Sixty percent of U.S. business and IT executives expect the IT spending of their companies to increase over the next three years, according to a survey from Accenture last month. The survey determined that 69 percent of the surveyed executives' companies have ramped up IT spending in the past three years, while 32 percent of all respondents said that their companies are actually spending less than they should on IT.

The top three drivers for increased IT spending, according to the 300 executives, are new business initiatives, upgrading legacy systems and adopting new technologies. It seems business trumps technology as a reason for spending more on IT.

Yet as supply chains become more global, complex and demand driven, their underlying technologies likewise must evolve. Staying ahead of the curve requires companies to continually look toward the next level of supply chain performance and prepare for the technology advances that will take them there.

According to a CIO Magazine article last year, it pays to spend money on technology because such investments will boost supply chain efficiencies, which in turn, will enable companies to direct resources to more strategic initiatives, e.g., sourcing, where they can derive even more value. "Companies that do it right spend more on technology in the short term, but less on overall operations in the long run," says CIO Magazine.

Global Logistics & Supply Chain Strategies (GL&SCS) recently partnered with Aberdeen Group to conduct a comprehensive technology survey of more than 100 companies that represent process, discrete and project-based manufacturers, as well as distributors and retailers.

This month's survey results show that investments in supply chain solutions again are picking up.

Nearly four times as many companies plan to spend more on new supply chain management (SCM) technology in 2006 than plan to decrease such budgets, compared with the prior year. Fifty-three percent of companies are planning six-figure expenditures on new SCM technology projects in 2006. While the majority (54 percent) respond that their budgets will be about the same — and supply chain technology spending has been flat for the past several years — some 37 percent of companies are increasing their technology investments in this area. This seems to be a good sign.

The top reason for companies wanting to improve their supply chain processes is cost minimization (33 percent). Other drivers include the following: meet customers' unique fulfillment requirements (19 percent); streamline fulfillment across multiple channels (13 percent); and minimize supply-demand imbalances, especially stockouts (12 percent).

Beth Enslow, VP of enterprise research at Aberdeen Group, Boston, gleaned the following key supply-chain tech-spending trends from the recent survey:

• Companies are seeking next-generation SCM solutions that will enable them to simultaneously cut costs and "thrive in an era of complex, multi-party relationships and dynamically changing customer requirements." Key attributes are as follows: removing the gap between planning and execution processes; enabling cross-functional management; and helping to manage multiple types of supply chains.

• Topping companies' lists on their SCM technology roadmaps are the following:

1. Inventory optimization
2. Distributed order management
3. Multichannel and collaborative demand management
4. Personalized performance management

• Interestingly, most companies are not looking at warehousing or internal-focused manufacturing as areas that will drive innovation.

• Overwhelmingly, companies are interested in supplier and global trade solutions that help them understand in-process and in-transit inventory, orders and costs.

• Companies are seeking personalized analytics, dashboards and performance management that help manage forward activity, not those that simply assess past results.

• Companies are valuing infrastructure technology such as business process management, visibility/alerting platforms and master data management.

Most notably, of course, the No. 1 tech process toward which investment dollars will go is inventory optimization. Companies overwhelmingly are interested in inventory solutions to help them better position and monitor inventory and better assign orders across multiple sites, according to this and all similar surveys. At the top of the investment chart are the related areas of inventory optimization, advanced replenishment and supply chain network design.

Naturally, the customer is the main focus of demand management efforts, as customers' satisfaction — and their willingness to purchase new products and services — usually directly impact top-line revenues. However, as a Supply Chain Systems Magazine article late last year noted, "most of the economies of demand management actually focus on inventory" — seeing how reducing needless inventory can drive cost savings right down to the bottom line. So mismanaging inventory can depress customer satisfaction if stock-outs and incorrect orders lead to lost sales, but vendors often over-compensate.

And inventory-optimization technology can help companies find cost savings that don't threaten service levels.

Earlier this year, WebProNews provided "Supply Chain Management — 6 Topics To Where It Is Going", noting a forthcoming "focused supply chain role for technology." Supply chain planning and supply chain execution, the article acknowledges, are required for strong supply chain performance and for operating effective lean supply chains.

It cannot be overstated, however, that such technologies are tools -- enablers -- not magic wands.

Says WebProNews:

They will be process enablers, not silver bullets to fixed poor and flawed processes. Such focused technology applications will facilitate reducing time, improving supplier performance, collaborating among key trading partners and gaining visibility throughout the entire supply chain from purchase order to delivery order. The technology will be scaleable, easily configurable, be hosted by outside service and will be paid for as on a "per transaction" or similar approach. This will reduce the risk and large capital requirements that have accompanied such technology.

"Technology is an enabler, no more, no less," a recent European Leaders in Procurement item quoted Tim Richardson, manager of procurement operations, British Airways. "But if the business process isn't right, or if the people don't want to or do not know how to use the technology, it will fail."

Where does your company currently place technology and tech spending in its supply chain roadmap?

Source

On the Road To Supply Chain Excellence
by Jean V. Murphy
Global Logistics & Supply Chain Strategies (GL&SCS), April 2006

References

Supply Chain Synchronicity
by David Essex
Supply Chain Manufacturing & Logistics, Oct. 13, 2005

Supply Chain Management - 6 Topics To Where It Is Going
by Thomas Craig
WebProNews, Jan. 27, 2006

The Price Of Procurement
CIO magazine, April 15, 2005