Category Archives: Technology

What If Your Supply Chain Software Vendor Goes Bust?

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A recent article in Logistics Viewpoints, the ARC Advisory Group Blog, asked a very important question given that many of the smaller vendors in this space are not on the solid footing they once were — What If Your Supply Chain Software Vendor Goes Out Of Business?

It’s a good question, especially since you’ll be in bad shape if you haven’t negotiated perpetual rights to not only the application but the code-base if you’re using a hosted solution and the vendor goes under or if you haven’t negotiated 24/7/365 full data access if you’re using a SaaS solution with mandatory notices before ceasing of operations, as I have noted you must do on several occasions.

In the first case, unless you happen to have an A1 development team in-house who can maintain the code base and customize it to your liking with little impact to your overall IT budget (which is likely not the case for 99% of non-IT supply chain companies), you’re going to have to migrate to another solution. If you suspect your vendor is going to go bust, and see the gradual warning signs of multiple layoffs, lack of solution updates, increased turn-around time on issue resolution, lack of insight into the roadmap, and the run-around when you try to inquire into their financial health with (what’s left of) senior management, then you need to start evaluating your options. If you start early, you can analyze your options, find the best one, and develop a staged migration plan that will minimize interruption to your day-to-day operations. If you don’t, you’ll be relying on expensive third party maintenance and prayers to keep you running until you can accomplish a stressful, organizational wide, all-at-once changeover.

In the latter case, you still have to migrate to a new solution, but if you negotiated full data access in a standard format, it’s just a matter of selecting the next best SaaS solution, loading all of your data, and then hiring a third party integrator to re-create any linkages to your current applications for automatic data exchange. You’ll have extra work while you manually export and import data until the new linkages are live, but since you’ll (again) negotiate full data access and the ability to export and import what you need, when you need it, with a bit of training and documentation, the interruption to your staff’s daily routine should be moderate at most.

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.

Product Portfolio Management Mistakes in a Down Economy

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A recent article in Industry Week on “portfolio management in a down economy” did a great job of summarizing all the mistakes dumb companies make in a down economy in blind efforts to conserve cash. As I have said before, and as the author clearly notes, companies that cut research-and-development during a downturn “don’t have anything new in their product portfolio that is of interest to their customers” when better times eventually return. This means that if you think times are bad now, they’ll only get worse when the up-swing starts and your competitors, who didn’t cut R&D, are introducing new, in-demand, products while you’re trying to push the same old, same old from two, three, five years ago.

While it’s understandable that R&D funding might have to be (slightly) reduced, there are right ways and wrong ways to go about it. The right way is to key (in) on the projects that exhibit new technology, gain entry into new markets, or are of greater interest to your customers. Similarly, a great technology without a current market should also come under scrutiny. Maybe development should be delayed to when you have more spare dollars to throw at it (as all great technologies will eventually find a market). And avoid these common mistakes outlined in the article:

  • Failure to reconcile the portfolio with resources.Make sure you can support the key portfolio projects to the full extent they need to be supported.
  • Failure to look outside the four walls. There are broad external forces that will ultimately decide which products will sell when the market up-swings and which won’t.
  • Failure to innovate. Some companies get complacent with an existing portfolio and focus only on product extensions rather than disruptive innovations.
  • Failure to understand the customer. If you can’t satisfy your customer, someone else will.
  • Failure to utilize common business sense. Yesterday’s metrics and data don’t tell the whole story about today, and definitely don’t tell the whole story about tomorrow. Don’t overlook the knowledge and experience your sharp people will provide and blindly rely on an unproven tool. Tools optimize scenarios … they don’t create them.

Building Better Links in Your High-Tech Supply Chains

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An article from late last year in the McKinsey Quarterly on “building better links in high-tech supply chains” did a great job of summarizing the roadblocks to collaboration in today’s high-tech supply chains and of providing great advice for building better bridges across your supply chain.

When you get down to the nitty-gritty, the following roadblocks are almost universally present in under-performing supply chains:

  • Partner complexity and churnSupply chain partners often change as product designs and specifications evolve.
  • Siloed forecastsManufacturing, Sales and Marketing, and Product Development often keep, and modify, their own copies of the forecast separately.
  • Poor data qualityOEM forecasts, which set broad targets across a number of product lines, aren’t typically granular enough to be useful to partners.
  • The spiral of mistrustExecutives often believe that they must guard information on their business plans and processes, even from partners.

However, with a little work, they can be removed. The advice given in the McKinsey article is good.

  • Sledgehammer the SilosEveryone needs to work off of the same plans and forecasts.
  • Trust is TantamountVery little is truly so confidential that it can’t be shared with (strategic) supply chain partners. For example, point-of-sale, customer forecasts, and primary market data will soon be public knowledge anyway (a supplier could walk in and see your product in a store, access public import/export records, and do a survey to see where most of your product ends up), so why not share the information up front? Confidential designs beyond the subassembly they’re building are one thing, forecasts are another.
  • ShareWhy should your partners use their own separate distribution networks with overlapping inventory hubs and logistics systems, which only increases costs for everyone? These assets can, and often should, be shared … and this will reduce costs for all parties.
  • CollaborateUndertake joint product development, at least on the components your partner is responsible for. After all, they’re the true experts and given the freedom to come up with a design that conforms to a few parameters might save you a bundle of cash. Look at what Tata Motors did. You could do that to.

Listen to Gene and Seize Your Supply Chain Opportunities

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Gene Tyndall, editor of CSCO Insights, recently penned a piece on how the “recession offers chief supply chain officers opportunities as well as challenges” which I believe is a must read because I do not think enough organizations are taking advantage of the opportunity provided to them to become the organizational superstars. Gene, who recommends that organizations pursue smart cost reductions, indicates that these smart cost reductions are likely to be found in your:

  • Overall Supply ChainAs many companies have found, going global typically adds unexpected costs, increased time, and risk. However, innovation and intelligence focussed on the problem by an experienced organization can often reduce these costs, time, and risks.
  • Supply Chain NetworkProduction and logistic locations add costs in the form of fixed capital, operations, taxes, leasing, and SG&A expenses to the business. Rationalizing the global network can reduce these costs.
  • Total Delivered CostThe total delivered cost, which includes freight, duties, taxes, and logistics, can often be reduced through better logistics, duty, and tax planning.
  • Logistics OutsourcingThis industry has rapidly matured over the last decade, and a 3PL provider with an appropriately designed network might be able to save you money.
  • Supply Chain TechnologiesWhile traditionally thought of as long-term cost reductions, there are near-term savings potentials through today’s rapid implementations, improved visibility, powerful analytics, and greater alignment of technology to the business. Especially if you go pay-as-you-go SaaS. e-Sourcing will allow you to identify potentially lower-cost and higher-quality sources of supply, decision optimization will allow you to define the allocation with the lowest cost that meets all of your business requirements, contract management will allow you to monitor and ensure provisions and pricing are being met, e-Procurement will automatically do m-way matching and flag invoices that aren’t at contracted amounts or duplicate billings, etc.