Supply Chain Management

The first is one anchored in the business pressures of the day, often in the context of continuous improvement.  Continuous improvement builds on the current business foundation and incrementally adds IT capabilities as the business or supply chain function encounters a business problem that needs to be solved.  Efforts tend to address one problem at a time, as functional or business pain points are elevated. Some examples would be a demand planning or forecasting process that needs to be augmented, or a sales and operations planning (S&OP) process that requires more robust planning and analytical support.  IT capabilities can either be augmented by development efforts of the internal IT support group, or an external application can be acquired or leased to augment process capability.  Today’s environments of hightened cost pressures brought on by global recessions have forced many companies into a continuous improvement perspective. The ROI of these efforts is often shorter, and today’s savvy supply chain and IT professionals can orchestrate a series of self-funding initiatives, with each increment generating sufficient cost savings to fund the subsequent increment.

The other approach is transformation.  Transformation starts with a common vision of an “end-state” and includes a framework of the required business metrics and business process capabilities that are desired to support both efficient and agile supply chain capabilities.  This path specifies an enterprise-level information architecture that can insure integration of information from either internally developed IT systems, externally acquired ERP, “best-of-breed”, or analytically focused business intelligence  applications.  Transformation can be a response to an overriding urgency for a firm to be more competitive in its industry segment or to prepare for business recovery in more agile and cost-effective supply chain capabilities. The challenge here is for IT and supply chain management professionals to come together to specify applications that are easier to integrate, cheaper in the long run to operate, or can easily change or adapt, when changes to the business occur.

There is one common option to the constant debate of build vs. buy of IT applications supporting supply chain, and that is having proper context and strategic framework.  Strategic framework equates to the existence of a common understanding of business metrics and outcomes desired by the firm, along with a well defined and understood information architecture that addresses robust information integration across cross-functional supply chain systems, both internal to the firm, and external among suppliers and trading partners.

The paths of continuous improvement and/or transformation have one other common trait, that being applications that conform to common information architecture, have been designed for flexibility and modular deployment, and have the ability to support change with the evolving needs of the business.  Whether these systems are built internally or acquired can then be easily equated to overall cost and time objectives.

My advice to companies that need to resolve the build vs. buy debate is to first take the time to outline common vision, business outcomes and overall information architecture that can support either continuous improvement or transformation needs.  Proper context and existence of a strategic framework of objectives makes the build or buy option far easier to address.

Finally, the current business environment has drastically curtailed the ability for companies to seek external consulting assistance in developing their required strategic frameworks. Indications that the economic bottom has been reached in many industry segments may signal the fact that reaching out for an objective, external consulting perspective to help develop a more well understood framework may be timely at this juncture.

The above guest blog posting comes from Bob Ferrari, primary author of the Supply Chain Matters blog, and Managing Director of the Ferrari Consulting and Research Group LLC. Infosys is one of many sponsors of Supply Chain Matters.