I recently participated in a Roundtable to discuss the future of technology in Supply Management. The participants included CPO’s, Procurement Heads and Consultants/Service providers. The discussion focused on several aspects of technology – scope, cost, effectiveness and innovation just to name a few.
In my opinion, the case of technology in Supply Management is a curious one.
The advent of modern cloud-based tools has seemingly made the tasks of professionals easier – they are now able to instantly react to new information and make faster and more accurate decisions. These tools have also improved the quality of internal communication within an organization. There now exist a plethora of tools in the market that support one, or all of the processes within Supply Management:
- Spend Analysis
- Sourcing Execution
- Contract Lifecycle Management
- Supplier Relationship Management
- Supplier Performance Management
- Transportation Management
- Benefits Tracking…..and much more!
These tools are very powerful and are capable of drawing from disparate sources of information, consolidating and cleansing data and presenting it in a format that facilitates decision-making.
Sounds great, right – so where’s the hitch?
As rosy as everything seems, there are deterrents that prevent organizations from reaping the full benefits of technology. Enterprise-wide tools are still very expensive and their implementation may take several years. Even after a long implementation process, companies may not end up with a perfect install. Most organizations will not be able to afford such tools as the return on their investment might not justify such an expensive purchase. On the other hand, independent tools are relatively inexpensive and get the job done – but how many of them can you have? Companies that have multiple tools, each managing a portion of their Supply Chain will face a major problem in integrating these tools in order to function efficiently.
So, which way do we go? This presents a conundrum that very few organizations are able to solve.
I am constantly reminded of a case study at Business school several years ago – the Spanish garments retailer Zara, and their use of technology. Zara was able to run a dynamic and responsive Supply Chain with a minimal investment in technology. If I remember right, they did not have an ERP system, much less even a modern software system that their competitors had at that time (they used a Point-Of-Sale system based on MS-DOS). Zara had a fabulous vertically integrated technology system that enabled them to place the latest designs in any store across the world within 2-3 weeks of a garment being introduced at a fashion show. They were able to gain a significant competitive advantage over other fashion retailers who took anywhere between 3-6 months to place their product on the shelves of retail stores. What set Zara apart was that they had a clear understanding of the role of technology in their Supply Chain.
The larger point I am trying to make is this: Ultimately, technology is an enabler.
Firms that invest in technology just for the sake of investing, end up being constrained by the very same tools and software they implemented. It is imperative that firms spend a lot of time on introspection before investing.
Back at the roundtable, there was a debate on most topics within Procurement. But one area where everyone universally agreed was the importance of processes over technology. Business processes are the lifeblood of organizations and should dictate the scope of technology – not the other way round.