Data processing, 1959. Image by James Vaughan, CC license

If you search “technologies for supply chain evolution” you will get 17.8 million results, many of which will mention IoT, robots, driverless vehicles, mobile technology, predictive analytics, network optimization software, and 3-D printing.

The presumption is that industry will want these solutions because of the coming added complexity and demands of the modern supply chain in the digital age.

But most supply chains still confront very basic problems and inefficiencies; they haven’t in many cases even fully deployed yesterday’s technology, so delivering product with drones doesn’t make the priority list.

So which technologies are key to the supply chain of the future? The same ones that were introduced 15 years ago that companies still haven’t adopted! This is unfortunate, because many of these technologies were designed to automate the supply chain office, and without automating the supply chain office, all of that promising talent you are committed to developing is typing away at tedium.

Just visit your customer service department, where very smart and capable humans – some with $120,000 college degrees — are reading data from pieces of paper and entering them into systems, an act which, according to supply chain technology gurus, should have disappeared years ago with the introduction of EDI, integrated systems, and OCR.

Supply chain managers are managing minutiae, not the supply chain.

Where does the minutiae come from? From the 18,000 to 30,000 phone calls or emails and the 120,000 to 350,000 manual interventions a typical ($2 billion +) company must make just to ensure proper system processing of its order-to-cash flow. And this is with all the normal ERP and associated technologies, such as EDI, that a company of that size normally uses.

Companies still have teams of people shuttling information and data all over the supply chain office, and because they are busy shuttling information they don’t have time to look at it to make sense of it and use it to improve your business.

Automating the supply chain office is one of the cheaper technology moves you could make. The EDI and OCR of the 1980s has gotten better and easier to deploy, and when strung together with complimenting technologies, can automate nearly all of your order processing, exceptions management, invoice discrepancies and customer claims work.

Automation also has the enormous benefit of – by definition – digitizing every piece of data from every transaction. If all of your shipping and invoice claims are scanned, stored, and sent to transactional systems for disposition, all that data is available to study for patterns, relationships, and other insights that can mean immediate savings. Like getting a view of the forest.

Want to evolve? Make the supply chain office run itself. For a $2 billion company selling to major retail outlets in the US, this means zero human intervention for every one of 60,000 deliveries a company of that size is likely to make. Most business rules are simple to automate: if X order received, send to Y location and reply Z back to customer.

A truly evolved supply chain office is one where all human assets are users of data, not movers of data, creators of opportunity based on a view of the forest, and customer relationship builders.

Ad for Infor ERP at O’Hare Airport, image by Steve Brodner, CC license

If you search for “lean ERP,” most of what you’ll read is about whether or not the traditional ERP system supports “Lean Management” concepts. The argument is that Lean Management is based on the pull of demand and Just-in-Time principles whereas traditional ERP is based on set lead times, planning windows, and building inventory based on a forecast. It’s a fair point.

But what about a truly “lean” (skinny!) ERP system – one that is simple, inexpensive, and easy to implement and maintain? Everyone knows that the typical ERP project, and the maintenance of the system thereafter, has more in common with the word “fat” – as in fat timelines, fat cost, and fat (extensive) complexity.

Stripped to its essentials, an ERP system is supposed to

• Tell you what resources (materials, labor) you need to make and sell your products;
• Serve as a system of record for standard business transactions;
• Record and store the financial results of all transactions

But many companies want their ERP system to do everything from managing specialized customer service rules to providing supply chain analytics – that is a mistake. There are better alternatives.

And ERP vendors want the footprint of their product in your business to be as big as possible (more modules, more users = more revenue).

Both of these factors make the typical ERP solution complex, bulky, and expensive.

A Skinny ERP is one that is limited in scope, relatively un-modified out of the box, and no more complex than what is needed for your business. It largely delivers the essentials mentioned above, and no more.

