Supply Chain Management

Why is software not a prerequisite?

By definition, a prerequisite is something that is necessary to the carrying out of a function. This also means that once the prerequisite is in place, the function will be carried out successfully. Hence, if software is prerequisite for supply chain, it would mean that without software a supply chain cannot exist or operate successfully and having software in place should result into successful supply chain operation.

However, this is indeed not the case.

Business world is replete with examples where companies have bought the most sophisticated automation / software to run their operations (GM, Ford) and still not been able to arrest the downturn. On the other hand we also have examples of companies which are not considered to let information technology / software to take prime seat (Toyota) and yet have amazing supply chain and operations agility and continue to create business growth. In between these two ends we can find the rest of the world either seeking supply chain nirvana through IT systems – often costly, time consuming and still not been able to deliver the desired results to the C suite or trying to embark on supply chain re-engineering initiatives which bring some improvements in short term but are not sustainable in the long run.

So, what is really needed to build and operate a successful supply chain? 

My viewpoint is that in order to answer this, it is important to look at role of a supply chain in a business organization. Supply chain is a means and not an end in itself. It is prime vehicle to deliver organization’s products / services to its customers and has direct linkage with organization’s competitive priorities and mission objectives. It is said that no two supply chains are alike. This is true because businesses differ on competitive priorities and strategic objectives and direction and not because the basic supply chain functions are different.

For example, if the strategic direction is to maintain control over most of the supply chain functions in-house and competitive priority is to maintain high market reach and availability, the supply chain focus of the enterprise will be very inward with limited focus on external collaboration. Typically in these situations, the supply chain functions are organized in silos with each function (source, make, deliver) organized to gain efficiencies within silos without considering the impact on total supply chain. Correspondingly, the supply chain systems also will be focused on gaining efficiencies within each function. Policies within each function will typically overrule the suggestions made by software / IT systems. The success / failure of supply chain to meet business priorities will be determined by the decisions made by key stakeholders and the control / effectiveness of policies in place to leverage systems. 
Hence for a supply chain to be successful, it is critical to have the alignment of the operations and underlying policies with the key business priorities. This requires aligning all the supply chain functions (Plan, Source, Make, Deliver and Return) to operate in concert with the key competitive priorities (contain cost, increase reach, increase customer service level etc).

The alignment of these priorities seamlessly throughout the supply chain org is a herculean task and requires serious commitment and ruthless implementation from top execs. This also requires setting up the right measurements and incentives in place to reward actions leading to overall achievement of the competitive goals and not success of individual functions. A closer look at the some of the successful supply chains clearly reinforces this notion.
This alignment can be brought by building the right organization structures, with clearly defined metrics / measurements linked to competitive priorities. This alignment is the true prerequisite to operate a successful supply chain. This requires the attention & ownership of key stakeholders and this clearly cannot be done by software / IT systems alone.

What are your thoughts?

In the next blog I will share my thoughts on the role which IT software / systems play in managing supply chain operations.