By Alan Radding
It's spring. The birds feel it. So do the bees. The whole world, it seems, feels it — love, romance — yes, everyone and everything, including the consulting industry. And the object of the consulting industry's ardor and affection? Supply chain management.
Like the fabled girl-next-door who has been there all along, supply chain management has been a central part of business in one form or another since modern business began. But it has looked decidedly plain and unappealing during the last few years, as consulting firms and their clients chased after dazzling dot-coms, B2C and B2B initiatives, portals, and e-business marketplaces. After a drab, downright depressing winter, however, during which even the hottest of the hot stuff suddenly went stone-cold, supply chain management appears to have a new luster. "Supply chain is one of the fastest growing segments of the business. Not necessarily the biggest — that's still ERP — but the fastest growing," says James Kilpatrick, partner, Deloitte Consulting, Toronto.
The appeal of supply chain management today is money — specifically, direct savings. By better managing the supply chain, at the least by aggregating purchasing to drive bigger discounts, managers feel that they will get a fast return. "Supply chain represents one of the levers a manager can pull to take out costs," Kilpatrick continues. Until the economy turned sour, executives were happily willing to pursue the more nebulous benefits of on-line business — vague expanded opportunities or unspecified competitive advantages. Not these days. Beset by plummeting stock prices and falling orders, executives want measurable results fast.
Some observers already are dubbing supply chain management ERP II and touting a return to the glory days of big ERP implementations. Supply chain management promises to help organizations manage external processes the way ERP allowed organizations to manage internal processes. But many in the consulting industry were already distancing themselves from ERP — clunky, cumbersome, internal-facing proprietary systems that did not play well in the Internet economy. To supply chain management proponents, an ERP II label sounds like a bad movie sequel.
"You definitely don't want to think of it as ERP II," says Kate Murphy, research director, AMR Research, Boston. Rather than ERP II, a new buzzphrase for supply change management, partner relationship management, is beginning to catch on in some quarters, she reports.
Whatever you call it, supply chain management refers to a broad set of practices, increasingly supported by information technology, that address how the organization acquires the products and materials it needs to conduct its business. This ranges from the procurement of raw materials or production subassemblies to the purchase of MRO (maintenance, repair, operations) goods, everything from paper clips to toilet paper.
In the current economic turmoil, supply chain management software companies have been hammered along with the rest of the technology stocks. The two industry leaders, i2 Technologies and Ariba, took big hits this spring, announcing substantial layoffs along with financial results that came in below market expectations. The economic distress was so great that Ariba felt forced to cancel its announced acquisition of Agile Software.
The Courtships
Despite the dismal financial performance, consulting companies are flocking to partner with supply chain management software vendors, as the consultants scramble to catch what they hope will be the next wave of information technology consulting. For example, A.T. Kearney, a wholly owned subsidiary of EDS, joined with i2 Technologies, Inc., in a supply chain management venture called 2Source. 2Source combines A.T. Kearney's ongoing strategic sourcing and procurement consulting with i2's direct and indirect sourcing and procurement software.
"2Source is really focused on procurement," explains Joe Raudabaugh, A.T. Kearney vice president. Procurement represents a subset of the overall supply chain management process. Today, 2Source exists as an alliance, with the consulting firm providing strategic procurement strategy and i2 providing the software. If the alliance is successful, he adds, it "has the potential to become a joint venture."
A.T. Kearney already has a successful procurement practice that generates as much as $600 million a year in consulting fees. However, much of the company's best consulting efforts in the past suffered because its clients "didn't have the technology to enable and enforce the new workflows," Raudabaugh notes. The alliance with i2, he continues, gives A.T. Kearney technology that will support the new procurement processes it develops for its clients.
A.T. Kearney clients can buy its consulting services without i2 software or bundle the consulting and software together for single-source accountability. Similarly, i2 customers can hire A.T. Kearney for consulting services or use any other consultant. "Neither company wanted this to be an exclusive relationship," Raudabaugh reports. If systems integration is required beyond the strategic procurement consulting provided by A.T. Kearney, the consulting firm steers the work to EDS's eSolutions group.
A joint team of about 40 employees from both companies works the alliance. Many of them are located together in Dallas, although others spend most of their time at client sites. A governing committee consisting of top executives from each company oversees the alliance. EDS, having bought out Sabre's hosting business, also handles any hosting.
