TORONTO (06/28/2000) - Success isn't easy. It comes with its share of problems and challenges, as David Feldberg well knows.
Feldberg is president and CEO of Teknion Corp., a Toronto-based company which designs and manufactures made-to-order office furniture. Over the past few years, the company has grown phenomenally. In 1997, Teknion's sales of desks, overhead storage bins, chairs and wall panels brought in CAN$330 million. In 1999, that figure reached CAN$630 million. What is more impressive, according to Feldberg, is Teknion managed this surge in sales while the rest of the industry averaged only a four-per-cent growth rate.
"All throughout the years, we've really had to reinvent ourselves," Feldberg says.
As the company grew so did its product line, but that just adds to the complexity of fulfilling a customer order.
"We have to get everything to one place at one time, and have it all ready to go up elevator four. We are constantly looking at our processes, and technology is one thing that we have identified to help us," he says.
Like most businesses, Teknion has spent the time and money to put an enterprise resource planning (ERP) system in place. Now the company is building upon that foundation and layering Web-based supply chain management components on top of its Baan Co. ERP base.
By adopting Web-based supply chain management practices, Feldberg says, suppliers can become more active participants in the manufacturing process.
"Sharing technology, on the product development side, means that our suppliers get early and accurate looks at the orders. That allows them to take it into their production supply chain, or to create new tooling so they can work concurrently with us. Rather than passing physical drawings back and forth, where there is more room for error, this gives us a better chance at getting a perfect product right out of the gate," he says.
THE TECHNOLOGY PICTURE
Currently, Teknion is running a pilot implementation of plant optimization software, and has purchased collaboration software that gives suppliers better visibility into the order placement and fulfilment process. Demand planning, capacity planning and unit forecasting software are also being put to use.
Overseeing the implementation of the supply chain management pieces is Teknion CIO Michael May. He knows there is more to the job than simply plugging in new technology.
"Supply chain management is a long-term planning process. We reengineered the business before we decided on any software or made any knee-jerk decisions," May says.
Even once those decisions had been made, nobody at Teknion started to rush blindly into full-blown implementations. New software and new procedures are being rolled out slowly and in careful, deliberate steps.
The collaboration software, for example, is going through at least two phases.
The first step is to put in place an e-mail-based messaging system that will allow Teknion to communicate better with its tier-two and tier-three suppliers and that will allow those same suppliers to more efficiently inform Teknion when there might be a snag in an order delivery.
"One of the challenges we face is that every once in a while a supplier can't deliver on demand and forgets to notify us. Then we plan a delivery time not knowing all the facts," May says.
The system Teknion is implementing sends an e-mail alert to each supplier once a new order has been placed. The supplier then has a set period of time to respond and say that either, yes the order can be fulfilled, or no it can't. If there is no response, or the response is negative, then a message is sent to the purchasing department for follow-up. In addition, the same system will be used for the supplier to communicate with Teknion if a problem occurs and a delay is expected.
The second phase of the implementation will have Teknion sharing the full purchase orders with suppliers, but that requires various application connectors so the purchase orders enter every supplier's ERP system properly formatted.
The plant optimization software is also being rolled out with deliberation.
"The issue with plant optimization software is that the discipline to run it is very high. That's a flaw in all advanced supply chain technology. It demands a very, very high level of technology and skills, and a lot of computer skills.
Unless an organization has perfect MRP (manufacturing resource planning) skills, it is difficult to use," May says.
To counter that difficulty, Teknion has spent a lot of time developing its training and education programs. Feldberg says that both the IT and human resources departments have evolved as a result of this intense focus, but then so has upper management.
"Change is generally something that people don't like to do. We have to show them the way. The general reservation about change comes down to: 'Is it going to make my job easier?' They have to learn to embrace the tools. And we have to really understand our business before we begin."
Even May himself has had to adapt to the new technology.
"Over time, I've had to learn to embrace it, if not completely understand it -- I'm not a techie. Years ago, you had these big boxes that ran your business, and they were almost like a necessary evil. Today you have to look at the technology as an opportunity, not a necessity."
THE BUSINESS VALUE
But in many ways, the technology is becoming a necessity, even if it is an expensive one.
"What money you spent on ERP systems in the early days, you'll spend on this, and probably more," May says. "ERP has become a commodity good, but the collaboration software, because it is new, costs a lot of money. It is perceived as high value."
Still, he says he believes the investment is worth it.
"Now the issue is payback. If I can constantly deliver product a week faster than my competitor, I will win a lot more business. Products are becoming a commodity, but the ease of doing business with a company is valuable. As well, if I can increase my inventory turns, I will get more products out of a smaller plant and get more profitability. This is a field that nobody can afford not to play in," May says.
Bringing this technology into the workplace, however, is anything but play. It takes an IT team that really knows its stuff inside and out.
"You must have a fully integrated ERP system to do it well," May says. "You must have complete trust in your ERP, and you have to be good at technology.
With supply chain management, the network has to be up all the time. If the network is down, it will encroach on your cycle time. The other piece you need is a data-management and data-messaging component. Even if you own each one of your suppliers, you will still be dealing with multiple technologies, different ERP, purchase-order and order-entry systems.
"You have to work hard and work smart. As a company, you need to understand inside and out, 'What does my business do and how does it work?' You have to be highly self-reliant. You need smart people in the office. This is not an outsourcing activity," May says.
In addition, Feldberg adds that a company has to be well in tune with its various suppliers.
"Everybody's got to be moving at the same speed," he says. "We use our tools to make our suppliers better suppliers, but then we have a pretty good group of ongoing suppliers, even those that aren't co-owned by us. They have had to change and grow as we have."
Teknion has ownership stakes in most of its tier-two suppliers, which assemble and manufacture goods, and some of its tier-three suppliers, which supply raw materials and parts.
May says he believes suppliers actually have more to gain from adopting supply chain practices than many of their customers do.
"This is an opportunity for tier-two and tier-three suppliers to take over a key position and take market share away from some slower adopters," May says.
Even though Teknion is still early in its adoption of automated supply chain management practices, Feldberg says he can see the day when long-standing customers will be able to order products customized for their needs over the Web and will be able to check on the status of their orders on-line.
May is looking to the future as well, and to the new developments he can incorporate into the supply chain management system, and the advantages they will bring.
"We're good. Are we absolutely leading edge? Not yet," May says.
"Are we working toward being leading edge? Absolutely."
Carolyn Gruske is a Toronto-based freelance writer who specializes in IT reporting.