Here’s how to get there:

• Make peace with your ERP solution. Let it do what it was designed to do, and give it accurate and consistent data across the enterprise. I’ve seen companies try, and largely fail, to modify the guts of their ERP system to automate workflows for order processing, customer claims, weight-based pricing, inventory reservation, and other processes with complex business rules and logic the ERP package wasn’t built to do. The modifications usually delivered a fraction of the intended functionality.
• Use other, nimbler tools and 3^rd party services to manage what doesn’t naturally fit in your ERP system. It’s now possible, for example, to send your all of your transaction data, automatically every day, via file extract, to a vendor’s cloud-based server, and use the vendor’s very rich analytics software to create the facts and insights you need, with no upfront costs, on a pay-by-month basis, with no annual contract. Stop trying to make your ERP a reporting system.
• Start managing the “enhancement request” desk that most IT departments have to entertain the user population’s list of desired improvements to your current systems. Some needs may be a natural fit with an ERP and you should do them. But many will be enhancements — suggested by smart and creative people — that improve only the part of the canvas they are looking at, and really don’t belong in the core ERP system. Go ahead and build them anyway, and you’ll have a very fat ERP.
• Question why you want to manage the business process at all, rather than letting a 3^rd party handle it for you. Is the process so important to the business that you need to control it in-house? You can outsource almost anything, and one advantage of this is that usually the 3^rd party specializes in the processes you want to jettison. An example is transportation: instead of trying to make your ERP manage shipping, or buying expensive transport software, let a logistics firm handle the whole thing – dodging the whole question of how to enable the process with your own software.

Start thinking of your ERP as the basic plumbing – the core – and begin to explore not how you change that core, but how you supplement or compliment it with the many alternatives now available.

Image by Andrew Becraft, CC license.

Business people complain their IT team is understaffed, uncooperative, slow, and deploys lousy systems. IT claims business people are disorganized, unwilling to learn, bossy and never available.

Such is the just-under-the-surface functional rivalry that regularly plays out every day in many organizations, a tiff that delays and sometimes stops a company’s technology evolution.

Where does the animosity come from?

Mars and Venus. Business and IT do come from different planets. IT is methodical, structured, detailed, and logical. Business functions are impatient, practical, and focused on quick solutions that work. The language, terminology, and methods of one are incomprehensible to the other. Right from the start, there is an inherent lack of understanding.

Turf and different agendas. Your CIO insists on controlling every aspect of technology in the workplace, but your Manufacturing VP asserts the right to acquire any information system that best meets the need. One side explores solutions and comes up with its favorite; the other side isn’t even consulted. People become locked into a viewpoint, start a campaign for their side, and nothing gets done.

Unrealistic expectations. The business side expects new stuff – innovation – from IT. But only 10-20% of a typical IT budget is slotted for innovation – the rest is consumed by keeping the lights on, a hard budget reality for most companies. The result: an unfair perception in the business that IT never delivers anything new.

Proximity. If a company occupies three floors of a building, where does IT usually sit? In the basement, first floor, or an annex somewhere (and sometimes halfway around the world). This telegraphs that IT is not important, and the physical separation creates gaps in relationships and communication. IT people want to be thought of as part of the team and having a seat at the table.

Misunderstanding of roles. Business and IT teams are often thrown together on a project without clear definition of who is going to do what. The business side expects much more from IT than IT expects to do, and vice versa. IT people also resent having to lead a project while the business side remains dis-engaged and absent.

Bring back some harmony with these practical moves:

Recruit the crossover people – those who understand and speak the language of both Mars (business) and Venus (IT) – to bridge the two sides. Put them in engagement roles with “the other side.” There aren’t enough of these people today because most companies still cling to ancient uni-functional career paths, but you know who they are, or could be, in your organization.

Establish together how IT solutions will be acquired. Business people are much more agreeable if they know there is at least a process where IT requests can be considered, prioritized, and acted on.  Agree that any exploration of solutions will be done together, that objective, score-based criteria will be used to evaluate system alternatives, and set a joint annual budget for IT investments.

Put people together: Co-locating IT people with their functional business counterparts is a big plus: 1) the business side feels valued because IT is paired with them; 2) IT people feel valued because they are “on the field” with business teams; and 3) communication and understanding have a better chance of emerging.

Negotiate roles upfront like you would any team effort. For a large project, what people resources are needed from business and IT, for how long? Who determines what each team member is expected to deliver? How self-sufficient is the business expected to be, in terms of learning and testing the new application? Write these down, publish them, and get signatures if you have to. Think of it as a team charter.

A final thought: is it time to re-think the traditional functional roles and the career paths that go with them, where IT is IT and sales is sales and supply chain is supply chain?

