Business applications that are not continuously maintained and updated go stale … and this is doubly true for supply management applications. After all, as a recent i2 article on “synchronizing supply chain applications with continuous change” notes, the value of an efficient supply chain and its use as a competitive lever can only come when it is in continuous alignment with changing business conditions and market trends.

These days, more and more companies are selecting out-of-the-box solutions since they provide access to best practices and the latest technological innovations. In particular, many companies are selecting modern, SaaS-based, applications that provide them with the flexibility they need to customize the user interface, workflow, data modeling, and other components they need to align more closely with business needs. But, these applications, however, can only deliver high value continuously if they are flexible and easily maintainable to achieve high-level responsiveness.

Specifically, such a system needs to be able to:

• integrate existing legacy systems until their functions are replaced
• allow rapid prototyping of business ideas through what-if modeling
• enable procurement users to define and adjust process flows without IT intervention
• link multiple disparate applications in a business process flow
• provide for data synchronization and harmonization across existing systems

And this will require constant maintenance and regular updates because business continually face the following challenges:

• operational
  all businesses experience turnover and all business need to retain operational knowledge despite the turnover
• evolutionary
  dynamic business conditions spawned by continuously changing demand requirements, competitive pressures and supply arrangements require applications that evolve in parallel
• organizational
  business needs change as market dynamics change
• infrastructural
  new hardware and middleware is continually introduced to the environment as the business tries to capture the new innovations they bring to the table

So how do you make your applications sustainable? Start by:

• Following a Standard Maintenance Program
  Out-of-the-box applications — be they traditional behind-the-firewall or modern SaaS — come with standard maintenance, and update, programs. Be sure to use them to their full advantage as they will help you overcome many of the operational and infrastructure challenges you’ll face on a regular basis.
• Regularly Reviewing and Tuning Your Solutions
  Applications will inevitably get out of synch with business requirements as small changes accrue over time. Applications should regularly be reviewed by subject matter experts who can identify misalignments, gaps, or missing opportunities and the best way to address them. Often, simple tune-ups result in 20% improvements in key metrics.
• Synchronizing with Business Changes
  If you select a well-designed application platform with a loosely-coupled architecture, it will be possible to make adjustments economically to keep the platform tightly aligned with business changes.
• Conducting a Strategic Impact Analysis
  With every deployment, key metrics and targets for improvement need to be identified and tracked against a well-defined baseline. This allows the organization to monitor the health of the application and determine when it needs to be tuned and when it needs to be replaced to keep the procurement operating at peak productivity … which it needs to do to achieve peak savings.

I recently encountered yet another RFID article that took a look at how RFID will impact supply chain optimization and control and decided that I just can’t ignore the subject any longer. As you have probably guessed from that first sentence, I’m not a big RFID fan. It’s yet another technology that greatly over-promised and greatly under-delivered, and it did this for two reasons. ( 1 ) The promises were outlandish with respect to what the technology actually does and ( 2 ) the technology, by nature, is not as “plug and play” as the vocal proponents would have you believe.

RFID, which is short for Radio Frequency IDentification , is a method of “automatic identification” that relies on storing and remotely retrieving data using RFID tags or transponders. These tags generally contain an integrated circuit for radio-frequency signal processing and an antenna for signal receipt and transmission, however some tags are read-only and do not contain an integrated circuit for signal processing.

RFID proponents promote the use of RFID tags for supply chain use because they improve the quality of material location/movement data versus current data collection technology and this provides more accurate data delivered to existing ERP systems that drive supply chain optimization systems. As a result, forecasting, master production scheduling, and distribution resource planning can produce better, timelier and more granular outputs based on more accurate, near real-time inventory and/or material movement. In addition, RFID allows manufacturers to keep in contact with, or at least “hear” from, their material as it moves through the supply chain.

The idea is that since the tags can automatically be read by readers at each checkpoint in the supply chain, the data is immediately available for processing and immediate transmission to your systems. And even though real-time data is valuable, and the benefits of this real time data that RFID proponents promote are significant, the fact of the matter is this: you don’t need RFID to know where your goods are in a supply chain and when they hit a checkpoint. You can just as easily slap a plain-old fashion barcode on every box and get the same results. Of course, you’d need someone at each step of the supply chain to scan every box, but as long as the systems are properly configured, the data could still flow automatically up and down the chain. The advantages of RFID are efficiency and human-error reduction, and that’s it. It’s more efficient because, as long as the scanners are properly configured, and the goods properly passed through the scan points, the tags are automatically read for the whole pallet simultaneously. It’s less prone to human error, because, as long as the tag is properly attached to each box on the pallet, it will be read automatically at each point and you don’t have to worry about a human missing a barcode or two each time the pallet is supposed to be scanned in full.

Therefore, RFID is valuable if, and only if the savings that result from increased efficiencies and reduced human error outweigh the costs of its implementation, which not only include the up-front equipment and installation costs, but continued costs associated with maintenance and each and every RFID chip. But it’s not going to save you a fortune … its the systems that you buy to take advantage of that extra data and optimize your chain that are going to generate significant savings, and, as a I pointed out above, they don’t care if the data comes from an RFID chip, a scanned barcode, or, if you want to go back to basics, a human operator typing in a box or pallet number into a terminal that automatically propagates the data up and down the chain.

I guess what I’m saying is, before jumping on the RFID bandwagon, see it for what it is, talk to your industry peers about the increased efficiencies they saw, and do the TCO calculations before committing to it. For most operations, I doubt it’s the best thing you can do to save money.

A recent article on “managing IT in a downturn” in the McKinsey Quarterly had a couple of great points.

1. In some instances, IT investments deliver more value to a company’s top and bottom lines — by creating new efficiencies and increasing revenues — than any savings gained from traditional IT cost cutting.

2. The impact on run-rate EBIT from optimizing supply-chain processes with streamlined systems is 3 to 4 % … which is 6 to 8 times the impact on run-rate EBIT from transactional IT cost reduction which tops out at 0.5%.

In other words, you get more bang for your buck from process improvements than from reactionary across the board budget cutting. The reality is, as the article points out, simplistic cuts, applied across the board, may endanger critical business priorities from sales support to customer service and could cripple your IT and supply chain operations.

Where do you start? With your data of course! As the article notes, few companies have successfully capitalized on the explosion of data in recent years. Often this information, residing in separate IT systems or spread across different business units, has never been mined for insights that could add value. So you start with a spend analysis and opportunity assessment. Then you tackle the opportunities with the largest savings potential first.

Then what do you do? You implement the right systems to streamline your operations. This will allow you to get more of your spend under management and tackle more of the savings opportunities that you identify.

Then you see real savings. And while your understaffed competitors are running around like chickens with their head cut off, because they foolishly cut across the board and lost key people and resources, you’re growing your market share.