For all of its promise, supply chain management software is clearly an underachiever. Some have said that a few executives are unhappy with the investments they made in the software over the last three years. In fact, it's more than a few.

A study of supply chain technology adopters by Capital Consulting & Management Inc. (703-370-2607) found that fewer than 20% believe their investments have shown a clear and favorable return on investment. That's the supply chain management blues.

The disappointment in some quarters is so profound that many executives have asked Bruce Richardson, vice president of supply chain technology for AMR Research (617-542-6600), whether the whole supply chain management phenomenon was just hype.

Richardson has a simple response to that question: 'How can supply chain management just be hype when you're competing against the likes of Wal-Mart and Dell.'

'If you have the right supply chain model, you will win in your vertical,' adds Narendra Mulani, a partner with Accenture (310-726-2700). 'Your overall cost to serve your customers will be lower. You will have the most efficient turns of inventory and the highest working return on assets.'

The ability to leverage those metrics is what results in sustainable higher returns in the marketplace.

Even Wall Street understands the potential. Research by Accenture has shown that the stock prices of public companies that invested in getting their operating model right with the aid of supply chain technology outperformed their rivals by 20 to 25%.

With all of that in mind, Modern looked at why so many users are disappointed with the results they've gotten so far from their supply chain information investments, and what really matters today.

The good news: Supply chain management software does provide a competitive advantage, as Richardson and Mulani suggest. The key is keeping expectations in check, while implementing targeted applications that can leverage your existing operations.

Let's not kid ourselves. There was a fair amount of supply chain hype during the late '90s.

'When the term e-commerce came into play, everyone tried to remold their companies under that banner,' says Lori Mitchell-Keller, senior vice president of market strategy, Manugistics (301-255-5000). 'They decided that the nuts and bolts of making logistics and manufacturing work weren't as important as this new universe of marketplaces, exchanges, and seamless connections.'

That new universe lacked an essential ingredient: the ability to execute around those plans.

'One of the unspoken realities of the supply chain market was that none of the potential results of e-commerce were possible without effective execution,' says Eric Lamphier, product manager, Manhattan Associates (770-955-7070). 'Companies spent millions on ERP, planning systems, and e-commerce solutions but they didn't have the right systems at the end to execute.'

Just as businesses were discovering the limitations of their new solutions, the economy changed. As a result, the premise behind many of the implementations done just a few years ago may no longer be valid.

'In the '90s, the focus was on how to make the most of constrained supply during a period of unconstrained demand,' says Mulani of Accenture. 'Systems were designed to pump the orders out. Today, you've got unconstrained supply and constrained demand. You need a whole different set of metrics and focus to win in today's marketplace.'

In fact, supply chain management still needs to address both planning and execution. Visibility, the one concept that survived the tech meltdown, is the link that ties the two together.

Supply chain planning has always been about providing tools to optimize your supply chain given orders and constraints such as inventory, equipment and manpower.

And planning looks at those issues in buckets of time: strategic, tactical and execution.

'If you think of football, strategic planning is like creating a playbook for the next season,' says Mitchell-Keller of Manugistics. 'Tactical planning is the game plan you create for any given Sunday. And planning at the execution level is the audible the quarterback calls at the line of scrimmage in response to what's happening with the defense.'

Today, those audibles—the planning and re-planning done at the execution level—are becoming more important in supply chain management as lead times and order cycle times continue to shrink.

'Plans change frequently,' says Mitchell-Keller. 'You need to be able to repair around the thing that went wrong, but keep the rest of your game plan in tact.'

That calls for planning systems that can be re-run throughout the day as events occur. It also calls for systems with visibility into the execution level of the business so the system can be alerted to things that have gone wrong.

Along with planning in real time, supply chain managers are seeing the introduction of intelligent planning systems that can keep track of the kinds of things that are regularly going wrong in the supply chain and fine tune operations to avoid those failures in the future.

While planning is still important, supply chain execution rules the market today. In fact, in 2001, corporate spending on supply chain execution systems surpassed supply chain planning systems for the first time.

That in part was an inevitable swing of the pendulum. In the '90s, supply chain planning companies owned the supply chain as companies tried to make the most of their plants, distribution centers and resources.

Now, they're closing the loop with execution systems that can distribute the real-time data that planning and enterprise resource planning (ERP) systems need to effectively do their jobs.

The move to execution is also a sign of the times. 'The benefits of supply chain execution are easier to quantify than planning,' says Lamphier of Manhattan Associates. 'While we have a broad vision for our customers, it's still possible to analyze those benefits and put together a sequence of applications that are discrete and measurable.'

The payback is typically quicker for supply chain execution systems like warehouse (WMS) and transportation management (TMS). Both are generally less expensive than planning systems, and are justified around immediate cost savings involving labor and order accuracy. When top line growth is slow, the only way to keep profits up is to take out costs. That's where supply chain execution comes in: think of it as a bottom-up approach to achieving a company's top-down vision.

As a starting point, a company needs a reasonably robust WMS and some level of TMS just to stay in the game. Moreover, those systems should be radio frequency data communication based to get real-time updates to products that have been received or picked.

At the next level of functionality are the emerging best practices that differentiate leaders in an industry from competitors.

With warehouse management systems, those might include functionality to automate complex picking strategies like task interleaving, cluster picking and batch picking. It's also helpful for picking orders in the sequence in which they'll be loaded and unloaded from a truck. They might also include pick face slotting and labor productivity management.

Within transportation management, being able to consolidate and optimize outbound shipments is a baseline activity for those with TMS. Optimizing and consolidating inbound shipments is emerging as a differentiator for industry leaders.

Finally, as with planning, gaining visibility into supply chain execution activities is emerging as a baseline supply chain management practice. Providing that visibility to trading partners is a best practice and competitive differentiator.

Going forward, supply chain management is still about delivering on the promises made to customers. For that reason, supply chain planning and execution are moving much closer together.

As supply chains become more complicated, winning in the marketplace calls for a much tighter integration between trading partners, contract manufacturers and third party logistics providers.

'Companies are recognizing that I can't think of my supply chain as me and my suppliers,' says Mulani of Accenture. 'So much has been outsourced to suppliers that they truly are an extension of your business. To succeed, you need to merge their metrics with your metrics.'

Going forward, Mulani says, supply chain management will be defined by performance management applications that integrate the planning and execution applications from the purchase of a product to payment of the invoice.

'Over the years, we have always focused on the demand side of our businesses, our customers,' says Mulani. 'Closing the loop on the supply side has never been fashionable. But with winning a matter of managing your cost structure these days, having the right views into the supply side of your business is going to be critical.'

That just might be the cure for the supply chain management blues.

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