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February 21, 2002

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The Evolution of Supply Chain Technologies — Part 2

Companies must understand and prepare for the effect the global war on terrorism will have on their supply chains

By Ram Reddy

Continued from Page 1

Most companies have plans for alternate sourcing, manufacturing, and distribution scenarios as part of diversifying their supply chains. Companies need to expand the scope of these plans to cover catastrophic events in the supply chain. Instead of starting from scratch, most companies can leverage their Y2K disaster recovery plans. Even though focus was on the Y2K date issue, the total failure of trading partners was contemplated with action plans to tackle such failures. SCM technologies to support resiliency must be able to be quickly implemented after alternate sources are found and contracted for.

SCM TECHNOLOGIES — PROVIDING RESILIENCY

The pre-Sept. 11th trend of modularization of SCM technologies supports resiliency. The modules will be less complex, quicker, and cheaper to implement. Even though modules reduce technology integration requirements, they need a minimum level of technology infrastructure from replacement partners. Investments in technology infrastructure can be avoided with the use of managed services and application services providers (MSPs and ASPs). Despite the recent setback to the MSP and ASP markets, there are still healthy companies that provide reliable services. Sites such as www.itworld.com are good places to research MSPs or ASPs that meet your company's specific SCM needs. They provide application functionality while owning and maintaining the technology infrastructure necessary to run the SCM modules.

Mobile devices will play a key role in enabling new supply chain partners whose technology infrastructure is unreliable or nonexistent. Global suppliers may lack the necessary wired infrastructure, or it may take time to commission the necessary infrastructure for local suppliers, such as a high-speed and reliable data link, application servers, and SCM applications. Mobile devices would let a company bypass this infrastructure and shift focus to establishing interenterprise workflows to get material flowing to other trading partners. SCM functionality deployed on mobile devices will let new partners (globally and locally) get up and running quickly. Mobile devices will also expand the potential pools of suppliers, distributors, and manufacturers that previously were not considered due to lack of IT infrastructure.

Finally, SCM technologies will have to provide functionality to support auditable processes for cross-border materials shipments. U.S. trading partners in NAFTA and across the world share the concern of ensuring that regular supply channels are secured and not being used for transporting unauthorized material. Clearly checking each transport truck and container at entry points into the United States has increased friction and costs in the supply chains. SCM technologies will have to provide functionality to support processes that allow cross-border shipments of material rapidly, while addressing security concerns.

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THE GLOBAL WAR ON TERRORISM

Quick action that yields immediate and improved supply chain security and reliability will become the order of the day. If anything, this need will drive a company to have single points of integration with its global supply chain and distribution network. Tight application integration across the supply chain will give way to loose coupling, based on standards such as XML. Unless dictated by competitive and manufacturing processes, most supply chains will move toward modularization with integration infrastructure provided by portal-type technologies. This move is especially critical as companies develop contingency plans for supply chain disruptions and need to bring alternate sources of supplies and distribution into the pipeline quickly. To paraphrase President Bush, this is going to be a long war. The Sept. 11th attacks will propel the deployment of technologies that provide incremental integration quickly within a company and across its supporting supply chain.

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.