Firms still disappointed by supply chain investments

Businesses globally invest more than £11.6bn a year on technology to improve their supply chain, yet half of these companies are...

Businesses globally invest more than £11.6bn a year on technology to improve their supply chain, yet half of these companies are disappointed with the results.

A study by strategy and technology consultancy Booz Allen Hamilton said most efforts failed because they did not challenge the fundamental structure of the supply chain.  Instead attempts are made to improve performance within existing limitations, often by installing expensive new technology.

Of 200 companies surveyed with assets or annual sales of more than $1bn, the level of dissatisfaction with IT system investments stood at 45%.

The most common reason for expectations not being met was an inability to forecast effectively (56%), followed by implementation issues and delays (48%) and unrealistic expectations about the impact of technology (44%).

Companies making considerable gains opted to relocate factories or outsource non-core functions rather than simply install a new IT system. Enterprise resource planning (ERP) software was the most popular investment choice (71%) followed by systems for inventory and warehouse management (54%) and order management (40%).

The most frequently cited benefits companies expected from IT systems solutions are not lower costs, but lower inventory levels (80%), increased customer satisfaction (71%) and better delivery reliability (69%).

The study also found that the most successful companies were the ones where the chief executive officer was personally involved in setting the supply chain agenda.

"This should be a wake-up call for CEOs to go back to basics and pay closer attention to operations; supply chain efficiency improves when CEOs roll up their sleeves and get involved," he said.

Typically companies making the biggest financial commitment received the best return on their investment. For example, 21% of companies spending $25m or more on supply chain improvements said results exceeded expectations, compared with only 5% of companies spending $1m or less.

Booz Allen received nearly 200 survey responses from manufacturing and industrial companies with assets or annual sales of more than $1bn in North America, Europe, Asia and Latin America.

Respondents included chief operating officers, chief financial officers, chief administrative officers, manufacturing/operations vice presidents and directors and logistical/shipping directors.

Sandra Rossi writes for Computerworld

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