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SCRC Article Library: Associated Technologies: Developing Collaborative Supplier Partnerships

Associated Technologies: Developing Collaborative Supplier Partnerships

Published on: Jan, 24, 2011

by: Brian Fillard, MBA ‘03 Scott Frahm, MBA ‘03 Amy Mercer, MBA ‘03 Kendyle Scott, MBA ‘03

Associated Technologies

Workstation Collaboration
Portals
Electronic Data Interchange (EDI)

p. The foundation of supplier collaboration is the ability to communicate effectively and efficiently with individuals and companies who provide the organization with materials to produce a final good or service. As the use of technology expands in the business sector there has been a great deal of demand for computer technologies which enable this communication. There are several big software players in the field of supplier collaboration and many of them have capitalized on the growth of the Internet to expand their capabilities of existing software packages. The systems range from simple workstation collaboration to full-scale enterprise systems with the ability to track inventory up to the minute.

Workstation Collaboration

Workstation collaboration has become a very popular tool among suppliers and manufacturers in the development of new products and the reengineering of existing ones. The linking of Computer Aided Design (CAD) systems, procurement systems, and supplier systems allows partners to work simultaneously on projects to make certain engineering specifications are met and that efficient manufacturing processes are developed (12). These systems promote stronger communications between manufacturers and suppliers well before the product is introduced to the market. Effective communications and collaboration allows manufacturers and suppliers to better understand each other’s needs and time constraints.

Another benefit of workstation collaboration is that it allows a single manufacturing company to communicate with a wide-range of suppliers. Suppliers of various parts are given the ability to use design tools to ensure all parts fit together as intended when it comes time to assemble the final product. Through simulations, one part of these systems, manufacturers can test how the product reacts under typical and atypical usage. GM has employed a computer system that simulates system performance and virtual crash testing (12). A wide range of companies such as i2 Technologies, IBM, SAP, and Alventive Incorporated produce these various workstation collaboration systems.

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h2. Portals

In addition to workstation collaboration, portals also promote partnerships with suppliers. In earlier days, portals were mere web pages that provided employees with information relating to human resources information and company activities. Now portals have the ability to provide detailed information regarding procurement and Enterprise Resource Planning Systems (ERP). Early in the lifecycle of ERP systems portals were used primarily within companies to transmit information between departments to facilitate more efficient operations. As the need for communications to outside partners grew, companies have searched for ways to securely share internal information with them. Through the use of web browsers, companies can present internal company information to all users with access to the portal. These portals can be divided into various sections, limiting access of some sections to specific user groups.

Portals also allow applications, such as ERP systems, to run via a web browser so that businesses can access current inventory information and track current order status (13). Pratt & Whitney, a jet-engine maker, developed a portal that allows access to suppliers’ systems where they can examine and evaluate delivery schedules for a wide range of parts. (13) Many companies choose to use portals because they offer a low cost solution compared to many of the other options in the market place. In addition to their ease of use, this type of system limits the amount of capital investment in computer hardware and software because of its use of a standard Internet browser.

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h2. Electronic Data Interchange (EDI)

The most popular technology associated with supplier collaboration is Electronic Data Interchange (EDI). Through the implementation of EDI, users are able transfer information through a networked computer-to-computer link, known as a Value-Added Network (14). Companies using EDI now have the ability to improve overall supply chain integration through the tracking of information between suppliers, customers, and manufacturers. Unlike other supply chain integration systems, EDI transmits vital data to all parts of the system, eliminating the need to reenter the data several times. This lowers the risk for data entry errors, as well as reduces the amount of hands on work needed to keep the system operational (15).

Early on, in order for these systems to interact it was necessary to develop a standard format in which the data would be transmitted. For many years, different EDI systems communicated in different formats, making implementation among several companies difficult. After some time it was decided that a standard must be created if EDI were to grow beyond its current state. In the U.S. a standardized format, X12, was developed in order to promote cross industry collaboration. For those companies operating globally, another set of standards, UN/EDIFACT, was made to ensure proper communication with global EDI partners (16). Traditional EDI systems place limits on smaller companies because of the extreme capital costs of building a network infrastructure. These limits have spurred growth in the development of low cost technologies that will serve the same purpose as traditional EDI systems.

In recent years, traditional EDI has evolved into systems that are more easily implemented and have the ability to reach all suppliers, no matter how small. Newly developed EDI systems use the Internet as the medium to transmit information, rather private than networks built and maintained by the company. By reducing the extreme cost of building a network infrastructure, smaller companies are able to become involved in information exchange with manufacturers and suppliers. Known as Web or Internet EDI, these systems use standard web browsers to transmit and view information. Web EDI is normally used for low volume interactions due to manual input requirements by the user, while Internet EDI is used in high volume interactions because it is simply transferring files (17). Each offers a graphical user interface that was never available with traditional EDI systems.

The key component of these systems, XML or extensible markup language, is based on text files with field names which are viewable to standard users through the use of an Internet browser. XML is not a software program, but a data format. It also has the ability to determine who has the responsibility for creating, maintaining, and transmitting files and messages being sent through the system. As XML is still in the early stages of implementation, it is experiencing difficulty in trying to expand across businesses and industries.

Several challenges must be overcome if a company chooses to implement XML into its collaboration system. First, a standard set of language has not been developed for XML, leading to confusion among trading partners as each uses different terms to describe common terms such as customer and purchase order (18). This causes problems when trying to integrate data between partners’ systems. Currently, the Accredited Standards Committee is presently developing a standard communications language much like it did in it developing X12 and UN/EDIFACT.

Another challenge of XML is the sheer size of the files transferred between partners. XML files have the potential to be up to seven times larger than their traditional EDI counterparts (17). This poses significant questions with regard to the bandwidth of the company’s network and the speed of network transmissions. Even with these problems in mind, XML is still the easiest way for a small supplier or manufacturer to break into the field of EDI.

Many people believe that EDI and XML are competing technologies, when in fact they are actually complimentary products. XML actually relies on EDI in order to perform its tasks. (19) XML allows EDI to have a more flexible format, so that all members of the supply chain network can read it. Versatility is what makes XML such a desirable solution for EDI. Companies are beginning to integrate XML with their large enterprise EDI systems in order to have connections with smaller, less established suppliers in the marketplace. This has the potential to improve communications between all links in the supply chain and promote more efficient operations throughout.

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