I live in a 40 year old house and in some ways it is certainly showing its age. When there is something that isn’t working, not meeting my needs, or simply has gotten out of date, I find myself asking the question of do I try to fix up what I have or replace it? There is a lot of maintenance needed to keep things running around the house, but for some things there comes a time when you have to ask “how far is this repair/upgrade going to take me?” If I keep investing just to maintain what I have, and at best, see an incremental improvement, when I am ever going to have the resources for re-designing and making real renovations? It is indeed a balancing act… and not at all unlike the decisions being made in managing supply chains.
A theme that resonated for me at the Gartner Supply Chain Executive conference the other week was the notion of “managing” versus “transforming”. There was a panel discussion on the Chief Supply Chain Officer (CSCO) Imperatives for Executing the Global Supply Chain Strategy where each of the panelists said that among their main priorities was balancing continuous improvement with transformative innovation. You have to do both. And of course technology investment is a key factor, given that most, if not all supply chain innovation will be supported by technology.
This point really hit home during Dwight Klappich and Chad Eschinger’s session where they discussed the results of their Supply Chain Technology User Wants and Needs Study. A key takeaway from the study was that SCM IT investment and supply chain maturity/performance go hand in hand.
The study showed those companies that had a Level 1 maturity supply chain are incapable of making progress given that 70% of their SCM IT budgets are aimed at simply running the business as-is. Contrast that with the fact that 60% of Level 4 supply chains consistently outperform their peers. Why is that? According to the study, higher performing supply chains are twice as likely to have a strong SCM IT architecture strategy. They are also 500% more likely to exploit risk for competitive advantage – and that’s because they are equipped to do so, because they have invested in process innovation, better analysis and decision making, new business models etc. that can transform the way they manage the supply chain and ultimately drive added value to the organization.
Here is the hiccup. Level 4 maturity supply chains only represented 5% of survey respondents. So what was the directive coming out of this session? It is time to “invest in the new, not just polish the old.” Companies need to define a more comprehensive SCM IT strategy that will provide real ROI.
Organizations with lower level maturity tend to focus on IT delivery, and define success by if the project was delivered on time and on budget. But what about the business results it delivered? Organizations must change their mindset and determine technology investments by the business outcome it can provide. This, by default, will lead them to invest in more innovation.
Now if you can forgive a little promotion, if you want to understand the results of a technology investment that supports supply chain transformation, I would direct you to the recording of the Kinaxis Solution Provider Session, where Benji Green from Avaya shared his journey of transformation. He too spoke to the necessity to establish new structures and processes that allow the organization to streamline the time and resources spent on non-value activities (executing basic tasks), in order to redirect focus on those activities that have the most significant impact to business performance (advanced analysis). Ultimately, this is the commitment you need to make – innovate so that you can move up the value pyramid.