Pedal to the metal
- 08 February, 2006 21:27
On the racetrack, as in all forms of business today, speedy delivery separates the winners and losers. Using the right tools can give an SME outsider the front running in business just as it can on the track.
Over the years Revolution Racegear has been revving up as [ita]the[end] supplier of the premier racewear and accessories for Australian motor sport competition, the company has treated its customers as highly mobile and motivated research laboratories. Feedback from drivers in events as diverse as V8 supercars and sprintcars have been used in the product development strategies at its purpose-built factory in Melbourne.
Unsurprisingly, accelerating delivery to speed-obsessed customers has proved essential to the company's success in keeping its RPM Racegear brand on the winner's podium. So managing director Dale Rodgers is glad to have the luxury of being able to control the entire manufacturing process, from design through manufacture to retail, in the face of the strong, unrelenting pressure on organizations to speed up order-to-delivery times. Since he took on his current position in 1997 Revolution Racegear has concentrated on "rejigging" its company-owned retail stores and processes, and on positioning its own brand to compete head on with the world's leading manufacturers.
"Timely delivery is critical," Rodgers says. "Motor sport at the professional end is a highly commercial business [and] the professional end absolutely demands that the window from agreed design and sign-off to delivery of the goods is short.
"So we've had to gear ourselves not just through technology but through better work practices internally to be able to deliver, particularly for the Grand Prix or Bathurst [races] where we have an enormous amount of pressure, with a lot of professional race teams showing off to new corporate sponsors and others."
Speed is not an issue for Revolution Racegear alone. A recent study from Aberdeen Group has found order lead time is the greatest challenge facing manufacturers, with the best companies tackling lead times and costs by reinventing their order-to-delivery process and IT solutions.
In fact, order lead time has now officially overtaken cost reduction as the top issue facing manufacturers. As customers trim inventory by insisting manufacturers become more reactive and reliable, those manufacturers are being forced to do much more than simply improve their complete and on-time order performance. Aberdeen says manufacturers are scrambling as they recognize that their current order-to-delivery processes are incapable of delivering in less time with the accuracy and cost profiles that customers and the CFO demand.
"Manufacturers now understand that their current order-to-delivery processes are nothing but a set of loosely coupled functions and not as integrated and streamlined as needed," says Aberdeen's senior vice president of value chain research, and report author, Chris Jones.
"Best-in-class mid-size manufacturers have adopted end-to-end integrated order-to-delivery processes and are using real-time information to accelerate the velocity of their business."
The research organization says far too many mid-size manufacturers mistakenly believe that an end-to-end integrated process does no more than efficiently pass information between the functional operations. The report shows only 20 percent of respondents had end-to-end processes in place and only 14 percent had integrated real-time IT solutions. Yet Aberdeen's Mid-size Manufacturing Order-to-Delivery Benchmark Report found manufacturers that move to a tightly synchronized order-to-delivery process are 2.5 times more likely to have the shortest lead times.
Traditional modes of interacting with customers are collapsing, with customers now much more likely to demand extremely rapid delivery, and just as likely to evaluate suppliers on their responsiveness and dependability alone. For instance, the number of manufacturers delivering products in five days or fewer had grown to 43 percent last year from 34 percent three years earlier, according to David Drickhamer, writing in Industry Week.
This new impatience puts great strain on manufacturers and their supply chain management capabilities. And as some firms respond, their competitors are being all but forced to follow.
"Buyers today have very high expectations," says Ian Hollingworth, CTO and regional vice-president of Quadrem Australasia, a procurement solutions provider with one of the largest supplier networks in Australia.
"They expect suppliers to have the ability to transact electronically, with integrated order-to-delivery processes, rather than via fax and phone. They also expect suppliers to give them accurate, complete and up-to-date electronic catalogue information that confirms with the buyer's preferred catalogue standards. For large suppliers this isn't an unreasonable expectation, but buyers are increasingly looking to SMEs to have the same capabilities.
"SMEs are therefore looking to third-party service providers who can close the e-readiness gap. With low-cost, Internet-based tool sets designed for the SME market, a small to medium supplier can interact with a buyer in a manner that is very similar, from the buyer perspective, to large global suppliers."
In such a highly competitive environment, manufacturers have little choice but to become faster and more nimble, to implement high velocity, rapid response order-to-delivery processes or risk losing business to their more nimble competitors. But if those nimbler competitors are vastly bigger than themselves, they are likely to find some special challenges to meet along way.
One source of likely trouble, warns Gartner vice president research, Kristian Steenstrup, arises from the fact that even when mid-size companies do invest in technologies they are often implemented in isolation. Like Revolution Racegear, most mid-size enterprises are not fully automated, making their many manual processes a significant impediment to speedy delivery.
"And those that have invested in technology often do it by a small-scale integrated software package, an ERP package or starter pack of some sort, that's installed and run in isolation, so it helps to improve the internal efficiencies but doesn't help external efficiencies," Steenstrup says.
"I think there's effort being put into it, and it is manifested by investments in software. We read every day about various small and medium enterprises in the manufacturing sector buying software packages and ERP packages and upgraded ERP packages, which give them the extra connectivity that they need to increase that speed from order to delivery."
