Supply-chain visibility boosts bottom line

As the need for businesses to cut costs intensifies, technologies that shed light on the inner workings of supply chains have been fast-tracked as the weaponry of choice against the slowing economy.

Vendors such as Saltare, webMethods, i2 Technologies, Vizional Technologies, and QAD are rushing to market with products and partnerships aimed at making the supply-chain systems and processes, which are often shrouded behind company walls, more visible.

A more comprehensive view of the supply chain allows businesses to trim inventory, streamline logistics, and optimise the efficiency of their work forces as they gain a competitive advantage.

"Some of the companies that have showed resiliency to the economic downturn are good examples of companies that had put in supply-chain [technology] ahead of time," said Bob Parker, an analyst at AMR Research. "The companies that have really been hurt are those that did not have supply-chain visibility."

Last week, Saltare and business-to-business integration pioneer webMethods announced an alliance to provide a single solution for integration and collaboration across disparate platforms. Meanwhile, Qiva added to its supply-chain visibility arsenal when it acquired Capstan last week, and SCM (supply-chain management) leader i2 Technologies has tapped Vizional Technologies to provide the distributed inventory synchronization component for i2's CRM (customer relationship management) solutions.

In addition, QAD, an ERP (enterprise resource planning) company, is scheduled to announce this week a hosted application for supply-chain visualization designed to deliver real-time visibility of inventory to manufacturers.

Many industry stalwarts, including Ford Motor Co., Barnes & Noble Inc., Hershey Foods Corp., General Electric Co., Subaru, Eveready Battery, and Swedish furniture retailer Ikea, have deployed various solutions to streamline supply-chain operations.

Hershey announced this month that it will expand its logistics supply-chain solution to a new distribution facility in California and is considering other distribution facilities. Barnes & Noble this month announced that it has implemented i2 SCM offerings to reduce inventory and costs at its distribution center.

The burst of user interest in supply-chain visibility shows little sign of slowing. The ARC Advisory Group released a study this month estimating that the SCM market will more than quadruple to US$518 million by the end of 2005, growing at an annual rate of 33 percent. Users are seeing profound results from technologies that offer a bird's-eye view into their supply chains.

Plasti-Line, a Knoxville, Tenn.-based corporate signage company, jolted its delivery schedule and shrunk its head count well in advance of the current slowdown, thanks to a tighter, more visible supply chain.

"There weren't any significant layoffs because we had already brought our head count down," said Nathan Bretscher, director of corporate process and information improvement at Plasti-Line. The streamlined supply chain also meant Plasti-Line was well-positioned to weather the current slowdown when orders decreased, Bretscher said.

Plasti-Line has implemented Atlanta-based SynQuest's software to graphically model any manufacturing process to optimize plans based on specific costs, revenue, cycle time, and on-time delivery objectives.

Eighteen months ago, the company had an on-time delivery rate of less than 50 percent, Bretscher said. Now Plasti-Line is shipping on time more than 70 percent of the time, he said. In addition, the company used to have more than $1 million in orders past due; now they have less than $100,000 past due.

GHSP, a Grand Haven, Mich.-based manufacturer of mechanical assembly lines for automakers, deployed QAD's hosted supply-chain visualization application three months ago. After rolling out the service to 16 of its 200 suppliers, the $130 million company garnered $7,000 in cost savings from reduced inventory and human resources in the first month, according to Jeffrey McCauley, IS manager at GHSP.

GHSP downloaded polling software that sends a streaming inquiry every 5 minutes to the ERP system to inquire about supplier information. The polling software accumulates the data, encrypts it, and sends it to QAD's Web site, where suppliers can log on to see GHSP inventory levels in real time, McCauley said.

"They can see exactly how much we need and when we need it," McCauley said. "We have very little worry of lines being shut down because of parts not being received."

Ford is using technology from SynQuest to coordinate the movement of all of its inbound parts for cars and trucks to its plants.

Using SynQuest's inbound planning manager, Ford can map the lowest-cost solution for transporting every part needed to assemble its cars and trucks, said Chris Jones, an executive vice president at SynQuest.

One car model may require as many as 4,000 parts. Ford spends $6.5 billion annually on freight costs, and the company has 500,000 tons of freight in transit at all times. The SynQuest application reviews various scenarios for inbound transportation and then suggests the optimal transportation option, Jones said. Ford officials could not be reached for comment.

Subaru of America, in Cherry Hill, N.J., is rolling out several supply-chain modules from Rockville, Md.-based Manugistics to cut its costs and boost customer service. Subaru will deploy modules for long-term planning of freight costs and for optimizing shipping schedules, said Stephen Kent, business applications manager in Subaru's IT department.

"Some of the shipping delays we've had in the past should be improved," Kent said.

The company also is rolling out Manugistics' fulfillment module to match customers' accessory requests to plant work orders. Previously, customers were prevented from making any changes in customization requests six days before the changes were to take place. With the Manugistics solution in place, customers will be able to make changes as late as the day before production, according to Kent. Subaru plans to integrate the fulfillment software with its ERP system and its Oracle parts as well as the company's financial and vehicle import systems.

Having a more streamlined supply chain has allowed companies such as Plasti-Line, GE, and IBM to forecast lags in demand and avoid being caught with excess inventory, according to AMR's Parker.

"Now people want ... the long-term quick hit," Parker said. "They want to be able to deploy something that can quickly deliver inventory reductions [and] cost savings. You can get some immediate benefits. ... At the same time, you can stay on track with the notion of, 'I'm going to compete [using] my supply chain.' "

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More about AMR ResearchARC Advisory GroupBarnes & NobleCherryFord MotorGeneral Electrici2i2 TechnologiesIBM AustraliaIkeaManugisticsOracleQAD AustraliaSaltareSubaru AustraliaSynQuestTransportationVizional TechnologiesWebMethods Australia

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