by 
True collaboration is the goal of a supply chain partnership, but that ideal is hindered by a number of factors. One is the set-up of most data management systems, which shield and protect information within individual silos. Within the four walls of a corporation, for example, the status of a financial transaction is not visible to all users.
In a typical supply chain, that problem is exacerbated hundred-fold. Electronic data interchange (EDI) is the most popular system for managing supply and demand transactions. Information is visible only to the principals involved: say, the distributor that is placing an order with a supplier, and vice versa. If for some reason there is a problem with that order, a second-source supplier isn't privy to it, yet, that supplier could intervene and help.
There are good reasons why information is often managed in a silo format: competitors shouldn't be able to see each other's pricing, for example. If certain data was shared — say, the fact that an order can't be fulfilled — competing suppliers could collaborate on a solution while price confidentiality is maintained.
This is the concept behind a set of supply chain solutions being offered by companies such as {complink 12942|E2open Inc.} and GT Nexus. These platforms, hosted on the cloud, enable partners to establish a set of rules that allow certain constituents to see information relevant to them. Unlike a typical closed system, the universe of collaborators can be opened to include financial institutions, logistics providers, and even governmental and regulatory agencies.
Let's say an event at a shipping port holds up a container in customs. Typically, this information isn't automatically shared with carriers, distributors, or even end customers. Another example: a manufacturer is awaiting a customer's credit approval before starting production. If the OK was communicated directly from the lender, manufacturing could start immediately.
Each system emphasizes certain strengths: GT Nexus focuses on the ease of sharing data. Users can collaborate without downloading or uploading data between systems. Greg Kefer, GT Nexus director of corporate marketing, said in a phone interview earlier this year:
- The supply chain is basically comprised of a lot of points of data that have a distinct chain of custody. This data is different for each company, and that information is often stored, or 'locked up' within an ERP system. These systems aren't designed to work across enterprises, so the data isn't flowing.
The only way to do that, GT Nexus believes, is through the cloud. Not only do most ERP systems not talk to one another, they don't even speak the same language. GT Nexus partners provide data from their ERP systems. GT Nexus takes it, translates it, and then makes the data available to select members of the network. Although the information is standardized, linked, and centrally stored in the cloud, it is also partitioned. It is visible only to stakeholders that have been granted permission. “Being part of a group does not necessarily mean every partner sees the data,” explains Kefer.
In addition to the partners in a typical supply network — suppliers, distributors, and customers — global commerce also depends on air, land, and sea freight handlers, third-party logistics companies, trade and tariff officials, seaports, and trucking and rail companies. Each of these groups manages information that isn't necessarily shared with an end customer that's awaiting a shipment.
Most users already have EDI links and legacy systems on which they have spent millions. The cloud doesn't replace those systems, but it does provide economies of scale. GT Nexus users pay a subscription fee based on their level of engagement. This means small companies that don't have costly ERP platforms can participate.
A similar concept was developed by E2open, which started as a component-sharing Website for OEMs. E2open's cloud-based trading platform, E2open Business Network V 8.0, allows supply chain partners to view and manage procurement events in real-time. The product, among other things, enables users to “monetize” the various aspects of a buying transaction. It captures and compares component costs; assesses various logistics scenarios, and calculates risks such as manufacturing line downtime.
E2open emphasizes the real-time aspects of its system. “The problem is the electronics industry has the fastest moving supply chain in the world,” said Michael Schmitt, E2open senior vice president of marketing and product management, in a phone interview earlier this year. “It's not just providing the data; it's the ability to interpret and react to the data.” (See: Have OEMs Relinquished Too Much Control Over Their Supply Chains?)
PC manufacturer {complink 9284|Lenovo Group Ltd.} uses the E2open system. (See: The Cloud & the Supply Chain: A Match Made in Heaven.) Lenovo set out to reduce the cost and time to onboard new trading partners and to build a real-time, consolidated view of processes and operations. Since implementing the platform, Lenovo reports it has reduced onboarding time by 85 percent, lowered IT costs by 53 percent, and reduced IT management costs associated with supplier integration by 70 percent.
{complink 1131|Cisco Systems Inc.} has also implemented the E2open platform and estimates it has linked its systems electronically to more than 100 key suppliers and partners. In a report on its results, Cisco notes that tech companies already have the ability to view and exchange data with their suppliers, contract manufacturers, and distributors. The key to success, however, will be how companies use that data to effectively collaborate and take action.
Some analysts believe OEMs have relinquished too much control over their supply chain and open collaboration platforms will reverse the trend. So far, it appears that cloud-based solutions complement, rather than replace, legacy solutions and therefore don't threaten the status quo. Yet, many partners in the electronics supply chain have taken on certain management functions to cement their relationships with customers.
Distributors, for example, coordinate amongst suppliers to make sure orders are fulfilled. Suppliers with proprietary customer relationships don't generally collaborate with second sources. However, if it's the end customer that determines the rule-set for collaboration, supply chain responsibilities may shift, again, back to the OEM.
