Let the Research Speak!Increasing the chances of successful supply chain managementby Ram Reddy Recent supply chain management (SCM) technology implementation failures at Fortune 1000 firms have received good and bad publicity. The skeptics have maintained that expensive and sophisticated SCM technologies do not demonstrate a measurable return on investment (ROI). Proponents of SCM technologies have insisted that these projects fail because they're undertaken without clearly defined business objectives and because management is unwilling to replace flawed business processes. It's been difficult to conduct any meaningful research to identify the root cause of failures. Companies that reportedly failed at SCM implementations are unwilling or unable to allow research into what caused the failure. Their immediate priority is to recover and find another way to meet their business needs. Conventional wisdom from the areas of systems and development methodology emphasize the importance of learning from the past. A recent research report ("Getting Supply Chain Software Right," by Kanakamedala et. al, The McKinsey Quarterly, 2003, No. 1) looked at this subject from the standpoint of success as opposed to failure. This report is compelling for management and IT audiences alike. The McKinsey consultants followed companies over a period of time to see the effect of SCM technologies on certain metrics, such as inventory turns. They were able to find proof to substantiate the anecdotal evidence they had collected before this study. If your firm is in the planning stages or in the middle of an SCM initiative, this report is an absolute must-read for executives, line management, and IT staff. Research MethodologyBefore I discuss the research findings of the McKinsey report, I would like to address the feedback I've received from readers of my column over the past few years. My columns have covered topics such as using an incremental approach to implementing SCM technologies and the importance of adjusting business processes and obtaining executive sponsorship to SCM success. To paraphrase some of the feedback I've received from readers: The ideas I champion are thought-provoking, but what's my proof they work? The McKinsey report provides some validation. Kanakamedala and his team followed a group of 63 high-tech manufacturing companies from 1995 through 2001 and measured their SCM effectiveness. The 63 companies fell into four broad categories. One category didn't adopt any SCM technologies. Among the SCM adopters, the companies clustered into high-, average-, and low-performing groups. The researchers determined performance by metrics such as inventory turns. The survey team dug a little deeper to find out what caused the variance in inventory turns across the 63 firms. One result was startling in that it bucked the conventional wisdom that IT investments always contribute to a company's productivity. Simple Truths ReemphasizedFirms that didn't adopt any SCM technologies fared better than low-performing adopters! Most of us in the IT community have had the gut feeling that the company we worked for was worse off after an SCM technology implementation than before — especially if flawed business processes weren't reengineered before technology implementation. It was heartening to see research validate this hunch. As a manager and later as an executive, I was involved in SCM technology selection. On a couple of occasions, it was clear that non-IT management had not addressed SCM processes and practices that were flawed to begin with. They expected the technology to magically fix flawed processes. The McKinsey report may help persuade the business managers to fix the flawed processes first! The study emphasized the simple truth that implementing SCM technologies without a corresponding business process change makes you worse off than before. In fact some of the nonadopters that improved their business processes without any technology support did better than both firms in their group that stuck to the status quo and the low-performing adopters. What about firms that adopted SCM technologies after improving their processes? As expected, they did better than the nonadopters and the low-performing adopters.
|
 |
Most Popular This Week
IE Weekly Newsletter
Subscribe to the newsletter
| |
| |||||||||||||||||||||||||||||||
