.. en Interest in supply chain systems has been the shortcomings of traditional enterprise resource planning (ERP). ERP systems are not constraint-based. They do not take into consideration where all the resources need to execute the plan are in place. Supply chain applications propose a schedule, highlight bottlenecks, and let users adjust due dates or resources until they find a satisfactory schedule. These plans can then be zapped into the transactional ERP system.
The Race is On There now seems to be a race in the technology field amongst the industry giants to get a product to market. Supply chain management and planning software are still in their infancy. There are a lot of sunk cost in the development of these systems and if a company can get a product to market and make it universal enough for other companies, then there is big money to be made. This is a new area business and people have hopes of, at the very least, earning back their investments before the market is saturated. Paraphrasing comments from an April, 1998 interview, IBM Global Business Intelligence Solutions General Manager Ben Barns stated the organization is focused entirely on business intelligence (BI). BI appears to be coined, IBM phrase that refers to the gathering, management, analysis and distribution of information and data.
Barns is predicting that spending on BI systems will exceed spending on traditional operational systems soon after the turn of the century. Barnes identified four keys to business success: Getting to market first, flexibility, choice and supply chain management. All four require BI, Barns says, as well as the technology required to distribute the data quickly. Most businesses have the raw components for BI, IBM is just going to make it work. The industry is very aware of what is happening and Council after council is forming. Advanced Manufacturing Research of Boston and the consulting firm Pittiglio Rabin Todd and McGrath (PRTM) of Weston, Massachusetts formed the Supply Chain Council in April of 1996 to construct a reference model.
The model was to be named Supply Chain Operations Reference (SCOR) and was intended to give manufacturers, suppliers and retailers a frame work for evaluation their supply chain effectiveness. The counsel, back in 1996, was made up of 69 manufacturers and their mission was to develop standards for measuring supply chain performance in various industries. The model breaks down the supply chain into four basic processes: planning, sourcing, making, and delivering, providing a common set of definitions for the elements in those processes. The model also provides benchmark metrics to measure performance, with different levels for different industries. In addition, it includes descriptions of ‘best in class’ management practices.
A review of 200 companies found that best-in-class companies enjoy a cost advantage of 0.3 to 7.0 percent of revenue compared to the median performance of companies in their industries. The computer industries have seen the light of supply chain management as well. An announcement was made the end of March that manufacturers, resellers and distributors of IT products plan to form an organization to oversee development of standards for what they call E-commerce transactions. In other words, transactions involving computer products. Fadi Chehade, executive director of newly formed Rosetta Net said, It’s a shame that grocers can look within the supply chain and figure out how many Oreo cookies they need, but technology companies have thousands of product returns daily.
Projects are underway to create data formats for software, memory, and notebook products. These new products are expected to be show cased in the summer of 98. Companies are beginning to wake up and see that in order to compete successfully in the 21st century, a fundamental shift in executive mind-set of the manufacturing industry has to occur. A 1998 vision in Manufacturing study from Deloitte & Touche Inc., found the following: To create value for customers, manufacturers must eliminate traditional boundaries between customers and integrate more closely with them. The study has identified five strategic areas where companies must focus.
These are: confront the realities of globalization craft a new agenda for product innovation resolve the customer paradox integrate the global supply chain align the organization to compete in the 21st century. The Path to developing a good Supply Chain Most supply chains consist of a large number of interacting, but not integrated business units. So, from this point the first order of business it to get the home location in order. JIT is the primary focus and the goal is to reduce in-plant lead times through the elimination of waste. Here, all levels of the work force must be educated in the objectives and techniques of JIT, otherwise it will not be possible to maintain the necessary discipline needed.
The next step has to be some sort of Interplant planning and logistics integration. JIT is good for reducing lead-times within various cells of an industry, but some sort of materials planning mechanism is needed to reduce the total lead-time of the business. Every activity needs to be identified and beginning and ending times for each must be defined. Once the is accomplished, a company wide effort can begin to reduce total lead-time. The next step in the cycle is vendor integration.
Before this can take place, the companies total number of vendors should be reduced to include only those that offer the best sources of supply or service. Most vendors will then be linked the location using some form of EDI. This then becomes the major channel for demand and supply information. The next phase is to integrate customer ordering and product distribution. Traditionally this is controlled by some sort of trained sales or marketing staff and these need to remain in place.
Products need to be added that allow the customer to directly place orders on-line, either to a central information system or directly to manufacturing. In parallel, systems need to be designed that allow direct shipment of products to the customer. In the end, there is a system that looks something like Figure 3 . Who’s doing what Many companies seem to agree that supply chain management is the way of the future. Everywhere you look, new companies are forming and someone is talking about the newly discovered supply chain management techniques, software or packages.
One company that should take particular notice of who is talking is Roanoke’s own Norfolk and Southern Railroad. CSX Rolls Out Java Application CSX Technology, a division of the transportation giant CSX Corporation, announced that is now offering a network-centric supply-chain management application (SCM) named TWSNet Premium. This application lets businesses track cargo shipments over the Internet from Java-enabled browses. The companies Jacksonville, Florida, division began marketing the TWSNet Premium the third week in March, 1998. Customers already piloting the application include Apple computer, Nissan, Procter & Gamble, Xerox and the U.S.
Department of Defense. The application is server-resident and must be purchased by the customer. Subscriptions are on a per-use basis and offer different levels of information access. TWSNet Premium is actually the third phase of CSX’s business critical Java deployment that began in 1995. CSX first rolled out TSWNet, an intranet-based application for its own employees to track shipments. Then came an extranet application called Transportation Workstation (TWS).
