Successfully rolling out a supply chain management system can be an extraordinarily complex and stressful project – not to mention expensive. Or it can be surprisingly simple. The trick is to make good decisions about what you’re getting into ahead of time, so that the considerable benefits quickly outweigh the short term effort.
Here we’ll look at options for medium-sized businesses, tips to make your roll-out a success, and cautionary tales of executions gone wrong.
In this guide to implementing supply chain management systems:
What is a supply chain management system?
Supply chain management systems are tools that integrate every element of a company’s supply chain to help it become more efficient, effective, and profitable. This is done either with on-premise software, through the cloud, or using a hybrid of both.
There’s not a one-size-fits-all approach, so choosing the right system for your business is important, as is its implementation.
Why implement a supply chain management system?
Supply chains have evolved dramatically from their early beginnings to the complex systems in place today. Over the past 30 years especially, the ability to move goods and products around the world on a mass scale has grown significantly with globalisation, inventions like containerisation and barcoding, and the advent of artificial intelligence.
As a result, the linear supply chain has become a thing of the past for many organisations, replaced by a complex web of partners and activities that span time zones, cultures, and political landscapes.
This is why a good SCM tool is so important. Industry leaders predict that in the coming years, more businesses will adopt fully integrated, digitized solutions in order to streamline their activity and secure a competitive advantage.
The right solutions help businesses manage their moving parts more effectively and efficiently. They break down silos and give teams access to essential information in real-time, fostering better collaboration and more informed decision making – something that’s become even more important during the pandemic.
And of course, there’s the issue of profitability: a study from Deloitte in 2014 highlighted the importance of a healthy supply chain to an organisation’s bottom line. It found that nearly 80% of companies with advanced supply chain capabilities reached revenue growth ‘significantly above average’.
Modern SMEs have a variety of supply chain management options.
What supply chain management system options do medium-sized businesses have?
What a good supply chain management system looks like to one company may differ from another, but whatever you choose, quality software should streamline activity across every link of your supply chain.
Here are three of the key options.
1. Enterprise Resource Planning software
Enterprise resource planning (ERP) software integrates and manages all of a business’ key functions under one system, including supply chains, HR, accounting, sales, and customer relationship management (CRM). ERPs are a good choice for companies wanting a business-wide solution.
If you’re looking into ERPs, you’re likely to come across providers like SAP, Sage, Infor, Netsuite and Microsoft Dynamics 365. Two other common products today are the Access ERP and Orchestra:
Brings financial, Materials Resource Planning (MRP) and production software together in a single cloud-based platform. A customisable ERP that can be assembled according to needs, with as few or as many modules as required. Users can choose a fixed implementation plan or a more consultative approach, and scale up as needed with everything from reporting and analytics, shop floor data capture, HR, payroll and hosting available.
A manufacturing production planning and scheduling solution, Orchestrate is designed for day-to-day scheduling, capacity planning and ‘what if’ analysis – a feature that lets users investigate how best to increase production efficiencies, while still improving delivery.
Cloud-based systems offer a cost-effective way to manage and monitor suppliers, inventory and more.
2. Cloud-based software
One decision to weigh up when looking for a new system is whether to choose on-premise software installed on your company’s own servers; cloud-based software accessed from the web; or a hybrid of both.
On-premise software has certain advantages, particularly for businesses that want to use their own infrastructure and hardware, or don’t want to rely on internet connection. On-premise also means having complete ownership of how and where data is stored, and is generally more customisable.
Cloud-based systems, also known as Software-as-a-Service (SaaS), can be a cost-effective solution for businesses, and give users real-time analytics, as well as the ability to scale up or down quickly. They benefit from regular upgrades and are serviced by vendors, so you won’t need a dedicated IT function to maintain it.
As more of the world’s business activity migrates online, many providers now offer cloud-based services either exclusively, or in addition to on-site implementation. This includes all of the providers mentioned above, as well as below:
Xero + Unleashed
Unleashed Software and accounting software firm Xero have a plug-and-play integration that allows you to manage the entirety of a business’s inventory and accounting processes. It’s a combination that provides real-time inventory tracking, from purchase to warehousing through to the sale and delivery of products. Data is sent to Xero instantly, allowing businesses to see corresponding balance sheet movements right away. It also syncs customer and supplier database information across both platforms, simplifying stakeholder management activity.
