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New Links in the Chain

By MARK SMITH, March 20, 2003
    Link to original story

As supply chain networks evolve and mature, managing their performance requires an increasing commitment to information and collaboration

e.Intelligence Inc., which provides a collaborative demand planning solution, has offered a hosted business intermediary model for its customers since 2002. It now provides a service where a manufacturer and retailer can perform category-level analysis and planning to expedite the collaboration of forecasting and replenishment. By providing this service and charging by category, organizations can adapt and grow with the service incrementally, significantly reducing the risk and required capital. E.Intelligence is now beginning to connect manufacturers with retailers to form a performance management network that has great potential in 2003 and beyond.

The supply chain remains an enigmatic spiderweb of people and processes, despite the slow and steady improvements in the links that connect its nodes — retailers, manufacturers, and suppliers. Managing costs and improving productivity in the supply chain therefore remains a high priority. Companies that can achieve superior supply chain performance will realize a sizable competitive advantage.

More than two years ago, I laid out a blueprint for how to enable supply chain performance management and discussed the strategic value that organizations can achieve through leveraging information and analytics. That article, "The Visible Supply Chain" (Oct. 20, 2000), also provided best practices for achieving supply chain excellence by breaking through cultural barriers and addressing affected internal processes.

So what has changed in the last two years? The largest business influence has been the downturn in the economy and its souring effect on business and consumer spending on services and products. This stricter management of financial resources has cut through the dot-com economy hype about converting from bricks to clicks and replaced it with serious conversations about incremental improvements in managing inventory and distribution channels. (See "The Visible Supply Chain" for more of the six steps for building better supply chain performance management systems.)

State of Software Technology

On the software technology side, the role that suppliers play in helping you with your supply chain improvements has changed significantly, especially in performance management and other areas where you can leverage information and analytics for increased visibility and control in your business. Performance management has become a primary focus for many organizations as they transition beyond transaction-centric investments. They're now investigating performance-centric approaches that can help them understand, optimize, and align these business processes. The underlying realization is that the combination of information and collaboration can provide a powerful tool for success for every member of the supply chain network.

The role of traditional reporting, analytics, and data warehousing technologies, sometimes referred to as business intelligence (BI), has continued to play a strong role in organizations. Compared to two years ago, a shorter list of BI technology suppliers, such as Business Objects SA, Cognos Inc., and Informatica Corp., continue in their efforts to provide templates — or in some cases, applications — that can act as a starting block for your projects. Business Objects launched its full Supply Chain Intelligence suite in 2002, and Cognos now provides Supply Chain Analytics applications. Informatica continues to make progress with its Supply Chain Analytics and Strategic Sourcing Analytics applications. And now with its new BI tool, Informatica PowerAnalyzer, the company is a full-fledged competitor in this market.

The transactional application providers, which include Oracle, PeopleSoft, and SAP, have set a steady course in their improvements, new offerings, and partnerships for providing analytics and BI. Many of these software suppliers are still not fully committed to performance management — resisting any change from their transactional application origins.

The midsize supply chain applications market, which includes Baan, J.D. Edwards & Co., and Mapics Inc., continues to progress through best-of-breed partnerships and joint application development. J.D. Edwards partnered with MicroStrategy Inc. to build out complementary BI solutions, while Cognos, Silvon Software Inc., and Vanguard Solutions Group Inc. all have prebuilt integration with J.D. Edwards' products.

In a short period of time, specialized technology vendors that were riding high on the industry wave two years ago have been acquired or merged or are operating in a significantly reduced way. For example, NCR acquired SageTree Inc., a Western Digital spin-off focusing on supply chain data warehousing and analysis, to make it the Center of Excellence for the Teradata division's Supply Chain Intelligence Solution. Many industry veterans view SeeCommerce as a good example of supply chain performance management, but even this company faces significant market and customer acquisition roadblocks due to the economy and management's inability to execute. PowerMarket Inc. was hyped as the cure for your spend-management challenges, but its venture capitalists guided it to a merger with the more experienced Tradec Inc., which provides supply chain cost-management solutions.


A New Intermediary Approach

The biggest question many organizations must answer is when to adopt a new project or method to manage supply chain performance. In fact, the software and hardware costs are the smallest portion of the overall project. The personnel costs of training, support, and management can be significant investments, which have ramifications on capital expenditures and risk. As a result, many companies are holding back on critical projects. Some organizations are reexamining hosted service models as an option for performance management projects that require interactions between suppliers, manufacturers, and retailers.


As an example, E.Intelligence Inc., which provides a collaborative demand planning solution, has offered a hosted business intermediary model for its customers since 2002. It now provides a service where a manufacturer and retailer can perform category-level analysis and planning to expedite the collaboration of forecasting and replenishment. By providing this service and charging by category, organizations can adapt and grow with the service incrementally, significantly reducing the risk and required capital. E.Intelligence is now beginning to connect manufacturers with retailers to form a performance management network that has great potential in 2003 and beyond.

Opportunity To Improve


New opportunities for you and your supply chain will arise when you follow the principles of performance management (efficiency, quality, and value) and promote existing and new investments to achieve higher levels of performance. Acting on these opportunities will require a sizable commitment to providing information integrated with collaborative mechanisms that can provide reporting and analysis as part of the process. Although the way that information architectures and applications will enrich the supply chain is still evolving, many of the early attempts now serve as learning experiences for the second round of technology providers. The performance mandate hasn't changed, but the technology and processes have made great strides in ameliorating the risk of adopting technology that can manage costs and improve productivity inside your supply chain.

Mark Smith [mark.smith@ventanaresearch.com] is the CEO and senior vice president of research at Ventana Research, an advisory services and research firm providing insight and education on best practices and technology performance management.





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