Theoretically, e-synchronisation can strip out huge amounts of cost and latency from supply chain activities. But, as Annie Gregory points out, industry needs to grapple with several issues to reap the benefits.
Let’s look at a hypothetical e-manufacturing world. The entire ‘extended enterprise’ – integrated as comprehensively as the inhabitants of an anthill – moves as one in response to a new market opportunity. The word goes out, using web technologies for instant demand messaging to all potential trading partners. Each springs into its own well-rehearsed routine.
The response speeds rapidly, effectively and electronically up and down the supply chain, into diverse planning and production systems, back to the OEM and/or out to the happy customer. At every stage, progress is visible to the entire chain, and as a result inventory, costs and lead times are pared to a bare minimum while the ‘e-synchronised’ trading partners move in harmonious mutual profitability.
Currently, although it’s still out of sight for most companies, this is definitely on the near horizon for the big players. Indeed it was played out in demonstration form almost a year ago with Andersen Consulting (now Accenture), Oracle, i2, Kewill (now K3) and others. Of course, unless the big boys can take a fair proportion of their suppliers with them, the programme won’t work.
So, in the normal scheme of things, it means Tiers Two and Three will eventually be propelled in the same direction, either screaming and kicking by their customers, or off their own bat and with good grace. In its incisive report, ‘Supply Nets Recast High-Tech’ (January 2001), the analyst Forrester cites two examples that illustrate the direction of the top tiers in the electronics industries. (And where electronics lead, other sectors tend to follow.)
First, Hewlett Packard: to increase continuity of supply and drive down materials costs, HP formed ‘Get Supply’ to improve collaboration and visibility across its supply chains. During a pilot effort in plastics, Get Supply implemented a single shared site for the ordering and tracking of plastics across all supply nodes, based on technology from Atlas Commerce. As a result, rather than having to integrate the various operational systems of its supply chain partners, HP implemented a single web-based engine that serves as an integration layer across all partners.
Next, Texas Instruments, whose supply chain priorities have been shifting from plant-level inventory management to improved cycle times and flexible capacity globally. TI now operates on a process basis, continuously planning and optimising global inventory, capacity and backlogs using the web. Previously, it had allocated plant capacity along product lines and geographies, but actual orders did not always match this plan. Its new operational model smoothes peaks and valleys, dynamically matching demand with capacity across a global, virtual network of manufacturing facilities.
These two examples jointly indicate an important point that is, however, often overlooked. e-synchronisation is not simply a matter of web technology. It is as much a willingness to think in different ways and to rip up previous cultural conceptions by, for instance, using multi-company workflows that cross business units and geographical boundaries. Many of the experts in this field openly admit that the technological issues will be done and dusted long before the attitudinal ones are even being acknowledged.
One of the toughest transformations required of the trading partners is the ability to harness new technologies alongside good old-fashioned trust. The strange irony of web-based synchronisation is that partners rely on each other even more, although personal contact is reduced and even eliminated at certain levels. 48% of the manufacturers that Forrester surveyed ranked sharing information across their supply chain as their top priority, while 40% ranked trust as the key attribute of a collaborative partnership.
This doesn’t necessarily make for happy bedfellows. Consider these two views from opposite ends of the supply chain. The first comes from the OEM. “I want to see the supply chain in its totality at the click of a mouse, from the scheduling of our product in supplier factories, through their in-plant processes and finished goods, to the in-transit inventory ...” The second comes from a contract manufacturer: “The extent to which OEMs stay involved in our business speaks volumes about the lack of trust they have for us. Some require that we consult with them before changing even the source of a capacitor. Without trust on both sides, we’ll see a lot of inefficiency in the supply chain.”
Clearly, there are some things that have to be established long before the word ‘web’ even enters the picture! And one of the fundamentals is to work out what you really need to know in order to stay in control of the process. Certainly, this is going to vary between trading partners but the answer will surely rarely be ‘everything’.
Still, let’s not lose sight of the big picture. Analyst Gartner Group puts it into perspective: “B-to-B (business to business) collaboration has become critical to enterprises that want to reduce cost and achieve competitive differentiation. As the Internet has enabled B-to-C (business to consumer) models, it is also being used in B-to-B scenarios to assist in data- and process-sharing.
“In many of these interactions, it is no longer acceptable to use fax, phone or EDI to push data to suppliers and customers. To address inter-enterprise pain points (eg, high-technology manufacturing outsourcing, or consumer goods demand planning), trading partners are not only sharing information through the web, but are also defining and employing collaborative processes. Interest in tools to enable c-commerce is becoming the rule rather than the exception when selecting SCP (supply chain planning) applications.”
