In the age of real-time commerce, Web-based tools provide provide improved supply chain efficiencies that help companies such as Timberland and Lucent stomp the competition.
|Yusef Akyuz, vice president of information services at Timberland Co.|
In the age of real-time commerce, Timberland Co. is just one of many firms in a foot race to satiate customers' increasing demand for specialized goods delivered faster and more cheaply than through traditional channels. These requirements are forcing companies in all industries to broaden their perspective to include outside suppliers and key trading partners that can help achieve the necessary efficiencies.
What's needed are real-time, collaborative links with these far-flung partners. As a result, companies like Timberland are turning to a new crop of Web-based supply-chain tools that deliver more efficient connections to external partners than those offered by proprietary systems or traditional client/server offerings. These firms also gain new planning and forecasting capabilities in the bargain.
"Real-time collaboration lets us do better planning [with our retail customers and suppliers] and reduces our lead time in getting product to retailers," explains Yusef Akyuz, vice president of information services for $900 million Timberland, the Stratham, N.H., maker of goods like rugged hiking gear and running shoes.
"The way we've been developing business plans, there's a lot of information communicated via e-mail attachments, faxes and voice mail so there's a lot of data being reentered and a lot of delay built into the process," says Akyuz. Based on the results of an early internal pilot of Manugistics Group Inc.'s Web-based collaborative planning and forecasting tool, NetWorks S/Collaborate, Akyuz anticipates Timberland will reduce its planning cycle from four to six weeks to around a week to 10 days.
While traditional client/server supply-chain management software from companies like Rockville, Md.-based Manugistics and i2 Technologies Inc. of Dallas, has made some inroads helping firms streamline internal operations, the new Web-based tools are making it easier and more cost-effective to include external partners. Through a simple browser interface, a manufacturer could, for example, tap into its suppliers' systems to see if inventory and production capabilities match demand for the manufacturer's products. Thus the manufacturer will be alerted to any potential bottlenecks or backlogs and can work with its suppliers in real time to head off these problems.
Similarly, other Web-based supply-chain components allow partners to collaborate on forecasts in real time or let a company's sales reps tap into suppliers' production schedules and logistics information so they can keep customers abreast of order status. As these new, extended supply chains begin to share critical production, scheduling, inventory, forecasting and logistics information in real time instead of by phone, e-mail or fax, companies can respond more accurately to dynamic customer demand. In addition, the sheer economics of providing this access via a browser instead of through either costly, proprietary systems or more limited electronic data interchange (EDI) software lets companies share critical business information with a greater number of suppliers.
|Ch-ch-ch-chaining....Projected revenue for supply-chain management software|
"The one way the Web factors in is transparency," says Darryl Praill, vice president of marketing for WebPlan Inc., a Kanata, Ontario, Canada, developer of a suite of Web-based supply chain tools. "With transparency, suppliers no longer have to guess what's needed because they know exactly when a manufacturer needs components. With visibility up and down the supply chain, no one gets hit with excess inventory--they can see seasonal demand and react to trends." Streamlining operations
There are obstacles to getting trading partners and customers to play by the new rules of the open and extended supply chain, however. While some still worry about security, most companies are relatively comfortable with the idea of passing critical business information over the Internet. Of more concern is the issue of trust, since most employees and trading partners are accustomed to cultures that discourage sharing of key business data. Modifying business processes so companies can actually respond to dynamic product demand is another key challenge.
Nevertheless, experts say companies must deal with these obstacles in order to remain competitive. "The key issue of survival going forward is you have to open your kimono to customers--that's how they gain trust," says Bruce Bond, vice president and research director of Gartner Group Inc.'s Enterprise and Supply Chain Management Service, in Stamford, Conn. "Web-based supply-chain technology is the enabler and will become a standard for doing business."
The Web's role in streamlining operations is expected to jump-start companies' deployment of supply-chain management software. According to AMR Research Inc., a Boston-based consulting firm, revenues in the SCM market were $2.6 billion in 1998 and are projected to soar to $18.6 billion in 2003, much of that fueled by companies adopting new Web-based solutions (see chart, "Ch-ch-ch-chaining"
According to AMR, this online cooperation will happen on three levels. The first level is transactional, where companies automate sales transactions, purchase orders, invoices and payments--steps traditionally done via EDI. Second is informational cooperation, where companies report on production schedules, forecasting, and the like. The third level is collaboration, where companies work together on forecasts in real time, as Timberland does with its retailers.
|A fragmented market: Leading suppliers of supply-chain management software |
Existing vendors of supply-chain management and enterprise resource planning software are frantically working to overhaul their product lines to support the new Web paradigm (see chart, "A fragmented market"
). Initially, most vendors refurbished their client/server offerings to make them accessible via a browser. Now, companies are rearchitecting their product lines to make real-time collaboration a core capability of their programs and to make their components perform optimally in a thin-client architecture.
In June 1999, as part of its announcement of Manugistics6, Manugistics released its e-chain architecture that brings Web and e-commerce capabilities to key components in its SCM suite. Walldorf, Germany-based SAP AG, for its part, is still lagging somewhat, promising new Web capabilities for its advanced planning and optimization (APO) package by the end of 1999. Other companies, like Ottawa-based WebPlan Inc., have introduced Web-based supply-chain suites designed from the ground up to support online collaboration via a browser.
|At a Glance: Timberland Co.
