TECHNOLOGY FOR CHANGE

Smarter Supply Chains: Clarity Is Key

Stephen Wellman | Date: 05-28-09 | Comments

The economic crisis caused many industries to over-cut inventories, making matters even worse. Fixing the failure of just-in-time will require a lot of work from business intelligence and supply chain management vendors.

The current economy is forcing many organizations to rethink their entire processes, many of which have become standardized across a large number of industries. One of the biggest old school assumptions coming under fire is just-in-time, the business strategy that revolutionized thousands of businesses over the last few decades. Seems just-in-time is great for growing markets, but as a tactical structure for a massive downturn it leaves much to be desired.

The Wall Street Journal recently dug into the challenges facing businesses using just-in-time processes in today's challenged marketplace:

The recession has exposed a harsh side effect of the supply-chain system. Because modern industry rewards suppliers with the leanest inventories and fastest reaction times, when economic crisis struck, tech companies up and down the line contracted as sharply as possible in hopes of being the ones to survive.

Forced to guess at demand for their products in a plummeting market, everyone hit the brakes, hard. An examination of the electronics supply chain�from retailers all the way back to makers of factory machinery�shows that, at almost every stage, companies were flying blind as they cut.

In short, many companies cut too deeply, hurting them more than helping. The lack of clarity in the supply chain�coupled with the just-in-time assumption that leaner is always better�led many industries, especially retail, to over-cut inventories, adding even more pain to their already bleeding balance sheets.
Fixing the failure of just-in-time will require improved technology, especially in the form of better business intelligence and supply chain management, but it will also require fundamental shifts in the business processes and inventory strategies. There is a lot of work ahead for BI and SCM vendors in the months to come.