These are very good tools. However, it has to be empoyed very carefully. Some feature may be very good, but it may hurt organization in long run due to some lack of secrecy. It is difficult to make decision.
@_hm and Barbara, I can think of many times when I thought an order was going along swimmingly and at the last minute I find that something happened where my order was left on a dock somewher due to poor weather conditions. I had a similar experience where several pallets of goods were sitting on a tarmack for days waiting for a plane that never arrived. It would have been great to know the instant something went wrong with my order. This last week I ordered some components for two-day delivery and have learned to ask that the supplier send me a tracking number as soon as the product actually ships. THis is slightly differen than just asking for a tracking number period. Often times, a shipper completes several shipping transactions by computer only to have missed the truck or staged for the next day's shipment. The cloud would be a great logistic tool for shipping concerns that covered detailed explanations stating why a product did not ship or on what tarmac it was sitting on waiting for a ride.
The applications or platforms like E2OPEN can definitely take the over all supply chain strengths to next level. Atleast from case studies of Lenovo and Cisco it appears that there could be many advantages including IT cost savings.
“Since implementing the platform, Lenovo reports it has reduced onboarding time by 85 percent, lowered IT costs by 53 percent, and reduced IT management costs associated with supplier integration by 70 percent.”
Those are very impressive savings. Cloud-based solutions hold great potential for the manufacturing industry. With that result we can rightly believe that cloud computing can trigger another industrial revolution.
@Douglas,
“The cloud would be a great logistic tool for shipping concerns that covered detailed explanations stating why a product did not ship or on what tarmac it was sitting on waiting for a ride. “
The success of this solution will depend on how the different actors involved will understand and use it. As Barbara said “the key to success, however, will be how companies use that data to effectively collaborate and take action.”
@elctrnx_lyf
Of course there are many advantages using the E2Open cloud solution. But the big change can only happen if the majority of the supply chain stakeholders embrace it. The question is how many companies are now ready to adopt cloud computing?
@DA: If all is good, there is mostly no reason, delivery or shipment gets interrrupted. But if there is small mistake or is complex custom query, most these type of tools want come to help you out. They will be interested in only very simple job. Personal touch and personal need of business are very important – this includes ITAR and similar requirements.
Hospice,
The cloud solution provides an option to stakeholders that could change the way they have been working in the past. It has a promising future (as I see it) but since organizations don't adopt to changes very often it will take time.
Hospice,
In todays envoirnment collaboration is an essential element for success. Organizations now feel the need to collaborate with each other more often in order to reap benefits. With the advent of cloud technology in supply chain the collaboration amongst different stakeholders will increase. And with the increase in collaboration we will see some good results as compared to the past.
@syedzunair
Let's hope that the stakeholders allow as much data as possible be shared among one another. If the various parties only keep certain data points (like cost) hidden and make available (opt-in) the rest of the data points perhaps the different stakeholders can use that extraneous data to craft better engagements. The cloud is the best platform for this type of data exchange.
The focus on mini supply chains within an organization reminds me of the tenets of lean manufacturing. By targeting attention to the little things, you reduce waste and increase efficiencies. The idea you wrote about seems centered on improving the little things so the big thing can be better. Would that be a correct assessment?
I think it all comes down to efficiency and cost for the organization. Vertical integration makes sense where control of IP, raw material and produiction quality, and scale-up are key; outsourcing makes sense where cost reduction based on volume across a set of customers (by your supplier) helps keep your cost down on mateials and components that don't fall into the first category.
@Bolaji, I think any improvement at any level in a system will improve the system dynamics. When I used the term “Mini Supply Chain” I was evoking more of a perspective for approaching process and procedure improvements. Every employee has deliverables and every manager that has oversight of the individual contributors will aggregate all the contributions into a department deliverable. I have a diagram on my website that I call an I/O (Input/Output) diagram. It is just a box surrounded with circles depicitng requests and expectations on the left outside border, and circles with results and deliverables on the right outside border. Inside the box, I name the process or procedure that must be executed within the department in order to produce the throughput results. The supply chain likeness is the basic demand and supply model. The inputs are the demands placed upon the department and the supply are the deliverables. By each department's careful review of their internal supply chains…communications, records management, order taking, order fullfillment, timeliness of deliverable, etc. , I believe any internal enhancement will make for faster turn-arounds on “Customer” requests and ultimately happier customers in general. An argument can be made that as soon as you stop improving, you stop growing. Sooner or later, an inefficient system will be weighed down by an overload that arises from increased expectations that come from the growth process. An employer should be just as busy about growing their employees as they are about growing their business. Stop one growth area and the other will either slow down or fail altogether. In that vein, employees that want to stimulate growth and have the know-how to get the job done, should be given every opportunity to succeed by being heard and taken seriously. The biggest potential supply chain enhancement is to have the right people with a full support system behind them enabling them to do their jobs. Make all the links strong and the whole chain will be strong.
