BPM: Supply Chain
BPM + SCM = New efficiencies across the enterprise—and beyond
By Crystal Bedell, ebizQ Contributor
Essentially, supply chain management (SCM) consists of a subset of business processes, and that makes it an especially good candidate for BPM. In fact, processes and process-improvement capabilities are typically embedded in SCM systems.
The problem: All too often, enterprises don't use those functions effectively. Those falling short of their SCM goals—especially in terms of inventory optimization—can often benefit significantly from evaluating and optimizing their business processes.
Starting with SCM basics
SCM involves coordinating and integrating the key processes that make up the supply chain. "A process is a way that a company gets work done. Processes define what an organization does," explains Joel Wisner, professor of supply chain management at the University of Nevada, Las Vegas. "These key processes would define what a supply chain is for an organization, too."
Because BPM involves automating and standardizing processes or parts of processes, it can provide plenty of benefits when applied to SCM.
"One of the characteristics of supply chain is that end-to-end processes cross multiple barriers within and across organizations," says Robert Kugel, a senior vice president with Ventana Research, a benchmark research and advisory-services company. "Because of that, a lot of handoffs have to take place." Automating those handoffs and ensuring consistency and timely execution not only speeds up processes, but helps minimize errors, saving time and money.
BPM can help achieve the ultimate goal for most SCM platforms: reducing or optimizing inventory. "Anytime you speed up processes and reduce errors, it will support optimizing inventory," Kugel points out. "If your execution of purchases and deliveries is more accurate, you'll have less stuff lying around and less stuff to physically move around than if you have errors in what you're ordering and what you're delivering."
SCM and BPM
Most SCM platforms come with some form of built-in BPM. The real questions, according to Kugel, are: Is that functionality sufficient, and are you using it to its fullest? "Often, companies may cut corners when implementing supply-chain and ERP [enterprise resource planning] software because the implementations are so expensive," Kugel says. But in many cases, that penny-pinching ultimately means that companies won't reap the returns that they'd hoped to see.
Kugel says it's important to step back and evaluate how such software is being used. He advises companies to learn and apply SCM and BPM best practices, both generally and specifically for their industries. He also recommends sending users to key vendor conferences "to find out what's possible, learn best practices, come back and persuade the organization that process improvements are worth implementing."
Optimizing SCM processes: More than technology
Of course, technology is not an end in itself. "It comes down to understanding that software is just a tool to help companies that are doing the right things do them better," Wisner says. "The idea is that if you're doing a reasonably good job, then software applications can help you do those things better. If you're doing a lousy job at something, then software is not the answer."
That means considering other factors in addition to your technology. "You have to take into account the people, the process, the technology and the knowledge that enables it," says Jeffrey Varney, a senior advisor for the APQC, the American Productivity & Quality Center. "To be successful, you need to integrate these four things."
Before implementing any technology, of course, it's important to first understand your processes. "Process is implicit in everything we do in our businesses, whether we know it or not," says Varney, who also leads APQC's Process Improvement Practice. "Those processes, if we don't have an understanding for what they are, can get messy and inefficient in a hurry. Those processes exist. The real question is: Do we have an awareness of them? Do we know where [in the enterprise] people do processes differently, and can we enforce a common approach?"
BPM gives organizations the perspective needed to identify supply chain processes, structure them in a way that's effective and identify process owners. But experts emphasize that users must be involved in these efforts.
After all, "a process isn't much of a process if people that should be involved aren't involved, particularly in areas of planning and reviews," Kugel says. "If you don't have all of the people involved, it's going to lessen the effectiveness of the process you're trying to manage. If you don't have input from the right people, or the right people who should know what's going on don't, then the execution of that process isn't going to be that great."
Process ownership must be in place and those process owners must understand their roles and how they need to fill them, Varney says. If owners aren't willing to adhere to established processes, they'll never take hold. By the same token, those overseeing BPM efforts should identify parts of the process where deviations and establish a channel for owners and users to report when and why a process doesn't work. "If you define processes that are so rigid that they don't allow variations, that can handcuff people and prevent them from using the processes correctly," Varney says.
With numerous processes comprising the supply chain, it can be difficult to determine where to begin with business process improvement efforts. Varney's advice: Start small. "Don't try to do it all at the same time," he says. "Look at what's strategically important and what will drive success, and focus on key initiatives that will drive success and greater value."
For example, you might start with a small piece of the procurement process and fine-tune your approach as you progress. But the effort should be slow and strategically driven, Varney emphasizes. "Getting processes infiltrated into the business can be challenging. But you'll eventually get champions in the business itself who will say, "This is working. You've gotta do this.'" With that support, you can then more easily extend efforts into other supply-chain processes.
Is your company reaching its SCM goals? If so, ebizQ editors would like to hear about your experience. Contact Site Editor Anne Stuart at firstname.lastname@example.org.