IT Strategy: Supply chain management - Integrating information flows

Supply chain management is one of those deceptively simple ideas that promises a nirvana of efficient operations with one hand, and then slaps it down with the other tattooed clearly with the dread word “integration”.

It describes a system where information would flow seamlessly between the applications run by a vendor, its suppliers of materials, its distributors and retailers, and even the end customers. Stock control, finance, customer orders and so on could be shared, cutting costs, and increasing efficiency and consumer responsiveness.

But the hopes of connecting the systems of a whole array of partners and clients seem bleak.

Though it may be sacrilege to pin future hopes on Microsoft, the company has come up with the most positive move so far to address the integration nightmare. Obviously this will involve customers standardising on Microsoft technology, but that could be better than no solution at all. So far, almost 200 manufacturers of software that appears somewhere in the supply chain have signed up for the Microsoft Value Chain Initiative, which aims to support dynamic information flow, in real time, between trading partners, based on NT and Microsoft’s Common Object Model software infrastructure.

Most analysts agree, however reluctantly, that this has a better chance of achieving some measure of supply chain automation than the slow processes of standards bodies or loose vendor consortia. The main problem is likely to be whether any single company can co-ordinate so many partners and drive an initiative involving many bitter rivals.

Microsoft does have the advantage of not competing with these software houses itself – it wants to grab for NT some of the Unix/Oracle dominated business apps market via the supply chain, rather than moving into applications.

But it suffers from suspicion of its credentials in the business critical space.

Still, Microsoft does seem to have the best chance of success – something that many analysts and vendors object to on principle, bewailing the fact that another key area of IT could become monopolised by one supplier’s technology.

But for most users, who have been frustrated a thousand times before by the failure of integration, having a single technological platform may be a godsend. Consultancies are certainly pricking up their ears.

Most of the Big Five now have specialised NT divisions, and also supply chain experts. The two can easily be brought together if demand is there.

While projects to integrate many diverse systems might be more lucrative for a consultancy, an NT solution will still require a fair input from consultants – to address the cultural as well as technical relationships between partners. And the influence of Microsoft and NT should ensure that this potentially lucrative market takes off more quickly than it would do otherwise.

If Microsoft is positioning to supply the infrastructure and steal a march on more traditional enterprise vendors, the ERP software houses want to clean up at the applications level. While initiatives like VCI look to integrate software from many different vendors, giants like SAP and Baan want to persuade customers that their chain will be simpler and more efficient if they buy all the key elements of the chain from one company. Hence we have seen rapid increases in the number of modules offered by these suppliers’ business apps suites.

All this should be good news for customers and consultants, driving forward the market and taking at least some initial steps to a truly integrated information flow between partners. But it may be at the cost of the powerful players – probably Microsoft and SAP – becoming even more dominant.

Caroline Gabriel is a group editor in VNU’s IT portfolio.

John Perry, managing director, Supply Chain Solutions (CERT Group)

Do third party logistics companies have the capability? While they have undoubtedly made major contributions to improving the efficiency of logistics operations there now exist some major opportunities to extend their capability into managing and taking responsibility for wider aspects of the supply chain. A new market is emerging as demand increases for suppliers that can provide a solution for all elements of the chain, including brands promotions and information technology.

These added value services can really impact on the success of the supply chain, and provide a service that offers a total solution. The rationale behind the total solution is easy to see – by dealing with one organisation the efficiency of the chain can be increased dramatically to realise a substantial reduction in costs.

Dealing with one management interface for a number of elements of the chain enables the total chain to be optimised, makes supplier liaison more efficient, and enables a more co-ordinated, cost effective and better service to customers.

We believe that benefits in cost and flexibility in service can be gained through controlling and managing the supply chain as a whole, including the management of a number of suppliers.