The Digital Supply Chain: Why Modifying Supply Chain Software May Cause More Headache Than Benefits

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The modification of a WMS has become something of a standard concept when selecting and implementing supply chain system technologies, but it may lead to increased costs when implementing or upgrading your system. According to BusinessWire, 80 percent of supply chain executives expect the digital supply chain to dominate the industry within the next five years, and the pressure to customize systems may leave IT personnel with few options and a mountain of added implementation and support costs.
The easiest way to eliminate these costs is to work within the boundaries of the system’s capabilities. In addition, companies must understand a few facts and tips about determining the “necessity” and potential impact of modifications in the digital supply chain.

1. Business Mandated Modifications Are Often Unnecessary in the Digital Supply Chain

Most modifications are unnecessary and difficult to justify when all criteria are considered. When project team members ask for modifications to a WMS or other supply chain system, executives and IT personnel should team up to play the role of devil’s advocate. Watch out for seemingly infallible statements like, “the business requires it.”  Objectively weigh the benefits versus the costs and make sure to involve any department that is (sometimes unknowingly) requiring the modification.

For example: At face-value, a modification may appear to save $30,000 in annual labor costs. However, the complete costs associated with the modification, including increased design costs, testing costs, re-design costs (along with even more testing), and recurring costs during upgrades often exceed those projected savings.

Tip: To separate unnecessary from necessary modifications, both IT personnel and supply chain executives must work together, asserts Accenture.

2. Modifications May Lead to Extensive Delays and Decreased Production Value

Modifications to supply chain systems may cause extensive delays during selection, implementation, upgrades, and future integrations. If a problem arises, correcting a poorly designed or coded modification can take days or weeks, with no guarantee that the first fix is the final fix. These costs eat away at production value. During implementation, modifications are notorious for causing inventory discrepancies, mistaken shipments, and work stoppages that can damage your brand, cost millions of dollars, and result in decreased morale and turnover throughout the organization.

Tip: For any proposed modification, evaluate the annual savings against the vendor’s cost of the modification, the increased time to the implementation schedule, the resources that will be required to test and re-test fixes, plus the Net Present Value of doing it all over again every 4 years. If the savings does not significantly outweigh the costs, abandon the modification or delay it to a future project phase.

3. Customized Systems and Modifications Carry an Increased Risk of Problems

Customized systems and modifications have an increased risk of malfunction. Complex systems are not necessarily designed to be easily modified, so the best-laid plans may not work as anticipated. This is comparable to putting larger tires on a Jeep and then finding out that your gas mileage was reduced by 40% and the tires sometimes rub against the shocks (yes, this happened to me). The point is that the positive effects are easy to exaggerate and the negative effects are very difficult to predict. Implementing a new system is a major event for your company, so you should avoid making it more complex than it needs to be.

Tip: Compare and contrast previous modifications with actual results. Did the modification go smoothly, and if so, did problems arise at a future date? Also, how often did problems arise? Add these costs and issues to your analysis of proposed modifications.

4. Modifications Have Perpetual Costs

Modifications always come with added perpetual costs. The cost of modifying a system today might seem minimal, but when it comes time to upgrade the system, the modification must also be upgraded as well. In the realm of cloud-based supply chain solutions, upgrades are inevitable, and more modification costs will recur with all upgrades.

Tip: Map out the projected future upgrade timeline and assume your initial modification costs will recur with each upgrade. Consider the total cost of recurring modifications when evaluating the reasonability and need for modifications.

The Digital Supply Chain: The Landscape, Trends, Types, and the Application in Supply Chain Management

Let a Third Party Help With Sorting Through Necessary and Unnecessary Modifications

A good third-party integrator will have a proven track record of helping its customers achieve a positive return on their supply chain software investments. The difference between what is actually needed and what everyone “thinks” is needed can decimate your system’s ROI. Veridian can help you implement strong communication channels between your organization’s IT department and executive-level leadership, review system core functions and demands, and review which modifications will help or hurt your profitability in the digital supply chain. With 70 percent of supply chains already steep in the process of upgrading to a digital supply chain, reports GT Nexus, you cannot afford to make any mistakes.

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