What IT experts can and cannot do

by F. Barry Lawrence, Ph.D.,
Industrial Distribution Program, Texas A&M University

The dot-com craze and the difficulties with enterprise resource planning (ERP) systems have left us all a bit jaded. Most business leaders are wondering how to run successful information technology (IT) initiatives and, in spite of the dot-com bust, still feel considerable pressure to capture the purported benefits of e-business. Many of these same leaders were responsible for approving technology initiatives that have not paid off and are anxious to get to the promised objectives.

So, why have technology initiatives proven so problematic? Let’s start by doing away with the old song that IT experts cannot be trusted. The simple fact is that expertise in programming, networking and other IT specializations is a profession that requires considerable dedication to keep current, much less be expected to master all distribution disciplines such as sales and operations. When the information revolution hit top speed (in the 1990s), the amount of knowledge required to understand what we were trying to achieve truly became more than any one or even many individuals could hope to understand.

The world wanted to get connected immediately, even before the software could be developed. Some of the goals simply could not be achieved; others were not nearly as important as many believed. The massive investments led to a sort of hysteria that carried everyone with it. IT experts received massive budgets and believed they could do more than they could. Consultants pushed solutions that might not be achievable without costs the firm would be willing to support. Worst of all, business executives, fearful of complicated IT jargon, came to believe their firm could be transformed by IT experts with assistance from consultants, and turned the responsibility for managing their information over to outsiders (consultants and IT firms) or to an internal IT department that was understaffed and under-budgeted. The internal IT specialists had heard the message from consultants and felt pressured to meet the challenge.

The results are well known. Blow away the hype and talk honestly with most firms, and they’ll admit their IT processes are not working the way they envisioned. Some admit that information technology is a daily firefight that will one day make the firm unable to compete.

So, what do we do? Begin by recognizing that consultants, IT providers and your internal IT folks are not experts on your business processes. Your sales force understands customer relationship management for your firm, not a customer relationship management (CRM) software firm. Your operations division is the true expert on meeting customer service requirements, not ERP or warehouse management systems (WMS) providers or consultants.

While your folks are the true experts, the fact remains that information technology is built around best practices. In most cases, IT providers have no choice but to program around documented best practices, otherwise, they could have difficulty defending those processes if (when?) they fail. So, if your company is not a good fit for information technology and has been unable to meet the new supply chain objectives, your transition to best practices is not well understood by your people and will not happen without a change in your approach.

The proper approach is the same with any complicated project. It requires a team. The members of the team must consist of business process experts (your sales force, operations experts), internal IT specialists, management and possibly consultants or the IT provider. Notice I include management (you cannot delegate this one) for reasons that will become clear.

The proper approach
Let’s walk through a simple example of the right way to use a firm’s resources and consultants to bring about a successful IT implementation. The example deals with forecasting, the most complained-about process distributors have to deal with.

First, define the process. This requires internal experts (sales and purchasing), a forecasting specialist (a consultant or domain expert in the firm, who is a sort of internal consultant with expertise on the process in question), and a specialist on the IT system (internal or external). The internal experts interact with the consultant or domain expert to define how the firm currently forecasts and compares that process to best practices to find ways to improve. The IT specialist interacts with both the internal experts and the consultant to determine what the system can support and helps define a system/human interaction procedure. This first step is often carried out very well at many firms.

Second, determine the data extraction process. This requires internal experts (usually with direct knowledge of the data), management, the consultant and IT specialists (usually internal). The internal experts try to identify data that will not cooperate with the forecasting procedure: new products, products with zero demand or spikes that do not repeat, back orders, stockouts, raw material and finished goods consumption, human error components, inconsistent calendar dating, special orders, high branch transfer volume and many other issues. Fixes associated with each of these problems require management decision-making.

For example, back orders can automatically go into the period where they were originally ordered. Many systems do this, but most firms do not address the issue. Zero demand and spikes are considerable problems that can be handled by the data extraction program or left up to purchasing experts. Whether to allow the system to smooth out these issues or to require human expertise depends on many things: how often these events occur, purchasing resources and skills, customer prioritizing and  marketing activities. Management has to resolve all of the problems. Once management makes its decisions, the consultant can walk the IT specialists through the programming exercise, which is the last and easiest task.

Data extraction is the most significant process in forecasting, and is rarely fully examined or understood. IT specialists are simply instructed to start the forecasting module and the purchasing department spends thousands of man-hours per year fixing a broken forecast.

Next, activate your forecasting algorithm. This is where IT providers hype their different algorithms, but the reality is, no major advancements in forecasting models have occurred in many years. Most systems have the same models and most models are effective if given clean data from an intelligently designed data extraction process. This step is a no-brainer for your IT folks.

Finally, design a process for human interaction with the forecasting process. This step requires the whole team (including management) to determine what decisions to make based on system recommendations and how to carry out alterations to system-generated results. Data integrity is critical and you must thoroughly examine all parts of the human process to understand their effect on the next round of the data extraction process. The consultant or domain expert should work with the firm’s forecasting experts to design the process, then walk the IT specialists through programming. Management must make critical decisions about how to alter forecasts, under what circumstances, and for what purpose. Additional IT resources may be necessary if the process proves to be too complicated, and management should do a solid cost/benefit analysis of the levels of complexity they allow to be programmed.

So, what can IT experts do? They can follow instructions and advise you of system capabilities from a system view. They cannot design the business processes or make critical decisions on data extraction and human/system interaction, both of which are present in all business processes.

This scenario addressed forecasting, but it applies to all business processes. Most IT implementations end up being heavily weighted toward IT specialists and consultants. As our example illustrates, the activity should be at least 50/50, or more heavily slanted toward the firm’s business process experts. You will pay for their involvement either way, during the implementation or after in added effort to correct a poor system, increased inventories to cover mistakes, and lost business when customer service fails. •

This article originally appeared in the ISMA/I.D.A. Spring Convention 2003 issue of Progressive Distributor. Copyright 2003.

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