And Gartner adds: “Although we envision collaboration being employed with all trading partners in the coming years, current deployments are usually with one or two significant partners as trust, integration and process issues are rationalised.” The firm points out that most SCP software vendors have already released, or plan to release software modules for collaboration across the enterprise and with trading partners. It is detecting increasing interest from its clients, particularly in dynamic, high-variability industries.
So let’s take a look at what’s on offer. It’s worth pointing out that, although the specialists are well known in this area – Synquest, Numetrix (now owned by JD Edwards), Manugistics, i2 Technologies, Agile (now with Ariba), Symix and Mapics among others – there’s another issue that should not be ignored. Collaboration starts with design, not production. e-synchronisation can play as critical a role here as in the downstream processes.
SDRC’s Neil Stocker talks about the problems that manufacturers encounter at this stage of the product cycle. “Typically, they are referencing a lot of different systems to make sure that the information they call upon is of the highest integrity. When they start wanting to react electronically with customers and suppliers, e-synchronisation between them is an absolute necessity. With more and more collaboration and suppliers playing a major role at the design stages of a new product, access to a common set of tools and a shared data environment is vital.
“As far as the user is concerned, all he wants is to enter an information portal and make some queries. He doesn’t care where that is coming from – PDM, CAD, ERP or CRM – nor the underlying applications, just that he can get it in a usable form.”
Back to the more commonly perceived route to e-synchronisation. Nick Ford is e-supply chain and web markets IT firm i2’s VP of business development and its e-procurement expert. i2, one of the pace-setters in this field, normally works at Tier One among Fortune 500 companies, and Ford says that he is seeing a change in the way customers are setting their goals. “They are moving away from the cherry picking of software, to synchronising the supply chain. They are focusing on integrating e-procurement with supply chain planning and linking it through to customers. e-solutions are being used to completely transform their businesses.”
He says that they are looking to use a platform to integrate the various ERP systems they have already invested in, using its content and catalogue capability to give them visibility and transparency across the supply chain. He agrees that, at the moment, it tends to be driven from the top but believes that SMEs are beginning to look that way too. Indeed, i2 has produced a ‘shrunk down’ version of its TradeMatrix software specifically for companies that want some measure of synchronisation that’s expandable to include private and public exchanges, but don’t want to make the full e-business investment.
Ford goes on to say that those that deploy effective planning and collaboration tools to share forecasts will benefit rather than suffer. “You can’t deploy this kind of strategy completely at the expense of the suppliers,” he explains. He thinks that Tier 2/3 suppliers are unnecessarily anxious about the pain involved in joining in. “The main requirement is the vision and appetite to do it.”
Natural cynicism leads me to expect that there’s a bit more to it than that. Nonetheless, web-based tools have averted one of the SME’s main dreads – wholesale upheaval of the existing IT infrastructure. “In no way are we implying we need to replace their ERP systems, even if they are of their own making,” says Ford. “What we [and others] supply is a layer of decision support, a layer of content and a platform that helps to integrate with all those legacy systems. We sit above it and provide the intelligence to aggregate the data that allows things to happen across the supply chain very quickly and transparently.”
It is obvious that, in order to synchronise with customers, suppliers will still face some taxing issues. It is, however, inescapable that those who do it are the ones who will get the chance to partner with the successful businesses. Just take a look at how it works for the most successful player in direct computer sales – Dell. It has simultaneously rolled out software vendor Agile’s ‘Anywhere’ collaborative manufacturing system to a product development community that includes five regional Dell factories and 37 of Dell’s top 50 suppliers.
Now, three months later, it is up to 45 suppliers covering 80% of its direct material costs. Glenn Neland, Dell’s VP of world-wide procurement says that it was a necessity to sustain leadership and to support the enormous transaction volume generated by suppliers and manufacturing partners. He maintains, however, that content-based process management has improved communication with both the internal divisions and its supplier network using Anywhere. “It ensures that all product content information is centrally aggregated in a single, global system and that all product changes are instantly disseminated and tracked across the global supply chain using the Internet.”
BoMs (bills of materials) and approved manufacturer lists, held in Anywhere, often change hundreds of times over the life of a product. By automatically exchanging this evolving product data with other business applications, Dell has been able to significantly improve its time to reach volume production, while maintaining product quality and improving supplier visibility. The clincher for most companies is this: what business in its right mind rules itself out from customers like Dell because it doesn’t want to bite on the e-synchronisation bullet?
Author: Annie Gregory