David Aquino, CPIM | September/October 2012 | 22 | 5
Easing the sources of conflict between supply chain and technology functions
Why do so many supply chain and operations management professionals dread working with their information technology (IT) colleagues? Perhaps there is a perception that IT departments are bureaucratic, emphasizing form over function. Maybe it’s due to the approach of keeping IT in charge of the budgets for new projects, which can paralyze the rest of the organization with excessive analysis, justification documents, and delays. Or possibly it is because of the shock that comes when pricing technology labor costs for seemingly basic tasks; after all, other groups rarely are called upon to provide hourly cost estimates or leverage existing overhead.
Another potential source for this conflict is that many supply chain leaders today are technologically savvy and even own aspects of the IT function. These individuals can feel the other parts of IT are too expensive to justify. Regardless, while there is no doubt that a well-positioned, highly capable IT department is valuable to the organization, in order to balance company objectives, the inherent conflicts between supply chain and IT must be addressed.
From a supply chain leader’s perspective, what is the goal of the modern IT organization? From my vantage point, IT provides ongoing support to well-functioning operations and new projects. Those professionals aid in defining and implementing well-crafted supply chain technology objectives surrounding customer-facing environments, planning, globalization, and analytics. However, the IT function has become fragmented in its focus, switching between managing large-scale projects and maintaining the existing infrastructure.
The consequences of outsourcing
As major technology systems such as enterprise resources planning (ERP) matured, communication infrastructure improved. At the same time, cloud-based solutions were getting better, and the economy was being derailed, forcing many businesses to cut costs in this area. Out went strong personnel with years of business knowledge, alignment with company culture, and the ability to understand their customers. In came globally managed infrastructure that aspired to provide better support and more capabilities at a much lower cost.
The trend of outsourcing IT functions has decimated staffs and capacity for new initiatives for the sake of keeping the lights on. At its worst, technology leaders in many organizations have become mere budget managers, lacking the interest, incentive, and capability to really contribute. Key performance indicators wind up overburdened with focus on cost controls, project justification, and reporting mechanisms, while IT departments miss having the creative, intelligent, and entrepreneurial people who are excited about developing the next solution. IT leaders are put in difficult positions; they feel they must justify their existences post-outsourcing and tend to cling to project and budgetary controls, price themselves out of projects, and make the rest of the organization distrustful of their strategies.
How much of your organization’s technology infrastructure is currently outsourced? Too many leaders view each technology dollar as the same and thus do not stratify needs, such as complex versus simple or structural versus differentiating. In the end, organizations that rely on outsourced technology become severely disrupted.
Terrible service; incompetent, frequently rotating personnel; poor relationships among groups; and too many failed projects have led to anger and frustration about how to manage technology. In some cases, the IT organization is supplemented with other personnel, which leads to shadow groups and further conflicts. Even internal support groups become worried for their jobs and frustrated with being unable to provide sufficient service as they are hamstrung with existing contracts.
If you talk to anyone who has experienced a first- or second-generation ERP implementation from a large vendor, you will likely hear a litany of complaints about performance, implementation challenges, and the clear lack of business understanding from both the IT group and the integration partner. Sometimes this highlights legitimate challenges driven by other parts of the company, such as abdication of responsibility, lack of engagement, or lack of committed education on the technology. However, sometimes it simply indicates incompetence.
Modern supply chains simply cannot tolerate ineptitude when improving existing technology. Plainly put, supply chain and operations management leaders often are the most in touch with the organization’s needs when upgrading existing ERP software or functions, such as supply chain planning, sourcing, and advanced analytics.
It’s not surprising there is distrust between IT and supply chain, considering issues such as brain drain of internal IT resources, more focus on cost management, the challenges of being multiple time zones apart from technology personnel, and other shifts in thinking. In order to develop and refine complex technology strategies, it thus is essential to have broad competencies across multiple technologies and platforms, rather than a large, monolithic vendor. Employing at least a few technology visionaries who can transcend departments is crucial.
This means war
One of the consequences of the changes occurring in the IT world is the overlap and obsolescence of the traditional chief information officer. Consider the broad responsibilities that now are assigned to supply chain leaders: They control customer experience, product development, manufacturing, distribution, and parts of finance. My own boss had a clear revelation of the significance and sway of the modern supply chain function. Not only does his department singlehandedly account for the majority of revenue at the organization, but it also is the largest source of costs.
Today’s supply chain leaders recognize the importance of, and are inexorably linked to, critical technology systems, whether planning, distribution, order management, or finance. They do not let these systems fail and impede the company’s progress. They often are involved in the design, development, implementation, and care of myriad systems, and many have suffered through the experience of other less-technologically oriented leaders abdicating their responsibilities. They inherently distrust consultants with flashy presentations and IT leaders who claim to understand the business. There is too much negative history to take that on faith.
Unfortunately, at many organizations, the IT and supply chain partnership has become a competition. Both parties are filled with long-simmering tension and disagree about the value, respect, competence, and intent of each function. Technology is too important, ubiquitous, and expensive to allow this dynamic to persist. Acknowledging the limitations and constraints of outsourcing and redefining operating strategy between supply chain and IT are two ways to move forward.
David Aquino, CPIM, is senior vice president of supply chain and operations at Barco Uniforms. His career as a supply chain executive has spanned many global organizations within the consumer products industry. He may be contacted at firstname.lastname@example.org.