The Synergy in Managing Information Technology and Procurement

Some companies have introduced into their organization a new job: the Chief Web Officer (CWO). Others, such as General Electric (GE), have given the CIO the responsibility of looking after the synergy of IT and procurement. Either way, job requirements must be met, and these include overseeing information systems and Internet strategies, creating and running the interwoven network of extra structure, and forging flexible Internet commerce links with business partners. At GE, the CIO works closely with suppliers to get them seamlessly online and manages all links connected to GE's massive procurement program. This synergy will, in all likelihood, increase in the coming years because technology moves so fast.

The perspectives of synergies continue to expand. As computers and communications become increasingly pervasive in our work, in our daily lives, and in our transportation environment, many instances of convergence are developing in the functionality of products and processes and the accompanying communications infrastructure. For example, cell phones are starting to incorporate the functions of personal digital assistants (PDAs); PDA capability overlaps significantly with desktop and laptop computers; and cable companies that have offered multimedia Internet access are now also offering phone service.

There is no question that IT and Internet solutions are merging. Personal computers function as Web access points, phones, entertainment outlets, and home automation controllers all at the same time. Software is being designed to allow multi-purpose products, while hardware is becoming more and more flexible. Personal devices and communications infrastructure converge to provide new functionality and handle all data, including voice, video, and the Internet.

It is not difficult to see how ERP solutions fit squarely within this perspective, whether their integration into the Internet environment is the responsibility of the CIO or the CWO. But the implementation of ERP also generates a rich knowledge stream that should be preserved for further usage. The appreciation of this fact has led to the institution of knowledge management procedures by leading organizations. A Year 2000 Conference Board survey of 200 executives at 158 large multinational companies found that 80 percent had knowledge management projects in the works, and many had already appointed a chief knowledge officer (CKO) or hired knowledge management consultants.

Knowledge management projects include a corporate memory facility (CMF) into which are registered all decisions as well as their reasons and aftermath; expert systems and agents that improve productivity and replace old approaches to computer programming; and a growing array of tools for knowledge management. Among them are chaos theory, stochastic processes, chi-square analysis, test of hypothesis, and experimental design.

What kind of knowledge does one want to preserve and reuse in connection with ERP and supply chain? Here are a couple of factual answers. Danone, a French milk products company, increased inventory turnover by 30 percent and decreased order lead-time by 57 percent after three weeks of implementing an ERP system. Only 110 days after implementing ERP, IBM was able to reduce the time for checking customer credit and for responding to customer inquiries from 20 minutes to instantaneously. At the same time, pricing data entry dropped from 80 days to 5 minutes.

At Bell Atlantic, information that once took a month to retrieve now takes a few seconds. Using ERP as a catalyst, Borden sharply reduced the number of computer platforms and applications. It also reduced 26 operating systems from four to one. At Nike, supply chain applications resulted in a 40 percent increase in order fill rate and a 27 percent increase in revenues. At Warner Lambert, the order fill rate increased to 99 percent and supply chain costs were sharply reduced.
In another case, the Internet-oriented implementation of ERP grew into a cross-partner supply chain management. This provided multi-company transaction data and planning information, helping to reduce inventory by 25 percent. At the same time, on-time shipments were boosted from 85 to 95 percent, and lead-times were lowered from 80 to 27 days.

What is particularly interesting about these references and accompanying statistics is the knowledge acquired by the people who put in place the applications in reference. It is the job of the CKO to work closely with the CIO and CWO to capture the acquired experience and make it available interactively over a wider reference frame. Online database mining helps significantly in this endeavor.

The fact that knowledge is the most important asset of an organization needs no explaining. The allocation of assets and their management must be done in real-time because the CEO and his or her assistants have much less time than in the past to assess the viability of a planned course of action. While professionals in this field have long considered how to improve the speed and accuracy of the planning process, the technologies and methods available were not adequate to handle a problem of this size and complexity or they were not to be found at an affordable cost.