Optimization is not the only algorithmic tool that supply chain companies need to solve their planning and decision-making problems.More May 2, 2019
What’s the value of a good business decision?
Author: Demet Sönmez
There is a question that arises frequently in my initial discussions with prospective customers: “What’s the value of your solution?” For obvious and understandable reasons, the people whom I am speaking with – whether they are supply chain directors, general managers, CIOs, CEOs, planners, or other key stakeholders – are interested in quantifying the potential value of a supply chain planning and optimization software solution for their companies. Most likely they need to calculate the possible value of the solution, based on its ROI and other performance metrics, to justify the proposed investment to themselves and others in their organizations.
Certainly, we can crunch the numbers and estimate the monetary value our solutions can deliver, and can provide a precise timeframe on when customers can expect to see ROI. But this is not actually a reflection of the real value of our solutions.
So how can we determine the real value of our solutions for our customers?
The two aspects of value
To me, value is a fascinating and tricky topic, and I think it has a bigger and broader meaning than many people realize. Fundamentally, value – in the context of supply chain software investments and implementations – has two aspects:
1) Business value: Some value can be quantified as a measurement of how the company benefits, financially and operationally, from the software solution. For example, from a supply chain perspective, the deployment of such a solution could lead to an increase in efficiency, planning accuracy, OTIF delivery performance, etc. From a financial perspective, the solution could lead to decrease in costs or an improvement in budget accuracy. Other business value examples that are non-quantifiable are visibility over end-to-end performance, flexibility to adapt to critical market changes, being proactive rather than reactive, increasing supply chain organizational maturity, etc.
2) Personal value: This is essentially a measurement of how the people in the company individually benefit from the implementation of the software solution. When positioned correctly, one solution can impact many people making them more efficient and effective at their jobs and make their professional lives easier and better. For example, if an S&OP solution allows a general manager to spend less time firefighting and reacting to minor daily events and enables him or her to focus on making important strategic plans and decisions, then the solution has a positive personal value for him or her.
To maximize both the business and personal value of each implementation, I always seek to – at the initial budgetary stage – develop a deep understanding of the company’s business processes and get input and buy-in from all key stakeholders across all relevant departments and levels. It is easy for the CFO or Sales Director to miss the value for him or her, if the solution was initially positioned only as a software tool for planners.
Only after getting the big picture and a firm grasp of the company’s processes and people can we determine the potential business and personal value of the software solution, and then help the company realize it.
The value of optimized decisions
For many supply chain planning and optimization software solutions, the optimized plan itself is the end result of the solution. But for ICRON, which is a decision-centric software platform, the goal is not merely to enable companies to generate optimized plans, but also to empower them to make optimized decisions that improve their productivity and profitability.
This new decision might be operational, tactical, or strategic decision that comes with risks like taking a new road, changing the way of doing things, taking more responsibility, or jumping a few steps at once. That’s also why it can add tremendous value. The paradox here is: we can only quantify what we already know.
So, instead of asking us “What’s the value of your solution?”, I think prospective customers should ask the question “What’s the value of a good business decision for my company, and me?”.
The value is never in the provided solution, it is always in the results of the actions taken based on an optimized decision. To calculate the real value – both business and personal – we need to be able to gauge the profound and positive impact of these decisions on multiple levels and the bottom line.