Company: Based in Stratham, N.H., Timberline manufactures footwear, hiking gear and related goods.
Feeling the pinch: Timberland's manual process of producing forecast and replenishment plans with key retailers via e-mail, fax and voice mail was not flexible enough to support the company's anticipated growth. The process was fraught with unnecessary delays, not to mention a lot of rekeying of data, which often led to mistakes.
Comfortable fit: By deploying Manugistics Group Inc.'s NetWorks S/Collaborate Web-based collaborative planning tool to internal planners and key retail accounts, Timberland will be able to cut its planning cycle from 4 to 6 weeks down to 10 days. And because the process is now iterative and more interactive via the Web, Timberland is assured of more accurate forecasts, which it expects will lead to higher sales.
|Timberland's Yusef Akyuz says the company's planning cycle will be reduced to 10 days by using NetwWorks S/Collaborate software.|
Using the Web to improve forecasting is one of the most popular ways companies are trying to stay abreast of customer needs. Unlike Timberland, companies like Eastman Chemical Co. are deploying the process in-house before they hook up key partners. The $4.48 billion manufacturer of chemicals, plastics and fibers is currently using Atlanta-based Logility Inc.'s Demand Chain Voyager software on its intranet to enable 240-plus sales reps to access and share forecasts.
Next year, Eastman will extend the tool, via the Web, to its key customers, allowing them to work collaboratively in real time with sales reps on forecasting. This will replace the existing manual process whereby reps have to place regular phone calls to planners at key accounts along with exchanging forecasts in spreadsheets via e-mail or fax. "That's where the streamlining comes in, in terms of reducing errors and non-duplication of efforts," explains John Hewson, manager of forecasting and planning at Eastman, in Kingsport, Tenn.
Allowing customers to have real-time input via Web-based supply-chain tools will help Eastman do a better job of identifying and timing demand. "We recognize we need to do a better job of satisfying and supplying what [customers] need when they need it," adds Hewson. "The Web lets us do that without seriously impacting our cost structure, without having to hold higher levels of inventory and without flying product around all over the country to meet customers' needs."
Lucent Technologies Inc.'s Rouen, France, Global Provisioning Center also anticipates substantial cost savings by deploying the SupplyIT component of WebPlan's eSupply Chain suite with its key suppliers, according to Raimund Elsen, the plant's manager of program management. The maker of optical and wireless networking products expects over time to replace EDI links with key suppliers with SupplyIT's browser-based tool set. "It brings more flexibility and interactivity than EDI and saves the traditional EDI link cost," which can be very high, Elsen says.
Another way companies are using the Internet to achieve supply-chain efficiencies is through Web-based logistics and fulfillment packages. ShopLink Inc., a $14 million upscale online grocery delivery service covering metropolitan Boston, knows that on-time and accurate delivery as well as a personalized shopping experience are just as important to encouraging repeat business as is its eclectic selection of specialty foods, choice meats and produce. To keep it competitive on that score, ShopLink is installing an Internet-based logistics and routing tool from Descartes Systems Group Inc. in Waterloo, Ontario, to bring efficiencies and knowledge sharing capabilities to its supply chain.
|Polishing the Shop Floor|
Datasweep Advantage helps manufacturers keep tabs on assembly lines.
Startup Datasweep Inc. is looking to take Web-based supply-chain management capabilities to an area it says is overlooked by the emerging crop of tools in this category: the manufacturing shop floor.
The San Jose, Calif.-based, company, which launched in mid-September, is now shipping Datasweep Advantage, a Web-based supply-chain management tool aimed at companies in build-to-order industries such as high tech and telecommunications, which are building highly customized products with a heavy reliance on contract manufacturers. The new tool suite replaces existing pencil-and-paper shop-floor systems or client/server applications, giving companies a browser-based, real-time window into what's happening on their own shop floor as well as on those of their key suppliers, company officials say. These tools are designed to improve time to market, flexibility, collaboration, and-ultimately--customer service.
"The trend of build-to-order, customized manufacturing is breaking existing shop-floor or legacy systems, which were set up to build 1,000 units, not to track custom units across an extended supply chain," explains Matt Holleran, Datasweep's vice president of marketing.
Specifically, the Datasweep suite can track work orders at the unit level for specific customers in real time; flag and manage product shortages; manage change orders and provide "as built" records to all parties in the supply chain to control quality; and monitor production throughout the product's lifecycle. The software incorporates an integrated data mart so data can be filtered into leading enterprise resource planning and advance planning software such as those from i2 Technologies Inc. or SAP AG. Datasweep was built on Microsoft Corp.'s DNA for Manufacturing platform and works with Microsoft SQL Server 7.0 or Oracle 8.0.
Acma Computers Inc., a Freemont, Calif., maker of custom computer systems, tapped the Datasweep suite to improve on-time delivery to customers and track and analyze quality information during the production cycle. Since implementation of the software in its plants in March, Acma has increased on-time delivery of custom units from 78% to 96% and improved final test quality from 90% to 97% right the first time, notes Allen Lee, Acma's president.
