'Vertically integrated companies will be at a distinct disadvantage'

CRM and supply chain management (SCM) are the hot enterprise apps around the

globe. Companies with ERP deployment are increasingly looking at integrating it

with CRM and SCM. Neil McMurchy, director, research, Gartner Group, advises

clients throughout Asia-Pacific on ERP and CRM strategies and directions. An IT

industry veteran of 20 years, McMurchy has held senior sales and general

management positions with enterprise application vendors such as Dunn &

Bradstreet, SSA, Walker and most recently with QAD, prior to joining Gartner.

McMurchy spoke to DATAQUEST about ERP and SCM implementation strategies in the

Internet economy. Excerpts:

On how ERP and SCM have evolved in the past few years:



The focus of enterprises in the past few years has been on internal

efficiency, which was mostly on how to manufacture efficiently and reduce costs

using ERP. ERP, a term coined by Gartner, was derived from material resource

planning (MRP) in the sixties. MRP was designed to tackle constraints in the

manufacturing environment. Then, in the nineties, it grew to ERP, which looked

at all the aspects of planning within an enterprise. Since then a lot has

changed within the enterprise.

Apart from an increased focus on internal efficiencies,

external competition too has increased with the breakdown of barriers to trade.

So, the challenge is at both ends. To tackle it, organizations are giving more

attention to every aspect of their functioning. They are trying to answer the

key question of how to manage the supply chain.

On the challenges of an effective SCM strategy:



For the integration of supply chain, many of the back-end aspects of the

business need to be managed. Making the technology changes will not be easy,

getting suppliers and manufacturers to trust each other and share the sensitive

SCM information would be the biggest obstacle. Inventory pile-ups and an

effective delivery mechanism becomes high priority. This makes the whole

manufacturing process and supply chain very complex. If this process is not in

proper place, the whole process gets affected and there could be goof-ups

resulting in the loss of business as well as reputation. So, this requires

inventory management to be integrated with the supply chain, else there could be

a rise in the inventory costs; not a comfortable thought for any organization.

These potential savings are almost completely dependent on

developing technology links with customers and suppliers through the Internet so

that manually controlled supply chains are automated. The savings also depend on

suppliers, distributors, customers and manufacturers giving direct access to the

entire process.

On the role of the Web in SCM:



The Internet is changing the methodology of selling. With it I think the era

of making things yourself is coming to an end. Earlier, companies used to build

a product, create a need and then market it. Nowadays it’s the other way. Take

the example of Dell: it takes its orders pre-manufacturing and designs the

computer on the users’ specifications. It is the new model of customized

services that has allowed it to grab such a huge market share. The old-fashioned

supply chain is quickly disintegrating in the Internet economy.

The Web is accelerating the disintegration in every industry

by eliminating the cost advantages that used to come with keeping everything

together under one roof. Indeed, we are rapidly getting to the point where

vertically integrated companies will be at a distinct disadvantage when trying

to compete with companies that use virtual supply chains. Companies held hostage

by in-house suppliers would be slower and less able to respond to changing

products and markets. Digital exchanges are also speeding the disintegration of

supply chains by making transaction costs insignificant. They do so by gathering

far-flung information together and wrapping that information in adding value to

services. This is where we see the potential of B2B, since it is nothing more

than supply chain management as presented by the marketplaces.

What is the potential of SCM in India?



SCM is all about collaborating between enterprises. However, in India, there
still seems to be uncertainty between suppliers, customers, distributors and

manufacturers, specially when a majority of the partners are in the SME segment.

The other inhibitor is that of cost, since products are still not feasible

enough for the SMEs. But we definitely can see the trends moving in a positive

direction, once all these minor anomalies are overcome.

VENKATESH GANESH



in Mumbai