Technology impact on supply chain

Updated: August 20, 2009

The supply chain is the core of any business. Most people attribute the supply chain to that of a large corporation, but every business has a supply chain. You have suppliers, purchasing, production, distribution, and finally customers. The end result of every supply chain is always customers. The problem with any supply chain is it is only as strong as the links in the chain. If a link is weak then your supply chain breaks down. This has impact on customers which in turn can negatively impact your business.

Twenty years ago it was pretty easy to hide a breakdown in the supply chain from your customers. You could make up for a slowdown in production by speeding up shipping or increasing your acceptable rate of failure on products to higher levels and making up for it on warranty exchanges. Customers in general moved at a slower pace and were used to doing business at a slower pace.

Today technology has dramatically impacted the supply chain process and the way it interfaces with customers. Customers are digitally connected and dialed in. They want answers, they want them now, and they don't want to wait. They expect you to have their personal portal updated with a tracking number and estimated shipment date within 10 minutes of placing an order. Telling somebody it might take up to 14 business days is no longer acceptable.

Though technology has made your supply chain more transparent, it has also improved the links in your chain. Retailers for example are completely tied together through technology. They have advertising management systems that forecast what products should be put in your ads based on trends. They have inventory control software that will automatically monitor inventory levels, and make purchase recommendations based on projected demands. This application is most likely tied to their digital purchase order system where the category manager can approve the purchase via their blackberry.

Technology has rapidly and dramatically improved the ability to manage the supply chain process more efficiently, as well as making information virtually on demand for customers.

It does not come without its complications though. Each CIO that is in the process of migrating, upgrading, or changing supply chain technology needs to take the following things into consideration:

  1. Learning curve. Most organizations don't change or update technology very often. Though you have every bit of confidence in your employee that they can simply just "figure it out" I assure you they don't share the same sentiment. Make sure you evaluate the learning curve and budget for effective training. Your organization and supply chain is only as effective as the training you provide to your employees.

  2. Overall Impact on the business. Everybody who wants to sell you a product will tell you about how great it is. I worked at an organization once where the CEO said "Never a vendor." The best example I can give of this is buying a "white" dog toy because they tell you it's the best selling product. Anybody who owns a dog knows you never buy a white dog toy as it shows the most dirt - ask anybody who works at a pet store they will tell you the same. So don't take the vendor's word for it. Make sure whatever product you are investing in meets the needs of your company both today and tomorrow. Would a SaaS or cloud be better for you? Would a custom homebrewed app be better for you? These are all questions you need to answer. Meet with the architect and discuss your strategy for the future. I can't tell you how many situations I have been in where the sales/marketing application didn't integrate properly with the PIM or inventory control. This can lead to costly custom changes to marry your applications together. Evaluate the impact this is going to have on the disruption to your supply chain and acceptable downtime. With any new system you will have downtime - we call this an investment, but at some point the downtime stops being an investment and starts being costly.

  3. Measure the performance. It's easy to sit back and say "hey look we're automating things and cutting a gazillion dollars from the bottom line," but make sure you can back these numbers up. Whatever supply chain management tools/systems you implement you will need to show equitable tangible monetized value. No tool is useful without effective reporting.

Improving the technology you utilize for supply chain management will increase your productivity as well as the bottom line. You will work more efficiently with fewer payroll demands, and improve your customer experience by being able to provide them with real time on demand information.

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