The term “supply chain management” was first introduced in the early 1980s and was primarily used in manufacturing to refer to the procurement of parts and systems produced by third-party suppliers versus fabrication onsite by the manufacturer.
Today, every company in every industry recognizes the importance of the supply chain to the organization’s success. Broadly defined, the supply chain is a system of organizations, people, activities and components involved in the movement of a product or service from supplier to customer. This includes procurement of raw materials to the actual delivery of the finished product to the customers.
Technology has been a critical factor in the globalization of supply chains for all industries, but most organizations have not included supply chain in their recent efforts to digitally transform the way they do business. While legacy systems supported the initial needs of the supply chain in the past, several factors have changed:
- Globalization of suppliers, which increases the need to communicate with disparate systems in real- or near-real time to ensure an accurate picture of material orders and product deliveries.
- Increasing competition in all industries – resulting in an emphasis on controlling costs, while ensuring quality.
- Greater collaboration among supply chain partners – demanding a need not to just push information back and forth, but also to link key business processes throughout the supply chain to provide better insight and create more value to the organization.
- Proliferation of technology to manage logistics – generating an ever-growing volume of real-time data from technology such as GPS units, RFID tags, route finders, voice-directed picking and smart phone scanners to improve fulfillment and delivery of products.
All of these factors have created the need for a faster, more agile supply chain, which requires the digital transformation of the supply chain. Unfortunately, as companies plan technology upgrades in their businesses, much of the time the supply chain is not top of the list.
In fact, a McKinsey study found that the average supply chain has a digitization level of only 43% and only 2% of the surveyed executives said the supply chain is the focus of their digital strategies. The same research suggests that companies that aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by an average of 3.2%—the largest increase from digitizing any business area—and annual revenue growth by 2.3%.
With the potential boost to the bottom line, why are organizations reluctant to move beyond the systems originally put in place to support the supply chain?
The answer for most organizations is the sizable commitment of financial and human resources to the project. Fortunately, OpenText can help enterprises that want to move from a legacy system to a cloud-based architecture that provides the agility required by supply chain organizations today. Not only are the economic challenges addressed by a predictable, monthly subscription model, but the staff expertise required for the migration to a new platform is provided by OpenText – for the initial migration as well as ongoing data management and integration needs. It is also important to note that during the migration to the OpenText™ Alloy™ platform, there is no disruption to ongoing business operations.
As businesses look for ways to be competitive in today’s global environment, a well-managed, optimized supply chain offers a strategic advantage, but only if it is supported by technology that not only provides the agility and speed required today but also the scalability to easily meet future needs.
Want to learn more about replacing your legacy technology to tap into the full value your supply chain can offer? Contact us to learn more.