Supply Chain Management Considerations in Technology Deployment

Technology Infrastructure Deployment as a Process Chain

The deployment of technology infrastructure, that is, the installation of network-attached devices such as routers, servers, hubs, PCs, and POS systems proceeds through a cycle of distinct process stages not unlike those found in manufacturing. In bringing a product to market, manufacturers think in terms of the following sequence of Stages and Processes:

These stages and their corresponding processes constitute a chain. As such, the chain must be viewed as an Integrated System, in order to judge its true contributory effectiveness to the enterprise. Clearly, sub-optimal results are the rule when links between stages are ignored, overlooked, or disturbed through process breakdowns.

The framework of the chain is the same for the product manufacturer as it is for the service organization engaged in the deployment of technology. The difference in the two lies only on the weight given a performance attribute such as price, quality, or service, and in the metrics that measure those performance attributes.

Supply Chain Management in Technology Deployment

A Supply Chain is that sequence of supplier processes that contributes to the creation and/or delivery of goods or services to the ultimate consumer. Supply Chain Management, by extension, relates to the coordination of the flow of goods and information from point of origin to point of consumption. It is axiomatic that supply chain management, to be effective, requires an alignment of suppliers and customers and their corresponding processes.

In principle, the goal of an effectively managed Supply Chain is simple: deliver the right goods-in the right quantities-at the right time-and at the right cost. In practice, however, this remains an elusive goal for most enterprises.

The reasons for this are varied and complex. They stem, however, from a fundamental failure to view the supply chain as a whole. Enterprises which focus on anything less than the whole chain of processes experience only tactical yields that disguise the true cost and impact to the business. As a rule, there is tension between supply chain processes (a common trade-off is the cost of maintaining on-hand equipment inventory vs. fulfillment times) which, if left unresolved, can impair the performance of the chain as a whole. Cross-functional barriers, too, can impede supply chain management performance. In those instances, executive leadership is necessary to frame the enterprise strategy for all participants in order to rise above narrow departmental objectives.

Other factors, such as relying on many suppliers-rather than few-to provide services across the chain, or focusing exclusively on one performance attribute, again, yields results that fail to grasp the true cost to the enterprise. In the latter context, price continues its long-standing supremacy as the single most important arbiter of supplier selection. Other important attributes such as quality, and service are distant factors which rarely overturn price as decisive supplier selection criteria.

Finally, enterprises which insist on performing supply chain activities internally-while ignoring the compelling financial, and "stick-to-core-competencies" advantages of outsourcing these processes-experience less than positive results.

The Impact of Rapid Technology Innovation

The view of technology deployment in the context of a supply chain gains added importance in the face of the ever-increasing rate of technology product refresh cycles. This quicker pace of innovation ensures the quicker onset of obsolescence.

The days are a dim memory when a technology asset placed into service allowed the enterprise to remain current, if not competitive, for a period of up to 5 years. Granted, technology growth demands were in the past far more modest than they are today and so capacity had the potential to be more long-lived. Refresh cycles in information technology today, although different from one technology family to the next, are bracketed within 12 to 36 months. The good news, of course, is that capacity improvements out-distance new technology acquisition costs by approximately two-to-one during the same time frame.

A failure to respond to these accelerated refresh cycles, in the mistaken belief that an asset "still has life" because it remains functional, has the effect of increasing the asset's total cost of ownership. This is because stretching the asset beyond its refresh cycle increases obsolescence (either by increasing disposal cost or by reducing the benefits of recovering the old equipment on a timely basis), support, maintenance, and repair. A more esoteric, though no less crucial consideration, is that refresh cycles-unduly delayed-jeopardize upward compatibility and migration paths.

Clearly, technology deployment in the enterprise must be in concert with product refresh cycles in order to achieve maximum financial advantage. Supply chain management considerations, in turn, ensure that technology deployment is not viewed episodically but as a continuum in good asset management practices.

Vetting a Supply Chain Management Partner

The foundational values required of a Supply Chain Partner to the enterprise customer are as follows:

• — Core competencies across the entire chain of processes
• — A willingness to align or integrate internal business processes, people, and information
     systems with those of the customer
• — A philosophical corporate stance to serve as a true strategic partner to the customer.

For some of the reasons cited earlier, many enterprise customers fail to grasp the true import of a supply chain. In technology deployment this failure is commonplace, as this area of the business has long been dominated by technical issues. Paradoxically, many companies-while struggling mightily to ensure the timely and cost-effective delivery of vast quantities of SKUs-fail to analogize the problem to their technology deployment supply chain.

