Consider this: Dayton, Ohio-based NCR spent $7 million on supply chain applications that did not produce any return at first, because many essential employees would not use them. Knoxville, Tenn.-based sign maker Plasti-Line wrapped up a supply chain project only to discover that its ERP system would not work with its new supply chain applications.

In fact, precious few companies have successfully automated their supply chains. So why bother? Because supply chain software is worth the time and money it takes to get it right. When NCR finally got its system up and running, it saved millions of dollars by shifting inventory ownership away from its warehouses and to its suppliers.

Thanks to better supply chain planning, Plasti-Line has slashed its manufacturing head count by 34 percent. Those savings are especially welcome in tough economic times, when companies struggle to become more efficient. Here, we offer five ways to get to those savings as quickly as possible.

1. Make the Sale to Suppliers
First comes the hard part. Supply chain automation is uniquely NCR's John Webster (left) and Ken Shaw told suppliers that if they took ownership of NCR inventory, NCR would do more business with them.
difficult because its complexity extends beyond your company's walls. Y  our people will need to change the way they work and so will the people from each supplier that you add to your network.

Only the largest and most powerful manufacturers can force such radical changes down suppliers' throats. Most companies have to sell outsiders on the system, something few CIOs have had to do before. Moreover, your goals in installing the system may be threatening to those suppliers, to say the least.

Just ask NCR, which wanted to shift some of its inventory ownership to its suppliers, according to Ken Shaw, director of global inventory management, and John Webster, director of services for supply line management. The two had to convince suppliers that taking ownership of NCR's stuff would benefit them—a tough task. To do that, Webster met face-to-face with the CEOs and COOs of the company's largest suppliers, pounding home the message that NCR's new applications would be of benefit to all. "Conversations with suppliers at the highest levels was critical," says Webster.

He carried a sales pitch to those meetings: Adopt our system, and we'll be prepared to do more business with you—as will other manufacturers looking for better supplier cooperation. Though there was resistance at first, NCR now keeps 40 percent of its inventory with suppliers.

2. Wean Your Employees off the Phone and Fax
If selling supply chain systems is difficult on the outside, it isn't much easier inside. Operations people are accustomed to dealing wit  h phone calls, faxes and hunches scrawled on paper and will most likely want to keep it that way. If you can't convince people that using the software will be worth their time, they will easily find ways to work around it. ERP at least erases the old ways of working by blotting out legacy software systems. Supply chain software is less militant. You cannot disconnect the telephones and fax machines just because you have supply chain software in place.

One company that got the internal sales pitch wrong was Keihin Aircon Trying to appease internal users cost Keihin Aircon time, money and vendor support, says VP of Operations Michael Mitsch.

North America, says Michael Mitsch, vice president of operations for the Muncie, Ind.-based tier-one auto parts manufacturer. Problem was, Keihin Aircon went too far to make its employees happy when it became an early adopter of software company Glovia's supply chain package in 1996. Mitsch admits that when he installed the new system at one of the company's Indiana plants, he overcustomized interfaces—specifically, order-entry screens used to send orders to suppliers—to placate a group of employees who did not like the interfaces Glovia provided.

"It was very hard for employees to give up their spreadsheets to adopt a more centralized theme," Mitsch says. To appease a group "that was not willing to change very much," Mitsch customized 20 percent of the system to match the way they did things. "We spent a lot of mone  y getting it that way," he recalls. The bill for customizing the system came to $100,000—five times the company's original plan.

Worse, customizing Keihin Aircon's software only made it more difficult to get Glovia's help when things went wrong. Like most vendors, Glovia does not support customizations of its software. "You're divorcing the software vendor from its responsibility for the product," laments Mitsch. "You have to build a little side infrastructure, and your IT people have to support it." Mitsch had to hire three extra full-time employees—at more than $50,000 in yearly salary apiece—to customize the system. Those employees are still there supporting the changes.

The customizations also make it harder to upgrade the system when a new version of Glovia's software comes out, because the customized pieces must be completely rewritten to fit the new version. "You lock yourself into whatever version you customize," says Mitsch.

When it installed the same system in another plant, Keihin Aircon dumped its customized scheme. Employees at the second plant—having learned of the software maintenance horrors at its sister plant—understood that learning a new system, while difficult, was a one-time occurrence, but that rewriting customized software was forever.

Ultimately, the company worked with Glovia to develop a standard system more in-line with both employees' needs and Glovia's ability to support it. Keihin Aircon has seen its investment pay of  f but only after learning a tough lesson about keeping employees happy: Don't sacrifice system integrity to do it. In the end, Keihin Aircon spent 20 percent more on its system—$1.2 million from a budget of $980,000—than it needed to, according to Mitsch.

At NCR meanwhile, the employees most reticent to change were those who had to learn new ways of doing their jobs to go along with the new
If you can't convince people that using the software will be worth their time, they will easily find ways to work around it.

system. A new customer service component, for example, shifted emphasis from a simple, scripted telephone interaction to a decision-making process that put greater responsibility (and accountability) in the hands of the person serving the customer. Not everybody bought into it. "People in business are very quick to find workarounds," Shaw says. "You've invested all this money in the new tool, and you find out people aren't using it."

