The following commentary is the author’s weekly guest blog appearing on the Supply Chain Expert Community web site.
On the Information Week web site, Dr. Larry Tieman, former VP at FedEx and experienced CIO has posted a series of commentaries on the theme: Why CMO’s and CFO’s Will Rule Above CIO’s. The premise of Tieman’s commentary is that disruptive forces such as cloud and mobile computing will continue to reshape the role of IT and potentially dilute the executive influence of CIO’s and the IT organization over time. His premise is that while the title of CIO will survive at some companies, particularly those where IT is an integral component of the business model, fewer CIO’s will organizationally serve at the C-Level, diluting their current influence in the organization. The commentary also provides scenarios where IT-savvy CFO’s and CMO’s will chip away at current IT strategies. As an example, Tieman postulates that as the CMO spends more money on customer and market focused IT projects, the CFO will opt to challenge existing IT infrastructure costs and cut the IT budget. Cited is a recent Economist survey of 536 C-level executives with a finding of 57 percent respondents expecting their IT function to significantly change, and 43 percent indicating that their company will increasingly use IT as a commodity service, bought only when needed.
Supply chain and their corresponding IT teams may elect to either agree or take issue with the statements made in the above commentary. That, I submit, would be non-productive. What’s important is to focus on and prepare for the implications of this trend on current and future supply chain business process and technology based initiatives.
There are two areas for teams to consider and prepare.
The first challenges the assumption that existing ERP backbone systems will continue to be the primary choice for any future supply chain related technology needs. Why? The principle recurring cost-driver of ERP systems is the burden of annual maintenance charges, along with the associated internal IT costs of various functional and best-of-breed systems integration needs. As was pointed out in the IW commentary, the new era of cloud-based and Software-as-a-service offerings in the marketplace can provide more cost efficient alternatives for businesses, alternatives where IT infrastructure costs are assumed by the software vendor, and where costs are a predictable monthly charge of operating costs. Tech-savvy CFO’s are already challenging existing assumptions related to IT infrastructure burden, and that is sure to spillover to the supply chain. We can identify with the operating principle related to systems: “if it isn’t broken, don’t mess with it” Forget that premise! In some cases, if it costs too much, you will have no choice but to mess with it.
While on the subject of software systems, supply chain teams must also be prepared to take more of the leadership role in technology selection. In many cases this is already occurring, and our Supply Chain Matters view is that the ERP vendors are in for an even more stark reality to the shifting influence of supply chain teams on the ultimate selection of technology. No longer is a “lock” on the resident CIO a given, and no longer can technology vendors tailor their marketing and sales pitches solely to IT.
The second challenge is the assumption of securing the priority of the C-Suite in approving critical supply chain related investments. Many in our community can relate to past situations where difficult cost savings extracted from supply chain operations were later utilized to fund higher priority sales, marketing or product-related investments. Supply chain teams were the loyal soldiers who made the sacrifice for the sake of business. However, too many cuts exposed highly vulnerable processes monitoring quality, conformance and other important requirements and have come back as disruptive costs. Some have led to costly product recalls or negative consequences to the product brand. With organizations such as sales and marketing potentially able to pitch their own IT spending initiatives such as an enhanced online presence or customer focused business intelligence directly to the C-suite, supply chain executives and their IT support teams may find themselves in yet another situation of being “the good soldier” and foregoing needed supply chain process and technology investments.
Supply Chain Matters submits that what this implies is that the new success in supply chain leadership demands much more tech-savvy knowledge, the ability to understand the tradeoffs in recurring IT costs, along with the ability to leverage and influence cross-functional and cross-organizational IT initiatives.
The summer months are often a time to focus on individual and organizational training needs, and a time where teams come together in “retreat” to discuss organizational goals. A good investment may well be a discussion on enabling a much more tech-savvy procurement and supply chain organization.
What’s your view regarding tech-savvy supply chain leaders?