A recent study by Ohio State University evaluated which supply chain execution systems were most critical and also which ones lent themselves most easily to getting funding for implementation.
New research from Ohio State University has found that transportation management systems are the simplest supply chain execution systems for which to build a business case.
The study, Evaluating the Business Case and Approval Process for Supply Chain Execution Systems Acquisition, is based on a survey of retailers, manufacturers, wholesalers, supply chain service providers and consultants, and was commissioned by the transportation management systems provider Eyefreight.
Authored by Jim Hendrickson, a professor in the Marketing and Logistics Department of the Fisher College of Business at OSU, the report sought to better understand which systems that act as an extension of enterprise resource planning (ERP) systems were most critical, and then which ones would be easiest to attain funding for.
The study found that ERP were considered the most critical systems underlying supply chain execution, with 89 percent choosing ERP, compared to 72 percent for warehousing management systems (WMS), and 69 percent for transportation management systems (TMS). Forty percent said supply chain visibility or control towers were critical.
Meanwhile, 86 percent of respondents said that an ERP was not enough to manage supply chain execution alone. And TMS and supply chain were deemed the most critical systems that act as extensions of an ERP.
The report then delved into whether certain specialized supply chain systems, such as a TMS or WMS, were more valuable due to their ability to manage complexity, or due to cost savings. In this evaluation, TMSs were considered most critical, both in terms of business value, and in terms of an extension of an ERP.
The study also considered how quickly various systems met their “break-even point” – essentially the point at which a system has saved its user an equivalent amount to what was invested in the system. TMSs and parcel management systems were the quickest to return to this point, with both under a year.
Sixty-four percent of respondents said TMSs met this break-even point within a year, and 89 percent said that point was met within 18 months. Those numbers for supply chain visibility systems were 22 percent and 44 percent, respectively.
“It is interesting that both of these systems deal foundationally with the shipping costs which have become a larger percentage of the total supply chain spend due to e-commerce, globalization, and the emphasis on reducing inventory by using transportation as ‘rolling inventory,’” Hendrickson noted. “As a result, companies without these systems would likely be at a competitive disadvantage compared to those with the systems.
“Supply chain visibility/control towers typically require a broader implementation across many facets of the supply chain to tie together real-time data to evaluate for disruptions, etc., which would drive a larger investment and take more time to achieve value.”
Since the study was focused on making the business case for supply chain execution system investment, it also looked at which characteristics of an organization were more likely to lead to successful approval of such investment.
It’s little surprise that nearly 90 percent of companies with $1 billion or more in revenues have a formal process in place for business case and project approval. That dropped to 80 percent for companies with revenues of $500 million to $1 billion, 51 percent for those with revenues of $100 million to $500 million, and only 6 percent for those with less than $100 million.
The report also found that the business case for supply chain execution investment needed to have a firm return on investment plan over three to five years and the impact on the company’s budget. However, including technical details of system implementation in the business case actually hurt, since that information tended to confuse the decision makers.
For more see the attached PDF.