Friday, March 20, 2009

Do it Right: Don't Undermine Your Investments in Supply Chain Technologies

In my last post, I talked about why it is important to have the people with the right skills to fully leverage the supply chain technology investments. In this blog, let me expand that equation further to see what are the other factors that corporations must ensure in order to fully leverage their supply chain solutions and the promised returns on their investments.

The following picture represents the main reasons why most of the failed technology/solution investments do not pay off.

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People:

Supply chain planning solutions typically are built as decision support systems with complex algorithms underneath. These solutions require people with the right skills for configuration, tuning, reviewing and resolving errors, and maintaining the planning parameters for the system to function at its best. Depending on the solution, these skills may vary from statistics, to mathematical programming, to data mining, etc. People can acquire these skills through training, academic background, and/or prior professional experience. However, the key is to plan for the people with right skills and not undermine the solution capabilities for want of a few good people. Also remember that we are talking about only a handful of super users that would fall in this category, since the large majority of the users, using the output of such systems don't have to be specialists at all! Read more about this aspect of supply chain solutions in my previous post.

Process:

Most corporations believe that their processes are unique, and therefore provide them with competitive advantage that others in the same industry do not have. The truth is that for most part, it is a myth. Very few processes in an enterprise actually have the potential of providing such competitive advantage, while most others will be just fine as long as they are efficiently planned, executed, and reviewed. Being open to review the old processes in an unbiased way, and adopting the standard process supported by the solution not only shortens the implementation timelines, it also saves money, and resources. And usually, it provides a standard way of doing business with other partners in the industry using similar solutions. Be open to evaluate all processes and adopt changes where such changes make sense.

Infrastructure:

Successfully implementing complex business applications requires proper infrastructure planning. With infrastructure in this context, I mean hardware as well as software infrastructure. An example of software infrastructure will be ability to manage common master data among many business applications; ability to extract, cleanse, consolidate, govern, and publish such data to all applications that need them; ability to analyze information; ability to collaborate; have automated alerts, and event based messaging to prompt user action when required. often these capabilities are not planned as part of the supply chain solutions since they are not mandatory. However, they allow the enterprise to fully leverage the core solution while absence of these capabilities truly constrains the ability to reap any substantial ROI. To a large extent, this can also be said about the hardware: having centrally hosted servers with proper back-up, disaster recovery plans that are routinely tested, high speed network among corporate locations, RF terminals, large monitors, etc., does add to the overall productivity, usability, and adoption of these applications. Only such investments with the right processes ensure business continuity in natural or man-made disasters. Having the correct infrastructure for a supply chain technology initiative requires holistic planning, the kind that is mostly missing from IT-centric project planning exercises.

Customization:

This is another huge factor affecting successful implementation and adoption of new supply chain solutions. Unless a solution is custom built to your requirements, chances are that your processes will never map a 100% to the process supported by the packaged solution. However, to avoid functionality gaps that may be truly constraining, you must determine these gaps prior to the investment in the solution. Since most of the bigger software vendors would have years of experience with similar customers, it is also a good opportunity to question all such gaps and determine if they are real gaps, or merely entrenched habits that are hard to break. Remember, every custom enhancement to the solution costs money to develop, pushes back the project timelines affecting ROI, becomes a permanent constraint to solution upgrades, increases on-going maintenance fees, and adds to testing and validation costs for original deployment and every upgrade thereafter. This is a sure TCO killer.

Metrics:

What gets measured, gets delivered. Therefore, define clear expectations on prospective operational improvements through well-defined metrics. What is it that the technology is expected to deliver: higher inventory turns, higher number of orders processed per buyer, higher fulfillment rates? Also make sure that you have the historical data on these metrics to compare the new numbers against. All ROI is questionable unless it can be established through consistent trend on the defined metrics, against a historical data set. Finally, make sure that these new metrics are aligned with the people's individual goals. Many a times, personnel goals are tied to the operational metrics, and when these operational metrics get revised due to new technology, the revision of the personnel goals is easily forgotten. But remembering to realign the two will make sure people have no hesitation in adopting the new technology, since the new technology is going to help them with their new set of goals.