Supply chain planning (SCP) software is essential for every organization that wants to grow and gain agility in a competitive and fast-paced environment, according to Gartner, Inc. However, many organizations still rely on basic spreadsheet software. To address this challenge, Gartner has identified three steps that SCP leaders can take to develop a strong business case for investment in SCP technology.
“Reducing costs and enhancing decision making are the top factors motivating organizations to invest in supply chain technology. An investment in SCP software can support the needs organizations are looking to address,” said Alex Pradhan, senior principal analyst at Gartner. “However, we see that business cases for SCP software have a high risk of failure when there is a lack of clear communication of the business value to senior leadership.”
Below are three steps to set SCP leaders up for success.
Step 1. Define the Problem or Opportunity
One of the goals of a business case is to convince stakeholders that there is a problem or opportunity and that addressing it should be a strategic priority. Therefore, the initial step must be to clearly define the problem or opportunity and explain how it impacts the overall business. “Although it may seem obvious, this step is often overlooked,” Ms. Pradhan added. “This neglect usually results in key stakeholders not understanding why an investment is needed when legacy systems provide ‘good enough’ capabilities.”
To overcome initial resistance, leaders should socialize their ideas in advance with decision makers and groups across the organization that will be impacted by the investment. “Engaging with key stakeholders early in the process makes it easier for them to understand how the initiative will support the overall business, as well as the impact on their specific areas,” Ms. Pradhan said.
Step 2. Align SCP Technology With the Business’s Strategy and Process Maturity
When developing a business case, SCP leaders might be tempted simply to recommend the technology solution with the most advanced capabilities and features. However, this approach puts the success of the business case at risk if it is not made clear to the stakeholders how this investment will support their individual goals and the overall business strategy. Technology and business process maturity should complement each other.
“Take an organization in the early stages of maturity that is currently using spreadsheets to create its demand plan and wants to improve its forecast. The organization should seek an SCP system of record which can provide support for demand planning capabilities,” Ms. Pradhan explained. “When the organization is ready to advance to more sophisticated capabilities — for example, demand-sensing — it will then have a strong foundation to support these more advanced capabilities. However, an organization that uses spreadsheets would currently not have the business process maturity to derive value from those advanced features.”
Step 3. Determine Benefits, Risks and Costs
A compelling business case for SCP technology should always include credible estimates of financial outcomes and metrics to track relevant business benefits. For example, the business case could focus on how the new technology will improve forecast accuracy, which will help reduce inventory, improve customer service and lower working capital.
At the same time, risks and costs must be evaluated and communicated to stakeholders. “To determine the impact of the technology, consider running a pilot. Many SCP vendors offer a variety of evaluation programs that can help validate financial analysis, determine financial benefits, translate improvement potential into financial impact, evaluate system capabilities and track key performance indicators,” Ms. Pradhan concluded.
Gartner clients can find more information in “How to Build a Strong Business Case for Your Supply Chain Planning Technology Investment”.