A real-time supply chain sounds wonderful on paper. It implies that organisations would be able to work faster and more efficiently, both internally and in collaboration with third parties, with time-wasting productivity bottlenecks becoming a thing of the past.

Unfortunately, this isn't quite as simple as it sounds. While there is technology aplenty on the market, the real issue isn't so much about putting in some whizzy bit of software. It's more about having the right people and processes in place to cope with this new way of working, and many firms simply aren't ready to make the leap.

"There's enough real-time software out there to sink a battleship, but the biggest challenges are cultural," said Nigel Montgomery, European research director at AMR Research.

"It's about looking at the overall performance of the organisation, rather than just focusing on real-time information, which potentially just allows you to do the wrong things quicker."

The ultimate aim is to create visibility of demand and, as a result, ensure the effective fulfilment of that demand. This often requires a change of mindset from the more traditional idea of making something and simply hoping that someone buys it.

One of the key ways of doing this is to guarantee that everyone in the supply chain has access to all the information they need to react to potential problems in an appropriate and timely fashion.

According to Clive Longbottom, service director at Quocirca, this involves looking at the supply chain as only one element of a 'value chain'.

This should include all other areas of the business such as enterprise resource planning (ERP) and customer relationship management, because each solves a different problem.

"Customers want to buy things, which comes from inventory provided by the supplier, but they pay for it via ERP systems that hook into supply chain management ones," explained Longbottom.

"There are gaps between these different areas, and they have to be linked using over-arching processes, but each has to work for the customer to get what they want."

While integration at the application suite level has made real-time data capture between systems more feasible and affordable, a key problem is that too many companies simply chase down the real-time route for the wrong reasons.

They have no idea, therefore, of what to do with all this up-to-the-minute data when they receive it, according to Montgomery.

"The value is derived from obtaining pertinent information when you need it, but a lot of organisations end up being overwhelmed with data on things that they don't need in real time," he maintained.

Moreover, implementing real-time systems is both time-consuming and costly, and should not be undertaken lightly.

"You don't need to have everything in real time, so it's important to think in terms of the cost and effort involved in doing this, and whether it's justified," said Enrico Camerinelli, a programme director at Meta Group's technical research strategies unit.

For example, systems on the 'shop floor' which handle manufacturing processes and related machinery need to produce real-time data to ensure that everything can continue to work smoothly.

But the business case is more arbitrary at the transaction layer, which is where the ERP and supply chain management (SCM) application vendors have traditionally sold their wares.

Here, decisions on whether to go real time or not depend on what information each individual company requires to function optimally, and the key performance indicators against which they wish to measure themselves.

While most ERP or SCM systems these days have real-time data collection and alerting features that indicate if something is out of the ordinary (such as inventory levels running low), Camerinelli suggested that there is no one-size-fits-all application suite available.

And nor is there ever likely to be, because of the diversity of potential requirements. For example, corporate instant messaging systems might be enough to satisfy some companies' real-time communication needs, while others might require virtual workrooms for engineers and designers to share and collaborate on technical drawings.

Longbottom agreed that there is no need for any organisation to introduce an end-to-end real-time supply chain. He even suggested that "real-time everywhere is bad business practice" because it indicates that a given company is operating in reactive rather than proactive mode.

While real-time systems can remove tactical bottlenecks before business processes are reorganised, they should be used sparingly to underpin a wider corporate demand-planning process.

"With good planning, you can start saying this or that scenario is likely to happen, set expectations all the way down the supply chain, and ensure the correct information is available, which involves companies having to sort out their policies and procedures," explained Longbottom.

This restructuring operates at two distinct levels, however, because real-time working affects not only how internal staff operate, but how they work with third-party organisations.

On the one hand, if a real-time system is introduced, personnel may require training in how to use it properly in the first instance, and, in the second, to understand how to read all the data.

Any requirement to act on this information, however, will require guidelines as to what is considered appropriate or permissible.

It may also mean that roles, responsibilities and accountability have to change, and that staff lower down the chain become more empowered.

This may meet with resistance from personnel - and management - elsewhere in the company. When dealing with third parties, however, the key issue is trust.

Mike Clarke, a consultant at Partners for Change, explained that organisations will need a lot of information if they want to share it to obtain competitive advantage.

"Many of the supermarkets are fighting on very tight margins, and are often reluctant to share any information that could be passed on to rivals," he said.

"But if they don't, their suppliers can't be as responsive as they'd like and have to carry more cost to buffer them against supply and demand patterns, so the supermarkets lose out."

This means that, while technology is available for real-time working across organisational boundaries, few companies have so far opted for it.

"Within their own walls, quite a few organisations have reaped the benefits of real-time information and systems such as inventory management and preventative maintenance," said Clarke.

"But where things are really in their infancy is beyond those walls, because strategic alliances haven't matured as much as the technology."

To do this successfully requires adopting a partnership approach, but this can be built up gradually using such simple tools as corporate instant messaging to kick-start more open collaboration and communication.

Where the IT director comes in is to act as a facilitator. They need to translate the potential technical benefits and pitfalls of turning real-time supply chain information into the possible business advantages of interest to managers.

From there, it is possible to build a case for changing organisational structures, processes and strategy, which requires the buy-in of senior management.

"Real-time information is not the key to improving business performance. The key is a change of mindset," concluded Montgomery.

"It's also not about an individual product, it's about changes to the way you think about deploying and using technology. To make this work, it's about mental changes and that can be the most difficult thing of all."

IMPLEMENTING A REAL-TIME SUPPLY CHAIN

• View the supply chain as only one element of a broader value chain that also includes enterprise resource planning and customer relationship management.
• Evaluate where you really need real-time data collection and analysis because implementing such systems is expensive, time-consuming, and can end up drowning staff in information that they don't know what to do with.
• Bear in mind that there is no single, one size-fits-all real-time supply chain system and never will be, because different business requirements require different solutions.
• Sort out policies and procedures to clarify how staff should handle and act on real-time data.
• Clarify what information third-party organisations should be allowed to access and how. But, where possible, adopt a partnership approach to build up trust.
• Act as a facilitator to translate the potential benefits and pitfalls of real-time technology into well-documented advantages and challenges that the business can understand.
• Obtain buy-in from senior management to institute the necessary organisational and strategic change required for real-time projects to succeed.