The changing role of IT organizations in supply chain management

Dr. MadhavDurbha

Information technology in supply chain managementI recently read this very interesting book, “Be the Business: CIOs in the new era of IT” by Martha Heller. In the book, the author made several very interesting observations about how the role of a Chief Information Officer is changing in the age of cloud computing, personalization of tech, and the rise of shadow IT. As I was reading the book, I couldn’t help but reflect on my own experience of working with IT organizations over the last two decades I have been in the supply chain business. Let us examine the shifts that happened. I will lean on the Supply Chain Planning space as an example and relate to the broader shifts in the role of IT in supply chain management.

1. The disillusionment with the establishment: In the late 90’s, i2 Technologies (the company where I started my career) was blazing a new trail in supply chain planning technology as most companies know it today. Manugistics was a strong contender to i2. However, the market was small enough that it was largely ignored by the big ERP vendors for a while. With the promise of these newer and exciting technologies at the time, IT organizations opted for a “best-of-breed” strategy bringing together the best of the ERP platforms and the specialty supply chain vendor capabilities.

As the market valuation of these supply chain planning pioneers skyrocketed, the inevitable happened. The giants awoke. With a combination of in-house development and acquisitions, the big ERP vendors followed suit. However, they missed the opportunity to completely change the game, and instead followed the trail set by the pioneers and came up with their own variants of these capabilities. Once they reached a point where the capabilities are “good enough”, the big ERP went to the IT organizations with the “ease of integration” and “one throat to choke” message. The message was very appealing as best of breed technologies brought with them the challenge of integrating disparate technologies and deployment platforms. It was a relatively less risky proposition. Given that these organizations have an existing relation with the ERP vendor in context, layering in advanced planning seemed logical. In other words, no CIO or IT organization as a whole could be blamed for a seemingly safe choice.

As organizations moved towards standardization of technology around the big ERP, best of breed vendors felt the squeeze. Consolidation followed and innovation took a back seat. Supply chain planning technology deployments resulted in a certain level of disillusionment. Even as the business complexity and volatility increased manifold, planning paradigms in most organizations are still stuck in the 90’s. While the business is happening in real time, these planning systems run in batch mode, significantly limiting the responsiveness and simulation abilities. The result is that most businesses are left wanting for more. Tired of asking IT for advanced capabilities to help with simulations and such, after spending millions on expensive technologies, planners resort to excel spreadsheets. This point of view was shared by Lora Cecere in her blog Bumps, Cracks, and Opportunities. All in all, this is leading to disillusionment with the establishment vendors of planning solutions.

2. The rise of SaaS and Shadow IT: With the rise in bandwidth, computing power, and storage, the last decade witnessed Software-as-a-Service (SaaS) specialty vendors emerge as viable alternatives to the establishment. In pursuit of technology that operates at the speed of business, business started bypassing IT and acquiring needed capabilities through SaaS vendors. This ended up creating “Shadow IT”, rising tensions between business and IT leadership. The self-service capabilities provided by the SaaS vendors put the power in the hands of business. What used to traditionally result in an IT ticket and wait time ended up being a configuration done by a business superuser.

Specifically, in the Supply Chain Planning space, this is resulting in a pivot back to the “best of breed” strategy. As bulk of the action in enterprises shifted from within the four walls of the company to outside the company due to increased use of contract manufacturing and third party logistics (3PL), traditional technologies built on ERP foundation came up short. Besides, the new generation of planners growing up in the world of smart devices and apps have very different expectations when it comes to speed of capability enablement. Concurrent Planning focused on real time end-to-end network planning, powered by in-memory architecture, is starting to replace the batch oriented supply chain planning paradigms at large global companies.

3. The changing role of IT – the move from enablement to partnership: The smarter CIOs and IT departments see these shifts taking place. They understand the rising risk of a potential IT disintermediation, as the core IT functions such as setting up the stack (hardware, database, middleware, etc), network configuration, and application installation have migrated to the cloud vendor. Yet, they also see the tremendous opportunity to proactively position themselves as the change agents and partners to business, as opposed to mere enablers of capabilities. Instead of the traditional “rip and replace” methods, they are blending together the best of legacy technologies and the emerging technologies to enable faster time to value. As opposed to going with a “one throat to choke” approach, they are spending time in researching the best of breed and open source technologies to offer true systems of differentiation to business.

