While the traditional role of IT in the supply chain has been to reduce costs by automating manual supply chain, such functions are now perceived as a given.
“IT is now used to assist trading partners to interact more efficiently,” says Advanta Software sales director Steve Nelson.
“Examples include notifying companies in advance of when to expect receipt of shipments at the wharf so that trucks may be allocated, or providing suppliers with forward demand forecasts so they can better plan their own procurement.”
“Importantly IT is increasingly being used to help businesses automatically manage the inevitable exceptions that arise,” Nelson adds.
“With rapidly increasing transaction volumes, even high service levels can still result in hundreds of transactions that fall short.”
“IT systems now monitor transaction status and in addition to automating corrective action, automatically alert appropriate parties in advance where necessary.”
As globalisation advances, there is a growing requirement for business processes that are based on integration and collaboration across regions, business units, and organisations.
“Market demand has forced supply chains to collaborate and the industry now realises it’s a significant win-win for customers, suppliers and all other levels of the supply chain,” asserts Infor managing director, Pacific James Brackenrig.
With the increasing use of internet technology supply chains are growing more and more fragmented and spread across the globe.
“Without a transportation solution to manage cost and performance, centralising the supply chain and aligning the transportation network can drain a company’s resources and halt forward momentum,” observes Oracle general manager for manufacturing, retail and distribution Scott Dawes.
“Often, business processes can’t scale to meet transport initiatives and neither the company nor the customers have true visibility to in-transit shipments.”
According to IBS Software CEO Rajiv Parrab, the proliferation of integration has been the most significant IT development in recent years.
“Properly implemented within the supply chain, IT has already reaped massive efficiency and profitability benefits for companies worldwide,” he says.
“Mergers, acquisitions and global markets require integrated information from all systems and business partners to provide a competitive edge.”
“An integrated solution allows companies to maximise existing investment while helping to implement new systems and technologies faster and more effectively.”
“The capability of an integrated solution to enable connections and utilise functionality across multiple and cross-business systems means companies are able to offer services they could not previously provide.”
Customers are looking for solutions that will integrate easily with their existing systems, regardless of which vendor the solution comes from,” concurs Oracle’s Scott Dawes.
“Shrinking product lifecycles, global competition, supply chain complexity and increasing customer demands are closing the window of opportunity for products across industries and markets.”
“Maximising product pipeline throughput while compressing cycle times and controlling for target margins and regulatory compliance is required to compete effectively.”
“Seamless integration of outsourced design, supply and manufacturing resources can be the difference in achieving leadership in an organisation’s field.”
Another major contribution of IT to the supply chain is in the areas of business intelligence and performance management.
“Organisations must be able to identify how they perform,” says IBS’s Rajiv Parrab.
“Today’s companies need business intelligence software that captures processes and analyses information from all events and transactions, across functions along the supply chain.”
Software industry vendors all agree visibility and traceability is one of the most essential supply chain improvements provided by technology.
“IT enables your supply chain to run at the speed of your business’ environment without being limited by the speed of your shop floor or the flow of paper documents,” says SYSPRO Asia Pacific general manager Shaun Butler.
“Nowadays, most Australian manufacturers make to order and not to stock, and are part of a global supply chain; thus the role of IT is to provide instant and real-time visibility of the supply chain at all levels to enable fast and accurate decisions.”
“A good IT system enables different views of the supply chain right from the shop floor to the end-customer with secure visibility available to external partners as well as management,” he adds.
RedPrairie managing director Mark Skipper says the key IT development of the future will be businesses seeking supply chain execution (SCE) solutions that incorporate real-time demand data into retail systems.
“With customers expecting shorter and shorter order fulfilment times, supply chain planning solutions with a batch processing approach will be increasingly churning out plans that are out of date,” he says.
“These next generation demand-driven SCE solutions will increasingly replace the current generation of applications and unify the supply chain execution segment of our customers’ application portfolio.”
“Secondly, because of the proliferation of global sourcing, advanced tracking and recall capabilities will stretch from the supplier to the point of sale.”
“Thirdly, voice technology will become fully established as the norm and RFID will, in 10 years, be widespread, when the cost becomes justifiable for the particular industry and application,” Skipper says.
“Lastly, all supply chain applications that want to survive will be based on service-orientated architecture (SOA), not the old clumsy architectures where scripting ties functionality together under the surface.”
