Getting supply chains in step

The concept of e-synchronisation is well established. By intelligent use of web-technologies, demand messages can pass smoothly down the supply chain, triggering a response from each member. The result, in theory, is a single extended enterprise in which data is shared and the actions of the entire chain and its component ‘links’ are visible to all concerned. System-to-system communication allows a high level of automation, with inventory call-offs and delivery promises being handled with a minimum of human intervention. Exception alerts and reporting allow people to focus their efforts where they are really needed, rather than tying them up in routine activities. In essence, the result should be a massive stripping out of time and inventory. That’s the theory. But practice can be very different. For mid- or lower-tier companies the price of entry can be high, particularly if they are faced with employing different platforms for each of their major customers. Further, some firms simply do not have the requisite IT skills to make the most of what is available and the ‘stick not carrot’ approach of their customers may not encourage experimentation. Increasingly, there is a recognition that what works well at the top of the chain can be extremely painful lower down. As a result, some of the software developers are pointing to totally different modes of operating that are as much about attitude as technology. But before we look at what’s in the pipeline, let’s look at an achievable, text book solution that doesn’t involve total systems replacement. LOGiCOM, which provides logistics services for spares across the IT industry, is using integration software firm SeeBeyond’s eGate Integrator to unite and manage its supply chain. Formerly part of ICL’s services arm, it became a separate company in April 2000, operating from over 60 locations across Europe, providing a 365x24 service to 83 countries, and handling 50,000 part requests per month from a multi-vendor inventory valued at around £50 million. The firm was unwilling to risk the disruption of implementing a new ERP system while it was throwing all its energies into building its new business. It therefore faced a choice that many firms will recognise. It could either add custom code to an ageing system – thought by many to be the costliest way down a blind alley – or find a route that didn’t force a choice between existing IT investments and new applications. It chose an integration broker to act as a messaging hub to pull ‘best of breed’ – or more accurately, legacy – applications into the framework today and make new links to customers, suppliers and carriers possible in the future. Equally important, when it eventually decides to replace its ERP, it will merely have to replace the interfaces without redeveloping the applications. Two interfaces were developed, one to its external service delivery systems and one to its carrier. It then integrated with a major OEM, its maintenance company and its major carrier UPS. Now, when the OEM establishes that a spare part is needed for one of its customers, it sends a parts request to LOGiCOM over the Internet. Using eGate Integrator, this is translated and routed to ERP which attempts to locate the part. Without manual intervention, the part request is matched to LOGiCOM’s stock and a message sent to the carrier. At intervals during transit the carrier sends track-and-trace information to LOGiCOM, which passes it to the OEM and supplies proof of delivery. A similar approach is used to manage the collection of failing parts. According to IT director Brian Askew: “eGate Integrator was absolutely crucial in enabling us to achieve external integration with this customer. When we first set up as an independent operation, we had a bespoke interface that we could use to communicate with our parent company but no message handling software. We were not in a position to implement any kind of B2B solution.” He reckons LOGiCOM will be able to achieve integration within a couple of months to new customers. Now let’s look at a means of inter-trading that is already achievable but underused. The ‘Autoclear’ project comes from an initiative between Wolverhampton University and Birmingham and Solihull TEC to help SMEs in the West Midlands automotive industry use IT to improve the running of their businesses. In particular, it is aimed at the exploitation of e-business. Part funded by the Rover Task Force and the European Regional Development Fund, its commercial partner is e-commerce firm Perwill. This is not expensive Autoclear is based on a secure website (128bit encryption) trading exchange hosted by Perwill. Order call-offs, acknowledgements, delivery instructions and despatch advices flow between large automotive companies and their supplier community. As the SME community was already familiar with an existing fax-based document format, the new on-line documents exactly match that. Once registered to the service, users are advised of new messages via email. Each has a security profile that controls a simple menu through which they can view only data relevant to them. Mayflower, a group of auto components suppliers, uses the firm’s eBiz Manager to integrate its cluster across the whole supply chain. The system has helped to eliminate paper documentation and take out annual costs of £6—7,000 per SME. In general, costs multiply when an SME needs to talk to other customers whose systems may be incompatible. But using the web as a ‘clearing house’ changes that completely. It removes the constraints and the costs, allowing third and fourth tier SMEs to take real advantage of e-business. Additionally, all it needs is a dial-up modem. Perwill managing director Bill Pugsley says that the intention is to accommodate most and least IT skilled firms alike. “When the order message is posted, they have choices: (a) they can download a copy and point it at their manufacturing system; (b) they could export [it] as a CSV or XML file; (c) they could upload that to Autoclear or equivalent and it can be