If you listen to some financial talking heads and political pundits, things in the economic world are much better, and the path ahead is clear (if you believe Vice-President Joe Biden). If you listen to some folks on the other side of the spectrum, we’re all doomed and you’d better stock up on ammunition and vegetable seeds for the post-apocalyptic world we are about to enter into. (Speaking of which, have you tuned in to radio and television personality Glenn Beck lately and heard some of the callers?)

The truth is somewhere in between those poles. And to a large degree, it depends upon which vertical you’re in and which markets you serve.

Regardless, it is never a bad idea to take advantage of lean times to fine tune your operations and business processes, assess your supply chain systems, and plan for the future – in this case, some level of financial recovery – by optimizing your supply chain and the information technology required to support it.

Many companies are in a budgetary "freeze" and have either set their 2010 budgets at 2009 actual spend levels or cut them back to some degree.

I saw a few projects delayed and/or scaled back last year, which unfortunately, puts those organizations at a competitive disadvantage – either because their competition is continuing to move forward with their improvement initiatives, or those companies are failing to gain momentum for an economic comeback, which is certain to happen.

So with all of that said, how are you freeing up capital to invest in operations consulting and improvement, as well as advancement of your technology capabilities?

Or have you found yourself in a dilemma where you can’t fund an improvement project, because your operation is performing sub-optimally, and/or you can’t perform optimally until you improve your supply chain operation?

In future posts, we’ll discuss how to free up capital. In the meantime, let me know what you are doing to get out of this catch-22.

-- David Meyers

On my way into the office this morning, I stopped at my local convenience store for a cup of coffee. During the past year, I stopped going to the "premium" coffee shops as a way to save money. Charging more than $2 for coffee should be a crime anyway. And I’m not talking about buying the sissy coffee type either; I’m talking just plain old coffee – black.

I’ve heard people say, "You could save a lot more money by making it yourself at home." It’s probably true, but that is beside the point. Buying it at the store is convenient (hence the term convenience store) and fast, and they actually have pretty darn good coffee.

Anyway, I know how much a 16 oz. cup costs at this place since I buy it there almost every day. So, this morning I grabbed the exact amount – 65 cents – from my change jar on the way out the door. I made the pit stop, went in and poured the coffee, and while I was standing in line, I reached into my pocket – two quarters, one nickel, and no dime – no dime in any pocket. So I put the change back in my pocket and pulled out a buck.

On the drive in, as I sipped my coffee, I thought that my premium coffee "boycott" and needing 10 cents more was very analogous to what has happened in most businesses and distribution operations over the past year or so.

Organizations have been forced to look at their budgets, cut out the premium stuff (as I did with my coffee), reduce waste, and trim costs wherever they can. And even now, they are still trying to find that last "10 cents."

So, how does that relate to Supply Chain Information Technology?

When supply chain systems are not configured or technologies are not used to their full potential, supply chain costs may remain inflated and service levels can be more difficult and costly to achieve.

You need to do an analysis of your organization's supply chain technologies to uncover cost reduction opportunities – both in terms of the overall supply chain performance as well as in technologies’ administrative costs.

Here are some questions you can ask of your own organization:

- How can existing systems’ functionality be better used to streamline operations?

- What performance metrics and tools best support the overall corporate objectives at the appropriate management levels for them to make better decisions?

- Are there practical opportunities to improve trading partner integration for timeliness and accuracy, thereby decreasing costs?

- Do the technologies effectively support corporate objectives for inventory levels?

- Are there opportunities to reduce technology administrative costs and overhead costs?

Today's business environment demands that companies optimize their technology investments and examine every opportunity to improve operating expenses while sustaining customer service.

You need to dig to find the hidden costs often buried in current systems’ configuration and processes.

Where is your dime coming from?

David Meyers

All right. We’re all a good way into the economic hiccup and gearing up for the recovery.

Budgets have been cut. Locating financing for new initiatives is like searching for the leprechaun at the end of the rainbow. Forecasts and actuals are way out of whack, and many of our plans have not reached what we’d expected a couple of years ago.

We’re seeing signs that we may soon be swamped with demands to achieve volumes and service levels that meet or exceed those that we were dealing with before the downturn.

As mentioned in the last post, there is no silver bullet for across-the-board, world-class, or best-in-class transformation. But, there are some well-understood steps that can make a major difference in preparing the organization to meet the demands of the recovery and achieving a market-dominating position, depending on your current situation.

There are moves that can be made today to demonstrate a clear, positive ROI, and you can build a business case that’s sure to gain the thumbs-up from the executive suite. What we want to explore here is what these look like based on where you are today.

First off, take a step back and look at the IT that’s currently in place and perform an assessment. What IT investments have you made that either satisfied your needs or wound up short of expectation? Are there improvements that can be made or additional components that can be added to bring more cohesiveness to you supply chain or a better basis for handling the rapid changes that are right around the corner?

Let’s begin the IT assessment by looking at two areas in the supply chain IT spectrum: (1) Supply Chain Management and Planning and (2) Global Trade Management and Supply Chain Visibility.

1. Supply Chain Planning and Management (SCP/SCM)

This is the area that most often sees the largest "bang-for-the-buck" in regards to IT investment. Key areas to address for your SCP/SCM business are:

• Manufacturing (either contract or in house) – Capabilities for managing order quantities and frequencies, lead times, and relationships with manufacturers based on market competitiveness
• Inventory – Determining the best levels and positioning, especially any that impact costs and handling processes in other areas of the organization
• Product Importance/Prioritization – Meeting service levels and the organization’s overall priorities

The implementation of solutions to address these issues very often falls at the lighter end of the scale when looking at the IT wallet, but it does require a good deal of organizational coordination and acceptance. Introduction of improved IT (or better configuration of existing supply chain technology) in the area of demand forecasting, sourcing and procurement, and distributed order management, often yields return on the investment in a major way.

