Supply Chains: Worth The Time And MoneySupply Chains: Worth The Time And Money

Companies that invest heavily in refining their supply-chain processes should take heart: They'll probably be happy they did.

Nearly 300 IT executives crowded into a conference room at Oracle headquarters Tuesday to hear industry experts and electronics execs talk about the evolution of the supply chain, and the message was clear: The increasing attention companies are paying to supply-chain issues is warranted. Not only do growing companies find themselves having to manage larger product lines and longer lists of orders, they're also likely to be working with more suppliers and partners. All of this creates an increasingly diversified ecosystem. "We don't see this changing or becoming more simplified, said panel moderator Meredith Whalen, a VP at research firm IDC. "In fact, outsourcing and global expansion will make it more complex."

Outsourcing in particular was singled out during a panel discussion as a key driver of supply-chain complexity. Companies that rely heavily on outsourcing--a number that's growing quickly---find that having important business functions handled by overseas partners creates lots of delays in the movement of products and information, said Jennifer Hamilton, CEO at RosettaNet, the nonprofit consortium working on developing E-business process standards. Any issues that were present before a business function was outsourced will only be magnified, making it necessary for companies to create tight communications and process links with outsourcing partners. "We have to be careful not to export our problems," she said.

Those linkages are just as necessary when business functions are outsourced to partners in the United States. Gina Gloski, VP and general manager of worldwide manufacturing operations at eSilicon Corp., has invested nearly $400,000 in Oracle's 11i ERP suite because she recognizes the need to establish those linkages early--albeit from the other side of the equation. Just three 3 old and with 85 employees, eSilicon is relying on 11i to automate the supply-chain processes that are its core competency--the company acts as an outsourced chip manufacturer and designer for electronics companies, managing relationships with chipmakers on behalf of its clients. The ERP system will help eSilicon provide customers with twice-daily order status updates accessible via a secure Web portal. "Before you do this, and you're living on scratch pads and in Excel, life is a living hell," Gloski told information.

But David Neely, a principal at consulting firm Booz Allen Hamilton, cautioned that throwing money at supply-chain problems usually isn't the answer. Booz Allen surveys have indicated that there's very little relationship between dollars spent on new technologies and actual supply-chain-process improvements. That kind of finding supports the prevailing wisdom that if you throw technology on top of a bad process, you've simply modernized the bad process.

Even an Oracle executive was in agreement with that. "The worst part about IT is that people see it as a panacea," said Jonathan Oomrigar, VP of Oracle's high-tech business-solutions unit. "If you don't have some good business processes in place, you're going to have some problems."

Process has been the major focus for Agilent Technologies, which is wrapping up a 30-site deployment of Oracle's 11i ERP suite that's redefining the way supply-chain processes are managed, "from quote to cash," as Kunio Hasebe, VP of Agilent's ERP program, put it. The deployment started 18 months ago with an attempt that failed because the underlying processes weren't looked at closely enough before the technology was implemented. After months of discussion, Agilent restarted the effort with more attention to those processes. The resulting changes, which are sweeping, have been met with some resistance from customers who aren't ready to do things a different way. Hasebe told information that he's confident customers will embrace the new system over the next couple of years.