Down, But Not OutSCM solutions are alive and kicking, and sorting through the many old and new choices is a difficult taskby Ram Reddy Over the past few months, I've been approached by numerous supply chain technology startups with new venture capital funding. At the same time, many corporations have asked my opinion on how to deal with the increasing amount of supply chain management (SCM) technology choices. Even in this gloomy economy, some promising news is coming from the supply chain technologies area — the proverbial silver lining around the dark cloud. In this column, I'll try to address the reasons for continued investments in SCM technologies and recommend how corporations can cope with the increasing choice in SCM solutions. Follow the MoneyThe old cliche "follow the money and you will discover the truth" applies to the continued investment in SCM technologies. One major contributing factor is the enormous amount of resources being deployed on the war on terrorism post-Sept. 11th. In my Feb. 21, 2002 column "Evolution of Supply Chain Technologies — Part 2," I highlighted the vulnerability of global chains that bring in tons of raw materials, components, and finished products into the United States. The U.S. government and corporate America are increasingly aware that potential terrorists could use these supply channels to smuggle dangerous materials into the United States. The flow of government and corporate resources geared at securing supply chains while minimizing friction as raw materials flow across borders has been a significant source of continued investments in SCM technologies. The second major investment source is from existing brick-and-mortar companies that have developed a best practice addressing a particular function or feature from the huge SCM functionality set. One example comes from a logistics services provider (the name of the company and the specific supply chain function have been removed for confidentiality reasons), which has been in business for more than 25 years. Over the years, it had developed business processes that made it the most cost effective and efficient company for that industry. Over the past few years, the company started getting requests from customers who wanted to take these best practices and customize them to tackle their own unique logistics problems. The logistics company ported its best practices into a software application and sold it to a few of its customers, who realized immediate benefits from the application package. Realizing the potential, the logistics company partly funded the software spin-off from its coffers and received a matching amount of funding from venture capitalists. Similarly, companies in areas as diverse as fresh produce distribution to pharmaceuticals are funding SCM technologies that address a specific need by packaging best business process practices that have proven themselves over many years. These two sources are supporting the continued investments and growth in the SCM technologies area. Niche Focus — Reducing the FootprintOne major factor inhibiting successful implementation of integrated SCM technology solutions has been the sizeable footprint of these integrated packages. Footprint refers to the number of business processes that are affected across multiple departments within a corporation and its supporting supply chain. Managing the organizational change necessary to support the application has been a major challenge. It's become increasingly clear that although supply chain fundamentals are universal, their application differs significantly from one industry to another. Consider the issue of inventory turnover, which will differ based on the nature of the inventory. Clearly, fresh produce and perishable goods need an entirely different approach from rolled steel.
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