Alerting your supply chain

Imagine the ideal scenario for your manufacturing firm and its supply chain: all partners and suppliers to your business are ‘connected’ via the Internet using some sort of supply chain fulfilment/event management software. Every order, stock item and shipment in the chain is monitored, managed and controlled using alerting software, routine tasks are automated and exceptions are identified, routed and reported immediately to the appropriate individual for actioning, before the problem gets out of hand. It may sound far-fetched and there may well be more important issues within your company that you would prioritise first. But you cannot ignore it. There are already manufacturing firms that have implemented such systems (albeit limited to perhaps a number of key suppliers) and have reaped the financial rewards. The system you opt for doesn’t have to be sophisticated either. The alerts side for example can be done by e-mail, telephone or simply pager alerts. You can also decide to start small and focus on your important suppliers first, then expand once it’s all tried and tested to other suppliers. Industry analyst ARC describes this software niche as ‘supply chain process management’ or ‘SCPM’. Steve Banker, director of supply chain solutions at ARC, defines SCPM as: “An application used to identify and proactively resolve supply chain problems in real time. It monitors the extended supply chain and provides event alerts [for example, a shipment has not left the supplier within a preset time] and key performance indicator [KPI] alerts to help synchronise the supply chain… It really bridges the gap between supply chain planning and supply chain execution systems.” ARC estimates that the global SCPM market is growing 83% year-on-year, but will drop to 53% over the next five years. 2001 revenues from this market stood at $170 million, with about 40 key software suppliers grabbing most of this pot. ARC expects many other vendors to follow into this niche very shortly. Customer success stories are plentiful in this area. Take electronic components manufacturer LG-Philips for example. The Dutch company is a major global manufacturer of electronic products ranging from audio and video systems, to lighting, consumer electronics components and telecommunication equipment. The company has 9,000 employees in its manufacturing sites in Brazil: the plant at Manaus does all the audio and video equipment production; the site at Recife is responsible for automotive lighting systems and electronic components; the Varginha plant makes all the group’s household appliances; and the displays division in Sao Paulo (two sites with 3,500 employees) manufactures glass parts for TV CRTs, computer displays and electronic components. Supply chain automation In early 2000, LG-Philips started a programme to automate its supply chain systems. The major obstacles for the group’s production chain at this time were primarily in components operation. Because of the company’s 24x7 production schedule, the manufacturing units of Sao Paulo, Varginha and Recife faced a number of difficulties detecting and solving operational problems, such as adjusting production and stock levels according to demand variations, as well as ensuring a continuous supply of parts from its supplier base. From a shortlist of vendors, LG-Philips selected enterprise software firm Baan’s supply chain planner software, to complement its existing Triton platform. According to Flavio Taioli, materials manager at Philips, “We needed a tool that could help us identify process bottlenecks and to standardise production planning across the Brazilian plants and its suppliers.” From stock and sales data available in Triton, 175 staff now use the software to create different business scenarios. From these, they can decide how to improve sales and distribute their products. According to Taioli, they also use the software to help develop long term production plans that establish the manufacturing runs, the required volume of components for current demand needs, and quality ratings. The implementation has been phased and involved the help of IT consultancy Atos Origin. Step one involved its components division to help synchronise production processes in different manufacturing units and to help prevent losses and increase productivity. “The time required for the development of the production schedule has dropped from one month to one week, allowing the manufacturing units to provide plans for weekly activities. Dealer support [which previously required three to four days] currently requires only two to three hours,” says Taioli. A couple of months ago, LG-Philips started looking at ways of integrating the supply chain of every industrial unit within the group to the network of suppliers and dealers, as well as part of its online customer support. According to Taioli, the company intends to use Baan’s supply chain planner software for this in combination with Atos Origin’s e-Kanban platform, a supply chain planning system that connects manufacturing units to suppliers via the Internet. There are of course a number of software suppliers that can help with your SCPM needs. The likes of Wesupply, Manugistics, i2, Viewlocity, Interbiz, LIS and Mercator are among specialist suppliers here. But the main ERP vendors can also offer you something to sit alongside your existing ERP software (search on our website www.mcsolutions.co.uk for a full list of ‘supply chain event management’ suppliers). One UK vendor, Sourceree, is offering its customers (including one of Rolls-Royce’s manufacturing sites near Birmingham) an Internet-based hosted, ‘pay as you go’ service that sits alongside a company’s existing ERP system and links to those of its trading partners. Paul Brothers, UK sales director for the firm, explains the offering: “It doesn’t require large scale integration because it simply pulls down relatively small, bite-sized pieces of information directly associated with key supply chain events [KPIs]. There are no license fees or integration fees to pay.” As for manufacturers that may already have implemented EDI technology in order to communicate information with suppliers, Brothers comments: “EDI can create links to external organisations but, because it’s time consuming to install and [relatively] expensive to operate, it’s not a viable option for supply chain communities with many members.” Whatever you decide, the consensus amongst consultants is that users considering SCPM need to ensure they can support five key functional aspects: customisable alert notification; exception-based management; online information visibility (such as order status and stock levels); data mining and presentation of information to stakeholders; and flexible workflow-based business process definition; as well as establishing flexible user-defined KPI models. Not trivial tasks.