Supply Chain decisions

The selection of a Supply Chain Management Solution is not easy. There are so many factors to consider and many companies continue with their existing applications because of this difficulty. In reality, most companies get side-tracked when evaluating Supply Chain solutions.
Written by Ross Eades, Contributor
The selection of a Supply Chain Management Solution is a difficult thing. There are so many factors to consider that in many cases, it just becomes too hard. Many companies continue with their existing applications because of this difficulty. In reality, most companies get side-tracked when evaluating Supply Chain solutions.

There are two processes that need to be agreed when evaluating and selecting a Supply Chain Management Solution. The first is internal. Your organisation must decide on the decision-making process. The second is external. You must agree with the potential vendors on a process of evaluation. Let’s take some time to look at both processes.

The internal process for decision-making is more for the discipline than anything else. If your organisation is going to invest in any major project then there will be a decision making process. This should be clearly documented and agreed by all parties before going to market. This process should cover such issues as:

  • What vendors will be invited?
  • What budget is available for the project?
  • What are the decision criteria?
  • Price?
  • Functionality?
  • Level of Fit?
  • Reputation of the vendor?
  • Return on investment?
  • Confidence in the vendor to deliver?
  • What is the decision timetable?
  • What is the need or business pain that will be addressed by     this selection?
  • Who will make the final decision:
  • A committee?
  • An individual?
  • All too often, putting priorities on the wrong issues clouds this process.

    The decision on vendors to invite is difficult. Should vendors be included/excluded based on reputation? Probably, the answer to this question is no as a vendor’s reputation will influence this decision. However, you should investigate potential vendors and determine if the reputation is warranted.

    Organisations that need to buy a Supply Chain Solution need to spend the money. It is like buying a car. If you need to buy a car, then there will be a cost involved. Before you spend the money, you need to know why you are buying the car. The same is true of software. You need to understand your needs before you set a budget. Many organisations set out to buy software without a budget, and this often leads to a panic-attack when they see the price tag. Set a realistic budget. Ask around for other companies in your industry. Find out what they have spent to implement Supply Chain Solutions. Once a budget is set, share it with the vendors. This will potentially save a lot of time and effort. Vendors do not adjust their price based on your budget. A professional vendor will tell you their price and compare it to your budget. If they cannot provide a solution at the budget you have set, they should tell you so.

    Be prepared to adjust your budget to accommodate the right vendor. You will know the right vendor if you follow your evaluation criteria. The right vendor will:

  • Have the solution that fits your business
  • Have a reasonable price
  • Have a strong return on investment
  • Have the right “feel” about them. By this I mean your corporate cultures     match.
  • Have a track record, but not necessarily in your industry.
  • Have good references.
  • Have the right financial backing so they will be around for the long haul
  • Determine your decision criteria up front. Price should not be the over-riding criteria. If your business has problems, they need to be solved. These problems have associated costs. You should know what these problems cost. This forms your Return on Investment (ROI). Your vendor should be willing to do this exercise as part of the selling cycle. If they are not willing, then they are the wrong vendor.

    Software is like any other asset. It must work for your organisation and it must pay its way. If the software investment is less than the return within eighteen months, then price should not be an issue.

    Functionality and level of fit are important issues, but they are also not the over-riding criteria. Most Supply Chain Solutions do the same things. For years, large consulting houses have made a business out of writing Requests for Proposals. These documents take months in the making. They detail to the finest degree the functions and features that are required. Then they give software houses about three weeks to respond. This is a ludicrous way of purchasing software. Vendors today are sophisticated. They do not say yes when the answer should be no. In addition, they are held to their answers by contracts. Features and functions are important. But ROI is more important.

    Look within
    When evaluating features and functions, look at the major issues in your daily operations. At this point, you should beware the biggest trap of all. So many companies evaluate software based on what their current systems either do or worse, look like. If the current systems are not doing the job properly, then they need to be replaced. It is logical that new systems will do things differently, and better. Yes, there is a trade off against the re-training of staff. However, if new systems have significant financial benefits to your organisation, then it would seem logical to adapt to these systems.

