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Is IT really a primary driver for making your supply chain ‘World-class’?

There have been numerous articles or reports written on building a ‘world-class’ or a ‘best-in-class’ supply chain that you would have surely read. Few of them definitely outclass others in terms of the focus and clarity they provide to the supply chain enthusiasts and practitioners. One such report that I would like to bring to your notice is recently published by McKinsey & Company called “The Race for Supply Chain Advantage” – an outcome of an intensive research done, with large multinational companies participating from multiple industry segments. The report provides the six key practices that would drive supply chain performance, and make companies world-class with outstanding results in some of the most critical parameters such as customer service, cost and inventory. I wouldn’t like to comment anything on the practices listed but I do feel worth mentioning an interesting finding in this report and that’s about the better performance of companies with fewer formal IT systems as compared to the ones that have invested heavily into technology.

As per the report, “IT investment is often not as useful as managers expect”. I find it contradictory to the popular belief that IT investment is not just an essential requirement but a necessary one too. What is your opinion on this?

I personally agree to the finding based on my industry and consulting experience. I have seen supply chain organizations that are fairly mature in operations and there are still these key business users who continue to use simple spreadsheets for most of their effective decision making. The business needs IT to just support the decision making and therefore, “IT as a strategic investment” may not be highlighted as amongst the primary drivers of improving supply chain performance. There are so many instances that we come across as supply chain practitioners where the decision is taken without any data and it’s purely based on experience and instinct. IT can’t capture all that and that’s one of the reasons why IT can’t be a strategic driver. Having said that, I also believe that as businesses grow and become more complex in nature, IT definitely plays a very important role in just ‘facilitating decision making’ and in reducing the level of anxiety and ambiguity in managing business.

With these thoughts shared, I would like to know your opinion on this subject matter. I would welcome your experiences on this and it will be really great to know the reasons and viewpoints in case you differ with my opinion…



IT is still one of the key supply chain driver apart from the 3 others (Logistics, Inventory & Facilities)and plays an important role in the end to end supply chain activities. But the real difference comes how an organisation views IT when it comes to differentiating itself from competition. Firms like Cisco and Dell use IT as a part of their business model. I agree with you when you mention that some business users still work with spread sheets when they have a huge IT setup for decision making. I was working with a german client and they were depending on their spread sheets more than SAP. Well there could be more reasons for that and multiple factors decide on the usage of proper IT systems usage. When firms become huge, their data becomes complex to handle and users have to start adopting IT to be more efficient.But apart from this there are other basic strategies that decide whether your supply chain is working well. IT can make your supply chain more efficient, but it is your basic supply chain strategies that will have to couple with IT to make it more effective.

Well, IT is important - and we all understand its significance. My viewpoint is that it is not a primary driver. Now, companies may use IT relatively better than their peers but it doesn't guarantee them improved performance. That's what i want to highlight here and the study definitely states that as well.

I think the "right" IT investment is critically important. I would argue that the reason IT investments in supply chain haven't always panned out is because the legacy supply chain planning systems designed in the 1990's were ill-equipped to deal with the rapidly evolving pace of change going on within supply chains.

If you combine that with the over-inflated expectations about value that would be derived from such investments at that time, you end up with a situation where people were bound to be disappointed - and many were.

I too have noticed that a very high percentage of users within the supply chain management roles end up relying on spreadsheets to try to cope with constant change. This speaks to a critical problem that is not being solved by the systems those companies have currently deployed.

I do believe that the right investments in IT can make a huge difference - but not in isolation. They need to be combined with smart people, solid leadership and well defined business processes. Without all of these elements, you'll never get the return you desire.

IT is definitely a necessary investment.

Its usage as a decsion making tool is limited because:
1) A large proportion of end users have limited scope of the systems capabilities. Hence, prefer time tested simple solutions.
2) Further, more often than not, over a period of time the limited "know-how" of the organization gradually withers down leading to an increased usage of spreadsheets, etc.

Most companies spend heavy on
a) financial and
b) intellectual resources on IT systems development and upgrade.

But the consecutive resources spent on training are not scarce especially in:
a) financial resources
b) intellectual resources
c) structured continuous learning programs.

For IT systems to become a strategic investment, it is necessary that more users understand
1) their processes and
2) information flow facilitated by the IT system.

So they can reccomend and continually upgrade decision making tools.

Randy-Thanks for such valuable comments. I perfectly agree with your viewpoint that "right investments in IT can make a huge difference - but not in isolation".
Do you see IT systems taking care of most of the business requirements of these supply chain users to a large extent?

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