A similar managed integration exists between Intuit QuickBooks and Unleashed, allowing for similar wrap-around functionality. While managed integrations with other app types – including CRMs such as Salesforce and Magento, eCommerce vendors like Amazon and Shopify, and POS systems like Vend – let users expand their stack to cover most core business needs.
Unleashed began life as an inventory management tool, and has expanded into a full business management solution for product-based industries. Features include:
- A B2B eCommerce store, with guest payments
- A mobile sales app
- Production module with serial number and batch tracking
- Purchasing and supplier management, International Commerce Codes functionality, and advanced shipping
- A business intelligence toolset called BI Vision that provides data visualisation in multiple business areas, including supplier performance, inventory, production performance and sales
Industries using cloud-based supply chain management software
The range of industries using cloud based supply chain management is surprisingly broad. Manufacturers, retailers and wholesalers in verticals spanning chemicals and metal fabrication right across to craft brewing and vitamin production, all tend to benefit from a move to the cloud.
Despite their huge differences, what these diverse industries tend to share is a common set of problems.
Problems that cloud-based supply chain management software solves
- Manual mistakes; sales order confusion. Any expanding business is today likely to receive sales orders from a range of sources, from over the phone, to email, via a presence on online platforms such as Shopify or Amazon, via channel partnerships and from salespeople on the road. The nightmare this can create for resource and production planning, purchasing, and inventory management can see growing businesses grind to a halt. A joined-up online supply chain management system will often resolve this pain point. Volcano Coffee Works is a good example of a business that moved past this issue.
- Manufacturing complexity. Tech manufacturers in particular can have extraordinarily complex supply chains, with each product line requiring hundreds of tiny components – each sourced from different countries, and purchased in different currencies. Cloud supply chain management software can be critical for this type of business, with features like serial number tracking of components proving invaluable for manufacturers like the UK’s Aston Microphones.
- Murky margins & confused costs. Complex supply chains are the enemy of accurate cost management, as identical components sourced from different suppliers – or front the same supplier at different times – vary in price according to hard-to-track third party costs such as freight and tariffs. Having a purchasing system that accurately records true landed costs is critical for any business that monitors the margins of each product line and makes business decisions based on product yield. Accurate financial information is also a huge help to the advisors who may be guiding a business. Australian spirits manufacturer West Winds Gin is a prime example of a firm benefiting from accurate visibility of their margins and inventory costs.
When freight charges vary, margin visibility can suffer.
Eight tips for successful supply chain management implementation
1. Know what you need
Before choosing new software, it’s important to work out what your business needs, both in the short and long-term. This might include conducting an audit of existing systems and processes, gathering information from staff and stakeholders, and of course, having a clear vision for the future of your business and your supply chain.
2. Shop around
There are a lot of products on the market, but you need the right one for your business. While one solution might work for one company, it may be too complex, simple, or bespoke for another.
Make a shortlist of the products you feel are best and set up meetings with representatives from your top picks to hash out exactly what they can offer. Tap your industry contacts for opinions and recommendations, and check out online reviews.
This process can take time, but rushing into a decision can cost a business dearly in the long run. Likewise, putting in the time early on to assess your options can make all the difference down the road.
3. Make a realistic plan
Implementing a new system is a big undertaking so before getting started, it’s important to lay out a roadmap and define what success means for your business. Include objectives, milestones, key activity, and timelines, as well as a map of key stakeholders and what their roles in the process will be.
Include metrics to measure success, like the accuracy of demand forecasting, revenue growth, and customer experience.
Be as realistic as possible about timelines and budget – things often take much longer and cost much more than originally expected, so conduct a thorough costing and timings exercise to help anticipate the most likely scenario.
4. Map the risks and considerations
Work with key stakeholders to identify a thorough list of the issues likely to come up along the way. This can include staff not wanting to change software, incompatibility with the systems you or your partners already have, or potential disruptions in your supply chain activity as you change over.
Once you’ve identified the risks, spell out the potential consequences and what can be done to mitigate these. It’s an important exercise in being prepared, but will also be a helpful tool in allaying the concerns of stakeholders, and showing that potential pitfalls are being taken seriously.
5. Communication (and onboarding) is key
This is true for every stage of the process, including before you’ve chosen a new system. Where possible, get senior management on board from the start to make sure they back the change, as well as key staff who will be most affected by the new system.
