Part 5 – Finding the ROI for an Investment in an Analytical SCM Solution

Technologyevaluation.com published a piece of mine on this topic a few years ago, but the ideas are important, so I am recapitulating the them here.  The first post in this series introduced the topic of overcoming the challenges to calculating the return for an investment in an analytical supply chain software application.  This post deals with the last of four challenges.

Part 5 — Fourth Challenge — No Patience for Context — “Just give me the bottom line!”

This reaction to understanding the value of a software investment is reminiscent of some people who are in a hurry to know what stock they should buy. 

This person does not want to learn about industry performance.

She or he is not interested in the relative competitive strengths of one company versus those of other companies in the same industry.

Nor is this person motivated to research financial statements in order to understand what might be driving a company’s performance or whether that performance is getting better or worse.

This person simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold.

So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then “places a bet” because at that point, the decision is little more than a wager based on an uninformed hunch.

It is likely that this person will be sadly disappointed in the return.

The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions.  Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.

In the same way, decision-makers in a company may rush to a “bottom-line” conclusion, only to have their efforts frustrated by poor results because they did not take the time and do the work necessary to gain some understanding of what is driving their pain and how their decision may affect those drivers.

This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.

Successful business is driven by quality decisions that can be executed in a timely fashion.

Some of these decisions relate to investing in software applications that support supply chain management.  At least four hurdles face those seeking to make a timely, but intelligent decision, as we have seen in this series of posts.

Reliable predictions of ROI will continue to evade decision-makers who react to these challenges with the responses we have studied here.  However, if you do not succumb to that temptation, some careful analysis can provide information that will guide your software investment strategy.

Companies invest in analytical supply chain management software to improve their decision processes.  You can read about my unique approach to prioritizing and accelerating the improvement of decision processes in “Finding the Value in Your Value Network“.

I leave you to ponder this final thought from Thomas Carlyle, “Work is the grand cure of all the maladies and miseries that ever beset mankind–honest work, which you intend getting done.”

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About Arnold Mark Wells
Industry, software, and consulting background. I help companies do the things about which I write. If you think it might make sense to explore one of these topics for your organization, I would be delighted to hear from you. I am employed by Opalytics.

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