Processing orders in Chicago, 1937; image by gallimafry.blogspot.com, CC license

In the most recent annual Deloitte supply chain study only 38% of executives felt they had the right skills in their organizations.

Why? Theories range from supply chain not being cool for new grads, to the predominance of men in the function (scan the room at a supply chain conference and you mostly see ….middle-aged men).

But another reason is that most supply chain jobs are tedious and boring. Ship stuff in. Ship stuff out. Key data into a PC, transfer it from one system to another. Look up stuff in tables. Compare what’s in the system to paper documents. Fix problems in failed transactions, summarize inventory figures, change or fix purchase orders, and create another report using pivot tables. Yawn.

Despite the hype about technology revolutionizing the supply chain, organizations simply haven’t adopted in a widespread way the automation needed to eliminate repetitive functions, because most large enterprises are risk-averse, slow to change, and don’t bother to make the business case.

Companies that have adopted expensive ERP systems still need people to shepherd transactions in and out of different applications. Companies that for years have had extensive EDI networks — which were supposed to automate basic commerce between businesses —  still touch every customer order.

The next generation of supply chain leaders is not drawn to jobs involving  banal tasks performed in 15 year old systems. You can see for yourself in many organizations – bright college graduates with supply chain or business degrees, bewildered at the dumb things they have to do in outmoded systems.

Companies staying on non-automated platforms guarantee that a certain percentage of their work force will never perform at their highest potential, despite the many commitments by nearly every employer to “developing talent.”

Consider logistics claims processing. A company making 75,000 deliveries each year will have to manage anywhere from 7,500 to 15,000 claims, maybe more – these are refusals to pay all or a portion of the invoice because of damage, unsatisfactory service, faulty products, incorrect pricing, late deliveries, etc (there are a million reasons).

In a non-automated environment, firms will staff people to collect paperwork, look up data in systems, copy delivery and invoice documents, investigate claims with warehouse and transportation providers, and assign a status to the claim for future credit (or not) to the customer.

Substitute PCs for typewriters and you have a work environment not unlike the one pictured above, from 1937.

In an automated environment, documents are scanned without human touch, sorted, filtered through business rules, and categorized into a database from which humans glean valuable information, such as which customers have a pattern of making claims for the same reason month after month.

In a non-automated environment, human talent is used to process claims; in an automated setting it’s used to reduce claims. Which role would a young supply chain professional find more interesting?

There are many solutions on the market today for automating these transactions but the best ones go a step further by not only automating but managing processes for you – removing completely from your enterprise the most burdensome non-value added work, yet delivering to you the valuable data needed for management decisions.

Some companies acquire and manage automation software – a viable option but less valuable than outsourcing. Software you acquire has to be configured, integrated with your systems, and maintained via license agreement and user support.

In the end, however, how you automate is much less important than whether you do so. With automation services priced where they are today, an attractive payback is not difficult.

Image: Loaded container ship in the Houston Ship Channel, by Louis Vest, CC license

There’s a debate going on in B2B commerce about “touchless” sales order processing. Touchless just means you don’t need a human to watch, review, check, or do anything else to an order when it’s received from the customer, like making sure product codes and pricing are correct.

On the one side are touchless believers and on the other, advocates of automated checks plus a quick review by human eyes, called “click and go.”

Many companies have already achieved touchless order processing on a very high percentage of their order volume, and you need to look no further than Amazon for a very simple example of completely automated order processing. On any given Saturday morning, you, along with thousands of others, made a one-click purchase on Amazon. That order made its way to a fulfilment center uninterrupted by human scanning because of software.

Getting there is not hard.

Touchless order processing in a B2B environment is best achieved with the right combination of order capture method and algorithmic checks based on your company’s business rules.

The key aspect of order capture is simple readability – a structured, typed form or an electronic form filled out via an internet portal, or the standard EDI purchase order.

Algorithmic checks can be written for just about anything – if customer order date is X, then send order to Y. Many companies, realizing they need these kinds of checks, start building them in their ERP systems using custom code.

But before long the DIY route can mean expensive software modifications as companies seek to automate more and more of their inbound order processing steps. I know of one company whose order checks are so complex that some of their large customer orders can take up to several hours to process.

