was often looked upon as a cost center to be cut, and not a source of cost savings. Done right, especially where supply chain management technology is concerned, good IT will pay for itself many times over in productivity improvements, insightful reporting, and, in e-Procurement, immediate identification of maverick spend or invoice discrepancies. But if you decide you can replace computers with typewriters (as one company in the survey did) at your offshore locations, those savings will NEVER materialize. One of the biggest costs, and sources of loss, in an Procurement department that has yet to be automated is paper invoices. They take time to enter, and even more time to process. Generally speaking, because of the effort involved just to confirm goods receipt, they’re usually paid at face value which may not be (and for some categories often is not) at the contracted rate. You need good systems to support good people. Period.

So how do you overcome the challenges that prevent IT from being seen as the productivity enhancing and cost saving toolset it really is? The article gave these tips for the three major challenges it outlined.

  • Cost Pressures
    Don’t tie IT funding to a site’s P&L. Manage it from a centralized IT budget established to support the entire operation, which allows for a meaningful calculation on ROIC.
  • Standardization
    Mandate that the entire business is to be run off of one set of standards and set up a global governance forum to insure that it happens.
  • Security
    Task Risk Management with IP management on systems. Once they understand the security risks posed by disparate systems across a non-standard network, they’ll become vocal proponents of good IT systems.