Supply Chain Intelligence
By Steve Rees, Wesupply
In modern and constantly moving supply chains intelligence and insight have become highly sought after by customers and suppliers as key governors of their performance and efficiency. Intelligence is where IT systems can ‘make decisions’ about transactions in order to focus human intervention where absolutely necessary. Insight is the provision of information and trends about supply chain activity that can be used to measure success. However, building intelligence into supply chain processes and accessing critical insights about performance is, as Steve Rees of Wesupply argues, easier said than done.
ERP systems have come to be seen as something of a panacea for supply chain inefficiencies as they are at the core of automated supply chain processes. But there are parts that even the best ERP systems cannot reach. Rees’ main premise is that ERP is largely a ‘historical’ system. It is not its primary purpose to manage and monitor transactions as they happen. This is where intelligence and insight is needed most – so that actions can be taken and problems resolved in real time. He highlights three key problems with ERP led supply chain insight and intelligence.
Thousands of trades and transactions pass daily between many buyers and suppliers, from orders and confirmations to shipping notices, invoices and payments. The accuracy of these data exchanges needs to be governed automatically as they happen, as people within the buying and supplying community simply don’t have time to check them. Errors can lead to a number of business problems, from reduced retail sales to serious supplier cash flow problems. Back end ERP systems are not focused on finding the flies in the ointment that will have a negative effect on customer and supplier businesses.
While intelligence within systems is important in removing errors, it’s vital for the buyer and supplier to know quickly when these errors are occurring. ERP systems are good at providing long term insight and data into supplier performance over time, but here’s the rub; by that time the problems have occurred and the damage may already be done. The customer needs to nip problems in the bud quickly. The supplier needs to know if they are underperforming instantly, so that they have the chance to address simple issues before they become serious. This requires instant insight into current performance, not past performance. Supply chain relationships are an investment made by both parties and immediate understanding ensures that these relationships don’t become a costly waste for all concerned.
Insights drawn from an ERP system have another problem in addition to being ‘old’. They also are owned by one or other party. In many cases, where both supplier and buyer have their own systems in place, there will be two versions of the truth. In other cases, where one or other party is too small to invest in an ERP system, there may be a severe imbalance in the ability to resolve problems quickly and cleanly. Settling issues and disputes can become difficult, straining relationships. It becomes far easier if just one source of information exists. This means that the data must come from the point of information exchange, where it is effectively sitting in the ‘common ground’ between the two parties. Third party EDI services provide this capability and regularly help supply chain partners to review and resolve issues from a more objective and immediate stance.