My regular trips to Boston bring me past some impressive multi-story buildings on the interstate. The big and legendary ERP providers maintain a huge presence hard to the highway, and their signs illuminate their many storied buildings and the bumper-to-bumper traffic sitting beneath them. These are the pillars of manufacturing technology and it would seem that they do a very good job in servicing their customers, at least based on their presence.
But in many smaller buildings and offices in the same industrial parks, smaller companies are creating modular and cloud-based ERP and manufacturing software applications that are very much meeting the needs of their customers as well. The variety of ERP and related software continues to level the technology playing field in the supply chain.
The top down approach where larger customers thrust their technology requirements down through the supply chain is changing. Driven by aging legacy systems, stronger and more independent suppliers and a broader menu of cost effective ERP and related products, some suppliers may now be dictating the technology relationship with their customers. This change in the technological relationship may cause some risk for both sides, but it can also offer an upside potential.
In any event, ERP economics show that most every company can have the technology. Suppliers, even smaller ones, may have more sophisticated systems than their major customers who may even be struggling with cumbersome or outdated legacy systems.
Dealing with the less technically sophisticated
The integration of dissimilar ERP and other technologies may create issues, but at least the customer and supplier are in the same arena, and the integration issues can typically be resolved. That cannot be said for suppliers who ignore technology or employ antiquated systems that may work for them but cannot interface where and when needed. This increases supply chain risk.
Some organizations that are implementing technology solutions may be leaving some important suppliers in the dust. It is important to see where your major and critical suppliers fit on the technology continuum, and to determine their attitudes and plans. All organizations will have to take a serious look at their existing supply bases to determine technological competencies.
A normal supply base is made up of a range of large sophisticated multi-national suppliers and smaller “mom and pop” suppliers. Both are valuable, and have their place in the supply base. Large suppliers may have vast product offerings, extensive technical support and technology-based systems that dovetail perfectly with your operating systems. You may be fortunate to have a solid relationship with these suppliers.
On the other hand, some suppliers may not be very technology sophisticated, but they offer outstanding service, the products that you need, aggressive pricing and generally great support. While a larger supplier can become technology enabled, the small supplier may still rely on handwritten packing slips and invoices. The smaller supplier may even be more important to your organization than the larger supplier. A non-technology workaround can only work for so long until a decision has to be made about the future relationship.
Changes in technology can shift relationships
Some may question how manufacturing companies running the latest in ERP and other manufacturing operating systems can deal with an extended supply base that might not be able to properly interface with their own systems. An all too common, but inaccurate, school of thought is that the larger companies invest in the latest and greatest technology while their suppliers may limp along with antiquated systems or even no systems at all. Those days are quickly dwindling, as even small companies are sporting the latest ERP tools.
There is also risk with customer driven systems. Big companies running complex manufacturing systems may not be as leading edge as they think. “If a company doesn’t have up-to-date systems, it causes huge losses in productivity with systems down, lack of integrated systems and manual intervention of what should be more automated,” said Ken Glasser, a supply chain professional working for a large player in the high technology capital equipment market. “Some companies defer maintenance and upgrades due to short term productivity losses or the complication of a new system upgrade.” Glasser notes that some upgrades, especially those that are rushed, can actually create additional problems.
It may be an inaccurate assumption as suppliers, especially smaller ones, just may have more sophisticated systems than their major customers who may be struggling with cumbersome or outdated legacy systems. Cloud-based ERP and other manufacturing, planning and operating software may offer a more agile approach to manufacturing, actually outpacing entrenched legacy systems that may offer limited flexibility and process integration with suppliers.
The way forward requires a technology roadmap
Organizations can develop a technology roadmap that includes the technology plans of their own, and of their critical suppliers. After careful analysis of the strategic business goals and objectives, a technology roadmap and related actions may include the following:
- Align the business goals of your organization with your technology initiatives. Include your suppliers and customers for a true look at the supply chain.
- Communicate your technology visions and objectives throughout the supply chain.
- Ascertain supplier readiness. What technology capabilities do your suppliers have? What will they need?
- Continually monitor process and progress.
- Keep abreast of new technologies.
You can also quietly force your suppliers to increase their use of technology and to integrate with yours. Let your critical suppliers know that your company wants to do more technology related activities. Provide your roadmap, and even some training. Allow the suppliers to be familiar with your initiatives, and establish a joint roadmap. Just be careful if they find the burden and compliance too expensive and with a negative impact on their business. They may decide to end the relationship.
Careful planning, a sympathetic ear, a technology roadmap and some good old-fashioned convincing will help your supplier community keep pace with your technology plans. Or yours with theirs.