Supply Chain Management Still A Work In Progress

By some estimates, supply chains aren't necessarily any better today than they were when the world first grasped the concept of supply chain management about 20 years ago. That could be because companies still think information technology alone will solve the bulk of supply chain problems.

Forty five percent of respondents to a Booz Allen Hamilton supply-chain management survey released this week report that their IT solutions are failing to meet expectations. "We often see unrealistic expectations of the technology," says Dermot Shorten, a VP with Booz Allen's operations practice. "People tend to think that just by putting in the right tools, that will solve their problems. But you need to step back and decide how you want your supply chain designed and how it will run, then look at how IT can help."

The survey, which queried 196 execs from a variety of companies around the world, found that the majority, or 58%, of companies are disappointed that their IT solutions fail to provide performance measures across the supply chain. Fifty-one percent say decision-making across the supply chain failed to meet their expectations, and 47% say the IT solutions didn't meet the expected promises of economic performance.

The survey found that the leading benefit companies have achieved thus far from supply-chain systems investments is the lowering of inventory levels, at 80%. Seventy-one percent said customer satisfaction has increased, and 69% said deliveries were more reliable. Enterprise resource planning systems topped the list of supply-chain system investments, at 71%, followed by inventory and warehouse management (54%), order management (40%), supply-chain execution systems (37%), advanced planning systems (31%), and marketplaces and exchanges (26%).

Despite the importance a supply chain has on many companies' success, the survey found some companies have yet to make supply-chain management a part of the overall business strategy and a CEO-level agenda item. Not surprisingly, those companies' annual savings in costs to serve customers is just 55% of what they are when supply-chain management is a component of the overall business strategy.

The survey comes 21 years after a Booz Allen Hamilton exec, Keith Oliver, coined the phrase supply chain management. Since then, supply chains "haven't improved terribly," Shorten says. "This whole notion about how you run the supply chain from the customer to the channels and back to you as company and how you manage your supply base are still largely in the Middle Ages."