Integrated Supply Chain Benefits Go Beyond the Internal Stuff

I met Lora Cecere this evening, well-known AMR analyst for Supply Chain – a good conversation about the deeper potential for supply chain integration technology. The topic: are there bigger benefits here? Is it really only limited to optimization of your own supply chain?

Don’t get trapped into thinking that the business benefit of supply chain integration is limited to increased visibility – look at the different scenarios. A simplistic view of an integrated supply chain shows all the elements, but managed within my own information system, my own ERP (ie. everything in blue, below). I can see all inventory, I can configure ATP all the way back to the raw materials coming to the manufacturing plants, and I can achieve some pretty nice customer service performance because I have full visibility …

There are plenty of benefits – forecasting my supply chain with max visibility, or optimizing my manufacturing footprint – pretty significant stuff. The challenge, of course, is getting it all into the same single system. This is a Command and Control mentality – nice if you can pull it off, but a challenge when talking about a growth-oriented company.

No surprise here – not all supply chains are this cut and dried. Most have to deal with a variety of owners and control structures – using “solutions” ranging from email and lots of phone calls, to EDI and total electronic connectivity. If I have successfully implemented electronic trading partner relationships, I should be able to get close to 100% supply chain visibility – even though the various components are in different ERP systems (shown by the different colors below) …

This is more of a Communicate and Collaborate environment – a name that signifies a philosophy change as much as a change in execution style.

If the standard mentality is if I can’t see it, I can’t manage it, then this will definitely generate some cognitive dissonance. However, if you can get beyond this, the savvy company will realize they have enabled themselves to make strategic partnerships happen that go beyond the simple acquisition model. I don’t have to acquire everything – I could choose to partner with companies that can provide the required level of EDI visibility to my supply chain. Instead of sinking big capital dollars into equipment, I can partner with other companies to do the actual manufacturing. This can and should be a shorter term commitment, so I can judge the efficacy of the partnership in a smaller time frame. Basically, I can get the benefits of a visible supply chain without having to sink the dollars into acquisitions, capital investment, and system integrations.

Don’t limit yourself to short-term, within-the-four-walls benefits of inventory and network optimization. Realize that you’re giving executive management additional tools in their never ending quest to generate shareholder value.