A question of maturity

No one disputes that technology is a very good enabler when it comes to managing a supply chain. But it needs to be underpinned by solid business processes and used by people who understand it and are comfortable with it, or it is doomed to fail. Anyone looking to implement a supply chain management (SCM) solution needs to take several critical factors into consideration before purchasing.

Perhaps the first consideration should be an organisation`s level of technological maturity. "Business processes, people and technology should all be at the same level of maturity," says SAP Africa solution manager Doug Hunter.

"If you are well up the maturity curve, have best practice business processes and your people are well versed in supply chain collaboration, then you can deploy sophisticated IT. If your people and processes are lagging, then it doesn`t make sense to buy sophisticated IT."

A supply chain, as BCX executive consultant Tjaart Kruger notes, is a process. Processes need to be managed effectively. Companies need to do the legwork and work out exactly how many steps make up each process chain. They need to analyse these processes, work out where things can be made more efficient, what can be automated and where resources are being needlessly wasted.

"The local market is still in its infancy when it comes to process management," says Kruger. "Maturity levels are not as high as we`d like. The reason for this is companies have not yet nailed down event management, in terms of how capable we, as an organisation, are of managing our events.

"In the old days, documents were used to record our events. A delivery note, for example, recorded the event of a handover at a point inside or outside a company. While this was a good start, documents never lent themselves to event management. Thinking you can have a document for each time something is handed over is not realistic. How do you keep track of events in your supply chain? If you cannot track events in the supply chain, it is very difficult to manage the supply chain. This is where it all starts: with event management," Kruger adds.

"In the past," says Eric Stockenstrom, business systems head of National Brands, which is reaping the benefits of efficient consumer response (ECR), "we looked at business processes as existing within the business. In reality, though, they exist across business boundaries. To be efficient you must look at the whole process from beginning to end.

"This was not done well in the past. The various parties operated in silos, made assumptions about what their business partners wanted and often got it wrong, for example, with returned goods. If something is not delivered for some reason, the ordering company will re-order just in case, then send the second delivery back, saying they don`t need it. The goods have then travelled by truck, sat around in the sun, and may not be usable once they get back to us. The customer [in National Brands` case, a retailer] and consumer suffer as a result. If our cost goes up, the product cost goes up."

"If your people and processes are lagging, then it doesn`t make sense to buy sophisticated IT."

Doug Hunter, solution manager, SAP Africa

Stockenstrom says it`s far better to play open cards with your partners. "The process improvements cannot happen unless there is a relationship of trust."

This lack of collaboration is seriously hindering local supply chain efforts. Says SAP`s Hunter: "In SA, people look at how to reduce their own costs, and the cost to their customers to the exclusion of all else. They don`t look at benefit to the end-user or to other players in the chain. The end-game would be better for everyone if they did look at that."

This is perhaps why supply chain initiatives in the local market have tended to be very restricted.

"The key issue is the flow of information is still very fragmented," says Greg Vercellotti, director of Dariel Solutions, which develops supply chain solutions. "You have islands of information - like trucking or freighting or customs - that are all disconnected. We`re not pulling these together. Some companies are trying to solve the problem from within their own organisations, from their organisational point of view. This isn`t the way to go as it creates integrated islands within one chain."

The trick is to integrate the full supply chain, bearing in mind, as BCX`s Kruger points out, that there is more than one supply chain within each organisation. The supply chain starts much further back than many companies look - where ore is mined, or steel is smelted, or vegetables are grown.

"If you extend the chain as far back as possible, forward past delivery to the final consumer and capture the history appropriately, you can work out the exact costs," says Vercellotti. "You can then compare anticipated costs versus actual costs, and ensure that planned and real costs are the same. One can then start doing exception management."

A common factor cited for failures to manage the supply chain is complexity. The theory holds that by reducing complexity you can better manage the chain. But, as SAP`s Hunter points out, supply chains, by their very nature, are complex. Technology, he says, can help here by moving the complexity away from the people a little. But National Brands` Stockenstrom advises: "Don`t regard the issue or the opportunity as a technological one. The technology is close to irrelevant."

Oracle sales consulting manager Attie Taljaard notes complexity can be a competitive differentiator for a supplier. "For example, the ability to produce an item to suit each end consumer`s requirement."

What is relevant is all players in a supply chain communicate and collaborate. Sharing information is what is critical here. A product may be late off the production floor, but the customer can only do something to mitigate the effects of that lateness if the supplier knows that it is late and communicates this fact. The technology merely automates and facilitates this process. If your supply chain partners aren`t talking to each other, no amount of technology will fix that.