SYSPRO’s Shaun Butler believes SOA will have two main influences on the future, including customer service levels and information management.
“Those supply chains that are driven by consumer demand need to supply accurate fast information to meet the changing needs of the consumer,” he says.
“IT systems will need to be flexible to cope with the provision of such information while internally ensuring that quality, cost effective inventories are maintained.”
“Inventories need to be accurately synchronised to retailers meeting consumer demand to reduce overall supply chain costs and meet customer service expectations.”
“SOA will allow information to flow seamlessly throughout the entire supply chain reducing the effort and inefficiencies of data collection and duplication.”
For SYSPRO’s customers, Butler maintains this presents an opportunity to extend their systems not only to applications inside the company, but to those outside, meaning better business insight, greater innovation and market growth.
Gartner predicts a quarter of new business software in the US will be delivered as services by 2011, up from around 5 per cent now.
According to Salesforce.com writer Rob Preston, “Software as a service (SaaS) is still an unsavory prospect for many business technology professionals.”
“Their point of view: If information is the lifeblood of the 21st century organisation, then ceding management and ultimately control of that information to third parties is something of an unnatural act.”
Preston quotes Aneel Bhusri, a former PeopleSoft executive who’s now running HR and financial SaaS startup Workday.
“The reality today,” Bhusri says, “is that many CIOs aren’t
willing to replace legacy systems with new software services because they don’t want to ‘waste’ the 20 per cent of their IT budgets earmarked for innovation.
In other words, they’re determined to continue funding software from the fatter, 80 per cent of the budget set aside for maintenance, leaving the 20 per cent for other projects.”
While there are real dangers in giving up direct control of your data, Tradegate CEO Peter Blanchard predicts SaaS will become increasingly prevalent among smaller enterprises.
Providing IT services to importers and exporters, Tradegate has seen IT processes becoming so sophisticated that smaller companies are being left behind.
“For SMEs that can’t afford an IT manager, SaaS will mean they don’t have to run desktop software,” Blanchard says.
“There’s nothing more precious than your own sales data, but even larger companies are now quite happy to have some of it held externally.”
Sterling Commerce ANZ managing director Michael Vulcan points out that the term ‘web-based’ has become so generic that it is almost meaningless.
“It seems that every company has web based solutions, however many did little more than put a web front end on their old application and market it as web-based,” he says.
“From that perspective, the industry is well beyond web-based.”
“The web of the future is akin to a living organism that is virtual, connectionless, and configurable in the moment.”
“Solutions delivery will include on-demand from service providers or from within the enterprise itself,” he says.
“Leveraging SOA and Web 2.0 tools, applications will be more of a ‘mash-up’ with each person using the system to create their own view; configuring the processes the way they work best for the ecosystem.”
“Visibility to other participants in the supply chain will be achieved regardless of location.”
“One can look at social networking to see a glimpse of how this might work,” Vulcan says.
“Imagine a supply chain presentation like MySpace where the computer, cell-phone, or home television monitor, can be part input, part transaction monitoring, part metrics, all configurable to a person’s job, location, and context.”
While nobody can deny the benefits of sophisticated technology to improve supply chain efficiency, a lag still exists for many organizations in terms of fully realising the value of their implementations.
“Most businesses already collect enough data using their information and management systems, but lack the ability to properly integrate this information across the entire flow of materials throughout the organisation,” says TIG co-founder Stuart Ferguson.
“The big issue is that software implementations require a change of business processes,” agrees Tradegate’s Peter Blanchard.
“If you’re going to accept data coming in to your applications, you want to make sure it is very accurate.”
“What we’ve found is that the benefits arising from data integration have actually come out of improvements made to daily processes prior to an implementation,” he says.
As IBS Australia’s Rajiv Parrab points out, IT solutions are not meant to remove the need for the human element, but to be used as a powerful tool that identifies ‘pain points’ within the supply chain and resolves them with the best possible solution.
“An integrated solution designed for the unique requirements of a specific industry vertical will accomplish this,” he says.
“We see IT as necessary to allow business processes to scale to address growing complexity in the supply chain created by issues like product and services proliferation, customer bifurcation and increasing demand for both commodity and luxury products,” says IBM Australia’s Craig Rawlings.
“Essentially, IT is an enabler of all the business processes within the supply chain.”