Exchanges, portals, auction sites--whatever the method, everybody's trying to aggregate supply and demand and operate their supply chains in new and more efficient ways. Office-furniture maker Herman Miller Inc. in Zeeland, Mich., got an early jump start two-and-a-half years ago on the development of a portal that lets suppliers rifle through data from Herman Miller's ERP system.
Mike Brunsting, electronic commerce/EDI team leader for the US$1.9 billion company, spoke with CIO about Herman Miller's efforts and the results thus far.
CIO: Herman Miller got into the portal game early. What led you to build your supplier portal?
Brunsting: This effort really started for us two-and-a-half years ago when we were going through process reengineering for our Baan [enterprise resource planning software] implementation.
I was part of a team looking at our purchasing processes. Out of that effort, we knew we had to change the way we were communicating with our suppliers.
The office-furniture industry has always been regarded as slow moving and unreliable--and rightly so. Herman Miller is looking to reduce lead times, while at the same time increasing reliability. From a purchasing perspective, we knew we could do all this stuff internally to improve our processes, but to be truly successful we needed to eliminate the waste in communicating with our suppliers. We'd been unsuccessful in the past at getting widespread adoption of EDI because many of our suppliers lack the technical sophistication or the resources. But we needed to put a stake in the ground, so we said, "We're going to do this through the Internet."
In building the portal, we had two main requirements. One was we needed two-way communication--back-and-forth collaboration with suppliers. The second was that we wanted to give them a real-time look at our business. We still do some batch processing on our back-end ERP system, but wherever possible we want to give our suppliers the ability to see transactions on a real-time basis.
CIO: What kind of communication is important? And what type of information are suppliers looking at?
Brunsting: On the financial side, suppliers are looking at our prices to make sure we're in sync, and they look at payment information to see which invoices we're paying. Then on the planning side, they're able to look at our manufacturing lead times and engineering data like materials requirements, drawings and revision letters. We're working on another project to convert our proprietary drawing viewer so that we can display the drawings over the Internet, plus actual demand data.
CIO: So it's more than just Baan data. Does that complicate matters?
Brunsting: Originally we planned to have 100 percent of our enterprise running on Baan over a year ago. Now we've decided that certain parts of the business may stay running on our old legacy systems.
The challenge is that, to our suppliers, we're making it look like they're coming into one portal--they don't see how many systems we're running behind the scenes. You can't always make it seamless on the back-end, so it's different looking at Baan information as opposed to stuff from the legacy system. You have to decide whether to go directly to the data or bring the data into a warehouse and massage it--but then you're doing batch processing and dual maintenance, so that's messy.
CIO: How did you arrive at a portal as the answer? What about auction sites or some of the other options?
Brunsting: At that point in time there wasn't anything out there as far as an independent trading exchange. Our options were limited. There also were not a lot of off-the-shelf products. We were pretty adamant that we didn't want to build it ourselves. We've built a lot of systems successfully, and a lot of those systems are still supporting our core business today, but over the years you wind up putting on a lot of Band-Aids and don't get to take full advantage of advances in technology. We wound up bringing in a vendor called TopTier to help build the portal. This plan lets the technology vendors focus on advancing the technology, while we focus on the business issues.
CIO: Now that exchanges are becoming more viable, is that an option you've evaluated--dropping the portal and moving your purchasing to an independent trading exchange (ITE)?
Brunsting: We are somewhat unique in that we will design a product and all the parts that make up that product, and then go find the supplies. The materials are not something that [the suppliers] could sell to our competitors, so I'm working on direct material that goes into our product. For example, our Aeron chair has a mesh cushion, and that mesh is unique to our product, as opposed to, for example, MRO [maintenance, repair and operations] items like office supplies. We might eventually do something there with an ITE.
For most large companies that have a pretty close supply chain system with suppliers, there will be a need for both public and private trading exchanges.
CIO: There's quite a bit of hype out there regarding portals and other supply chain or procurement mechanisms. Plug it in, turn it on, save billions of dollars--is it really that simple?
Brunsting: Our portal went live September 1999. Right now we have roughly 50 percent of our core strategic suppliers connected to it, so we're in full production.
I'm a true testament to the power of the TopTier technology: My background is all manufacturing and purchasing, I came to IT just over a year ago, and I've been able to do all the development on the client side, all without writing a line of code.
The delay is more on the training side. One of the things we've found is, when you start opening up your systems to your suppliers, there's a whole new level of business literacy that has to be in place, and it's outside your four walls. We're actually going to suppliers one-on-one and providing the training at their facilities.
CIO: What returns have you gained for your investment?
Brunsting: The hard-dollar return is tricky. This question always comes up, but we didn't really have to do [a hard-cost justification]. From our senior executives on down, we have decided we will connect our suppliers and our customers. Everything has to tie in to that corporate strategy, so we had to show how we're going to improve reliability from a general standpoint, but not with specific numbers. And we've brought our reliability from 75 percent to more than 90 percent in on-time shipment. That's a combination of all the work we've been doing internally and externally.
At the end of our presentation when we're training suppliers, at times I've thought it must feel like we're pushing everything off them. But the reception has been very positive. In the past they had to make decisions based on very limited information. So they were doing a lot of guesswork, making assumptions. Now they don't have to call three people at Herman Miller to get information or make guesses. So they feel like it's a time-saver.
It's a big shift from the old purchasing model, which was: The more information you had and the less your supplier had, the more power you had. When you went into negotiations, you had the edge. Today, it's all about sharing information, and that feels a lot better to the suppliers.
Hammered the kinks out of your supply chain yet? Tell Executive Editor Derek Slater your story at firstname.lastname@example.org.