Effective and efficient supply chain operations require more than just integration: you need trust, business arrangements, collaboration and synchronisation. Frank Booty explains.
Effective and efficient management of supply chains and the reliance on IT systems to fulfil customer orders are key business issues for manufacturing companies. Time-to-market and manufacturing, as well as business costs, can all be reduced using a collaborative approach to commerce. Yet how exactly can IT be deployed to streamline processes with partners and customers to make all this happen? What are the related business benefits, and the technical and cultural challenges that are met on the road to achieving e-fulfilment?
“E-synchronisation is the dream,” says Dan Roberts, consultant at manufacturing IT consultancy Cambashi. “The reality is that companies will essentially achieve better relationships between suppliers and customers using XML-based integration between systems for forecasting and supply chain interactions.”
Collaboration tools become vital when distances between manufacturers and suppliers become great. In principle, argues Simon Bragg, European resarch director at analyst ARC Advisory Group, they enable manufacturers to achieve Toyota-like efficiencies. “Toyota has long been famous for its manufacturing engineering. Its supplier base works as a virtual extension of its own production facilities,” says Bragg. “This is easier for Toyota as the average Toyota supplier in Japan is just 59 miles from the Toyota plant. Consider General Motors – its average supplier is 427 miles away.” So, 59 miles is an early start, and next morning every member of both project teams can meet. With 427 miles just the manager turns up, after a flight and a night in a hotel – and he manages, he doesn’t know the detail.
ARC’s seven recommendations for collaborative e-manufacturing are to: synchronise manufacturing with business systems; integrate outsourcing and suppliers; automate business processes; generate value by empowering people; integrate engineering with the plant floor; integrate logistics, CRM (customer relationship management) and SFA (sales force automation); and integrate EAM (enterprise asset management), maintenance and support.
“Really, however, there’s not a lot of evidence on e-synchronisation and supply chain management,” says Bragg. “There should be business benefit to this stuff, but most of it is arm-waving rather than hard numbers. It now looks like the technology is the easy part, but identifying the new business processes enabled by this technology, plus putting loot on the bottom line, is the hard part.”
Bragg likens it to the early days of ERP, where in the early/mid-90s, it enabled new processes across functions within the enterprise. But there wasn’t much evidence then: you had to believe. Some did, got it right, and gained an edge over their rivals. Others hashed it up, blaming everyone but themselves. “Hopefully this time, manufacturers will remember what they learned during their ERP implementations and apply those lessons to implementing their collaborative manufacturing strategy.”
JD Edwards’ e-commerce Evangelist Nick Rawls agrees basically with these assessments. “To get proper collaboration you must inter-operate with multiple hardware and software platforms in the enterprise and supply chain. That’s not really e-synchronisation, rather collaboration and collaborative planning, forecasting and replenishment, CPFR. People need to replace architectures with an open collaborative hub and spoke architecture. Wall-to-wall systems are not needed: you collaborate internally. Externally, you need to integrate with manufacturers and supply chain activities. But there’s no control over the software being used by the many suppliers. You should be able to speak to these with XML.”
And he adds: “For us it’s right to say the technology part is easy: it’s the people side that’s enormous.” Reference is made to the CEO of a large European car manufacturer who recently maintained the challenge is not the boardroom but collaboration – if he could hook up all his suppliers electronically he could slash £1,000 off the cost of a £10,000 car. “If you’re synchronised with information, you don’t have to carry inventory,” observes Rawls.
The component supplier doesn’t have to lay out stock, the manufacturer doesn’t and neither does the customer. Benefits to the customer of concurrency and collaboration also impinge on time to market and reduced component obsolescence. Simulation and modelling over the web is the essence of CPFR. But none of this matters a damn if you can’t execute synchronously.
Interoperability of systems is paramount. Make the supply chain really fly. The key issues? How many people run with open systems today? Or is it proprietary or point-to-point interfaces still? Do companies get the most out of the legacy systems in their portfolio? “By using JD Edwards’ hub and spoke architecture, they do,” says Rawls.
Dexion doing it
“This is the vision up to now,” says Rawls. “It’s never been done before. We have supply chain customers who are doing parts of this now.” Examples? Shelving manufacturer Dexion UK is using a web-based integrated product configurator for customers working under rules-based logic to provide what they want, trickling down the supply chain to all parties and covering changes too. The system validates customer needs, stock required, etc. And medical equipment manufacturer Sims Portex has an HTML front-end talking to legacy systems, all of which is being integrated.
“It is early days for collaborative commerce,” says Rawls. “The pioneers have to redefine relationships. To further assist this, we’re writing workflows across multiple software packages across multiple hardware platforms, graphically.” The ability to collaborate and graphically back-up workflows is here assisted through an underlying technology XPI (external process integration) component.
“The big thing now is return on investment and delivering value to customers,” says Rawls. “That’s total value management, which is comparable to key indicators equating to industry averages or best-in-class. It’s like taking the DNA of customers as a road map to business benefits. It doesn’t matter how good software is if any effort didn’t deliver value to our customers – that’s market value. One year ago the big noise was in e-procurement and e-CRM. Now according to Gartner Group research, it’s ERP-to-something which enables collaboration.”
The mantra being pushed around JD Edwards today is “it’s the freedom to choose and the power to share”. The MD of a company trading within Europe or globally has the freedom to choose the portfolio of software his company wishes to deploy. Utilising the web, the company trades internationally and exports goods, yet has no control over the systems set-up among its suppliers and customers.
The way for effective and efficient management of supply chains is through a collaborative approach to commerce. It’s the way to go.
Author: Frank Booty