Web-based Supply Chains Dragging

LAS VEGAS (03/27/2000) - Since December, Ace Hardware Corp. has launched supply-chain collaboration projects with four manufacturers, in an effort to cut costs and improve its ability to fill product orders from retail stores that use the Ace name.

Four more manufacturers are expected to join by May. But the Oak Brook, Illinois-based retailer is keeping the collaboration project small for now because of concerns about opening its mainframe-based inventory management system to a big group of external users.

Scott Smith, manager of Ace's inventory department, also wants to tread carefully to make sure the first participants don't find collaboration a waste of time and money.

"I have a sense of responsibility [to the manufacturers] because I'm kind of pitching them on this idea," he said at a supply-chain conference organized by IBM Corp. last week.

Ace's example illustrates the cautious steps most users are taking toward Web-based collaboration between different companies on key business tasks such as demand forecasting and production planning.

Supply-chain collaboration was a hot topic at the conference. And for good reason: Pioneering companies expect to reap substantial business benefits by using the Internet to better automate their supply-chain activities.

Marcia Meyer, president of Petsmart Inc.'s product sourcing unit, said the Phoenix-based pet supply retailer has used Web-based collaboration with manufacturers to increase the number of items it sells by 40 percent, without expanding its buying staff. More than half the overseas trips that buyers used to take have been eliminated, Meyer said. And new products are being developed faster because specifications and designs can be exchanged via the Web, she added.

But several other users said they still have technology or business issues to work out before they can take full advantage of collaboration.

For example, Lockheed Martin Co.'s missile division last year launched a collaboration project with five key suppliers on one of its missile programs.

Randy Burch, a product development manager at the Dallas-based unit, said the company hopes to reduce manufacturing cycle times by up to 15 percent.

But for now, missile designs and production plans have to be extracted from Lockheed Martin's systems and converted into separate electronic documents.

Direct Web-based collaboration won't be possible until the SAP AG supply-chain software used by the missile unit gets upgraded later this year, Burch said.

Lockheed Martin is waiting for that to happen before it starts implementing collaborative approaches across all the missile division's product groups, he added.

The Quaker Oats Co. has made improving its supply-chain management a top corporate priority since 1993, said Karen Alber, director of business solutions at the Chicago-based food manufacturer.

But she added that Quaker Oats is only now starting to look at replacing its old business systems with more integrated enterprise resource planning applications that should make supply-chain data easier to find for end users.

The company wants to tap technology to do more synchronized planning with retailers as well as its suppliers, Albers said. "But we have to get our own internal information in order before we could head down that road," she added.

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