Since the inception of this blog nearly a year ago, I have penned over 50 separate commentaries on various incidents involving supply chain disruption and risk management.  Many of these incidents involved external incidents and threats. But supply chain risk can also originate internally, specifically within internal IT applications.

Supply chain systems integrator Bristlecone sponsored a research study titled The Hidden Risk in Your Supply Chain, (download link for PDF file) and I had the opportunity to speak with Anil Gupta, vice-president of marketing regarding the background and conclusions derived from the study.  For those readers not familiar with Bristlecone, they primarily specialize in the implementation of SAP based advanced supply chain applications. I first became aware of this firm’s capabilities in 2002 when I was global director of product marketing for SAP’s SCM applications suite. Since that time, Bristlecone has expanded its focus into the SAP SRM suite of applications to include spend analysis and strategic sourcing.

The study itself involves over 90 companies, with respondents primarily reporting their role as supply chain, procurement, or IT.  Corporate profile was weighted among companies with $1 billion to $10+ billion in sales. The responses to the survey questions reflect that respondents tend to focus on external supply chain threats (supply risk, price volatility, compliance and customer demand changes), while weighting IT system risk lowest.  While over 60% of respondents directly agreed that on the internal risk inherent in their supply chain management systems, the implication is that IT is “covering their back”.

Often, after an advanced APS application successfully goes live, the parameters of the application tend to remain static or placed on “auto-pilot”, even as the business experiences significant change.  There are many legitimate reasons. Users sometimes do not have the skills or expertise to understand the statistical modeling, optimization algorithms, or technical parameters of an application like SAP APO. They will tend to view it as a “black-box”, relying on either internal IT or a consultant to help when change needs to happen, or planning output tends to look abnormal. IT groups want to insure that users do not “mess” with the configuration and data structures, thus locking-out configuration parameters to specific IT support persons, or contracted consultants.  The problem may also not be solely limited to SAP shops.  Those companies who previously installed an i2 Technologies or Manugistics supply chain planning application are most likely not in any position to switch-out, and thus need to continue to configure and optimize these systems to support changes.

Putting biases aside regarding the fact that this study was sponsored by a systems integrator with business development intentions, this study does provide us a wake-up call for two specific reasons.  First, the current unprecedented downturn in the global economy has caused many larger companies to have to dramatically cut-back in headcounts, sometimes involving either experienced supply chain planners or IT support.  Second, the same forces of the economy are triggering dramatic shifts on either the product demand or supply sides of the supply chain.  Thus, those original configuration parameters may well need attention and modification. Of more concern, if these systems lose relevance, they become supplanted by those mischievous individual spreadsheets, negating all the previous effort and cost to implement an APS.

What about your advanced supply chain systems- has your company have a focus on fine-tuning?  Have certain facilities closed or been idled? Are you experiencing periods of lumpy or no demand?  Are support resources identified, or budgets identified to be able to address these needs?

Food for thought and action.

Bob Ferrari