UK: Information technology - keep abreast of supply chain IT.

UK: Information technology - keep abreast of supply chain IT. - Break the electronic chain and you will have to bear the cost.

Last Updated: 31 Aug 2010

Break the electronic chain and you will have to bear the cost.

Competitive pressures and rising customer expectations are forcing reduced lead times, faster and more flexible delivery schedules and cost reductions on businesses. This presents enormous challenges for SMEs in particular.

Typically, they are the 'piggies-in-the-middle' in the supply chain, sending either component, module or service upwards, but dependent on others to supply them with materials and services from below. Yet SMEs often do not have the financial clout to insist on the service they need from their own suppliers.

IT development is accelerating the chain's already rapid evolution. If IT systems become integrated across firms, they can deliver enormous improvements in terms of cost, service quality and customer relationships. Getting the supply chain right is such an obvious - but seemingly difficult - thing to do. And SMEs are particularly guilty of stalling. Recent research emanating from the US shows a poor rate of accuracy of order forecasting among SMEs.

The same research adds that a mere 10% improvement in accuracy can add £1 million to the profits of a £30-million turnover company.

The IT which integrates the supply chain can be anything from the simple exchange of electronic mail using the Internet, through to electronic data interchange (EDI) between different organisations' systems. None of these technologies are particularly new. Indeed EDI has been promoted for some 15 years.

But what has changed is the competitive environment which has brought down the cost of the equipment and simultaneously increased the demand for it. This has been accompanied by the market recognition of technical standards built into software packages. This has enabled easy information exchange and simpler upgrading.

Indeed, if there is one piece of unfashionable wisdom which applies to IT, it is: 'Don't be tempted to customise.'

For such integration between enterprises to work, and for every part of the chain to benefit, uncertainty and unpredictability must be tackled wherever possible. Easier said than done, of course, but more effort can be made in the area of timing of orders, for instance. Getting that right is part of a virtuous circle which leads to customers trusting suppliers - and suppliers having the time and resources to deliver quality.

There is progress and of course technology is only part of the bigger picture. A recent UK survey showed that over 55% of respondents were re-engineering their supply chains every year.

With supply chain integration generally driven from the head of the chain, anyone not electronically linked to their customers or suppliers is adding cost and uncertainty to the whole supply chain - and hurting themselves in the process.

Rob Wirszcyz is head of the Computer Services and Software Association.

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