To help the process along, NCR hired an outside consultant to train employees on the new system. The company also set up an incentive program that considered internal leaders of the project for promotions and other incentives if they got other employees to adopt the new system.

Managers and outside consultants focused their efforts on the 20 percent who resisted the new system. Shaw and Webster had to explain to them how the whole thing hung together—that if employees chose to ignore the new system, NCR   would lose credibility with suppliers and fail to realize ROI from the project. Managers also took the time to listen to employees on a personal level and let them vent their frustrations.

But for the stragglers, it took a not-so-subtle nudge and some close monitoring from a manager to make the system more attractive. For the most part, though, once employees understood that their individual participation in using a new system was critical to the success of the company, they bought in to the new scheme.

3. Prepare for Bad Information—At First
There is a diabolical twist to the quest for supply chain software acceptance among your employees. New supply chain systems process data as they are programmed to do, but the technology cannot absorb a company's history and processes in the first few months after an implementation. Forecasters and planners need to understand that the first bits of information they get from a system might need some tweaking. If they are not warned about the system's initial naiveté, they will think it is useless.

In one case, just before a large automotive industry supplier installed a new supply chain forecasting application to predict demand for a product, an automaker put in an order for an unusually large number of units. The system responded by predicting huge demand for the product based largely on one unusual order, according to Jim Kilpatrick, global leader of Deloitte Consulting's supply chain practice in New York Ci  ty.

Blindly following the system's numbers could have led to inaccurate orders for materials being sent to suppliers within the chain. The company caught the problem but only after a demand forecaster threw out the system's numbers and used his own.

That created another problem: Forecasters stopped trusting the system and worked strictly with their own data. Like NCR and Keihin Aircon, the supplier had to fine-tune the system itself, then work on reestablishing employees' confidence. Once employees understood that they would be merging their expertise with the system's increasing accuracy, they began to accept and use the new technology.

4. Fix the Supply Chain Connection to ERP
You have probably heard that installing supply chain software is the natural next step after finishing your ERP project. Indeed, the two serve each other well. ERP captures all the product, sales, finance and inventory information that supply chain applications need to predict demand and optimize the flow of material through the chain.

Unfortunately, that symbiotic relationship does not translate into an easy integration between the two different systems. In all likelihood, your new supply chain implementation will not interface cleanly with your current ERP system.

The supply chain system needs a map to the way products go together ERP and supply chain software don't get along, says Plasti-Line's Nathan Bretscher.

on the assembly line or it will no  t have much value. At Plasti-Line, its new SynQuest production-scheduling application had to reflect the different steps required to make a sign in order to efficiently schedule the work. Trouble was, the company's ERP system—where the information about sign materials resided—didn't handle the process that way, says Nathan Bretscher, director of corporate process and information improvement.

The ERP system documented the production process in individual, linear steps, while the supply chain system, which was designed to actually execute sign making, handled the process as it happened—a bunch of steps all done at the same time.

To get the two systems to see eye to eye on the sign-making process, the company ultimately had to rework the ERP system to match the supply chain system. Bretscher assigned a full-time engineer from within the company, and the IS department did some reprogramming to redefine and reroute bills of material in the ERP system based on the actual process of making a sign. After whipping his data into shape, Bretscher was able to reduce the number of people making signs from 69 to 45. "Nothing works if you don't have your data structured to reflect the physical process," he says.

5. Defuse Functional Warfare
Supply chain software projects bring CIOs into direct conflict with the people who run the supply chain day to day—a contentious group with a lingering chip on their shoulders. Derided as a second-class function for years—log  istics or procurement or however it is known in your company—has always been considered mundane, back-office territory everywhere but perhaps in retail.

These folks are not used to having outsiders snooping around. CIOs need to know how to work with those who might slam the door in their faces. "We wanted to determine the business requirements [of a supply chain project] without getting the 'You can and you can't' [from IT]," says NCR's Shaw. So NCR began its project planning process without anyone from IT at the table. By doing so, Shaw says his team created a hypothetical system. Then his team brought in IT to help with technology-related matters such as vendor selection. IT had no opportunity to help improve the strategic focus of the project. Instead, IT became a tactical installer, greatly reducing the group's value and input in the project.

To avoid being marginalized, CIOs need to play the role of advice giver IT employees asked Aviall VP of Information Services Joe Lacik whose side he was on—IT's or the users'.
and facilitator rather than critic, says Joe Lacik, vice president of information services at Dallas-based Aviall Services, a company that helps aircraft manufacturers manage inventory. When he took over as vice president of IS at Aviall in early 2000, the company was in the midst of a supply chain upgrade. He stressed that one of IT's critical roles was to help users become acclimated to the new system.

"The first thing I hear [from   IS] is, 'Whose side are you on? [Ours or the users']?'" Lacik says. But ultimately IT came around. Lacik's service-oriented department has helped make Aviall's supply chain effort a success.

Supply chain automation is the type of technology that can transform a business—for better or worse. The risks are great, the potential rewards greater. However, companies that have gotten supply chain right—and some that have not—know that every link in the chain has to be strong. That takes an effort from the entire business that is unprecedented in enterprise application implementations.

CIOs can be supply chain leaders if they mix reality with the desire to serve business needs. Their job should be to choose vendors wisely, manage technology implementations and offer as many technological solutions as possible to business leaders' desires for system capabilities.