The Evolution of Supply Chain TechnologiesReducing complexity and increasing probability of successful supply chain implementationBy Ram Reddy Continued from Page 1 Figure 1 represents a landscape of the current and future evolutionary paths of SCM and VI technologies. Traditionally, SCM technologies have been associated with the source, make, and delivery of manufactured products. The traditional role of SCM systems has been expanded to cover procurement of products and services that aren't directly utilized to manufacture the company's finished product. Examples of these products and services are categories such as office supplies, marketing services, maintenance resources, and healthcare services. Technologies with intelligent workflow engines support the procurement of these nonstrategic products to reduce the total landed cost of using them. Most enterprises have to use a combination of push and pull SCM technologies for strategic raw materials — those raw materials companies directly use to manufacture the finished product. The portal is the technology infrastructure that's emerging as a critical integration mechanism within the company and among its suppliers, distributors, and VI partners. Portal technologies are at a relatively early stage compared to traditional SCM technologies. The compelling feature of portals as an integration platform is the incremental nature in which they can be implemented. Previously, the toughest thing for an IT person to do was justify the technology infrastructure to support cross-functional initiatives that required a common enabling technology platform. The common technology platform would cost more than the application development costs to support the cross-functional initiative within the enterprise. This fact made getting funding for technology infrastructure very tough. The typical company may have up to four categories of portals. Portals to support traditional SCM practices will develop for the buy-side, in-side, and sell-side integration. The buy-side integration portal would support the procurement of strategic and nonstrategic raw materials, products, and services from a number of sources. These could range from e-marketplaces to the established supply chain partners. The compelling value provided by the buy-side integration portal is the aggregation and management of all supplier integration points through one point of contact. This reality is especially relevant when managing the security aspects of integrating with members of a global supply chain. Similarly, the in-side integration platform is important for supporting the many specialized technologies within the company; functions such as finance, manufacturing, and inventory management. Sell-side integration serves a similar purpose in providing a single point of contact for integrating with all direct and indirect distribution channels for the company's product. A new breed of SCM technologies is evolving to support products with extremely short life cycles with out-side integration portals. Consider the area of consumer electronics. Whether it's video game devices or the convergence of handheld devices with cell technology, the pace of change is very rapid. Many companies in this arena are relative newcomers, without much experience in areas such as customer service, logistics, and manufacturing. These companies will develop and launch new products with the ability to scale rapidly using the VI infrastructure. Customer service, logistics, and manufacturing can be virtually integrated with specialists in those areas, leaving the company to focus on marketing its innovative product. Out-side integration portals will increasingly shape the evolution of the company over the next few years. SCM and CRM technologies will evolve to support the virtually integrated enterprise. ECONOMIC DRIVERS FOR THIS TECHNOLOGY BLUEPRINTThe current economic climate, in addition to disillusionment with technology in general, is going to make funding very difficult for multimillion-dollar and multiyear IT projects. Currently, most companies have little control on sales revenue. However, cost of goods sold and general administrative expenses are completely within the company's internal control. The technology blueprint discussed in this column is geared toward improved efficiencies in the areas that a company controls in this harsh economic environment. It will be much easier to get backing for, and implement, the incremental technologies where the payback can be achieved quickly and, most importantly, measured. To borrow a phrase, now more than ever companies will be demanding, "Show me the money." Ram Reddy [ramreddy@tacticagroup.com] is the author of Supply Chains to Virtual Integration (McGraw-Hill, 2001). He is the president of Tactica Consulting Group (www.tacticagroup.com), a technology and business strategy consulting company.
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