Supply baffles retail

Supply baffles retail

Few companies would be surprised to hear that IT is crucial to improving their supply chains, but most don't realise that they may not be getting the efficiency boost they expected from investments in supply-chain automation.

That odd dichotomy stood out among many findings in a report presented recently at the National Retail Federation's supply-chain management conference in Philadelphia. Because they are at the consumer end of the supply chain and often deal with thousands of suppliers, retailers are sensitive to inefficiencies in the supply chain.

`The thing that is going to differentiate a company is the effective use of IT,' said Laurie Widder, a senior manager at KPMG Peat Marwick LLP, which conducted the study with MIT. But the report found that more than 40 per cent of 190 companies from a variety of industries have seen no overall improvement from information technology investments in their supply chain.

`It's pervasive,' Widder said.

Some companies don't measure their supply-chain performance rigorously enough to identify any benefits, and others don't adjust their business processes to fit the technology they have implemented, the report found.

Widder said many companies measure only inventory levels, turnover and other basics, not higher-level functions like service levels and whether shipments match demand.

But users said that unless they focus on specific areas, it can be very time-consuming to benchmark something as complex as the supply chain.

A study published in March by International Data Corp found that companies need about five years just to reach the early stages of use for a supply-chain package.

Petsmart in Phoenix has cut travel time and costs by 60 per cent and decreased inventory by 20 per cent by rolling out its SourcingLinks extranet to standardise trading and product development with international suppliers.

Yet the company has only laid the groundwork for supply-chain improvements with a rollout of SAP AG's retail package over the last couple of years.

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