To do this, you might consider developing a business case. Gather specific evidence showing why the current system is no longer fit for purpose – both for the company’s bottom line (e.g. inefficiencies, waste, or errors) and for staff’s ability to do their jobs well and with reasonable ease (e.g. lack of access to information, siloed working, or clunky or outdated systems). Then demonstrate how a new system would solve these issues.
Continue to communicate through every stage of the process. The more staff know, the more prepared they will be to adopt the system. Don’t forget to include external stakeholders in your communications plan as well. You’ll want the businesses you work with to know what you’ll be using (particularly if they foresee any compatibility issues) and to know what it will mean for how you work together going forward.
6. Train your staff
The best system in the world can fail (and waste a lot of money) if staff don’t know how to use it properly, so make sure to have a robust, ongoing training programme as part of the process that starts as early as possible. Appoint some internal champions for the software to help with this – the more super-users there are, the more access staff will have to help and guidance.
Many software providers also develop their own training videos and courses. Check what training resources your preferred suppliers offer before you make your final decision.
7. Test early and often
There will be bumps in the road for any new system, so test it before it goes live, and keep testing it throughout the implementation phase. Make sure key staff are involved in the process and open a line of communication for employees to share any issues they encounter along the way.
Proactively check in with them as well – speak with staff one on one, and/or set up a forum for people to discuss how things are progressing. This is an important way for users to work out minor issues between themselves, and to identify which are more substantial or need escalating.
8. Monitor your system’s progress
The work won’t end when the roll-out is finished. It’s important to continually monitor how the system is working, what impact it’s having on your supply chain, and how staff on the frontline are finding it.
Lay out a monitoring plan and keep the lines of communication open for feedback from staff and external partners. What you don’t know you can’t solve and issues that go unchecked for too long can grow into serious problems. Monitoring will help you nip those issues in the bud, and give the new system the best chance for success.
Gathering feedback from your supply chain management system’s users is key to a successful rollout.
Digitisation fails to learn from
Supply chain management software can yield significant benefits for businesses when done right, but things don’t always go to plan. Here are some examples from big business where rolling out a new system went very wrong.
One of the most high profile companies to suffer from an ERP/SCM fail was Nike back in 2000. The shoe and athletic apparel giant embarked on a $400 million upgrade for its systems with i2 Technologies to help with inventory and orders for its global shoe division.
Unfortunately, a glitch in the system impacted stock distribution meaning stores couldn’t fill orders. The debacle resulted in $100 million in lost sales and a 20% drop in its stock price. Of course, the problem couldn’t go unchecked, so Nike had to invest another five years and millions of dollars on top of its original investment to get things back on track.
When the US retailer made a move to expand in Canada, things went so badly wrong that in 2015, Target Canada had to file for bankruptcy. The problems started with an overly ambitious timescale to launch stores nation-wide, leaving little time to expand the company’s existing software. Instead, Target chose to use a new system (from SAP) to speed things up.
The decision led to a slew of problems; the difference in currencies and measurement systems (imperial vs metric) between Canada and the US wasn’t accounted for, and the loss of historical data had a huge impact on forecasting abilities. When stores launched, many were lined with empty shelves while warehouses overflowed with stock.
Eventually, the company decided to pull the plug amid a flurry of bad PR and increasingly frustrated stakeholders. It’s one of the more sombre supply chain management system failures and has been widely analysed, including in an in-depth report by Canadian Business which interviewed nearly 30 staff members caught up in the disaster. The impact was significant – Target suffered $2.5 billion in losses and more than 17,000 employees lost their jobs after all 133 Canadian locations were shut down.
Several years ago Revlon was in the market for a new system to integrate its functions after acquiring Elizabeth Arden. Despite having had a successful ERP rollout with Microsoft Dynamics in the past, this time around Revlon chose SAP for the job. In February 2018, the system was rolled-out at its plant in North Carolina to integrate delivery, production, and distribution activity, as well as financial transactions.
Things didn’t go well. It’s chief operating officer at the time, Christopher Peterson, said that issues with the implementation “caused the plant to ramp up capacity slower than anticipated”.
Revlon’s manufacturing abilities were badly hit and it was unable to fulfil orders with some of its large retailers across the US. As a result, its stock price fell by nearly 7% and it lost sales of $20 million. Things were so bad that eventually, its own shareholders sued the beauty company, claiming that the fault lay with Revlon, in part because of poor preparation and planning.
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.