The goal of supply chain management can be stated simply: Deliver perfect orders of profitable products. That’s a tall order, and it’s made even more difficult if you’re depending on old-school supply chain technology in this data-driven world.
“Supply chain has probably changed more in the last 30 years than almost any other aspect of business,” says Jon Chorley, chief sustainability officer and group vice president, supply chain product strategy and PLM at Oracle. “How do you have a responsive supply chain when it takes you two to four weeks to ship the goods to a customer? It requires enormously sophisticated planning and modern, cloud-based tools to meet this demand.”
Yet many companies are still using outdated supply chain and ERP (enterprise resource planning) applications and processes that were designed with an inside-out focus—designed around how a company (rather than its partners and customers) operates, Chorley says.
Today, that focus needs to be outside-in.
“You may be working with your supplier’s supplier, or selling through a reseller to an end customer, yet all of this is your brand, your supply chain, and so you have to understand what’s going on end to end,” he explains.
What CEOs Want from their Supply Chain
Chorley says CEOs are looking to supply chain executives to tackle a number of critical issues:
• Improve return on innovation spending. The questions of what products to build, evolve, enhance, or kill are often decided with a wing and a prayer. The key is to improve visibility to the process: Collect and evaluate product ideas, pick the great ones, accelerate the conceptual design process, and then balance your overall product portfolio.
• Maintain a flexible approach to sourcing, production, and distribution. One of the biggest inhibitors to a business’ flexibility is the IT systems that support supply chain. Complex, unintegrated supply chain applications make it very difficult to take advantage of new opportunities.
• Attract and retain productive employees. Decades-old supply chain applications don’t provide the kind of analytics that workers need to make smart decisions. Expectations of new employees are shaped by social networks and consumer applications, giving another incentive to move to modern, cloud-based tools that provide an analytics-driven user experience.
Critical Issues to Consider
You can’t deliver on these CEO demands with technology designed for how business worked 20 years ago. For the many companies looking to modernize various components of their supply chain, Chorley offers the following tips:
1. Define your desired endpoint, then craft the path that moves you toward it. Up until now, the cloud has been used to drive departmental-driven initiatives. The result was short-term gains that resulted in complexity and lack of integration in the long run. A critical part of the overall design must be how supply chain ties in with other systems such as ERP, sales, and marketing applications.
2. Find the right partner or partners to get you to that endpoint. Who has the depth and breadth to tie all of these pieces together? Cloud is about service, and in a service environment, your partnership with the cloud vendor is critical.
3. Keep your enterprise architecture simple. The fewer moving parts, the simpler and more robust it will be. Buying broad solutions that are pre-integrated will simplify the architecture and make it easier to maintain.
4. Re-evaluate your processes. Your processes were probably based on your outdated technology and have become culturally ingrained. Again, keep the end goal in mind.
5. Change management is crucial, so fund it. The cloud reduces your need to invest in infrastructure and associated technologists, so adjust your IT spending toward business change expertise, because that’s where supply chain initiatives generally stall or fail.
6. Put the right people on the evaluation team. There is an unfortunate tendency when looking at mature product areas, like supply chain, to look for a supersized product, with as many features as possible. You need a team that is able to rise above feature-function comparison and has a vision of where they want to take the business.
7. Structure your supply chain project to create interim wins. Look for projects that can deliver business value in six to nine months.
8. Make sure you have options in how you approach the cloud for the supply chain. Where you start should be flexible and matched to the specific needs and circumstances of the business. Start with the specific areas that are most likely to deliver business value and which also progress you along your own path to the cloud.
9. Think about the long-term cost of ownership of your cloud solution. If you have six cloud vendors, and each one of them is upgrading twice a year, then you could be dealing with an upgrade every month—and that complexity will take much of the IT department’s time.
10. Consider your cloud vendor’s “ecosystem” of partners. If you’re a global business, your cloud provider needs to be global as well, and able to tap into implementation and support partners worldwide.
11. Is your cloud application mere window dressing? Some cloud vendors simply move their on-premises solutions to the cloud. But these older applications are not re-architected to include modern processes, collaboration functionality, or true mobile capabilities. They are not built to be easy to configure or upgrade. They are not built to have web service interfaces, or to be easy to extend without breaking and without causing major upgrade headaches down the road. So buyer beware.
Reprinted from OracleVoice on Forbes.com. Download our eBook and learn why supply chain leaders are moving to the cloud. Visit www.oracle.com/goto/scm-cloud.