SCM still not working for most firms

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Twenty one years after Booz Allen first coined the term supply chain management, too many companies are still throwing technology at a problem that requires process change, according to the US consulting giant.

Forty five percent of respondents to a Booz Allen Hamilton supply-chain management survey released report that their IT solutions are failing to meet expectations. The survey, which polled 196 executives from a variety of companies around the world, found that 58 per cent were disappointed that their SCM software failed to provide performance measures across the supply chain. Fifty-one per cent said decision-making across the supply chain failed to meet their expectations, and 47 per cent said the software didn?t boost the bottom line.

The main benefit of SCM implementations to date has been lowering of inventory levels, cited by 80 per cent of respondents. followed by customer satisfaction increases cited by seventy-one per cent and more reliable deliveries which was named by 69 per cent.

Some $19 billion a year is spent on SCM software in various forms. Enterprise resource planning systems topped the list of supply-chain system investments, at 71 per cent followed by inventory and warehouse management on 54 per cent, order management on 40 per cent, supply-chain execution systems on 37 per cent, advanced planning systems on 31 per cent and marketplaces and exchanges on 26 per cent.

"Despite major advances in technology, supply chains still cost more than they should and tie up more inventory, and the underlying reasons haven't changed in twenty years," said Booz Allen Vice President Dermot Shorten. "The message is clear ? companies looking for improvements must break the mould, not just polish the mould.?

Companies that treat SCM as a CEO-level item achieved annual savings improvements of 8.0 per cent in their cost to serve customers, nearly double the 4.4 per cent savings of firms where responsibility for the supply chain resided lower in the organization. In addition, purchasing savings improved significantly - 5.9 per cent against 5.0 per cent) for companies at which the CEO is personally engaged in setting the supply chain agenda.

"This is a wake-up call for CEOs to go 'back to basics' and pay closer attention to operations," said Shorten. "Supply chain efficiency improves when CEOs roll up their sleeves and get involved."

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28th May 2003 10:00

Looking to improve the efficiency of its global Supply Chain, the UK Ministry of Defence undertook a data profiling and analysis project. That is, it used a new breed of software solution to identify, and bring to the attention of executive management, the impact of previously hidden issues in the masses of supply data relating to Royal Navy, Army and RAF.
(See 'Customers' on the vendor's site http://www.avellino.com for a case study).

Net result: £20m in savings after costs when senior management understood the impact 'dirty data' was having and authorised investing in a data cleansing project.

Data profiling and analysis is also applicable to CRM, data warehousing and indeed any process where data integrity/quality impacts returns. It can be used to present objective answers to the management question: "Is our data fully supporting, or hindering efficiencies, IT investments and objectives."

Abbey National bank claims £15m added value from using the same software as the MoD (Avellino Discovery) to profile source data prior to migration into a customer data warehouse.


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