    By this, I do not mean that every process and procedure has to be changed. No! That is expensive, wasteful and probably will be a precursor to failure. Your way of doing business has got you this far. Do not change the core of your operation. What is meant is not to change the order entry program because it is different to your current program. If the solutions you are purchasing cannot be easily adapted to your way of doing business, then they are probably the wrong solutions for your organisation.

    Be certain that you understand the business issues or pains that you want to solve when you select a Supply Chain solution. Understanding your business pains is 99 percent of being certain that you will select the right solution. Make absolutely certain that your selected vendor also understands your business pains. If they do not, then they will be trying to solve one set of pains while your organisation is trying to solve another. This will lead to over-runs, expense and potential failure.

    If a potential vendor is not willing to put in the time and effort to understand your pains, then they are the wrong vendor. If a vendor comes in and says, “I know what your pains are” without looking at your organisation, then they are potentially the wrong vendor. Each business is unique. Businesses share common issues because they are in the same industry, but to solve business pains at this level is superficial. In all probability, the pains will remain after the solution is implemented. If you understand your business pains going into the process, then you are well equipped to drive success. Let potential vendors who want to understand your pain do so. Do not fall for the mistake of telling them what your pains are. Let them go out and find out for themselves. They may well find pains that you did not know you had. After all, new eyes often see things that old eyes miss.

    Enzo Ferrari was quoted as saying “all business should be run by an odd number of people, preferably less than three”.

    Whilst it is good to have consensus on the selection of a Supply Chain Solution, this does not always lead to successful selection and implementation. Evaluation committees can take months to make a decision that could be made in days or weeks. Remember, the selection of this system is being done to resolve business pains. Business pains have related costs. Every day that your organisation delays in making a decision, it is losing money. This does not infer that your organisation should rush out and buy the first solution that it sees. The suggestion here is to give you a timetable. After all, if you were building a warehouse or buying new assets you would have a delivery date. Why not with software? This is just another asset that is going to reduce business pain.

    Once you have a timetable then work to it. Schedule meetings both internally and externally and give consideration to all the vendors you are dealing with. It is costing them time and money to deal with you. While you are drawing out your decisions, you are placing business pains on your vendors. Your timetable should be based around the amount of money your organisation can afford to lose while you make this decision. If you clearly understand the pains and their costs, then setting a timetable is relatively simple. Remember, the purchase of software is like the purchase of any other asset that will assist your business to be more efficient. If selected and implemented efficiently, it will add to shareholder value.

    The selection of a Supply Chain solution is a critical decision for your organisation. Give it the same priority as decisions about other assets. Note that at the end of the day, the selection of a Supply Chain solution is only the first step of the process. For your selection to be successful, your organisation must make an executive commitment to the implementation process. This process will interrupt your business. It will create additional work and stress within your company. However, if you and the vendor agree on a reasonable ROI, then this work and stress is worthwhile.

    The process of purchasing a Supply Chain solution does not end with the selection. It also does not end with the implementation. Successful Supply Chain solutions are ones where the ROI is measured and achieved. Your organisation must put a measurement process in place to ensure that ROI is realised. If it is not, then you have valid reason to discuss this with your vendor. It is not necessarily their fault. It may be that your organisation is not utilising the solution as it was proposed. However, it is legitimate to have detailed discussion with your selected vendor to jointly examine why the returns are not being achieved.

    This is the basis of investing in a Supply Chain Solution. It is not a question of how much money and time to invest. It is a question of what are the returns from this investment? How do you select the right Supply Chain Solution? Work with the vendor who is willing to invest their time and effort in understanding your business. Work with the vendor who is willing to build a ROI for your organisation. Features and functions are important. You must make sure that the solution you want to implement will do the job for you. But pick a vendor who has a corporate cultural fit with your own organisation. Pick a vendor who is willing to go the hard yard during the sales cycle. This is the vendor who will “deliver the goods” with a Supply Chain Solution here in Asia.

    Ross Eades is the Regional Director for Enterprise Management Systems for Infrontier Asia Pacific. Ross has thirty plus years of experience in Supply Chain. He has worked throughout Asia helping customers address their supply chain and e-business issues. He has worked to develop e-business and collaboration solutions for some of the largest organisations in Asia.

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