The IT-enabled supply chain: Key to future success

By William C Copacino -- Logistics Management, 4/1/1998

In 1990, I wrote a column in this magazine that explained why information technology (IT) was critically important to logistics management and suggested that the importance of IT to logistics would increase. This prediction clearly has been realized, if not exceeded.

IT developments over the past eight years have enabled companies to achieve a quantum leap in their supply-chain performance. Those that do not have robust "IT-enabled supply-chain" capability, by contrast, simply can not compete effectively in today's business environment. An IT-enabled supply chain requires the following elements:

* Enterprise Resource Planning (ERP) software, which links functions such as finance, sales, distribution, materials management, and production planning in an integrated way with a common database. ERP is particularly valuable for linking global operations and providing a current and common view of a corporation's operational status, such as current sales by customer or geographic area, inventory status, and so forth.

* Decision Support software, including supply-chain optimization and demand-planning software. These programs, which include such capabilities as forecasting, Distribution Resource Planning, manufacturing, scheduling, network analysis, operations planning/optimization, and transportation scheduling, often are very important for effective supply-chain management. These capabilities are being integrated with ERP software as ERP vendors expand their software's functionality and conclude alliances and formal product-integration programs with decision-support software developers. This convergence is one of the most powerful developments affecting the potential of supply-chain management.

* Manufacturing and Logistics Execution software, which manages shop-floor control, costs, documents, warehouse-management systems, transportation, etc. The integration of this software with the types of operating software mentioned above is contributing to enhanced supply-chain performance. The emergence of real-time inventory-development software, moreover, provides companies with entirely new tools for logistics management.

* Channel Integration software, such as electronic data interchange (EDI) and new approaches such as collaborative planning, forecasting, and replenishment (CPFR) and other Internet-based applications. The emergence of these software packages is allowing companies to manage the extended supply chain more effectively and efficiently.

To develop distinctive supply-chain capabilities, companies still will need to make the most of their supply-chain infrastructure, operating processes, and organizational design in addition to fully using IT support. Nevertheless, with advances in application software, network linkages, and the ability to integrate more types of software, an IT-enabled supply chain will be at the core of differentiated supply-chain strategies in the new millennium.

William C. Copacino is managing partner of Andersen Consulting's Strategic Services Practice for the Americas. Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Andersen Consulting's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.