Such investments can make a huge difference, Steenstrup says. Take the case of a US timber mill, which used to have planning meetings every week that went on for hours and were rife with disputes between sales, order processing, manufacturing, shop floor and distribution, about whose numbers were right, the work that needed to be done and the most acute priorities. Once this company implemented more integrated software that took a process flow approach, those planning meetings seldom lasted more than 15 minutes and were much more harmonious because, "everybody knew what was going on, everybody knew what they were supposed to do, and everybody agreed on the numbers.
"This is a true anecdote regarding a US-based company but I have heard anecdotally the same conversations in Australia. We documented this one. It was all to do with integrating their shopfloor management, so accuracy of information was really important to improving the time it took to take something through the process," Steenstrup says.
Inaccurate data deals a double blow to the company, Steenstrup points out. Not only can it lead to design or delivery flaws, it can also mean spending a great deal of unnecessary time in working out the right number.
However, mid-size companies looking for solutions also face other constraints. Abbott Australasia business manager information technology, Mcgregor Grant, says while order-to-delivery in the company's Australian operation is relatively simple, globally the company has installed Manugistics to achieve a 24-month rolling demand forecast that feeds into the company's various manufacturing plants and produces a mass arrival schedule detailing what product will get shipped to where from where and when.
"It's all running off a central server in the US and performance has been a big issue, in that product people enter their forecast into Manugistics and it doesn't get updated until overnight, and so if you entered in an incorrect forecast or you wanted to see the financial impact of forecasts you entered, you don't get to see it until a day later. That whole kind of performance/communications issue has been a problem," Grant says. "[They are addressing that] with a combination of more intelligent design and greater communication bandwidth. It's sort of a never-ending process of improvement and refinement."
Speed lessonsOver recent times vendors have been moving away from the silo approach towards a business process approach that takes account of the needs of the various constituents - customer, manufacturer, software vendors and consulting companies - in terms of business process flow.
"For instance now we see discussions about order-to-cash, where you actually have this continuous flow through the whole business environment from taking an order to executing whatever that order is," Steenstrup says. "It might involve procurement or manufacturing or customization and all the way through to the other end of the cycle."
That is important, she said, because people haven't been thinking about that context in previous years, but now it is being considered in the context of business process definition.
Such an approach makes for a more seamless hand-off from one stage to the other, thereby improving both accuracy and latency of information. Steenstrup says the ideal solution for the mid-size company is to install integrated collaborative software that lets it collaborate internally via real-time sharing of a single set of accurate information, and collaborate externally with suppliers, third-party design and fabrication shops and other third-parties.
However, he says even a small company should not begin until the CIO has developed an IT architecture that can serve as a roadmap on how to expand IT.
"The best way to get started is to get some IT consulting assistance because you are only going to do this once, maybe twice in your career, whereas these guys do it for a living. And yes they're going to charge you money, but they are also going to offer you their experience, which is manifold over what you are going to have by yourself," Steenstrup says.
"You need to look at industry peers, and your ecosystem. That's two different things. Industry peers show what everybody else is doing and certainly consulting companies can help you with that because part of their experience base will be what other industry peers are doing. And the ecosystem is what all of those other industry participants are doing - whether they are electronically enabled or primitive in what they do."
Going to consultants helped Pearson Australia Group (comprising Pearson Education and Penguin Books Australia, which distributes 20 percent of all books sold through retail outlets in Australia) get BookMaster, its new fully integrated ERP system, up and running.
"We selected a company which specialized in publishing distribution systems as a supplier," says IS director Peter Dart. "The second thing we did is bring in an outside project director to work with me to make the thing happen and at the height of the project we had 40 or so contractors working for us.
"The lesson we learnt was never underestimate the people side of the project. We put about half of our budget into the people side of the project and we could have used more."
Still, with order-to-delivery a vital part of the company's business, Dart says the effort has been extremely rewarding. His customers would probably agree - and that in turn will inevitably put pressure on his competitors to follow suit. The wheel turns.
Race to the top
Australian company Revolution Racegear develops and makes its fashions with Australian conditions in mind. It delivers the needs of motor sport teams via its own retail network and keeps materials, fabrics and designs constantly under review in the interests of quality and maintains full custom design, digitizing, embroidery and sales departments.
In competing on the world stage against global manufacturers, Revolution Racegear has proved able to produce an equal quality garment probably 60 percent of the time, says managing director Dale Rodgers.
Partly that is because Revolution Racegear invested a couple of hundred thousand dollars beginning in the late 1990s on IT systems to help it improve production processes, scheduling and information back into stores and direct to the customers in a labour-intensive operation, and partly it is because of the dedication and skills of its staff. While Rodgers says those IT systems play a vital role in speeding delivery to customers, so do the consultants that have helped the company deliver.
"Certainly we have worked very hard on the operating platform for our business and our operating system is Attache. We've got a fairly hybrid version of that with various Attache consultants [working] on that," Rodgers says.
"As far as our direct IT involvement goes, we've swung right away from some of the larger suppliers ... over time ... and gone through smaller, consultant-based businesses where we know we get continuity of people, and where that person or the people know us and don't spend the first week trying to understand what the hell our business is about. And really that's turned around our view of IT.
"Quite frankly, we got fairly disenchanted with having people come in, tinker around with our IT systems and then leave the building without even us understanding what had happened, and then hearing the operators saying that something had changed and they didn't know what it was.
"So to my mind it's not actually technology at all - essentially the people around the technology that make the difference," Rodgers says.