Softworld for the Supply Chain - IT: saviour and sinner

Information technology is seen as both saviour and sinner in the world of supply chain, according to KPMG Consulting’s latest global supply chain research. Conducted in association with academics from the JL Kellogg School of Management, the survey collated responses from 24 countries.

IT is seen as a strategic tool by 87 per cent of companies, yet most were dissatisfied with many aspects of the technology (see right). Supposedly key technologies like electronic commerce are failing to deliver the goods, and IT integration, low in the organisation as a whole, is even lower in the supply chain. Yet for all the dissatisfaction, companies retain faith in the ultimate ability of IT to deliver – 75 per cent predicted an increase in their IT spending over the next three years. However, the survey notes that there was no correlation between the level of IT spending (as a percentage of sales) and levels of satisfaction. Although EDI has so far failed to impress, 90 per cent of companies expect to increase their activity in this area over the next three years.

The survey recommends the following action items on IT:

use intranet technologies to facilitate internal communication between departments, divisions and regional locations;

implement data warehousing technology to support decision making;

share shipping status, inventory and order status information with suppliers and customers;

consider supply chain planning systems to develop

multi-constrained dynamic planning and optimisation capability;

use point-of-sale systems to capture downstream consumption data and improve demand visibility;

maintain reasonable expectations and conservative timetables when dealing with new technologies.

It is worth noting that, while companies see strong IT performance as a driver of success, they value strong, well-qualified management even more highly.

Although 98 per cent of companies surveyed reported some outsourcing, the actual percentage of supply chain activity outsourced is low – 30 per cent. Commodity items such as transport were more likely to be outsourced than areas with strategic implication such as order processing and inventory management. The motives for outsourcing were either a simple lack of internal resource, or a belief that the market could perform certain activities at lower cost: the survey discovered no relationship between the level of outsourcing and improvement in actual performance. (Supplier performance, by contrast, is seen as having a significant effect on operational performance).

Whereas many other trends in supply chain show consistency across the region, the scale and nature of outsourcing varies wildly according to region and function.

Companies are aware of the benefits of supply chain integration, but achieving it appears to be some way off. Over 40 per cent of respondents indicated below average or even no involvement of suppliers or customers as partners in the supply chain.

Effective inventory management is seen as the most important contributing factor to supply chain success. Since last year, 42 per cent of respondents have lowered inventory levels, and 52 per cent expect even lower inventories in the next three years.