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.

Inside a Red Wing shoe factory.  Photo by Nina Hale, cc license.

The supply chain – a term used to describe all the activities needed to bring goods to market, is a natural beneficiary of a good ERP system because the supply chain extends from one end of an enterprise to another. Often the individual parts of a supply chain run on their own systems – a system for raw materials, another for planning finished goods production and deployment, and so on. It’s possible to have three or four separate systems running different parts of the supply chain. With an ERP system, all parts of the supply chain are connected to one another.

All of the costs and activities associated with each part of the supply chain are in one place, and they are mutually dependent on one another as either inputs or outputs. It is at least theoretically the logical software equivalent of the connected enterprise. And if the enterprise is truly connected and coordinated, then theoretically there is never any wasted inventory, lost sales, out of stocks, overproduction, late deliveries, etc.

A good ERP system will coordinate the supply chain like this:

• It will have a sales forecasting module that allows users to source historical sales data and model it to derive projected sales;
• The projected demand, by day, week, and month, will automatically determine quantities of raw materials needed, where, and when;
• The required materials will automatically be converted to purchase orders for those raw materials;
• The projected demand will determine a production schedule by plant and a schedule of where the finished goods are to be shipped;
• Sales orders are received, checked, confirmed, and sent to the warehouse or distribution center for shipment;
• Sales orders will “consume” a sales forecast so that managers can track shipments against projected sales;
• Sales orders will be routed for delivery via the most efficient method of transportation and transportation providers will be confirmed and scheduled;
• Inventory will be shipped to distribution centers according to the geographic demand of product;
• Distribution centers will receive sales orders for shipment, and shipments to customers will recorded, posted to financials, and used to generate an invoice;
• Warehousing and transportation costs will be posted back to the financial system and the corresponding accounts payable will be created.

For more on this topic, Gartner has some interesting research here.