Healthy Decision Making for SCM Applications

Working paper from Ehsan Ehsani of

As business pressures on companies’ value chains have been intensifying during the last 15 years, we have been witnessing a movement toward implementing IT initiatives in supply chain era. The focus of such initiatives is usually cost reduction through optimization of the inventory and process automation, or enhanced visibility in the supply chain.

Unfortunately many of such initiatives fail to fulfil their purpose and this brings a question to the
mind that how can we improve success rate of supply chain IT initiatives? This question provided
a motivation for us to study the underlying problems in the IT planning and implementation
and not surprisingly, we noticed that many of the issues arise from the way the supply chain IT
initiatives are treated in the companies and specifically the process of decision-making.

In order to find an answer for our question, we conducted a thorough analysis of the decisionmaking process in one client in the retail sector as our main case study. We also conducted a number of interviews with other players in the company’s supply chain, namely its main suppliers and customers.

Suppliers, distribution channel players and customers are not the only stakeholders in a
company’s supply chain initiative. So we discussed our findings with supply chain software companies and planning and implementation consultants to enrich our insights and validate the results at the industry level.

Our results were quite fascinating: We found out that supply chain software can no longer be treated as a black box. Companies need a system in which all stakeholders in the supply chain, including not only the board, internal customers and related areas such as finance and IT department have the necessary input into the decision making process but also company’s suppliers and customers.

In addition to fostering innovation through the chain, the above mentioned system provides two
main benefits: First, it prevents a single function, typically IT, being blamed for poor decisions. It
also prevents users from later complaining that the systems don’t perform as expected.

Having an effective Supply Chain IT Governance system requires the senior managers of the
company to attack fundamental problems in supply chain decision-making such as communication and involvement of the players and then try to develop a suitable mix of structure, processes and communication protocol that responds and supports company’s strategy.

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