Lora Cecere, founder of Supply Chain Insights LLC, recently published another cogent and valuable report entitled Supply Chain Visibility in Business Networks.
In the way only Lora Cecere can do it, her insights nail the critical issue in a few succinct sentences:
"Companies want to build end-to-end value networks. The supply chain processes are more dependent on trading partners and interactions of the extended supply chain; but, the IT capabilities are largely based on electronic data interchange (EDI) and spreadsheets. It is inadequate. IT spending is focused on Enterprise Resource Planning (ERP) which automates the enterprise, not the network. This is a conundrum for the supply chain leader." [p. 2]
What we say we are building versus what we are actually building
While many of the companies with whom we do business say they are building end-to-end supply chain processes, in the final analysis, we generally discover that this is not the case. What they are actually building is mostly internal automation of their own activities around the supply chain.
Sure. Many of them recognize the increasing need to extend visibility, integration, collaboration and even automation beyond the four walls of their own enterprise, most of them are still stuck managing most of their supply chain tasks on spreadsheets and limit external integration/automation to whatever EDI capabilities they have added over the last decade or so.
I have frequently told companies with whom we consult, "If Microsoft Excel were to stop working tomorrow, the U.S. economy would grind to a halt."
Furthermore, Cecere's analysis is correct: "EDI is effective in moving transactional data, [but] it is point-to-point [and lacks] community interaction." Hence, EDI is not an effective tool for really increasing visibility across the extended supply chain in any real sense.
Always seeking, but seldom finding
Almost all of the small to mid-sized business enterprises (SMEs) for whom we consult have recognized the need for increased supply chain visibility as being critical to being able to achieve supply chain agility.
What they want--indeed, what they need--is an IT infrastructure and architecture that will give them some hope of achieving near real-time supply chain visibility. It would be a huge boon to many of these SMEs to be able to know the true "shelf take-away" of their products from the point-of-sale (whether that's a cash register at some retail establishment, a delivery guy, or some other transaction point).
Unfortunately, as Cecere points out clearly in her report, "To close the gap and improve supply chain visibility, there is not a clear path forward."
In the Supply Chain Insights study, nearly half (49 percent) of the organizations surveyed made ERP the focus of their IT budgets in 2013. I doubt that this number will shift dramatically in 2014.
Most of us who consult with clients on a regular basis and understand their ERP systems well are thoroughly convinced that the supply chain visibility gap will not and cannot be closed through ERP spending alone. Worse! While "B2B efforts are now three decades old;... the primary mechanisms are [still] based on manual efforts. The dependency on spreadsheets is limiting the evolution of supply chain visibility" into something deeper, wider and more robust, Cecere cogently assesses.
Finding a way forward
I am confident that there is a way forward. Some of the largest enterprises (e.g., Fortune 1000) have the resources and have begun creating their own infrastructure and mechanisms for end-to-end supply chain visibility. Certainly Walmart’s work in this arena stands out as being highly visible.
However, for the SMEs with whom we consult on supply chain and business improvement matters, there must be found answers that are both effective and within their reach from both a skills and economic point of view.
The steps outlined in the Supply Chain Insights report [p. 12] certainly apply, regardless of the size of the enterprise:
1. Define priorities and align solutions -- Our sense is that as long as "cost-cutting" is focus of SME executives and managers, rather than "increasing Throughput" (and, hence, profits), then all (or most) of the priorities will remain internally focused and the resulting "solutions" will do little to actually increase supply chain visibility, integration or collaboration.
This, we believe, is a huge mistake. It will be the SMEs with the vision to begin redefining their supply chains from the outside-in that will increase their market share and become dominant in the near future.
I also believe that the IT vendors and value-added resellers (VARs) who first create a way for SMEs to readily provide and consume customer-driven data up and down the supply chain, at a price the SMEs can afford, will also become market leaders in their industries.
2. Get clear on what you are doing today. Document the 'as-is' and the 'to-be' states -- When we work with our new clients' executive and management teams, we find that what they think they know about how their organizations and industries work and reality are sometimes miles apart. Many of them do not have good tools in hand for unlocking "tribal knowledge" and documenting in a simple easy-to-use, easy-to-update form their current reality ('as-is' state) or future reality ('to-be' states). Instead, they rely on business process management (BPM) consultants who leave them with huge binders of written pages that mostly end up gathering dust on their shelves after the many thousands of dollars in checks are written for the cost of preparing these tomes.
We believe that there is, indeed, a simple and effective way to help organizations understand and agree upon their current reality and the cause-and-effect relationships that drive their current reality.
Generally, in a single day, we can generate a single-page document that allows managers and executives to see their organization and operations like they have never seen it before--with clarity.
3. Align IT strategies with future goals -- Cecere is correct in concluding that if IT spending is to be a real investment, instead of just money thrown at problem, then--proceeding from step 2 above--the IT money must be allocated to those few factors that are going to lead to increasing Throughput and profits. Everything else merely adds expense.
So, I want to thank you, Lora Cecere, for bringing forth this excellent report on supply chain visibility. We would also like to hear your comments and questions on this important matter.
Please leave your comments here, or feel free to contact us directly, if you prefer.
Cecere, Lora. Supply Chain Visibility in Business Networks. Rep. N.p.: Supply Chain Insights LLC, 2014. Print.