March 31, 2023 Supply Chain Investments Need Integration to Pay Off

Investments in supply chain agility and visibility must be integrated across the entire ecosystem to gain the biggest return.

By Mahesh Rajasekharan, CEO, Cleo

Organizations that neglect to optimize their supply chain investments with integration could find themselves stuck with a system of disjointed parts, unable – or only barely capable – of working together.

Supply chain innovators, technology providers and investors are hard at work trying to develop new and innovative ways of overcoming the myriad challenges faced by supply chain-oriented businesses today. New challenges seem to pop up on a near-weekly basis, from fluctuations in demand and supply levels to unpredictable blockages caused by weather events and geopolitical unrest. Companies, consumers and investors are taking note of these challenges, and recognizing a market ripe for investment and optimization. While the development and deployment of new solutions and technologies will undoubtedly improve operations and increase supply chain resilience, organizations must consider how these technologies will work together from an IT perspective, which necessitates a strong understanding of ecosystem integration.

The Key Drivers of Supply Chain Technology Innovation & Adoption

There are many factors currently contributing to the destabilization of global supply chains, including geopolitical conflict, economic drivers such as inflation, workforce issues and resource availability being among the top challenges. While the pandemic highlighted certain issues and elevated the topic of supply chain efficiency to a household discussion, these ongoing trends are causing challenges that came to a head during the pandemic to persist.

In response to the ongoing challenges, technology providers and investors are pouring money into potential solutions. In 2021, $11.3 billion in funding was invested in supply chain management (SCM) companies. By 2022, the global SCM market was valued at around $28.9 billion with expectations to increase to $45.2 billion by 2027. However, investors are also beginning to recognize that not all supply chain technologies are created equal and are now prioritizing investments in solutions that enable automation.

How Companies Plan to Use New Supply Chain Technologies

On the adoption side, companies are also taking note of technologies that can provide critical revenue-driving capabilities. Recent research shows that 80% of companies have been motivated to direct budget increases of 10% or more toward supply chain technology investment. Businesses are investing in new technologies and solutions in an effort to regain control of supply chain operations and success. The key benefits companies expect from technology investment include increased automation and visibility, access to skilled talent and the replacement of outdated legacy systems, all of which contribute to increased control and predictability.

The solutions available to supply chain companies include modern systems to support enterprise activities ranging from inventory planning, to quality management, to production optimization and more. There are a host of systems and solutions that can meet these demands, from enterprise resource planning (ERP), to quality management systems (QMS), to manufacturing execution systems (MES), among others.

Each of these solutions address certain aspects of supply chain governance that can be controlled within the four walls of a company. But how will these solutions work together to generate value for the organization? In supply chain technology, the whole is often greater than the sum of its parts. Just because you have four wheels, an engine and a steering wheel doesn’t mean you have a fully functional car. In the same vein, just because you have invested in modern ERP, MES, QMS and other systems doesn’t mean you’re a fully optimized, modern enterprise.

From an external perspective, how will these investments improve communication and coordination with supply chain partners, customers and suppliers? If each partner is investing in different systems, or even the same systems, how can the benefits provided by those investments extend across the entire supply chain to ensure that companies aren’t investing in optimizing internal processes only for partners to drop the ball and disrupt supply chain operations down the line?

Why Ecosystem Integration Is Critical to Supply Chain Technology Investment Success

Identifying and deploying optimal technologies is great – it pushes enterprises further along toward their digital transformation goals and enables them to generate higher levels of productivity and revenue capture. However, supply chain-oriented businesses must remember to address a critical component of the IT landscape at the beginning of, and throughout, the digital transformation journey: Integration.

It can be easy for organizations to consider integration as an afterthought. But 99% of businesses report that integration issues resulted in lost revenue upwards of $1 million. With that in mind, let’s explore why integration is so critical to supply chain and technology investment success.

Business leaders want greater control of supply chain processes, both inside their companies and across their ecosystems of partners, suppliers and customers. Achieving such control requires visibility across enterprise and supply chain operations. Connecting systems between supply chain partners provides end-to-end visibility by enabling the constant flow of real-time information between interested parties – ensuring that all participants are operating on the latest updates and communicating strategy changes with one another.

Achieving greater visibility becomes even more critical when one considers that companies are opening new marketplaces (39%) and adding new lines of business (38%) in efforts to mitigate supply chain disruption. As more business lines and marketplaces are added to a company’s portfolio, there are more operations to monitor and adjust as needed. Automating the integration of new marketplaces and lines of business reduces the manual effort required to monitor and adjust new business operations based on new information.

Business leaders also want to enable automation, which increases agility, efficiency and scalability without increasing costs. Manual processes prevent companies from operating at peak efficiency and are generally more costly than automation in the long run. Integrating systems across an enterprise’s IT landscape and supply chain partners allows automation-driving data to be shared between stakeholders. Thus, automation capabilities are improved and more robust, as information that drives automation can be collected from various systems for analysis.

Ecosystem & Capability Enablement Requires Integration

Integration not only serves as the foundation of digital transformation, enabling the connectivity of core business systems both internally and across partners and suppliers, but also as a tool that maximizes the potential of digital transformation and technology adoption. Supply chain challenges will continue to emerge and dominate the attention of businesses across nearly every industry. Investors will continue to pour billions of dollars into companies and technologies that promise a solution to those challenges. However, regardless of the specific solution or technology a company invests in, integration strategies must be top of mind to maximize that investment. Organizations that fail to adequately consider integration in their transformation planning will find that, while they’ve invested in all of the necessary parts to create and optimize certain functions of supply chain management, the sum of those parts does not equal a whole (in this case, a fully functional and controllable supply chain).

Mahesh Rajasekharan is President and Chief Executive Officer of Cleo, a global software company that delivers ecosystem integration solutions to help companies discover and create value across their multi-enterprise ecosystems.

Since joining Cleo in 2012, he has built the company into a global integration software leader, overseen tremendous revenue and geographic expansion, and shaped the company’s reputation through thought leadership, product innovation and customer-service excellence.

He holds a Ph.D. in Industrial Engineering from Texas A&M University, an M.S. in Industrial Engineering from Texas Tech University, and a B.E. in Mechanical Engineering from Anna University, India. He also earned an MBA in Finance, Strategy, and Marketing from the Haas School of Business at UC Berkeley.

Subscribe to Industry Today