Collaboration and automation
Crucial links in supply chain
At the center of supply chain management (SCM) is the premise that collaboration between business partners and suppliers leads to financial success through inventory control, lasting customer relationships and increased competitive edge. As business-to-business (B2B) e-commerce becomes the vehicle for advanced SCM practices, the supply chain will be farther redefined and tightened by offerings such as trading exchanges, hosting services and e-procurement. AMR Research projects that B2B e-commerce will reach $5.7 trillion by the end of 2004, according to an April 2000 report.
Whatever the strategy employed, companies must weigh which investments will provide the most cost-effective and direct route to success. For many organizations, a crucial first step in building a supply chain is establishing the means for high-quality internal communication, which then ripples out to customers and suppliers.
At Chesapeake Display and Packaging, a collaboration solution has led to the transformation of how worldwide project teams work together. The manufacturer and distributor of floor displays and graphic packaging for consumer products decided to overhaul its communication strategy, from the inside out.
Prior to the creation of its current IT infrastructure, there was no messaging, groupware or transactional data system to facilitate communication between Chesapeake's 11 U.S. plants. Project plans were coordinated via phone and fax across sites in Europe and North America, involving designers and engineers, sales, marketing, manufacturing and accounting.
Gary Cheimis, VP of operations, was tasked with building an IT infrastructure that would reduce cycle times and increase Chesapeake's competitive edge. The architecture is built from four tightly integrated systems: Domino and Lotus Notes from Lotus Development; a J.D. Edwards enterprise resource planning (ERP) system running on AS/400; a Domino-based project management system from CYRE; and a production management system developed by Synquest. The four-way system was up and running within 17 months.
The solution is rolled out across the eight plants under Cheimis' jurisdiction, serving 847 users from 18 Domino servers, with plans to add more divisions over the next year.
The integration of knowledge management technologies--such as collaboration--and supply chain management is a natural fit, according to Martha Tacy, director of Strategic Knowledge Management Marketing at Lotus. "It's all about applying information technology to core business processes within an organization to make it more effective," she says. Customers use Lotus products to accomplish internal collaboration and as an element of a B2B strategy, to facilitate near-instant collaboration on inventory management, resupply planning and forecasting issues.
Chesapeake's project management component, CYRE, is linked to the ERP system and uses a controlled workflow process to capture all project information in a series of databases. Notifications of task completion are sent to the next person in line within a production cycle, and if something is due or missing, an alert is issued. Likewise, when a deal is negotiated with a customer, "we can hit a button that says, 'Turn this project into a sales order,' and it will feed the data directly into our ERP system, which then generates a work order and launches the workflow," says Cheimis.
Synquest's SCM application, Manufacturing Manager, then picks up the work orders from the ERP system and sends them on to the plant floor. Cheimis explains, "Domino provides the workflow agent for Synquest messages. If a work order gets stalled somewhere, Synquest triggers an alert. Then Domino recognizes that it's coming out of Plant A, Department X, and shoots off a message to the right managers."
Implementation of a Notes and Domino-based compliance management tool from Quality Systems International is underway.
The most immediate benefits for Chesapeake--a big boost in productivity and cycle time reduction--will also prove to be the most enduring.
"Customers are always pushing us to provide finished products in a couple of days that used to take two weeks--even two months. So when we can get everything entered once very quickly and then have it travel automatically everywhere it needs to go, that cuts days off our cycle time," says Cheimis, "and that's the real key to competitiveness and longevity in this business."
As a hosting service, SPS Commerce represents another face of the B2B e-commerce marketplace. For those companies that wish to forego major IT infrastructure expenditures of both time and money, relying on a hosting service for SCM automation is an increasingly viable option. SPS uses the Internet to automate transactions between a business and all of its trading partners. Customers benefit from an integrated supply chain, without the responsibility and cost of IT infrastructure construction and maintenance.
The Trading Partner Enablement Program works with each vendor to achieve compliance and supports transactions from paper-based to Web, Electronic Data Interchange (EDI), HTML and XML. Services include browser-based UPC barcode labeling; management of advanced shipping notices, purchase orders, invoices and electronic payments; and online product catalogs.
Direct marketing and online retailer Fingerhut is using SPS Commerce's services to automate transaction processing throughout its supply chain, which is comprised of approximately 1,500 trading partners.
The incentives for automating Fingerhut's supply chain were cost reduction, productivity gains and improved inventory. The catalog company is focusing on automating its core transactions: purchase orders, purchase order changes, advance ship notices and invoices.
"We were exchanging EDI with around 30% of our trading partners, mostly the larger ones," says Scott Bolduc, EDI operations manager. "Using SPS to enable more of our suppliers allows us to automate the processing of shipment and invoicing information, which represents a pretty large savings to us in paper and productivity gains."
SPS Commerce is doing all of the testing and certification of Fingerhut's EDI-capable trading partners, and providing services--such as EDI to Web and EDI to Fax--to non-EDI capable companies. The process has unearthed a surprising number of vendors that were EDI-capable but not previously taking advantage of automated exchanges with Fingerhut. "We are approaching 500 new trading partners that have been added by SPS since the first of the year--and 70% were already capable," says Bolduc.
Here's how it works. Suppliers that have selected "EDI to Web" access purchase order information through a Web site created and supported by SPS. The supplier is notified of documents that have arrived by e-mail or fax, then accesses the site and pulls up the forms to fill the order. When merchandise is shipped, the vendor accesses the site again and completes a ship notice form and an invoice form. The documents are converted to EDI and sent to Fingerhut; EDI to Fax vendors complete the same processes using faxes, which SPS sends to Fingerhut in EDI format.
Future implementations will extend the e-transaction process with Order Status Inquiry and Report, Remittance Advises, and Inventory Forecast.
Among the benefits Fingerhut has experienced are improved data accuracy, simplified data entry and reduced lead-time. With the automation of inventory control, Fingerhut employees are able to refocus their attention on other customer satisfaction issues.
"People who were spending time pushing paper or on the phone with vendors and customers, are now spending more time on problem solving and real customer service functions," says Bolduc. And that's what it's all about.