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March 20, 2003

New Links in the Chain

As supply chain networks evolve and mature, managing their performance requires an increasing commitment to information and collaboration

by Mark Smith

The supply chain remains an enigmatic spiderweb of people and processes, despite the slow and steady improvements in the links that connect its nodes — retailers, manufacturers, and suppliers. Managing costs and improving productivity in the supply chain therefore remains a high priority. Companies that can achieve superior supply chain performance will realize a sizable competitive advantage.

More than two years ago, I laid out a blueprint for how to enable supply chain performance management and discussed the strategic value that organizations can achieve through leveraging information and analytics. That article, "The Visible Supply Chain" (Oct. 20, 2000), also provided best practices for achieving supply chain excellence by breaking through cultural barriers and addressing affected internal processes.

So what has changed in the last two years? The largest business influence has been the downturn in the economy and its souring effect on business and consumer spending on services and products. This stricter management of financial resources has cut through the dot-com economy hype about converting from bricks to clicks and replaced it with serious conversations about incremental improvements in managing inventory and distribution channels. (See "The Visible Supply Chain" for more of the six steps for building better supply chain performance management systems.)

Debut of a Column

Managing the performance of every business process at all levels of an organization has become the focal point of conversations across the industry. This critical imperative is the essence of my new column, Business Performance Management. My objective is to offer actionable insight into formulating strategy by guiding you through the selection, implementation, and maintenance of BPM technologies and showing how those solutions can be best aligned to business requirements. This column's focus and direction will cross vertical industry and geographic boundaries, and more important, provide valuable tools to you in your own organization.

State of Software Technology

On the software technology side, the role that suppliers play in helping you with your supply chain improvements has changed significantly, especially in performance management and other areas where you can leverage information and analytics for increased visibility and control in your business. Performance management has become a primary focus for many organizations as they transition beyond transaction-centric investments. They're now investigating performance-centric approaches that can help them understand, optimize, and align these business processes. The underlying realization is that the combination of information and collaboration can provide a powerful tool for success for every member of the supply chain network.

The role of traditional reporting, analytics, and data warehousing technologies, sometimes referred to as business intelligence (BI), has continued to play a strong role in organizations. Compared to two years ago, a shorter list of BI technology suppliers, such as Business Objects SA, Cognos Inc., and Informatica Corp., continue in their efforts to provide templates — or in some cases, applications — that can act as a starting block for your projects. Business Objects launched its full Supply Chain Intelligence suite in 2002, and Cognos now provides Supply Chain Analytics applications. Informatica continues to make progress with its Supply Chain Analytics and Strategic Sourcing Analytics applications. And now with its new BI tool, Informatica PowerAnalyzer, the company is a full-fledged competitor in this market.

The transactional application providers, which include Oracle, PeopleSoft, and SAP, have set a steady course in their improvements, new offerings, and partnerships for providing analytics and BI. Many of these software suppliers are still not fully committed to performance management — resisting any change from their transactional application origins.

The midsize supply chain applications market, which includes Baan, J.D. Edwards & Co., and Mapics Inc., continues to progress through best-of-breed partnerships and joint application development. J.D. Edwards partnered with MicroStrategy Inc. to build out complementary BI solutions, while Cognos, Silvon Software Inc., and Vanguard Solutions Group Inc. all have prebuilt integration with J.D. Edwards' products.

In a short period of time, specialized technology vendors that were riding high on the industry wave two years ago have been acquired or merged or are operating in a significantly reduced way. For example, NCR acquired SageTree Inc., a Western Digital spin-off focusing on supply chain data warehousing and analysis, to make it the Center of Excellence for the Teradata division's Supply Chain Intelligence Solution. Many industry veterans view SeeCommerce as a good example of supply chain performance management, but even this company faces significant market and customer acquisition roadblocks due to the economy and management's inability to execute. PowerMarket Inc. was hyped as the cure for your spend-management challenges, but its venture capitalists guided it to a merger with the more experienced Tradec Inc., which provides supply chain cost-management solutions.