IT versus supply chain

Does IT have a place in today’s boardrooms? That is becoming an increasingly common question as the economy begins to recover after years of recession and IT developments are forcing companies to take action. Research by McKinsey in 2011 revealed that only 20 percent of companies link their business strategy to clear decisions about their product portfolio and allocation of the necessary resources. The commercial directors and supply chain directors must take care of this, whether as part of their medium-term sales & operations planning or not. Effective provision of the necessary information is crucial.

When assessing the various types of IT systems Gartner, an analysis and consultancy firm, uses a classification based on three distinct layers. The ‘systems of record’ contain the orders and other administrative transactions, typical ERP functionality. The layer of ‘systems of differentiation’ comprises solutions which help companies to gain a competitive edge, such as forecasting, production planning and advanced transport management and warehouse management. The ‘systems of innovation’ are new, sometimes experimental supply chain applications which may be mobile and/or in the cloud and enable information and schedules to be exchanged with customers and suppliers.

A project manager at Danish fashion Bestseller told me about a nice real-life example of the use of production planning to gain a competitive edge. The company intends to plan the production of its denim jeans based on insight into current capacity at contract manufacturers in Italy and Turkey. This allows the retail data and forecasting to be used to decide on which actual ‘wash’ to apply to the jeans at the very last moment, which will in turn reduce delivery times and inventory.

A supply chain director at an international retail chain of branded sportswear recently showed me the company’s new app: a supply chain portal which provides insight into the status of purchase orders, shipments, schedules, goods received and payments at order level. This is a good example of a ‘system of innovation’.

The business, sales and supply chain, must make it clear how, and in which IT layer, processes require support. The IT department is responsible for ensuring effective and rapid implementation.

Martijn Lofvers, Publishing Director & Editor-in-Chief Supply Chain Movement
martijn.lofvers@supplychainmedia.nl