Monday 6th Jul 2020 - Logistics & Supply Chain

Counting the IT risks

I”m always suspicious of the lists of 10 you often see in business magazines – 10 ways to make more profit, 10 qualities in the perfect employee. You know the kind of thing. Why should there always be 10 points to make? Life, especially business life, isn”t as neat and tidy as that.

So I was encouraged to note that there are 11 areas of technology risk facing companies, according to a study from accountants PricewaterhouseCoopers. Perhaps encouraged is not quite the right word when we”re talking about risks to the supply chain, but at least this sounds like a serious piece of research rather than something just jotted down.

Tales of IT-induced troubles in the supply chain never seem far away. In recent memory, publisher Penguin Books, furniture chain MFI and airline BA are just three companies that have reported supply chain problems rooted in IT.

So what are these 11 points and what can logistics professionals do about them? Of the 11, six stand out as a greater danger than the remaining five. And of the six, by far the most worrying is the growing complexity of IT projects. It was problems implementing a major ERP application that caused MFI many of its woes.

It”s a fact that around a quarter of all major IT projects fail completely and a further half are delivered late or over budget, according to PwC. Which leaves just one in four coming in without trouble. Not good odds.

I suggest three remedies. First, much more upfront study of the full business process implications of any IT project. Second, break down big projects into smaller self-contained modules wherever possible. Third, make sure you have top class project management skills on board before the project starts.

The second most-cited IT risk is IT resilience and continuity. Research from the London Business School suggests that 57 per cent of business disasters are triggered by an IT collapse. It was the failure to operate a new warehousing system that nearly did for Penguin a few years back. Staff ended up distributing books from a hastily erected marquee in the company car park.

Logistics professionals should ask their IT director what business continuity plan is in place and, most pertinently, whether it is ever tested.

The third most frequently cited problem on this doom-laden list is IT governance. The world, it seems, is going governance-mad. But there is some solid evidence from a US study that companies that manage their IT governance well perform better than those that don”t.

The trouble with this is that many IT directors I talk to are still trying to come to terms with the practical implications of governance.

Fourth up in IT risks is the question of data security and privacy – a topic that takes on added relevance now that more customer information gets passed around electronically, sometimes in frighteningly insecure systems. Not only is there a growing problem of identity theft if customer details are stolen at some point in the supply chain, there is also the danger of reputational damage to the business if the story hits the press.

The starting point for tackling this one is to identify those points in the supply chain where customer information is handled and the potential risks of its misuse at each point.

Fifth comes the question of upgrades to Research by the London Business School suggests 57% of business disasters are caused by an IT collapsebusiness systems. This is a surprise one as upgrading business systems is supposed to be a good thing. The trouble is that IT systems are so complex these days that an upgrade in one part can leave loopholes or flaws in another part because the interconnections haven”t been spotted. This is especially true in supply chain systems that cross boundaries between organisations and, of course, countries.

The sixth of the main risks is data quality. And this is an area where there won”t be many organisations who couldn”t do more to improve processes that ensure customer, product and other data is more accurate and up-to-date.

For the record, the five lesser risks are IT compliance, the complexity of global IT, handling emerging technologies, IT asset management and IT outsourcing arrangements. Which brings us up to a satisfyingly unround figure of 11.

Peter Bartram is a business writer, journalist and author of twenty books

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