The Supply Chain Challenge Never Ends - InformationWeek

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Government // Enterprise Architecture
10:02 PM

The Supply Chain Challenge Never Ends

The big ERP suites are still falling short on sales and operations planning, advanced analytics and supplier management.

I spent an extremely entertaining and informative day with Kinaxis at their user conference last month, and it struck me how much supply chain management (SCM) seems to be stuck in the past. That's even as SCM increasingly occupies one of the hottest of hot seats in the corporate world, and even as companies like Kinaxis strive to bring the supply chain into the future.

And if you don't think SCM is in the hot seat, ask the world's disk drive makers about what's happening in Thailand, or the Japanese automotive manufacturers about what happened with this year's earthquake and tsunami. Or Boeing with its many delays and problems getting the Dreamliner out the door. In the globally interconnected economy, it's the supply chain that rules.

Not that Kinaxis is guilty of living in the past-–though it has been decades since I heard a vendor talk about the virtues of a hierarchical database. Au contraire. It's the rest of the supply chain market that seems to be relying on older business and technology models, to the detriment of the big enterprise software companies and to the benefit of best-of-breed vendors like Kinaxis.

This living-in-the-past problem was evident at multiple points during the day, most obviously when it came time for Kinaxis' customers to stand up and tell their stories. As is common at a best-of-breed vendor show, the customer stories were replete with references to the SAP and Oracle software that these customers still use, even though the core strategic supply chain functionality they were touting that day belonged to Kinaxis.

[ Want more on supply chains as a strategic edge? Read Whitman Refines HP's Tech Leadership Team . ]

What every user story boiled down to was the following formula: my company still uses [insert big enterprise suite], but for this core function [insert sales and operations planning, demand-driven planning, outsourced supplier management, advanced supply chain analytics], we're going with Kinaxis.

And every justification for going with Kinaxis contained a similar formula. While [insert big enterprise suite] is still my system of record, it's too [slow, ignorant of how to manage outsourced supplier, not good enough for sales and operations planning] and we couldn't wait around for them to [add the functionality I need, make it cost effective, make their user experience more user-friendly, put the resources into my company to make sure my needs are being met]. And so Kinaxis' supply chain best-of-breed story goes.

What's amazing about these stories to me is that I heard similar stories-–including some from the same customers about the same suite vendors-–when I attended an E2open conference three years ago. And when I toured Silicon Valley's top manufacturers in 2005 as part of a supply chain research project, stories such as these were the order of the day at every company I visited. In a recent visit to E2open, one of its executives reminisced about discussing these issues when he was at Oracle in 2000.

What's up with that?

Part of the problem is clearly the rapidity with which business models are changing. And the breadth of what constitutes SCM keeps shifting as more stakeholders become involved and more data becomes available to do more complex analysis and build more comprehensive supply chain plans.

Even new product introductions are changing: One of Kinaxis' customers is Barnes and Noble, which introduced its Nook reader in 2009 to great fanfare. There were two problems with this new product introduction for Barnes and Noble: the first was that the company is a novice at manufacturing supply chains, being a book distributor doesn't really prepare a company to be a consumer product manufacturer. The second, most importantly, was that the Nook is part of an entirely new wave of tablets tied to a retail distribution company, not a traditional consumer electronics company: how could Barnes and Noble do supply chain planning the old, rear-view-mirror way when there is little or no comparable product on which to base a demand plan for the Nook?

So Barnes and Noble signed up for a new point-of-sale-based, demand-driven supply chain run by Kinaxis software. Turns out this is a bit of a gamble, as Kinaxis has never tried to wire up over 10,000 POS systems, and Kinaxis' pricing structure for its software wasn't designed for this volume of end points either (let's just say at list price, 10,000 POS stations would have made this one of the most expensive SCM implementations ever--safe to say Kinaxis and Barnes and Noble managed to come to an agreement on a more reasonable price.)

The other reason the supply chain management status quo seems stuck in the past is that really transformative SCM is as much a business-process journey as it is a software journey. That's hard, very hard, and even harder in companies that don't understand how strategic their supply chain needs to be.

In my wanderings about the supply chain world I have often been amazed at how good enough keeps being good enough, despite the fact that at a corporate competition level, good enough is usually the domain of losers and also rans. This fact alone often relegates true supply chain transformation to those renegades and rogues that dare think out of the box. Lucky for them, there are products like Kinaxis RapidResponse that allow these transformers to do their thing and still keep the big ERP suite advocates in their jobs too.

The good-enough syndrome turns out to be a major conundrum for any big enterprise software vendor. Becoming an entrenched interest at a customer site often leads to-–or is a leading indicator of-–a good-enough mentality that helps maintain incumbency at the cost of innovation. This makes it hard for the SAPs and Oracles of the world to be identified as the innovators among their core, entrenched user communities; and it makes it easy for a Kinaxis to appeal to those who don't mind upsetting the good-enough, entrenched thinkers and driving a little innovation into the enterprise.

One more comment about Kinaxis that bears mentioning: their user conference was downright fun, and they managed more than once to make supply chain leadership funny. Yes, as in LOL funny. Okay, maybe I'm impressed for the wrong reasons, but a company that is comfortable enough with its products and customers to make it fun and funny has a lot going for it. That was a best-of-breed show if I ever saw one.

Josh Greenbaum is principal of Enterprise Applications Consulting, a Berkeley, Calif., firm that consults with end-user companies and enterprise software vendors large and small. Clients have included Microsoft, Oracle, SAP and other firms that are sometimes analyzed in his columns. Write him at [email protected].

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