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Supply chain management strategy may call for process overhaul

Ensuring that your SCM implementation runs smoothly requires much upfront work. You may need to help employees move from spreadsheets, get the right people involved, make sure the data going into the system is good data, and have a plan for measuring ROI.

The decision to get started with a supply chain management (SCM) project will probably stem from some obvious organizational needs. And while implementing SCM software can be a mostly seamless transition from an older version to a newer one, it could also entail a huge leap from paper file folders to a technologically advanced, company-wide system.

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Many manufacturers implement supply chain management products to replace Microsoft Excel spreadsheets. When that happens, Dave Boulanger, industry analyst for industrial automation and process control at Frost & Sullivan, said, "Don't expect to replicate this spreadsheet in these advanced planning tools. Let the tool do what you need it to do. Relatively speaking, out of the box, you should have what you need."

Change management is a major step when you're shifting the way people do their jobs, said Elinor Price, director of product marketing at Aspen Technology Inc., whose software helps process manufacturers optimize their engineering, manufacturing and supply chains. "If you don't go through the process of trying to change business processes and you slap technology on top," she said, "you're just going to do a bad process quicker."

Building an SCM planning team

Getting the right people involved in the supply chain management strategy planning and implementation process for an SCM implementation is critical, according to Boulanger. "You need to go to the supply chain planning manager and find the person responsible for actively developing forecasts to help you build a prototype," he said. He recommends pulling a few customers and their history into the new program and doing it sooner than later. "Don't wait six months to show a supply chain planning prototype to executives and sponsors. After four to six weeks, give them something to look at."

Any organization's supply chain implementation project involves a range of people. "Have multi-level buy-in at manager and user levels," said Mark Humphlett, director supply chain, global solutions marketing at ERP vendor Infor.

But each SCM project might take a different form, and, according to Price, there are two alternatives for a supply chain implementation: rolling out one business process across all business units, or going vertically through the unit, then moving to the next unit. A business team leader might want to tackle his biggest problem company-wide, for example, or instead create a standard application for scheduling across the board, and then move to planning and forecasting. "I don't think one way is better than another," Price said. "It's what fits the corporate culture better."

Supply chains need quality data

When starting with a clean slate technology-wise, a company needs to make sure the information going into the new system is good information. "Data drives everything," Price said. "The worst thing is to make a decision based on erroneous data. Data isn't sexy, it doesn't have a big graph, but it is the foundation [for a supply chain implementation]."

"Access to good-quality data going in is a requirement," Humphlett agreed. "Supply chain systems magnify the impact of bad data multiple times over. Having that quality data going in is key to making proper decisions."

Finding the ROI for SCM

Measuring SCM's ROI, a major step in taking the plunge on a supply chain project, isn't always straightforward. ROI for a supply chain project can be "measured in reduced time to respond and increased predictability," Boulanger said, adding that quicker product delivery can translate into increased sales, decreased reworks and fewer defects.

Humphlett points to decreased transportation costs as the easiest way to measure ROI, along with increased carrier compliance and on-time customer deliveries.

"Perfect order performance is the holy grail of tracking numbers," Price said, especially for consumer packaged goods (CPG) businesses. "It's an easy KPI to know beforehand." She also names correct inventory sizes, logistics costs and forecast accuracy as ways that businesses might measure ROI.

Finally, since SCM is such an all-encompassing project, the scope of an SCM implementation must be kept in mind throughout the project. "Supply chain covers planning, execution, shipping and logistics," Boulanger said. "What do you want to bite off first?"

About the author: Christine Cignoli is a freelance writer based in Boston who writes about IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.

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