April 1, 2003, 12:00 AM

Large supply chains investments have yet to pay off, says new survey

Less than 20% of companies surveyed, which included retailers and manufacturers, believe their investments have definitely shown a clear and favorable return on investment, Capital Consulting & Management reports.

 

$15 billion invested in supply chain technology over the past three years has returned few benefits, says a new survey of a broad range of companies by Capital Consulting & Management Inc. Less than 20% of companies surveyed, which included retailers and manufacturers, believe their investments have definitely shown a clear and favorable return on investment, Capital Consulting reports.

The survey also found:
--ROI was a factor in supply chain technology decisions for more than 90% of companies, who expected either strategic or operational benefits from such investments.
--Of those who achieved clear ROI from their technology investments, nearly 60% say ROI has been below the level they expected.
--Senior management involvement in achieving the benefits has been limited, with more than 80% of supply chain managers indicating "cursory" or "no" significant levels of attention. Capital Consulting says that lack of involvement is “an especially surprising result in light of the cost and visibility of these investments.”
--Factors contributing to the shortfall in achieving ROI include organizational challenges, long implementation times and inadequate support in driving adoption of supply chain technology.

"Companies need to take a new approach to value attainment in the supply chain arena," said Charles Maynard, president of Cojent Consulting and co-author of the study. "First, you have to have a rigorous methodology that measures and tracks value over the entire lifecycle of the technology - not just during the up-front decision period. Secondly, you have to create the organizational environment that supports and encourages the adoption of new technology so that the value of these solutions can truly be realized."


--Communications: Emphasizing the rationale and expectations for new technologies
--Incentives: Aligning incentives and performance standards to better ensure active participation and support for change
--Organization: Creating an environment that encourages innovation and risk tolerance
--Skills: Identifying and filling the gaps in internal capabilities so that new technology can be fully utilized.

The survey asked companies to assess returns in reducing costs and inventories, cutting cycle times, improving forecasting and increasing flexibility and responsiveness in areas such as planning and execution, procurement, production scheduling, transportation management and order fulfillment.

"The `go-go days` of major supply chain software and hardware investment are largely over," said Scott Elliff, president of Capital Consulting. "Companies now need to turn their attention to improving usage of these new systems within the everyday execution of supply chain activities so that they get the bottom line benefits these systems were designed to provide."

 

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