The devil of SCM software selection is in the details

One of the most valuable things to come out our workshops is insight into some of the less obvious root causes for why supply chain efforts go wrong. Recently a delegate told us something surprising: that his company’s IT department chose some planning software without consulting anyone in supply chain. I later heard a similar story from someone in our last Supply Chain Club meeting.

Mainstream software

Although patchy collaboration between IT and supply chain is nothing new, I wondered whether this total failure to consult might reveal something even deeper. Supply chain’s importance is becoming much more apparent to businesspeople and consumers. Not only through crises like the recent scandal of horse meat entering the beef supply chain, but through inspiring stories of supply chain directors sitting on executive leadership teams of companies like Rolls Royce or even getting the top job, as with Tesco. However, could some IT professionals be falsely concluding from all this that the industry has gone so mainstream that selecting supply chain software is now just as straightforward as, say, selecting HR software?

Incumbent ERP and enterprise software vendors aren’t helping by approaching IT directly with their supply chain solutions and offering to bolt-on supply chain modules to existing application suites. This is very misguided. IT might think it’s saving money, including integration costs, but unless supply chain people are involved in the decision it unlikely that the software will be fit for purpose.

IT should join S&OP

To help solve this, we are appealing to IT professionals to actually join supply chain meetings such as the master planning meetings and the S&OP review meetings to understand the details of the job and how its processes work. In order for IT people to make informed decisions on best-fit software for supply chain planning, they need to understand a much more granular level of planning detail than vendors normally delve into. For example, many older planning systems only take historical data into account and aren’t sophisticated enough to analyse granular data like order-line level detail, seasonality and the patterns of slow-moving, intermittent SKUs. This can result in forecasts that are little use to planners who need to take this data into account.

Depth of understanding behind vendor claims and terminology is so important because, for example, you might have a vendor who claims to support the ability to run weekly forecasts but really only divides a monthly forecast into four equal segments, completely failing to account demand fluctuations within the months. These fluctuations are vital to establishing the right stock replenishment policies that affect profitability and customer service levels.

IT buys ‘shelfware’

Ironically, it’s the IT people who end up bearing some of the worst consequences for not involving supply chain people in the software evaluations. If the tool doesn’t do the job, IT ends up with more expensive ‘shelfware’ that prevents it from being able to make other purchases. We have seen many instances of the spreadsheets that IT tried to ban from the planning process starting to creep back in because they end up being slightly better than the alternative.

Given the strategic importance of supply chains and their ability to make or break companies today, we urge IT departments to learn from and engage their colleagues in supply chain. If they do this, eventually they will be on the front foot and have the knowledge to recommend a wider range of advanced applications that can factor in granular planning data and also meet future requirements, like being able integrate market demand signals into the forecasting process.

Alain Vix is Account Director at Supply Chain Planning specialist Hughenden Consulting.