validated, converted into EDI and sent back to the originator; or (d) they can sit on-line and fill in a few fields with the delivery dates and press the send button. It will then go back to the originator in real time. So it fits people still working off manual schedules with a finite daily output, and equally it fits the automated make-to-order environment.” It seems almost too simple and it has profound implications for supply networks. “If someone is EDI-enabled they don’t need Autoclear; they can work through the traditional route. The reality is, however, that even companies like Asda don’t have all their suppliers on board using EDI.” Pugsley says that the bedrock of his firm’s technology is the ability to communicate point-to-point securely, or via a VAN, or to convert data from SAP to XML, or XML to EDI. “The key is being able to pull the pieces together and have them working in weeks rather than months. If you can create web pages you can use it to do virtually anything you want.” The company can also set it up for a larger company trading, say, with a six-person SME, so the SME doesn’t have to worry about anything other than a browser. But here’s the rub. “What we have achieved is the removal of cost for the smaller enterprise provided the larger enterprise is prepared to configure it or pay for it to be configured. For probably less than £100,000, a company could end up with everyone they trade with on this cluster. As long as the supplier has a computer with Internet access, they can receive and respond to the information from the owner of the cluster.” But Pugsley admits that it’s difficult to persuade the majority to go this way. His firm is focusing on big companies with money because the ideal of delivering a workable, low cost solution to smaller communities just isn’t being taken up. “People don’t like change, even when it’s good for them. We find that when people work closely with their suppliers and educate them, they will win. Where they tell their suppliers this is what you are going to do and how, they won’t.” Keep it simple Another company that thinks life has been made over-complicated for SMEs is scheduling software specialist Preactor whose products appear in virtually half the ERP systems currently on offer. The firm has a reputation for innovation, and technical director Graham Hackwell cheerfully declares that Preactor is out to make people re-read the rule book. “Supply chain management tools are really aimed at controlling inventory in multiple warehouses, putting in your forecast sales and geographic data, working out where you are going to flog it from and where you replenish, etc,” he declares. “None of it takes much account of the capacity of plants to produce.” Which is fine if you have one large company controlling a supply chain, or an OEM taking a large percentage of a supplier’s capacity and thus able to call the shots. But it ignores a whole mass of companies that are collaborating, often in an ad hoc manner, to service specific orders. “These people need to be linked in a supply chain that may persist if they get on well together but may only last long enough to fulfil one particular order… We are looking at a situation where people ask ‘when can we have it’ rather than demanding it next Wednesday.” And his company says it’s providing a new route to automate this aspect of supply chain synchronisation. The software, dubbed Supply Chain Server, is a separate system that operates with Preactor’s own advanced planning and scheduling (APS) system as well as other ERP/MRP packages. It continuously maintains an up to date view of the plant and schedule, and will respond to electronic messages and inquiries from other systems. You could consider it as the electronic equivalent of a planner sitting permanently in front of the scheduling system, ready to answer questions such as order promise enquiries. It can have scheduling rules built in so that, for example, if there is no available capacity but a tasty enquiry comes in, a rule can be invoked that says ‘don’t give an automatic response but flag it up for human intervention’. Hackwell says that SCS uses open messages between systems, so it doesn’t matter if the system responding to the enquiry is Preactor or not. “You can peg stock against the order promise but you can also set a rule for how long you allow the order to persist without confirmation before you delete it and free up the capacity and stock.” The software is being beta tested by Decorpart of Nelson in Lancs, which makes pressed aluminium parts. Decorpart is using it to sell excess capacity in its anodising line. It has a continuously running published output of its spare capacity which allows local companies to look at its website and buy short term. In a sense it answers a perennial problem for MTO manufacturers: do you push the demand through the supply chain – as EDI/SCM does – or do you do it the other way round and pull capacity from the bottom up, helping everyone work together? Nevertheless, there are a significant number of cultural issues here. Hackwell says: “People who may compete as well as co-operate aren’t going to say ‘Whoopee, we’ll open up our schedules to everyone else’. On the other hand, people do ring up and ask when they can have 50 widgets. At that level, we are doing no more than people already do – just in a much better way.” Firms may want to show real details to those with whom they have a close relationship and not to others. “It’s like setting up a network with permissions; you can determine the level at which you want to share detail with specific people.” One final vital thought: cost. With both Preactor and Perwill, it’s no use saying you can’t afford the advantages that e-synchronisation can offer. SCS will sell for the same price as Preactor’s APS – £12,500. So if you put them both in – which is sensible since you will need the APS to schedule in your plant – you can solve your supply chain response problems for around £25,000. In this case, the potential payback is not proportional to the outlay. It’s better.