Harmonic Inc., an $83.8 million maker of digital and fiber optic systems, is using Datasweep Advantage to automate the monitoring and reporting of quality data on two of its lines. "We were looking for something simple to tell us what the state of the factory is," explains Doug Zody, director of operations engineering for the telecommunications provider, in Sunnyvale, Calif. "Prior [to Datasweep], the process was all manual and very time-intensive. The Web-based tool lets us disperse quality data and other factory metrics to a wide variety of Harmonic employees who previously had no way of getting to it."
If Harmonic's pilot is a success, Zody says the company plans to roll out Datasweep Advantage across its entire factory and eventually to its key contract manufacturers. Says Zody: "We're hoping it will allow us to acquire the same quality information we're getting in house with our suppliers."
"We are judged by our customers in fairly simple ways
--if we deliver on time and if we deliver 100% of the products ordered," says John Icke, chairman and CEO of ShopLink, in Westwood, Mass., explaining that 80% of ShopLink's customers place a weekly order averaging $100. Web-based supply-chain management is a key tool that the firm uses to satisfy its customers.
ShopLink had been relying on manual processes to route its fleet of 28 trucks, which make close to 800 deliveries daily. By installing Descartes' new Web-centric DeliveryNet.Home fulfillment package customized for home-delivery businesses, Icke says ShopLink can draw tremendous efficiencies by optimizing routes, preventing drivers from getting lost and doing dynamic scheduling to reroute deliveries, for example, in the event of traffic congestion or inclement weather.
Currently, ShopLink employees have to rekey information coming in from the Web-based order-processing system into the Descartes routing software. But phase two of the project, scheduled to kick off in the next few months, will integrate the two systems so order information is dynamically routed from the Web into DeliveryNet.Home for scheduling.
In the final stage, ShopLink plans in February 2000 to put handheld, wireless devices in all its trucks. This will let drivers tap into the firm's central Oracle Corp. databases to access key customer information such as delivery preferences as well as input fresh data such as whether the household has a new baby or pet; this will enable ShopLink to suggest additional products and services. "The new products will help us improve operational efficiencies, but they also provide us with a broader set of tools to gain customer intimacy," explains Icke. Competitive Edge
For some companies, offering customers Web-based visibility into what's happening with their particular product order or service can be a competitive edge-and open a new revenue stream. Rentway Limited, a truck leasing and fleet management consulting company, for example, plans to leverage its deployment of Descartes' EasyRouter Web-based routing and scheduling software as a new business service. Equipped with just a browser and a phone line, Rentway clients can tap into the tool to dynamically route their leased vehicles. These users pay Rentway a monthly charge for the software for each truck along with a transaction fee each time they generate an optimized route.
"By offering the Descartes system, we've gone from a narrow service offering to broadening our footprint of influence," explains Scott McRorie, national business development manager for Rentway, an Etobicoke, Ontario, Canada division of Trimac Corp. "That differentiates us from competitors in the leasing area, adds tremendous value to existing clients and provides us with an additional revenue stream." Rentway is piloting the Descartes software now and hopes to make it available to its customers in the fourth quarter of 1999.
SMTC Manufacturing Corp.'s use of WebPlan's e-Supply Chain suite is becoming key to how the electronics manufacturing service provider promotes itself to its high-tech customers like Dell Computer Inc. As a major outsourcing partner for many high-tech firms, SMTC produces circuit boards and other components that manufacturers use to assemble finished goods configured to their customers' specifications. This enables Dell and others to work to a build-to-order model, which is more cost efficient than maintaining inventory.
Currently SMTC is rolling out WebPlan's OrderIT Web-based tool to allow its customers to "peer" into its factories to check on the status of orders, which in turn allows these customers to provide better information to their own customers as well as to access SMTC's master production schedule, which helps them better respond to dynamic customer demand. (See story, "Polishing the shop floor."
) SMTC also plans to require its own suppliers to use WebPlan's SupplyIT module so customers will have the same visibility into SMTC's extended supply chain.
"We're aiming to be the supply-chain integrator for our customers," notes Phil Woodard, SMTC's senior vice president of enterprise development and integration in Markham, Canada. "The Web-based initiative is truly to integrate customers so they can talk to us and our suppliers in a quick, reactive fashion."
Woodard admits there will be some rough patches. With everyone's work patterns openly accessible to all parties in the chain, any mistakes in planning will be visible right away. Woodard and crew are working to change the perception that hiding that kind of problem is better than sharing it--and resolving it--up and down the supply chain.
Eastman's Hewson also anticipates having to work on the trust issue so everyone is comfortable with information exchange. He suggests modifying business processes so companies can actually take action based on this rapid exchange of data. Says Hewson: "It's no good having a fast interface if once data arrives within the walls of an enterprise, you don't have the equivalent speed with which to take action."
Who knows, maybe the Web-based supply chain tools will be just what companies like Eastman, SMTC, Timberland and others need to win this customer-driven foot race. // Beth Stackpole is a freelance writer living in Newbury, Mass. She can be reached at email@example.com.