An over-reliance on outdated tools and processes in the supply chain is harming growth, and cutting competitive advantage.
Today’s international business environment is more complex than ever. As this complexity, and volatility, continue to grow, companies need to ensure that processes and tools are up to date. Without doing this, they risk cutting their growth prospects, and erasing their competitive advantage.
Growing global risks, evolving supplier networks, and economic difficulties in key, and traditionally stable, markets all must be factored in. Businesses not taking advantage of Advanced Planning & Scheduling (APS) systems run the risk of much increased costs.
Failure to adapt to new technology also means that companies will be left with limited flexibility to respond to changing market conditions.
Responsiveness and Agility
In the past twelve months, the global economy has suffered from a period of unprecedented, and unheralded, volatility. Events like Brexit, ongoing civil unrest, and the rise of extremist terrorist organisations, have left global supply chains in jeopardy.
Organisations can no longer rest on their laurels and bank on continuing success. Ensuring success in this environment requires robust scenario planning, the ability to adapt quickly to change, and the capability to deal with changing suppliers and business partners.
As many experts have highlighted, procurement and supply chains need to be agile in order to adapt to external changes.
Outdated Tools and Systems
Global supply chain consultancy, Crimson & Co, recently conducted research into the tools and processes organisations were using in their supply chains. At a majority of respondents, they found a continued reliance on outdated tools, and legacy systems.
The research found that over two-thirds of those surveyed still relied upon ERP and spreadsheet systems.
The findings also showed the benefits that an effective APS system could deliver. Respondents highlighted a potential 20 per cent reduction in working capital, 5 per cent increase in service level, 6 per cent reduction in logistics costs, and 3 per cent reduction in the cost of goods sold.
This research has gained more credence in recent weeks, with the bankruptcy of Hanjin shipping, and the associated issues for US retailers.
Failure to Rise to Challenges
Dave Alberts, Director at Crimson & Co, explained:
“A continued reliance upon outdated planning tools like Enterprise Resource Planning (ERP) systems, bolstered by an array of spreadsheets, prevents many businesses rising to these supply chain challenges.
“If supply routes need to change following disaster, or old trade agreements can no longer direct freight transport, businesses leaning on ERP systems can find themselves on the back foot and unable to take advantage of such changes.
“All in all, these outdated tools can result in significantly increased capital and service costs in the case of any changes to the supply chain status quo.”
Alberts also highlighted the need for businesses to update their planning tools in order to remain competitive. Legacy systems inhibit the ability to innovate and improve supply chain processes.
Alberts argues that these companies will likely fall behind more reactive and agile businesses supported by more flexible planning tools.
“There is a clear incentive for businesses to adopt a robust APS system. Through benchmarking of planning and scheduling solutions, companies can quickly work out the systems that need updating and the practices that need improving. They can then work to develop these areas where necessary.
“In most scenarios, the adoption of an APS system can result in reduced overall supply chain costs and greater ability to deal with complex business decisions,” Alberts concluded.