Daily Archives: May 25, 2011

What’s the Right Portfolio View of the Supply Chain IT Investment?

A recent article over on the SCRC site on The Supply Chain IT Investment Enigma promoted a portfolio view of the IT investment, in line with Hackett Group recommendations, that appropriately balances the sustainment of current capabilities with the development of new capabilities. The question is, for an average organization, what’s the right balance?

It’s difficult to say as it depends on where the organization is on the technology curve, how long since it has acquired the solutions it has, what types of solutions it has, and what the gaps are between the organization and world class organizations in its peer group. Furthermore, it’s often hard to differentiate sustainment technologies with new capabilities, since upgrading certain solution suites, such as the sourcing suite, will not only sustain the organization’s capabilities but add new ones to the mix.

And the article, which ran through the laundry list of Supply Chain Technologies — DM, PLM, PP, APS, SCEM, SRM, WMS, etc. — wasn’t very helpful in terms of describing what that portfolio should be. Analytics needs to be there. World class sourcing and SRM needs to be there. And PLM needs to be there. But what else needs to be there depends upon the current state and specific needs of the organization. And so does a solution that integrates all of the solutions onto one backbone. But it might not be possible to determine more than this without a gap analysis by an appropriately experienced supply chain IT professional. Any other thoughts on the issue?

Lessons Learned from Best-in-Class, Part III

The following are some more of the lessons learned shared by some of the participants at this year’s Hackett Best Practices conference in no particular order.

09. Data is King
Cost savings reports are good, but savings reports backed up by hard data are better. Forecasted savings are good, but detailed projections backed up by proven models and years of hard data are better. Targetted spend categories are good, but spend categories known to have considerable overspending backed up by a data-rich spend analysis are better. Any which way one chooses to look at it, data is king.

10. Demonstrate an interest in your client’s business
Just like the most successful service companies in the consumer space put the interests of the customer first, the most successful Procurement organizations put the needs of the client’s business first. But they go beyond that and develop, and demonstrate, an interest in the business of the client and try to understand what the internal client organization — be it Engineering, Marketing, or Legal — will need before even the client organization understands what it needs.

11. Do not minimize country specific needs
It might be tempting to globalize successful sourcing and procurement practices as is, but each country will have specific needs with respect to its culture, language, and accounting systems. As a result, it may not be possible to globally deploy certain systems or processes with respect to transaction management and global trade documentation management if the systems do not have customizations for those regions.

12. Empower the Global Teams
If the organization uses global teams for Procurement or Sourcing, be sure to empower them to do the jobs they need to do. Don’t outsource invoice processing without the authority to resolve discrepancies. Don’t outsource categories without the authority to contract on the award decision. Otherwise, the teams will not feel like they are a critical part of the organization and, once the team members get the skills and experience they need, they will depart for greener pastures.

13. Establish common methods of approach
Even though there may be category or country specific needs, generally speaking, the 80/20 rule is in play and 80% of processes, methodologies, and technologies can be standardized across the entire Global Procurement organization, which should be center-led.

14. Everyone wants the benefits, but no one wants the risk
The category owners will want the benefits of lower cost and higher quality that can come from a new supplier, but will want not the risk of the unknown. The users will want the advertised benefits of a new IT system, but will not want the risk that it will cost more and take longer to be deployed than advertised, or the risk that it might not even meet the big audacious goal that was advertised.


Our next post will continue our overview of the lessons learned that were shared by some of the participants at this year’s Hackett Best Practices conference.