It is much better, in my view, to outsource the order check process by streaming your orders through a 3^rd party-hosted application. This allows almost unlimited creativity in order check logic because you don’t have to wrestle with your ERP code.

You can also buy packaged software to do order checks, but why would you want to license more expensive software, hire and train people to maintain it, buy a server for it to run on, and manage all the future modifications, upgrades, and integrations with your ERP system? If you’re thinking about using EDI services companies for this function, don’t. Outsourced EDI wasn’t built for this type of work.

While “click and go” may be suitable for a small universe of customers, adopting this method for all orders defeats the purpose of automation, which is in the end freeing up supply chain talent for more valuable work.

Maybe software should be packaged like this?  Photo: Tetra Pak Package Portfolio, by Tetra Pak, CC license

A “packaged application” is software already built, coded, tested, used by other enterprises in your industry, and hopefully a solution that will meet most of your needs.  In general I recommend using packaged applications (why re-invent something?)

But a packaged application is not ready-to-use, in any sense of the word. The word “packaged” is kind of a misnomer. You won’t find a warehouse management system in a shrink-wrapped box on the shelf at Best Buy. A packaged application is simply one whose features and functions match in general terms what you want the software to do, but which still needs to be configured for your business. Configuration (also called setup) involves a lot of work and expense.

Much of the time involved in configuration is not in setting up all the data and parameters, but in deciding what data and parameters to set up. What data do you want to/have to set up for each customer? Should employees be “suppliers,” so that you can reimburse them for travel expenses? Do you want to manage your inventory levels according to min/max parameters or days on hand, or some other way? In most enterprises, decisions like these aren’t made by one person – groups of people get involved, and all those meetings and explanations have to be scheduled, and someone has to herd everyone into a decision. Not a quick process.

Packaged software is an annuity business. A software company survives in the long run because it is able to collect annual maintenance and support fees from its customers while providing custom development services and a stream of version upgrades. The support fees can be 20% to 25% of the original cost of the software license, so to the software firm, it’s like selling a new system to the same customer every four or five years. In exchange for the fees, the customer gets access to support desks, can have the software firm make modifications to the system usually on a time-and-materials basis, and automatically gets some upgrades and patches (or fixes) as well as user guides and maybe some technical documentation.

Recurring support revenue is highly profitable for vendors selling packaged applications. It is not unusual for big packaged software vendors like SAP, Oracle, and JDA to have this type of revenue represent 60+% of its sales while incurring only 5% or 10% of its operating expenses.

If you are selecting a packaged application, understand that your vendor will try to sell you the traditional on-premise solution, in which you will own and host the software while paying the vendor for additional licenses, upgrades and custom developments, plus the annual maintenance fees of 20% to 25% of the original license cost, which, on a license costing $500,000, for example, would be $100,000 to $125,000 per year.

And therein lies one of the most debated and disruptive topics in the software market today: the move away from the traditional on-premise (also referred to as perpetual license) model to a service or subscription-based model.  It is not exaggerating to say that the perpetual license model has in a way been the drug, the stream of highly profitable revenue, sustaining the software industry the past two decades.  Stay tuned.

All your apps are in the cloud(s) now.  It’s OK.  Photo: Paul VanDerWerf, Potts Harbour, Hartswell, ME.  CC license. 

Hyperscale computing (HC) may sound like something only NASA and Google need.  But any business doing any kind of commerce with web sites can potentially benefit, as can brick and mortar companies who are highly dependent on 24 x 7 x 365 operations and no longer want to buy and maintain servers.

Hyperscale computing is computer processing power and storage that can be scaled up or down instantly, in large amounts.  Hyperscale computing relies on distributing computer tasks to multiple servers (distributed computing). You could do this on your own, duplicating your server environment and buying extra servers and the software needed to distribute tasks, but all of this is already available in the cloud, by many reputable firms, at costs that are not only low but predicted to go lower.

