One of the biggest areas of opportunity for CIOs is in the area of information visibility, the process of sharing critical data required to manage the flow of products, services, and information in real time between suppliers and customers. The greatest potential of the Internet has been to facilitate collaboration between supply-chain buyers and sellers to achieve better information visibility and facilitate better decision making. Information visibility between original equipment manufacturers or large service providers (such as airlines) and their lower-tier suppliers holds the greatest potential for creating joint cost-savings opportunities.
If information is available but cannot be accessed by the parties most able to react, its value degrades exponentially. To improve responsiveness across their supply chains, companies including General Motors, Johnson Controls, and Solectron are exploring the use of collaborative models that share information across multiple tiers of participants, from their suppliers’ suppliers to their customers’ customers. These trading partners are seeking to share forecasts, manage inventories, schedule labor, and schedule deliveries in order to reduce costs, improve productivity, and create greater value for the final customer in the chain. Software for Business Process Optimization (BPO) and Collaborative Planning, Forecasting and Replenishment (CPFR) are evolving to help companies collaboratively forecast, manage customer relations, and improve after-market service. Traditional supply chains are rapidly evolving into “dynamic trading networks” comprised of groups of independent business units sharing planning and execution information to satisfy demand with an immediate, coordinated response.
Perhaps no other company has been as successful in implementing information visibility as a competitive strategy as Dell Computer. Dell’s direct model makes it possible for the company to hold only hours of inventory, yet promise its customers lead times of five days. Component suppliers who wish to do business with Dell have to hold some level of inventory, since their cycle times are typically much longer than Dell’s.
Dell utilizes the Web to provide its supplier with forecasting information and receive information about the supplier’s ability to meet the forecasts. Dell uses i2 Technologies products for demand-fulfillment operations and products from Agile Software for engineering-change-order and bill-of-materials management. Communication of engineering changes, component availability, capacity, and other data between Dell and its suppliers flows both ways, along with forecasting and inventory data. Dell also is able to review suppliers and place Web-based orders into their factories in hours. Companies such as General Motors, Ford, BMW, and General Electric also are seeking to use the Web as the platform for taking customer orders and then building the products.
Some of the considerations that must be planned for in implementing an information visibility system include the size of the supply base and the customer base with which to share information, the criteria for implementation, the content of information shared, and the technology used to share it. Clarifying these issues will help to ensure that all participants have access to the information required to effectively control the flow of materials, manage the level of inventory, fulfill service level agreements, and meet quality standards as agreed upon in the relationship performance metrics. CIOs must guide their organizations in carefully thinking through the details of such systems before implementation. Johnson Controls Inc. spent a good deal of time piloting its visibility system with a limited number of plants and suppliers before full implementation. Once it identified the critical problems (training and different business processes across plants and suppliers), it adopted a modified approach to implementation across the company.
Additional research by the SCRC with Solectron’s implementation of its data warehouse conducted by students and Dr. Fay Payton have led to additional insights for managers who are implementing new systems.
- Increased management support and resources would improve organizational implementation success.
- Effective and efficient team skills has hampered project implementation success. In our case, however, much of these competencies were lacking by the outsource vendor. Thus, Solectron management used the team’s quantitative data to renegotiate contract terms with the vendor and communicate deficit areas associated with the data warehouse.
- Solectron’s data warehouse implementation was supported by a limited internal team while a critical, strategic technology and its applications were outsourced to the vendor. While there were no apparent issues with the development technology, a myriad of source systems “feeding” the data warehouse proved to be a challenge to data and system quality.
While there are no “magic bullets” for managers to consider, the most important issue is to consider user requirements, measure supplier performance, and implement in a manner that is slow and considers each of the different locations’ individual characteristics. Finally, use metrics! Unless you are measuring the performance of software vendors, the process is likely to quickly get out of hand.