0 Replies Latest reply on Feb 23, 2010 2:51 PM by RDCushing

    Supply Chain Management R.O.I.

    RDCushing Master

      I do not consider myself a first-line expert on SCM. I am, for lack of a better term, a "systems" guy -- but not as you might be thinking. By a "systems" guy, I mean system-think, as opposed to silo-thinking.  My focus is on improving the performance of the entire system -- i.e., the entire organization -- where "improvement" is measured as making more money tomorrow than it is making today.


      Therefore, I would like to hear from you folks that are tightly focused on SCM.


      I find that in the ERP world, almost without exception, when ROI (return on investment) is discussed between a technology vendor/reseller and a client or prospect, it is discussed in the roundest of numbers and the most general of terms.  In my regular blog, I use the analogy of someone putting an additive into their car's engine. They talk about their company's impending improvement from new technology like they talk about their engine running "smoother," "faster," or "longer" without reference to "how much."  There are almost never any metrics employed by either side in the engagement.


      Is this equally true in the SCM technology world?


      If not, or if you wish it were not so, how do you or would you engage in a conversation with a client or prospect about the specific and measurable improvements coming from new supply chain technologies. Even more specifically, how would you discuss these improvement in the following terms:


      1. Increase in Throughput, where Throughput is defined as Revenues LESS Truly Variable Costs (read, generally, 'raw materials' and 'cost of outside processing per unit of revenue')

      2. Reduction in Truly Variable Costs (TVCs), such as reduced landed costs for raw materials, outside processing, or subassemblies

      3. Reduction in Inventories
      4. Reduction in demand for new Investments, such as the need to build new, or enlarge an existing, warehouses

      5. Reduction in Operating Expenses, or holding the line on Operating Expenses while sustaining substantial growth in Throughput


      You might want to take a look at the series "ROI is a Responsibility" to get a better understanding of what I'm driving seeking here. Then give me your feedback.