Why should you care?  Here are two scenarios where you might benefit:

1. Your product is sold at brick and mortar stores as well as your own web site.  Your retail customers (stores) use your primary site to place orders and as a selling tool in their stores.  You frequently promote your products to generate sales, so traffic and transactions on your site fluctuate a lot.  In this case you have to manage high traffic in a high- responsive way, and you need alternatives for backup if your primary servers fail.  Again, you can manage the hardware physically, but the most efficient way will be to virtualize your servers with scaleability built in, which is the whole purpose of hyperscale computing.
2. You don’t sell a thing online but your 24 x 7 x 365 operation is highly dependent on e-commerce with other companies and your own ERP system, the hardware for which is hosted by you or by an external company. Most companies have redundancy backup internally, or they make sure that apps or services they use are hosted by firms that also have redundancy backup.  But what if your vendor has the traditional one or two server backup, and one or both of those fail?  As companies more and more adopt SaaS for applications solutions, they can’t just assume that their SaaS vendor has adequate backup/scale-up capability.

Think of it this way, in simple terms: what you used to think of as big computers in some refrigerated room running all your stuff is now available online, not only in the quantity that you want, but with much more capacity and speed and at much lower cost; but more importantly agile enough to expand instantly as needed, or failover automatically — both data and software — to a redundant environment in cases of disaster, virus, or overload.

Image: Nash assembly line, 1951, by Alden Jewell, CC license

Maintenance and maintenance parts are two other manufacturing sub-categories where the software market offers several competitive alternatives. This category is referred to as CMMS, or Computerized Maintenance Management Systems. These systems keep track of maintenance schedules for equipment, tell you when parts have to be ordered, manage vendor contacts and accounts, manage your parts inventory, and integrate to your financial systems to record parts expense and value of the parts on the balance sheet.

Like many software categories, parts and maintenance management has vendors that range from the big players to firms that offer free downloads and desktop versions. SAP, Oracle, and JD Edwards all have established offerings in this category.

Here, my advice is to select something close to home; meaning a vendor who is either your ERP vendor or a well-known and established software company. The reason is that maintenance is usually a non-critical function, and doesn’t warrant a lot of integration and customization work. It’s possible to get by for years using spreadsheets or vendor catalogs or other tools.

The ROI for this type of application usually comes from saving administrative time in keeping track of maintenance schedules and keying purchase orders and receipts for parts into your financial or ERP system. Manufacturing applications are no different from other software in that they need data to deliver the benefits they offer. That means someone has to key this data in, unless the software is getting data from a connection to another application.

Purchase orders, part numbers, receipts, parts usage, and lots of other data have to be entered or uploaded into a maintenance management application. This is one of the downfalls of software, not unique to manufacturing applications but maybe more prevalent in that category because the manufacturing floor is not the place you normally have the people who enter data: the quality, accuracy, and timeliness of the software’s output is directly correlated to the quality, accuracy, and timeliness of the data going into the application.

A maintenance management or parts management application will also change your internal ways of working. The software can’t read your mind; it only knows what you tell it. If your work force is sloppy about entering data or about workflow procedures like scanning parts into and out of the system, you won’t get much but headaches from the application.

Photo: Ministry of Information, Singapore; William Cho

The term “enterprise information management” seems to capture the whole world, right? But this term applies to the indexing, searching and compilation of information (not necessarily data) from all of the places in your enterprise where documents might reside.

Gartner defines EIM as “an integrative discipline for structuring, describing and governing information assets across organizational and technological boundaries to improve efficiency, promote transparency and enable business insight.”

It’s hard to tell where document/information management leaves off and (data or information) analytics begins. This is part of the mashing up of software functionality that is going on in the market today.

Information is everywhere – in emails, presentations, documents stored on a company’s server, individual user hard drives, servers in the cloud, etc. So traditional search software is somewhat ineffective, because it expects data or documents to be neatly organized inside a box where it can simply sort through data and return matches to your query.

Modern enterprise information management (EIM) software is different because it can search multiple and geographically and systematically separate sources according to terms defined by the user. It does this usually through a web browser.

The market for these tools arose because companies generated tons of documents without any “filing” standards, other than placing them on a corporate shared drive or on people’s PC hard drives. As a result, it was almost impossible to assemble all documents within a company’s four walls related to a particular customer, vendor, product, project, formula or activity. The ability to perform this type of search is especially important to legal professionals, who must respond to government inquiries or parties involved in litigation. This type of search is referred to as e-discovery.

