Supply chain management is a core activity for many companies, providing competitive advantage. Any change, enhancement or extension is fundamental to the way the business runs and operates, so addressing the people and process issues is more important than in many other application areas.

“Organisations must take a very serious and comprehensive approach to engaging management and staff,” says William Barry, a partner at Atos Consulting. “They must understand why the business wants to make the change; the competencies they will need to operate a new way of working; and what implications that may have on their colleagues outside their immediate area. If the organisation underestimates the impact the people have on the way the business operates, it will not see the benefits of sustainable change.”

John Cummings, senior vice-president at i2, a supply chain management vendor, puts it succinctly: “Without organisational buy-in for the desired transformation, the business will end up with new software, but the same problems as before.”

SCM software both automates mundane processes and provides information for decision-making. When automating processes, powerful rules, complex mathematical algorithms and closed-loop real-time business intelligence can allow the system to analyse data and make decisions. This speeds up the business processes and leaves people free to make the more important decisions.

Greg Cudahy, global managing partner for supply chain strategy at Accenture, says that most clients find defining the boundary between automated decision-making and human decision-making especially difficult. “We would like to push as many decisions into the system,” he says, “because if you define the rules properly, the person is really a very expensive silicon chip.”

He advises letting the system handle decisions with little variability and low economic impact, leaving people free to concentrate on what is most highly variable and has most impact on the business. Automating decisions could put part of the business at risk, yet not automating them when competitors do, slows them in the marketplace.

Mr Cudahy recalls a client that had used its system to make instant decisions for small unimportant customers. However, decisions relating to large strategic customers had to be approved by senior executives, which could take up to five days.

“Algorithms, constraints and schedules mean that SCM systems tend to be complex beasts,” warns Teresa Jones, senior research analyst at Butler Group. “Unless users understand how calculations are done, they will not trust the schedules. Conversely, when users override what the systems recommend, it is important to know whether they are aware of something outside the system. In this case, such information needs to be brought into the system to improve automation in the longer term.”

As with any system, data quality is critical. Mark Soden, commercial director at IFS, a business software vendor, says that inaccurate data and poor rules could result in the organisation ordering three boxes of envelopes from eastern Europe instead of from a local warehouse.

Ms Jones advises providing an incentive for users to ensure that the system is kept accurate and up-to-date. “Humans make up the vast majority of any supply chain, even in an automated warehouse,” she says. “They need to know the consequences to everyone else if they do not enter accurate and timely information.”

The nature of integrated supply chain management means that this problem extends to customers and suppliers, who must meet similar data quality and timeliness performance expectations. “Organisations sometimes forget to think that way,” says Ed Stark, Capgemini’s North American supply chain leader. “They expect full compliance from their partners and that doesn’t happen without effort.”

John Hannah, practice head at Morse, a business and technology consultancy, points out that extended global supply chains are only as strong as their weakest link. Partners must be involved early in the design process and training. Far too often they are only brought in at the last minute, which inevitably leads to problems.

Mr Cudahy points out that in some parts of the world orders may require a fax or telephone call, even though the system that has been put in place is supposed to be generating automated decisions. “There is an inherent implication for risk and reliability which most people don’t factor in when they are planning global organisational changes,” he says. “They just look at the low cost of operations.”

With so much supply chain information flowing through the system, it is essential to set targets that influence behaviour to drive the business in the right direction. The system must then provide people with the right information at the right time in the right format to help them make decisions to meet those targets.

Adam Jura, manufacturing technology analyst at Datamonitor, points out that supply chain management systems can pull data from most parts of the organisation. He warns that users can be sent too much information and screens full of numbers can make their job harder.

“We find that the vast majority of supply chain problems are metric-related,” says Mr Cummings. “There are not many people with the expertise to really understand what metric structures would ensure that the entire system operates correctly.”

i2 advises its customers to ignore non-cash costs, such as amortisation, depreciation and leasehold impairments. These tend to encourage managers to produce excess inventory in order to reduce their cost per unit.

“They write-off millions of dollars of obsolete inventory, thinking they are doing the right thing, but the metric was wrong to begin with,” he says. “People get bound up in narrow cost metrics and make the exact opposite decisions that they should make. You get very different answers if you look at your business based on cash.”

Mr Cudahy reports that the most neglected area is internal politics. Supply chain management technologies can bring about a tremendous power shift in who actually has the ability to make and control decisions in the organisation. People now have to be available on their Blackberry to make decisions that they didn’t even know about previously.

Advanced planning systems often require new levels of expertise to operate effectively. “Problems can often occur if the people using the system are not planning experts,” warns Mr Hannah. “The challenge is to make sure your people have the right level of expertise to understand the outputs of the system.”

Businesses must plan organisational changes before they deploy new supply chain technologies. “Otherwise they could suffer unintended consequences,” says Mr Cudahy, “that are completely the opposite of what they expected.”