The Fax Machine: The Champ of Supply Chain Hardware

If Excel is the champ of supply chain apps, then the fax machine is the champ of supply chain hardware.

While Big Data, Internet of Things, Mobile, Cloud Computing, and Social Networking are the headliners on the main stage today, there are countless fax machines beeping away in the shadows backstage, transmitting orders, invoices, and other documents from one company to another.

The promise of a frictionless, paperless supply chain remains just that — a promise.

During yesterday’s earnings call, Craig Menear, President of U.S. Retail at Home Depot, mentioned that the company went live in its first store with a new customer order management system or COM. “This system is designed for greater visibility and execution of special orders by our associates and a frictionless experience for our customers,” he explained. “We are planning for the system to be rolled out all U.S. stores by the end of the year.”

Later in the call, in response to a question from an analyst, Menear provided more details:

Well, we’ve just begun the pilot in the first store. But what we are trying to do is give greater visibility to the consumer and our associates to special orders throughout the process. So when they actually place an order to understand the status of that order, where it is in the process of manufacturing.

And then obviously arrival to our stores and we want to be able to give that visibility to our associates in the store, so they can better answer questions as well for our consumers during that process. And it’s a coordinating effort that drives back into our manufacturers, our suppliers to be able to coordinate all the way through the supply chain.

But it’s the insight provided by other Home Depot executives that really caught my attention. Marvin Ellison, Executive VP of U.S. Stores, added:

In the past your greatest visibility was a phone call to an associate in the store for a status update and we want to give the information to the customer at their convenience, mobile device, PC, text…allow the customer to choose how they want to receive that information.

And Matt Carey, Executive VP and CIO, said:

I would also add that believe it or not a lot of these orders used to be faxed to the vendors and obviously a lot of opportunity for error. So we have eliminated those faxes, put it on EDI and really kind of started to streamline how those orders look.

According to Home Depot’s CEO, “our large suppliers have that [EDI] capability, and we are working with some of our smaller suppliers to bring them up.”

The more things change, the more things stay the same. The supply chain reality today is the same as I encountered in 1999: large companies conducting business electronically with its large trading partners, but still dependent on faxes, phone calls, and other manual processes when dealing with smaller trading partners. And while those smaller suppliers and trading partners typically account for a small percentage of sales and transactions, they account for the lion’s share of data quality issues, which impact everything from inventory costs to customer satisfaction.

I don’t know the details of Home Depot’s B2B connectivity strategy, but history has proven that getting 100 percent EDI compliance from trading partners is a failed and/or costly strategy — especially if you’re talking about yesterday’s EDI technology.

The best path forward, in my opinion, is the Supply Chain Operating Network (SCON) model — the business equivalent of Facebook and LinkedIn — that enable communities of trading partners to communicate, collaborate, and execute business processes in more efficient, scalable, and innovative ways.

But despite my support of the SCON model, I also recognize that it’s not a silver bullet. There are many reasons why supply chain visibility remains an elusive goal for many companies:

  • Supply chain data is stored in too many systems, in too many formats, across many companies and geographies.
  • A lot of data/information is communicated in batch and serial mode, sometimes hours or days after a transaction or event occurs.
  • Low-tech / no-tech processes still exist, especially in developing countries.
  • Supply chain networks are reconfiguring at a rapid pace, so the challenge of connecting to new trading partners is ongoing.
  • Nobody really owns or is accountable for supply chain visibility and data quality management.

The question is whether you will continue to address these challenges with yesterday’s thinking, technology, and approaches, or take a different path forward, led by new technologies and services.

You can either fax me your answer or post it below.

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