Just a few years ago, I worked on a project like this, except it was referred to at that time as a records retention project, and we installed software from vendor L. The software was basically a search tool for the company’s numerous internal file directories, and required the indexing of every file according to pre-established criteria, and the establishment of a document hierarchy and permission levels. It also assumed that all of the company’s 1,200 employees would store all of their documents on the company’s shared drives, and no longer use their PC hard drives to store files (this was not realistic).

Today, the company that used vendor L is implementing a different system that is capable of locating files anywhere within the company’s network – shared drives, hard drives, emails. In less than 24 months, software that cost over $1 million to implement was rendered obsolete.

EIM usually includes e-discovery tools, and tools for managing content or knowledge, such as user guides, formulas, troubleshooting guides, business process steps or standard operating procedures, system diagrams, and documents critical to retaining official records.

Clearwell Systems, acquired in 2011 by Symantec, is a leader in the e-discovery field. Symantec also offers other EIM solutions. The Symantec web site says this about the Clearwell e-discovery application: “The Clearwell eDiscovery Platform, nominated as a Leader in Gartner’s 2012 Magic Quadrant for eDiscovery, provides users with one seamless application to automate the legal hold process, collect data in a forensically sound manner, cull-down down data by up to 90%, and reduce review costs by up to 98% through the use of Transparent Predictive Coding.”

My advice with this type of software is 1) like any software, garbage in = garbage out, so make it easy for users to do what they need to do for compliance; otherwise users will invent ways to work around your application, not use it; 2) whatever you are archiving must be important so put it in a secure environment with a redundant backup; and 3) as soon as you index, categorize, and digitize your enterprise information you will think of new ways of using it so pick a vendor with a wide range of services and solutions.

Photo by Meredith Cook at Breckenridge, CO on a “blue bird” day, a clear day following a fresh snowfall.  It’s unrelated to SaaS or Cloud (or is it?); just nice to look at.

SaaS and cloud are starting to be used interchangeably (“we’re looking for a cloud solution”) but they really are not the same thing.

Software-as-a-Service (SaaS) is: software that is made available for use based on access to features, time, number of transactions, number of users, or a combination of variables.  A ‘cloud’ is simply a server – a computer you don’t own or maintain – that sits somewhere other than in your building, that you access to run applications or store data.

SaaS describes a type of software, cloud describes a type of platform.

So you can see it’s possible to take applications that you own, and put them in ‘the cloud,’ and also possible to use software you don’t own, but pay for based on usage, that is sitting in your data center with all your other applications.

But there are more important distinctions.

Type of Software-as-a-Service: Is it software that only you access (single tenant), or is it an application that many other people or companies use (multi-tenant)?  Multi-tenant is generally lower cost, but with less specialized functions for your particular enterprise.  Is it truly SaaS, or just a full cost, configured-for-you application hosted by someone else whose costs have been spread out monthly over 5 years to look like a SaaS solution?  True SaaS works like a subscription: sign up, pay by month and use it; when you no longer need it, you cancel.

Type of Cloud: Is it a private or public cloud, or a hybrid?  A private cloud is a single tenant environment (your enterprise) where you control access and have firewalls for security and where you can define the hardware.  A public cloud is where you are paying for a part of an existing cloud server environment; here, you “rent” space and the advantage is flexibility, low cost, and the ability to scale capacity up or down based on your needs.  Hybrid clouds offer both private and public spaces for you to use.

Let’s look at examples; in both cases we will use the scenario of a manufacturing company selling to major retailers in the U.S. and Canada.

True SaaS:  You contract with a company that offers tools for analytics (software) together with point-of-sale (POS) data for your products for your largest retail customers.  You pay by month to access and analyze POS data. The costs vary depending on how many report levels you want to see.  You access the application via internet, anyone in your company can use the service, and you can cancel at any time.

True Cloud: For purposes of experimenting with business intelligence applications, you purchase database space from a vendor, at a cost that varies depending on how much space you use.  You can scale up or down in terms of the storage you need.  You can connect to this space with a variety of tools for transporting  data and you can install and remove applications easily.  For running your business day to day, you can host your most critical applications in this cloud, and have in reserve an identical cloud with servers ready to take over in cases of disaster or over-capacity of your main servers.

Before you accept at face value the terms ‘cloud’ or ‘SaaS,’ make sure you understand what the vendor is telling you. Ask for details and explanations.  What the vendor thinks is cloud or SaaS can certainly be different from what you expect.