The TWSNet Premium application is the first to include a multi-modal system from transportation company Sea-Land, as well as CSX’s rail Network. IBM offers asset-tracking service Although this IBM product does not fit into the external supply chain picture, it does provide a service to get the supply house in order. In January of 1998, IBM’s Global Services division announced an asset-tracking service that works via the Internet. Called Asset Services, the service is intended to help corporations keep track of hardware and software, as well as control the cost of managing existing equipment and buying new equipment. The service uses the Internet to pass information between companies and IBM.
Many companies go to great pains to track inventory coming in and going out of the business, but don’t pay a lot of attention to in house inventories. In this day and age, it is relatively easy to invest hundreds of thousands of dollars in software and hardware and not have a whole lot to show for it. Personal experience in the computer industry has proven this repeatedly. Carilion Health System’s network ist second in size only to Walt Disney on the East Coast. Network Services, a division of Carilion’s Information Services, has been installing about $200,000.00 worth the hardware and software every month for the last three years. When so much money is being invested in internal computer systems each month, its easy to lose track of who has how much of what. People move around all the time and upgrade their PCs whenever possible.
Its very easy to lose a $500.00 software license or forget to un-install a legacy system that cost $2.500.00 two years ago. IBM’s service begins with a manual survey of the equipment’s location and information about the equipment’s assigned person or department. A user requires a baseline inventory. We (IBM) can conduct it or direct them in it, and once it is done, we can update it as they need it. The information goes to an IBM service center in Georgia, which uses Lotus Domino and a centralized group of IBM employees using Notes to manage the inventory.
The only software needed at a client site is a Web browser. The service includes: inventory, tracking, acquisition, moves and adds, and roll-outs. Kellogg Kellogg Co. is known as a breakfast food giant. It owns better that 40% of the breakfast food market share. This Eggo king is starting to feel pressure from the outside to get its act together. One guess as to where the pressure is coming.
The answer is Wal-Mart. Wal-Mart and Kellogg’s own growth from $3.3 billion company 11 years ago to a 6.8 billion company last year, is spurring th producer of Pop-Tarts and Rice Krispies to invest millions in new software systems to support the business processes necessary for global operations. Kellogg states that they need to be able to give their customers what they want, but the truth of the matter is they are probably being strong-armed by Wal-Mart. Kellogg’s point is legitimate, however, when the say the need to be able to quickly and correctly serve those industries, that are setting up shop in every corner of the globe. Kellogg is not buckling under the pressure. They do not want to invest in a technology just because of one or two customers; they want something they introduce unilaterally.
There vision for the supply chain is, to take an order anywhere, make it anywhere, stock it anywhere and ship it from anywhere. Kellogg has invested in an Oracle based package named Consumer Packaged Goods (CPG), which is a mix of applications from Oracle and other various specialty vendors. Reynolds Metals Co. Reynolds has thousands of products and millions of dollars in inventory. Being able to successfully forecast sales demand accurately is extremely important. In June of 1997, Reynolds implemented a new supply chain planning software from Logility Planning Solutions.
In the six months after installation, Reynolds claimed it cut its forecasting error rates from 15% to as little as 5%. The statement was also made that they were also able to reduce inventories significantly. The Logility system interfaces to Reynolds’ software which resides on an IBM AS/400. The production plants are all connected via a closed-loop distribution system. If more product must be made, the plant materials managers are able to log on to the system, view the information and order the run. Watch out for Vultures The list of companies that are using the new techniques to gain new market share and bigger advantages goes on and on.
In all the good, there is defiantly a lot of bad. Small companies down to mom and pop business are in a real good position to be abused. Many of these businesses want to take advantage of what the technological world has to offer, but they do not have the resources to invest in the proper tools. An excellent example of a company that was formed because of all the hype is Supply Chain Solutions, Incorporated (SCS), founded in 1994. In February of 1998, the company announced the general availability of a full – function web – enabled service bureau that will support clients in implementing a vendor-managed-inventory.
(VMI) This company grew out of the Pharmaceutical manufacturing and distribution industry. The article was entertaining enough that a few paragraphs just needed to be quoted. The wire release starts off by stating, We have chose to offer the service bureau in response to key players in industry who desire the benefits of a VMI program with a much lower investment and lower risk associated with implementation. SCS prides itself on consistently rapid implementations and to assure success of our program we offer resources of hardware, software, and operational expertise. The article went on to say, SCS also revealed that seven clients are already using the service as part of there efforts to reduce inventories, increase customer service levels and so on and so on.
From personal experience, a red flag went up as the article appeared on the monitor screen. Still having the bitter taste of once having worked in a company that invested a not so small amount of money in such product, except this translation of the above news flash. Since there seems to be many companies that want Wal-Mart type of supply chain management at a Wal-Mart price. For this reason, we are offering our product at a price too good to be true. SCS prides itself on its ability to get quickly in and out of your business.
If you want the program to run properly, it must be run on our hardware. We also have staff who can show you how to use the product if you cannot figure it out yourself. In the four years we have been in existence, we have managed to sell this product to seven other businesses. The record of accomplishment is not great, but good advertising and PR can cover a multitude of mistakes. Conclusion The whole idea is companies want to better serve their clients and decrease lead times. A good supply chain is measured by its ability to get a good or service to an end user as quickly as possible.
Technology, particularly advancements in Personal Computers Business Reports.