Conversely, the enterprise customer who values the relevance of supply chain processes in technology deployment faces an entirely different challenge. For these customers, the challenge is securing a strategic supplier-with the necessary foundational values-from a supplier base plagued by transactional and point-solution providers.

Few suppliers today can represent themselves as supply chain partner candidates to the enterprise customer as they have failed to make the necessary investments in people, processes, facilities, and systems. The principal hurdle for these suppliers, however, is far more daunting: it is an institutional inability to rise above routine transaction processing and embrace a customer-oriented culture.

It is this cultural inertia in the supplier space-conspiring with enterprise procurement practices which, time and again, fail to view technology deployment in the context of a supply chain-that accounts for the oftentimes still-born contribution of technology in meeting strategic business objectives.

Are We Partners After All?

Given the many impediments and difficulties to effective supply chain management execution in technology deployment, how do the enterprise customer and supplier organizations ensure a willingness to work together?

Unfortunately, corporate slogans alone won't make it happen. Each partner, enterprise customer, and supplier must undertake an assessment that will answer, conclusively, whether they can be counted on to be an enthusiastic proponent of integrating operational processes for mutual benefit. An assessment such as is being proposed here is hard-hitting, and gets at issues such as:

• Is the customer willing to make a multi-year commitment for services to its strategic supplier partner?
• Is the supplier prepared to integrate people, processes, and systems within the enterprise organization-and to tailor these for the benefit of the customer?
• Is the customer willing to offer the supplier a right of first refusal for services incremental to the existing service agreement?
• Is the supplier willing to offer most favored nation's pricing for a given bundle of service?
• Are customer and supplier alike inclined to have fewer, but deeper, broader, more long-lasting relationships?

Answers to these key assessment questions are an early warning signal to gauge whether the parties are in a position to rise above the mere procurement of transactional services. Negotiations between the parties might still fail in the end, but a careful assessment screening process should keep conceptual surprises to a minimum. In any event, choosing a strategic supplier should be undertaken as an organized and deliberative process with representation from those functions of the business potentially affected by supply chain issues. Clearly, this selection process transcends the procurement function and in effect becomes more "global."

The Bottom Line of Working in a Supply Chain Partnership

As we enter the 21st century, the viability of narrow-focus, transactional suppliers is diminished; many will perish, as their only lever for survival will amount to nothing more than continued price reductions to attract and keep customers. This is clearly a game with no winners.

The supplier who has only the price card to play had better be the low cost producer relative to its competitors. This is because continuous discounting by a supplier who is not the low cost producer is unsustainable and can ultimately prove ruinous. The enterprise customer, for its part, who is heavily dependent on a no-frills, low cost provider may find any cost advantage nullified if the supplier's quality and service are not, at minimum, on a par with the higher priced competitors. In the worst case scenario, the enterprise customer may find itself with mission-critical services in the hands of insolvent suppliers.

The ever-increasing complexity of the supply chain will inevitably drive enterprise customers to seek strategic suppliers imbued with the foundational values alluded to earlier. Gradually, it will become clear that strategic suppliers, given the opportunity to know as much about the customer's operations as the customer itself, will yield life-cycle benefits unattainable by the steady stream of point-solution providers parading through the customer's revolving door. Generally speaking, the enterprise customer will benefit from the learning curve advantages and insights that will accrue to the strategic supplier over time. The upshot of this collaborative undertaking to the enterprise customer will be a shorter, tighter, and more flexible supply chain. And, consequentially, reduced total transaction costs, faster deployment times, improved service levels, and improved returns on capital invested in technology.

It is no mere coincidence, as repeated research studies have suggested, that companies who master their supply chains are also among the leaders in terms of financial performance when compared to their industry peer group.

The benefits to the strategic supplier are similarly profound and are centered around the creation of a revenue annuity that-given warranted service performance-is unassailable by the competition. In this environment, marketing dollars gain added leverage as customer churn is minimized. Additionally, continuous improvement initiatives amortized over a long-lived service agreement will inevitably reduce the per unit cost of service delivery, thereby enhancing operating margins.

The strategic driver for both suppliers and enterprise customers seeking to work in a new, strategic, and collaborative partnership in technology deployment is a fundamental belief that supply chain mastery is a core business strategy. As in any endeavor, however, there are leaders and there are laggards. At TIS, we have incorporated into our business model the strategies, the people, the systems, and the capabilities to assist leading enterprise customers to excel in their Technology Deployment Supply Chain.