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Chuck Schaeffer Supply Chain Management Software Selection Advice

3 stars Average rating: 3 (from 36 votes)
 By Chuck Schaeffer

Truths When Selecting Supply Chain Management Software

Many companies prefer to purchase separate Supply Chain Management (SCM) software rather than rely on the SCM module in an Enterprise Resource Planning (ERP) system to handle the functions of the supply chain. By its nature, SCM software is generally considered less complex and disruptive than ERP and it is more tightly focused on the opportunities, issues and problems of supply, distribution, fulfillment and pricing.

However the "SCM" acronym conceals nearly as much as it reveals. There are many SCM software products out there for all sizes of companies and ranges of functions. But it's also important to recognize there is no "one size fits all" supply chain management software solution so it remains paramount to know your SMART (Specific, Measurable, Actionable, Realistic and Time-bound) objectives, business requirements and budget before selecting a suitable partner.

The State of Supply Chain Management

Like most enterprise software, the Supply Chain Management software market met the global recession in 2008/9, with the top companies' revenues declining by 0.7 percent between 2008 and 2009 to a 2009 total worldwide of $6.1 billion, according to Gartner Group. 2010 and 2011 resulted in slight upticks of 2 and 4 percent repsectively, but the pain hasn't been evenly spread.

According to Gartner, the large suite-oriented companies, such as Oracle and SAP took most of the hit. Oracle revenue dropped 3.7 percent between 2008 and 2009 and has been inching back up since. Meanwhile the smaller specialist companies that focus on best of breed SCM software solutions generally incurred lesser revenue declines during the recession and have accelerated revenues at a faster pace since.

What this probably indicates is that more companies are postponing or abandoning sweeping business software projects in the face of the down economy and electing instead to pursue a more incremental approach or focus more tightly on specific parts of the company, such as the supply chain. Those numbers also suggest that in spite of economic conditions, companies recognize the need for the kinds of economies and efficiencies Supply Chain Management offers and are willing to invest the money on focused SCM projects that demonstrate and forecast positive ROI.

Despite the state of a lingering software industry, some things remain constant. When considering an SCM software acquisition, it's important to start with a proper supply chain software selection project and begin by asking several questions to get the most return for your investment. Here a few examples to stimulate your thinking.

What must you accomplish?

While all the functions of Supply Chain Management are important, none of them are equally important to your business. You have needs to be met or specific functions you will want to emphasize. To effectively choose the best fit SCM software product its critical to identify, weight and prioritize your business needs—so that they can be aligned with your corporate strategy and objectively evaluated against multiple supply chain software systems.

Some of these business needs will be determined by your industry. Pharmaceutical companies, for example, need the ability to ship products from raw materials to the distribution of finished products and do it at a fine level. Food companies need exhaustive lot controls during the distribution process. Luxury goods companies may need serial tracking while commodity producers may be more concerned about getting products to the customers on agreed-upon schedules, and so on.

Other needs will be determined by your own business and IT strategy—and even influenced by your partners and customers business strategies. If you have customers running a just-in-time operation you will probably need to meet very specific goals for delivery times and quantities. If you're running an operation with multiple highly automated warehouses, your software will need to support those enabling functions.

How well does the software match your needs?

Supply chain management is a very big tent and software vendors have staked out many different approaches. You want to choose a supply chain software vendor whose products are particularly strong in the areas that are most important to your company. To do this right, it's not a subjective decision process but instead on objective and scored fit analysis that ranks vendors in an apples to apples comparison.

For example, one of the fundamental divides in Supply Chain Management is between planning and execution. In many areas of SCM, vendors tend to be stronger in planning for SCM, such as finding the best routes for delivery, or in execution, such as scheduling parts delivery in the right quantity and the right time. This is a macro level example at best, but suggests the varying approaches used by varying software vendors.

Is the software compatible with your existing systems?

Unlike the situation with ERP where you're essentially replacing all or most of the business software in the company, SCM only handles part of the operation. That means that as much as possible it has to work with your existing systems with a minimum of unnecessary disruption. (Note the word "unnecessary". You're undoubtedly going to want to change some things to get more efficiency and better economies. This is necessary disruption and your SCM software should support it.)

Except in the smallest companies, you're unlikely to find an SCM system which is a perfect drop-in fit. Data is going to have to be converted, processes are going to have to change, integrations are going to have to be developed and so on. However where you can minimize the changes by adopting industry standard protocols and technologies, leveraging vendor-managed integrations or tapping into pre-integrated solutions from online ecosystems, you can minimize the amount of change up front and during the life of the software application.

How well does it work with our customers' and suppliers' systems?

As business becomes more integrated, it's important to have as much interoperability as possible with your clients and suppliers. In fact one of the major ways SCM can help your business is by more tightly integrating your supply chain. This means working with your suppliers and customers, first, to find out what systems they are using and what their data requirements and processes are, and second, how your new system can be integrated and benefit with theirs.

The process of data integration, both within and without the company, is likely to be one of the most time-consuming parts of installing a new SCM system and it must be thoroughly tested to make sure everything works properly. Start planning for this integration as early as possible by collecting information from your operation, your customers and your suppliers.

Especially with suppliers and customers it's important to double-check everything. When you ask a supplier about formats for a specific kind of data or transaction, they're likely to tell you something like: "We store that data in a comma delimited format". Which is fine as far as it goes, but there are a lot of variations on ASCII or comma delimited formats and they're not all compatible. Get the details.

How reliable is my provider?

Especially in today's tough economic climate it's important to know that your SCM vendor is going to be around for a long haul. Ideally you want a software company with a history in the Supply Chain Management business, who is used to dealing with companies of your size and complexity and who has the appropriate reach (regional, national or global) for your operation. Investigate potential partners carefully. You're going to be in this together for the long haul. End

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The decline in large software suites indicates that more companies are postponing or abandoning sweeping business software projects in the face of the down economy and electing instead to pursue a more incremental approach or focus more tightly on specific parts of the company, such as the supply chain.

 

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