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20 May 3 Reasons NOT to implement SAP’s SCM Application

By Mike Raftery)

Sure, everyone wants a more efficient supply chain. After all, every dollar saved in your supply chain costs fall to the bottom line. However, is more technology always the answer? Most definitely not.

Before making a significant investment in time, money and resources make sure you are not acquiring more technology than you really need. It’s easy to throw technology at the problem. Especially the latest and greatest versions with new and exciting features. However, be careful. Technology is not always the answer. As someone that sells technology for a living it is tempting to fall into the trap of “When you’re a hammer, every problem is a nail.” I believe it is more important to get the right answer than the familiar one, so before throwing money at the problem make sure it is worth the effort. There are three scenarios outlined below where I believe technology might not be the answer, and scare resources could easily be more effective elsewhere.

Steady Demand Signal – If your demand signal is steady month to month and week to week then an advanced planning tool might not be for your organization. Supply chain planning and optimization tools excel at taking difficult and risky problems like seasonal demand and new product introductions and meeting those needs in an efficient and cost effective manner. However, if your demand signal is predictable and not likely to change week to week then it might be better to invest in integration with suppliers to reduce material costs than to put more into the demand and supply functionality that comes with SAP’s SCM application.

Available Capacity – It’s fairly easy to decide where to produce the first unit of product, the art of a supply chain optimization application is knowing where to produce the most expensive product when capacity gets tight. Therefore if capacity is not a serious constraint for your business then an advanced planning application like APO might not provide the same ROI for your business as it would for a business that is tight on production capacity. Instead, you would be better served by focusing on studies like sourcing cost optimization or your transportation strategy to reduce costs other than production costs. If capacity is always there when you need it then responsiveness should be the focus, not efficiency.

Organizational Priorities – This is a broad category but very critical when deciding whether or not to implement SAP’s SCM. Overall the point to evaluate is if your organization is ready for the integration and complexity that comes with SCM or any advanced planning application. This can be divided into technology and capability. First, technology. If your organization has multiple supply chain applications from multiple vendors than SCM might not be for you. The interconnectivity of SCM with the SAP ecosystem is its biggest and best competitive advantage. Therefore, the need to re-write custom interfaces to insert SCM into a landscape of various applications severely limits the advantages of this system. Second is capability. Does your organization have the talent, time and dedication required to incorporate the SCM application into the day to day running of your supply chain. Each supply chain is different with it’s own complexities. These are not plug-n-play applications so if a supply chain planning application is not the priority of the entire supply chain organization then maybe it’s not the right time for SCM.

While countless testimonials exist that demonstrate the effectiveness of SCM as a planning application, it is not a one size fits all solution to every problem. It is not an easy button, and cannot solve the most common problems of process and execution. So before diverting scarce resources towards the latest and greatest application, take a moment to understand the problem and ensure it’s the right solution for your organization. That’s the only one that matters anyway.