While using point solutions to tackle tactical business problems is a pervasive trend these days among budget-strapped IT executives, a new report from Cap Gemini Ernst & Young found overall operational excellence can best be achieved by the marriage of point solutions with strategic business objectives.
The report, Operations Excellence: The Transition from Tactical to Strategic Supply Chains, examines how companies are achieving operational excellence in the supply chain through a number initiatives, but central to its findings is the integration of CRM and SCM systems to increase supply chain visibility, efficiency and overall customer satisfaction.
What the study found was when IT managers take into account all areas of the company the supply chain touches and incorporate the needs of those business units into their overall SCM strategy, they have a much greater chance to achieve operational efficiencies that not only save money but add to top-line performance, said Tony Ross, one of the study’s authors and a senior manager at Cap Gemini.
“When you put together your supply chain IT strategy, don’t just bring in the transportation guy, and the warehouse guy, and the order management guy, but bring in the folks from CRM and marketing and sales, the people they all touch,” said Ross. “So when you put that strategy together, you’re getting the IT system you need to achieve what your internal and external customers need and a whole lot of people just completely over look that.”
Among the 185 respondents, the report found 84% have already attempted this type of initiative by linking their tactical and strategic business strategies but only 58% have a formal technology strategy for SCM. In other words, they haven’t realized the big picture the supply chain represents, said Ross.
“The ones that have the (right) strategy are going after it from the business issue perspective,” said Ross. “Those that have gone after their IT strategy, as it relates to supply chain, are achieving the better overall performance ratings.”
Respondents who already have integrated transportation and warehousing software with order management systems for example, reported a 6% increase in perfect orders being shipped from 75% in 2002 to 81% in 2003. A perfect order is defined in the report as “complete, on time, damage-free, and contains the correct invoice.”
“Operations excellence is the goal because too much time, energy and resources are being used by firms on point solutions, which address problems, not processes, and tend to be siloed by nature,” said Mary Holcomb, one of the study’s authors and an associate professor of logistics & transportation in the College of Business at the University of Tennessee. “Instead, operations excellence puts the focus on solutions that are integrated with the rest of the firm’s infrastructure (like CRM) and its supply chain partners. It is an end-to-end perspective, with tactics and strategy aligned to accomplish the goal.”