These progressive thinking CIO’s are retooling the skills of the IT organizations by focusing on building techno-business capabilities, staffing up on data science, machine learning skills, and staying abreast of the evolving technologies. They are constantly tuned into the shifting business and technology trends and are focused on bringing capabilities business will benefit from. While traditional metrics such as system up time, response times, and service levels still remain very relevant, the dialog between these progressive IT organizations and the business is starting to focus more on the business metrics such as customer engagement/ loyalty, order fill rates and asset utilization. Large global IT organizations are realizing that “one size fits all” approaches don’t work with regions with varying degrees of maturity. They are opting for technologies that cater to this diversity of maturity amongst the regions they support. They are partnering with and supporting the regions on their maturity progression, as the standard bearers. Business is appreciative of the intelligence these CIO’s and their teams bring to the table. As a lot of physical devices are becoming connected smart devices, these IT organizations are best equipped to advice R&D organizations on the emerging standards with Internet of Things (IoT) and such.

While these shifting dynamics in the IT organization’s thinking are happening in select leading organizations with visionary CIO’s, the majority of the IT organizations are still operating in the older paradigms of being “enablers” of business capabilities as opposed to becoming “partners”. The time is now for every IT professional to rethink their role in this rapidly shifting world. Supply chain IT professionals are no exception!

Dr. MadhavDurbha

As Vice President of Industry Strategy at Kinaxis, Madhav serves as a trusted advisor for our customers through sales and implementation, ensuring success. He also engages with our strategic customers and key industry leaders to drive thought leadership and innovation. Madhav joined Kinaxis in the summer of 2016, bringing many years of experience in Supply Chain Management across various industries. Madhav started his professional career at i2 (which was later acquired by JDA). During his 17+ year tenure at i2/JDA, Madhav played numerous roles in Customer Support, Consulting, Presales, and Product Management. During his illustrious career, he was instrumental in helping enable numerous large scale transformational supply chain opportunities. He is very passionate about Supply Chain Management and the role it plays in making the world a better place. He shares this passion with others through his engagements and writings. Madhav has a Ph.D. in Chemical Engineering from University of Florida and a B.Tech. in Chemical Engineering from Indian Institute of Technology (IIT), Madras. Madhav received the ‘Supply Chain Pro to Know’ recognition in 2017 by Supply & Demand Chain Executive magazine.

More blog posts by Dr. Madhav Durbha

Discussions

  1. I am interested in your opinion about IT platforms that are used in supply chain finance solutions?

  2. Hi

    Hi– I have written in before saying the same, but wanted to emphasize again how much I love this blog! Really enjoyed the portion on shadow IT of this particular post– had never heard that term before, but certainly have witnessed a lot of different departments within my company finding/deploying cloud based tech solutions on their own time without the pain of working through the IT dept (I have even done so myself).

    I am sure it is not custom that you all receive requests, but I would love to hear about Kinaxis’ view on blockchain’s role (or lack thereof) in the “control tower” concept or even RapidResponse 5 or 10 years in the future.

    thanks

    James

  3. Thanks for the kind words James! As for blockchain, here is what i see. It can certainly provide better visibility and traceability into transactions up and down the supply chain. Of course it can record these transactions as they occur and make sure there is a degree of transparency and authenticity to these transactions. From a control tower perspective, let us say there are risks that emerge such as recalls for example, blockchain has the potential to provide traceability from the shelf into manufacturing and sources of supply. A control tower with end-to-end visibility can use such connectedness to help pinpoint and isolate the effects of such risk to specific batches that are in procurement, manufacturing, or in distribution. This helps in containing the impact of a recall in this example. This is just one of several potential usecases. All in all, in my view blockchain holds great promise in general. However, standards need to evolve for interoperability across companies and networks. Also regulatory issues and cross-country agreements need to hashed out to unleash the full potential of blockchain.

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