Supply Chain Best Practices Consortium

Supply Chain Best Practices Consortium Technology Investment Executive Seminar – Supply Chain Leadership Forum Track C, Session 3 September 11, 2007 ...
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Supply Chain Best Practices Consortium Technology Investment

Executive Seminar – Supply Chain Leadership Forum Track C, Session 3 September 11, 2007 1

Session Scope This session covers best practices in the decision making process needed for investment in supply chain technology.

ƒ Setting Investment Criteria: Return on Investment (ROI) is only part of the equation when it comes to deciding where to make technology investments. ƒ Setting Priorities: Identifying where to make the investment. ƒ Post-Implementation Audits: Getting more value from your investment by reviewing a project after its completion.

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What is the Investment? Supply Chain Capital Budget Average planned capital expenditure budgeted for supply chain technology

$10,955,600

Planned capital expenditure budget for supply chain technology as a % of revenue (Highest)

1.15%

Planned capital expenditure budget for supply chain technology as a % of revenue (Average)

0.13%

ƒ Technology investments, year on year, are likely to be highly variable and cyclical in nature. ƒ Technology investment budget amounts tend to directly reflect an organization’s position in the system life cycle.

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Who Approves the Investment? Who Approves Supply Chain Related Technology Investments Board of Directors

Financial Mangement

Executive (non Supply Chain) Information Technology Management

Supply Chain Management

Small Investments under $50K

Medium Investments up to $1MM

Large Investments above $1MM

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4

Why Do You Make the Investment? Data from our benchmarking respondents suggests a shift in priorities. Priorities For Adding or Enhancing Supply Chain Technology Percentage of Respondents Event Management Performance Monitoring Status Reporting Warehouse Management System Transportation Management System Auto-ID Barcoding Freight Audit EDI software Vehicle Location and Messaging Fleet Management Software Asset Tracking Auto-ID RFID Security EDI XML Upgrade 0%

10%

20%

Less Important

30%

40%

Important

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50%

60%

70%

80%

More Important

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What Drives the Investment Decision? ROI, company growth and providing better customer service were cited as the driving factors for supply chain investment/upgrade. Criteria for Making a Supply Chain Investment Percentage of Respondents Past Investments Risk Management Capital Availability Competitive Response Competitive Advantage Customer Service Supporting Company Growth Based Upon ROI

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 % Less

Important

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More

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Post-Implementation Audits Post-implementation audits are needed to quantify project benefits and improve future project planning and execution. Companies Who do Post-Implementation Audits No 37%

Yes 63%

Who Completes the Post Implementation Audits Financial Management

76%

Supply Chain Management

68%

More Than One Group

56%

Information Technology Management

40%

All Three Groups

28% Copyright © 2007 Supply Chain Consortium. All rights reserved.

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Post-Implementation Audits Of the respondents who did post-implementation audits, their ROI was clearly better than expected. Quantifying the Results Expected Vs. Actual ROI Worse 20%

Better 80%

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Post-Implementation Audits Reported ROI - IRR Transportation Management System Over 50%

Warehouse Management System

30% to 50% Status Reporting

10% to 30% Up to 10%

Performance Monitoring

Negative

Event Management 0%

10%

20%

30%

40%

50%

60%

70%

ƒ It is clear that TMS has the greatest variability, from negative ROI to over 50%. ƒ What drives that variability? Is it the type of system, the scope of the implementation, or the execution of the implementation? ƒ WMS is clearly the best technology to implement from an ROI perspective.

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Potential Group Discussion Points ƒ Who first defines the need for a technology investment to be made and who initiates the process? ƒ Once the need has been identified, how do companies determine which specific solution set can best address it? ƒ How do you best ensure that ROI goals/targets are met? ƒ How financial return-oriented is your company with respect to technology? ƒ What other benefits do you and company leaders expect from technology investments? ƒ What process do you have for deciding if an upgrade or a new system and new technology is the right investment/solution?

Copyright © 2007 Supply Chain Consortium. All rights reserved.

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Benchmarking & Best Practices References Information on technical investments can be found in the following references: Online Interview Section/Topic Profile Finance Supply Chain Technology Technology Investments Inbound Orders Vendor Collaboration

Reports and Analysis Analytical Reports Supplier Collaboration Retail Supply Chain Best Practices Review - Supply Chain Technology

Copyright © 2007 Supply Chain Consortium. All rights reserved.

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