The IT factor

The IT factor

The globalization of commerce has made it necessary for companies both large and small to have a world view - a big-picture, global perspective that helps them see the possibilities for their business in their entirety. It's particularly essential for manufacturers whose markets demand that they source from overseas.

Consider that a U.S. apparel company might source fabric from China, manufacture garments in Vietnam, send them to Italy for custom design work and ship the final product to a stateside warehouse for retail delivery. There's no pulling off that complex, urgent piece of multiparty commerce without a world view - and some sophisticated logistics technology.

Pulling it off in an economical way comes down to far more than technology. It takes a global view of the supply chain that extends well beyond the physical means of moving products and considers the impact on corporate finance.

The need for advanced IT solutions may seem obvious, but research from Aberdeen Group suggests that a surprising number of companies still have a long way to go when it comes to having the kind of sophisticated global supply-chain technology that can help them make crucial and timely financial decisions.

According to eyefortransport's 2006 Fortune 500 Supply Chain & Logistics Challenges Report, many Fortune 500 companies consider their global supply-chain technology inadequate to provide the kind of timely information required for budget and cash-flow planning. They have cargo visibility but no fiscal visibility.

The global supply chain has been relatively ignored because it traditionally has been a small part of a company's business mindset. The world has changed, however, and companies now realize that neither their IT systems nor their fiscal models are set up to support globalization.

With global sourcing growing rapidly, companies have been caught off guard and are scrambling to close the technology gap. Without fiscal models to account for costs throughout these systems, and, in most cases, without additional staff, supply-chain managers face the daunting task of managing this activity using makeshift systems, faxes and phones.

Because the supply-chain technology void affects logistics managers' ability to deliver crucial financial data, some CEOs and CFOs have noticed and are now joining the technology crusade. This may open a window of opportunity for logisticians who can tie technology investments to a business case outside the supply chain to secure needed funding for global commerce tools. After a company decides to invest in technology, the next question is whether to develop solutions in house or partner with a technology or logistics provider. According to the Global Institute of Logistics' Global IT Council, organizations are increasingly choosing to forgo proprietary solutions and seek outside help.

Upfront investment and implementation costs are primary factors. Maintenance is another. So is speed to market. Most supply-chain departments don't have the budget to buy external technology, and multiparty, collaborative practices are not a core competency. They also can't be confident that the technology solution they build today will support their needs five years from now. They need to be able to combat inefficiencies now and in the future.

How do they do it? By having fiscal visibility within their supply chains. It's unrealistic to try to solve every problem at once. For most organizations, achieving fiscal supply-chain visibility should be both the immediate and ultimate goal, and it can be accomplished in steps.

First, pinpoint the area of the supply chain that can benefit the most from a quick technology upgrade and make that change. Keep in mind that technology is not the magic fix for global logistics problems. Technology for technology's sake is nothing. It must be accompanied by skilled people and efficient processes. That may make it a larger investment, but it will reduce risk and improve return.

The next and most important step is to account fiscally for the total supply chain - not just international inbound or domestic distribution, but every aspect from purchase order to point of purchase. Fiscal visibility, from purchase order to point of purchase, is the essence of supply-chain efficiency. It quickens cycle times and reduces inventory investment. It also draws interest and excitement from chief financial officers, who invariably come knocking on logisticians' doors asking, "What's next?"