by Thomas Wailgum

Supply Chain Data: Real-Time Speed Is Seductive and Dangerous

Mar 18, 2010
Data CenterEnterprise ApplicationsIT Leadership

Businesses face pressure to make supply chain data available at near real-time speeds to customers, suppliers and partners. But remember, bad data delivered that much faster is still bad data -- and can lead to worse decision-making.

Let’s call it the Wall Street Effect: Many companies now face tremendous pressure to ensure that all corporate data is “up to the second,” just like those traders on The Street who bask in sub-second financial data and those consumer “day traders” who now demand equal speed.

Give me my data, and Give it to me fast!

[ asks: Supply Chains Are Bigger Today, But Are They Better? | Wal-Mart Orders Suppliers to Go Green and Some See Red ]

That “need for speed” in today’s supply chains is one of the underlying messages of a recent report from Aberdeen Group: “Supply Chain Intelligence: Adopt Role-Based Operational Business Intelligence and Improve Visibility.” (Free with registration.)

Given that Wall Street Effect, users of supply chain systems today expect this up-to-the-second data. Customers now look for it as well. The Aberdeen report notes that 21st-century supply chains must collaborate with and respond to customers, suppliers and partners at real-time speeds. Supply chain risk needs to be assessed as it happens.

In several instances, the report’s authors, analysts Nari Viswanathan and Viktoriya Sadlovska, point to a coming shift in historic supply-chain strategy: from the traditional “supply chain organization” to a “customer-focused customer value chain organization” that utilizes “advanced BI technologies that are pervasive and role-based.”

That may be a buzzy mouthful, but the message is clear: Supply chains must become quick to respond—to anything, anyone and anywhere in the chain.

Bad Data Delivered Faster Is Still Bad Data

There’s one thorny problem, however: These chains are already complex beasts. “Today’s global company is faced with a growing number of contact and flow points across continents, countries, inbound and outbound flows, supply and demand interactions, multi-tier movements and customs checkpoints,” write Viswanathan and Sadlovska.

Before any company hits the accelerator, it would be wise to ensure that the existing and new supply chain data is sound: Bad data delivered that much faster is still bad data—and can lead to worse decision-making.

Pockets of bad data, delivered even faster, can also introduce what supply chain experts call “noise” and “nervousness” into global supply chains. Unpredictable and random events that occur in concert with those faulty data streams can produce worst-case scenario events, as covered in The Perils and Promise of Real-Time Data.

“Overreacting to sudden and random upticks in sales can produce a deadly chain reaction in the supply chain,” notes the article, “with each supplier downstream from the first increasing its orders and supply requirements because it wants to have enough inventory to comply with the illusory rising demand. This is called the bullwhip effect.”

The Aberdeen report notes that “best-in-class” performers (culled from its survey of 209 companies) “dedicate a lot of effort [than other respondents] to making sure that the information exchanged is accurate and complete, which enables them to make the right decisions for their supply chain.” That information feeds apps such as supply chain dashboards, back-end ERP systems and supplier scorecards, which are used to evaluate supplier performance. (This capability will become even more critical in the future as companies such as Wal-Mart continue rolling out their sustainability initiatives.)

The “best-in-class” performers in the study are 85 percent more likely than all others surveyed (“industry average” and “laggard”) to report that data obtained during supply chain monitoring is accurate more than 90 percent of the time, according to the report.

For supply chain execs and IT managers, the Aberdeen analysts wisely offer this nugget: “Even if information is timely, it is worth nothing if it is inaccurate.”

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