For some, there is little investment required as the solutions may already be installed or available on your own shelf.

2. Global Trade Management (GTM) and Supply Chain Visibility

This is another area that sees a great deal of return in a short time-frame in terms of IT investment. A bit deeper coordination (internal and external) than the SCP/SCM elements is required, because it typically involves external trading partners and the broader segments of the supply chain network.

The positive here is that the focus is on linkage and visibility in meeting existing service goals can very often be the driving business case element, more so than establishing new goals for the entire organization. Key areas for assessment and improvement include:

• Supply Chain Visibility – Are you proactive or reactive in regards to disruptions?
• Other Systems – Are you linking your GTM system (either in-house or provided by freight forwarder) to other systems for better status updates on distribution labor and transportation resources?
• Performance Expectation – What steps do you need to take to ensure freight forwarders and other trading partners are performing as expected?
• Import and Export Management Functions – Are these functions siloed, or are they being communicated with meaningful updates to the rest or the organization?
• Cash Flow – Is the cash-out to cash-in cycle capable of being shortened by improving the ability to address adjustments and by increasing the visibility of progress to satisfy demand? (By the way, cash flow, of course, is a major motivating factor for adding more effective IT solutions to address these needs.)

Time to deploy, cost to deploy, and return on the investment for these two areas are receiving a lot of attention – and rightfully so. They are the areas that provide for the coordination to address the broad needs of supply chain flexibility and setting a new standard for speed-to-market and customer service levels.

These well-aligned supply chain IT updates set a new level of competitiveness and ability to take market share. All of this can be achieved with relatively little IT spend as compared with other major supply chain initiatives.

So, finding your leprechaun (in other words, finding financing for IT initiatives) may take a little more than luck; it takes a firm business case that’s built with a solid assessment.

But, feel free to hold your rabbit’s foot or horseshoe while you’re working on it.

We’re interested in knowing your thoughts. What are you doing to prepare for supply chain IT investments? And, what would you like to know more about in this area?

Ciao for now!

Matt

Photo credit: little_frank

While our CEO and President Jim Tompkins tells us that he’s been called many things in his lifetime, one of his favorite nicknames is "the Prophet of Boom."

The name emerged due to his clear and consistent message that economic recovery is here, and he has been encouraging business leaders to "shake off the funk" and prepare for the Great Comeback.

With his positive message backed by economic evidence, no wonder he got the name "Prophet of Boom." But, so that we’re clear, I usually stick to calling him Jim.

As a supply chain system guy, when I pass along the "Great Comeback" message to folks, the question I get most often is, "What can my company do, from a Supply Chain Information Technology (SC IT) perspective, to come out of this economy in a position to beat my competition?"

That’s a great question, and the answer that I give is, "well, it depends." I’m not side-stepping the hard question, but this opens the opportunity to review the important actions that should precede any investment in SC IT.

When preparing for your company’s Comeback and SC IT needs, the first step is executing an "Environmental Assessment" and determining the impact that the global economy, domestic economy, business cycles, consumers, investors and government are having, and will have, on your business.

For the second step, do some "Competitive Intelligence" and determine where you are and what you’ve been doing as compared to your competition.

Next, set your "Comeback Expectations": When are your turning points and what is your recovery lead-time and future volumes?

After that, the next critical step is performing an "Organizational Analysis," which typically includes benchmarking your operational processes and supply chain benchmarking, and seeing how this measures up and/or how it could be improved.

It is now that you can "Define your Comeback Plan" based on the first four steps.

Now that you have the process for building your Comeback Plan, let’s talk time frame.

As a sidebar, if you are not already working on this process, you may be too late in coming out of the recession ahead of your competition. But, even if you have not begun, now is the time to start. I’ll explain this a little more in a second.

Right now, I want to stress that I am by no means arguing for the implementation of technology for technology’s sake. What I am suggesting is that you need to have a good understanding of timing for the assessment, selection, and implementation of technology that best supports the goals and objectives of your business.

OK, now that I got that off my chest, we can begin looking at the array of SC IT solutions best performing companies are using and chart that against where you are in your current state of supply chain excellence and information technology maturation.

There is no silver bullet or magic potion that will transform your organization into world class or even best-in-class, but some basic blocking and tackling will keep you on the path to success.

What are some of the basics? Well, if you’re like most of the folks that I work with, you are being held to a fairly high set of standards, as most waste and non value-added steps have already been removed from your supply chain operation and technology solution set.

Your budget has been tightened and the bar has been raised for your key performance metrics. But the thing that remains consistent is your performance being measured against budget and the successful execution of your work plan.

It is more critical than ever that you understand the present value, the return on investment, and total cost of ownership of any investment in SC IT, as well as how long it will take for you to define the requirements, select the best-fit solution and implement it effectively.

My colleagues and I have talked through some high-level estimates of how much time it takes to select and implement several key types if SC IT solutions and here is a table that summarizes our thinking.

Note that the above estimates will vary based upon your specific situation, and the costs to implement will also be subject to more a detailed analysis. IT really does depend. But the time for you to be making your plans is now.

Are you already planning your next steps? Do you agree or disagree with the estimates above? Let us know what you think.