THU, MAR 5, 2009 12:40 EST
Supply Chain Disaster Brewing: Quest for 'Cheaper and Faster' Has Created Huge Data Blindspots
For decades, CEOs have given supply chain chiefs marching orders that typically sound something like this: We want it cheaper, faster, better.
Many consequences and trends have resulted from this mantra. For instance, companies are now more likely to use less-expensive and standardized packagedapplications, rather than in-house software. And companies big and small now source goods from lower-cost and speedier manufacturing partners in China. (One can even make a case for those companies whose supply chain still relies on the good 'ole fax machine; but that's a different story.)
A new IBM study resulting from interviews with 400 supply chain executives, however, points to one disastrous and unintended consequence of the "cheaper, faster, better" mindset: a "data visibility" crisis in enterprises' supply chains.
Nearly three-quarters (70 percent) of the respondents say their number-one challenge is "overwhelming and fragmented data," as well as a "lack of ability to make sense out of the information."
But, say these supply chain execs, fixing the problem is actually not a high priority right now, even though they understand the threat and consequences of these "information blind spots." Why? The execs say it is a costly endeavor, there's a high degree of difficulty in actually making it work, and they are "just too busy." (To read about challenges of a "going green" in the supply chain, see "A Green Global Supply Chain? Yeah, Right. Maybe Next Decade.")
On top of it all, according to the IBM study, respondents said that their supply chain data "silos are worse than ever." Just 16 percent said that they are "effective at integration and visibility of information across the supply chain with external partners."
I want to state that it's my extrapolation—not IBM's—that the "cheaper, faster, better" mantra has played a part in creating this supply chain data disaster. I've written about this topic before. Case in point: Nearly half of business users still rely on their gut when making critical business decisions today, rather than relying on theirERP, CRM and BI apps.
All of this ties into supply chain execs' number-two problem: risk management. You know, those nasty product recalls, data breaches, acts of terrorism or lead-paint scares that can wreak all kinds of havoc. Unsurprisingly, 60 percent of respondents in the study state that risk is escalating as a concern.
And here's where the data visibility problem and risk management dovetail so perilously that it should send shudders down any CEO's spine: How can you understand and manage risk across your global supply chain if your core data is unintelligible and unmanageable? In the IBM study, supply chain executives cite "the lack of standardized processes, insufficient data and inadequate technologies" as the chief stumbling blocks preventing effective risk management.
Sanjeev Nagrath, global leader of IBM's supply chain management practice, commented in the IBM study that "as supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."
Sure, "cheaper, faster, better" enabled the unprecedented expansion of global supply chains and sourcing capabilities, and the supposed cost-savings realized by companies and their customers during the past several years.
But nothing actually comes for free. And now, in the depths of a battered global economy, companies are paying for their choice.