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3/4/2003
02:07 PM
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Implementation Imperative

Avoid costly supply-chain mistakes by understanding objectives and getting buy-in

Supply-chain management software is already helping companies save millions of dollars by reducing inventory, improving logistics, and tightening production lines. But it isn't cheap. In fact, it's estimated that large companies spend several million dollars per supply-chain project. With such high-stakes investments, especially in today's down economy, it's imperative that IT managers avoid costly mistakes.

There's a handful of best practices IT departments should follow as they work through their supply-chain management implementations, from getting executive-level buy-in to performing application and infrastructure testing before the software starts running the operation.

Perhaps the most frequent advice heard from industry experts and IT managers is: Understand the business objectives you want and need to support before buying any software.

Surprisingly, this key point often isn't taken into account. "Some people buy too much software and end up using only 5% to 10% of it," says Al Delattre, a partner with Accenture's supply-chain services practice. Others buy functionality without realizing that the business lines didn't want it. Still others buy software only to find out all their suppliers use something different, he says. "None of them had really thought strategically about their business."

Before it began implementing software, Halliburton Co. identified the pressure points within its supply chain, then considered how they were affecting overall business goals--and which of these points should be addressed first. "Don't try to solve every business problem you have on day one," says Phil DeFilippo, an IT manager at Halliburton's energy-services division. "Solve the problem that causes you the most pain and use a technology that can expand with you."

That approach was pivotal to improvements made to the supply chain at Halliburton's Carrollton, Texas, facility, which designs and makes surface and subsurface production and completion equipment, as well as services tools for oil and gas wells. The supply chain is an integrated infrastructure of SAP manufacturing and financial applications, i2 Technologies' Factory Planning and Scheduling software, Acsis' real-time data-collection and warehouse-management software for SAP R/3, Intermec Technology's wireless bar-code equipment, and shop-floor execution systems from Apriso.

Phil DeFilippo Photo

Halliburton identified the pressure points within its supply chain, then considered how they affected overall business goals, IT manager DeFilippo says.
"We looked at how we were internally managing our materials and our demand for materials inside our operations," DeFilippo says. What Halliburton discovered was a delay in the time it took to process for final delivery raw materials, such as metals, and finished products, such as tools for controlling well pressure. "There was enormous delay in the operations because everything was on paper. Someone would pick an order, but it wasn't recorded until the end of the day, so we weren't transacting in a timely manner."

So Halliburton set out to improve the process that connects the steps involved in picking an order for shipment and the IT systems that support customer service and inventory apps. "If you don't transact the physical event with the system event, you've lost the fox," DeFilippo says.

Now, thanks to its revamped supply-chain operations, Halliburton knows instantly when materials are received at the Carrollton facility. Halliburton customer-service reps can check a Web-based application to find out where a customer's order is in the supply chain. On-time delivery to customers improved 8% to 12% within three months of the implementation of the warehouse-logistics system from Acsis less than a year ago. Meanwhile, suppliers can check a portal to find out the amount of materials Halliburton will need from them in the near term. So far, the implementation has been under budget and on time, DeFilippo says.

Executive buy-in is always an important element in a successful technology implementation. But IT managers shouldn't forget the employees who are actually going to use the technology. That's been important as Sonoco Products Co. rearchitects its supply-chain infrastructure, which includes multiple enterprise resource planning systems, a Computer Associates' mainframe application, QAD's manufacturing apps, and, most recently, analysis and design software from Optiant (see "Beating Down Inventory Costs," April 21, p. 49; informationweek.com/936/inventory.htm).

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