@CPeterson, Data sharing amongst stakeholders should be transparent (I mean that most data points should be shared). However, I am sure that companies will deliberately withheld information especially the one relating to their USP's. Even then I believe that the cloud will be the best platform for such exchanges because it will eliminate the intermediaries that were there previously.
Elredge, Agreed. Vertical integration only makes sense when you have the control of inputs and raw materials. On the other hand, outsourcing makes sense when you don't control the materials and you want to produce bulk items of a similar kind.
Organizations must focus on process re-engineering if they are to benefit from Douglas's idea of refining the mini-supplychain. Often there are redundant processes or methods that are inefficient to the speedy delivery of the product to the next process in the mini-supply chain. However, nobody has time or gives effort to identifying to these operational weaknesses and people are too involved in routine tasks.
@ Eldredge
When there are problems in raw material supply quantity and prices, vertical backward integration should be a worthy investment and when customers are demanding service quality which retailers are not being able to provide, vertical forward integration should be made. Most of the times, expected bid price outweighs the benefits of integration.
“I have the greatest competitive potential in the world because my production, material, and transportation costs could not be any lower”
@Doughlas: Shouldn't you be lowering costs if you're outsourcing functions like packaging or shipping to other businesses? Those businesses specialize in these areas and they do it for a large number of organizations so their costs have to be lower than yours. If you are to lower your total costs in the supply chain, you have to outsource certain processes.
I think if you are making a mini supply chain within your organizations and treating indiviudal departments/functions as if they exist as independant companies, you need to have measures to track the performance and output of each department. You need to assess each department as if it were an independant company and there must be KPIs to see the performance of the department in isolation regardless of how the overall company has been performing.
Interesting post, Barbara. Products like GT Nexus are a great way to make two ERP systems “talk” to each other over the cloud and enhance the usability of ERP systems by several times. However, from what I think, these products would only support the leading ERPs in the industry. What if some companies have their own in-house developed systems? Would they be able to integrate with other systems over the cloud with products like these?
“The question is how many companies are now ready to adopt cloud computing?”
@Hospice: That's a good question. I think the readiness towards cloud computing obviously depends on what the companies are getting by moving to the cloud platform. Most companies can easily upgrade their technical setup to move to the cloud – the decision is on the business side. If companies think that there are considerable cost advantages by communicating with their suppliers and customers by integrating their ERPs over the cloud, they will go for the option.
@Syedzunair – outsourcing may also make sense when the material or component you need has a broader based market that increases your suppliers volume and decreases per unit cost to you.
I believe companies looking and targeting sustainable growth and long term stabling will always assess their current organizational practices across different functions and identify the areas of simplification. Mini suppy chains with in the company are one of the major things which is reviewed constantly and looking for reducing the time and efforts.
I like your idea very much, maybe the CIOs have to consider where is the source (mining places) when they choose to move a factory to another area.
Hi Douglas,
I keep envisioning the supply chain as a web–it has its circular aspect as well as the tributaries you mention. Either way, I agree that vertical integration has a significant comnpetitive advnatage and in some cases outsourcing has run amok. Looking forward to further discussion.
@Barbara, the web anology is apt. The chain link fence or river delta system with parallel and intersecting paths, seems like the picture for multi sourcing and contingency planning that would aid in risk mitigation and consequently a higher level of confidence that the supply will be there when you need it.
Hi TaimoorZ: I think these platforms are ERP “agnostic,” meaning it supports all systems, and companies with custom platforms or that use EDI can use it as well. I also believe the ability to communicate isn't just two way, but can go in multiple directions. I think this also enables small companies to participate.
I'm not too up on the technology, but let me know if that answers the question.
I agree about the web analogy although at times I believe this web is so broken in places that flies are just zipping in and out at will.
As you are aware this has been the case for quite a while and it will continue to be so in the near future because the web isn't built for one “spider,” it's not a single web either and there are just way too many spiders with conflicting interests. The web isn't working for the benefit of all but often its limitations impact all.
@ Bolaji, I like your analogy of many webs and many spiders. I got bit by one of the poisonous spiders last week. My entire website was hijacked and all the links took visitors to bogus sites. I cleaned up the redirecting files and a day later was bit again. So, I hired a security service who is now watching my site 24/7. I also upped my registration requirements to ferret out the spider spam bots. Anywhere the supply chain has an open link, is a potential for a incursion, diversion, and subversion. Anyway, thst's my version of this issue.
SCM always has been unde estimated. It does cove many pats which we do not see from ou end.
@Eldredge:
Raw material cost is one of the key variables for production and if you can decrease the cost of raw materials you can make the product in lesser cost. However, I believe that the decision to outsource should not only be made on the basis of cost of raw material. There are some other factors involved like production facilities, infrastructure, compliance etc. If the site that you want to outsource to meets these criteria then outsourcing might be a good option.
@syedzunair – I agree. I don't think I expressed my thought very well in previous post, but was trying to say that it may be far more economical to purchase rather than make a material or component when there is a broad base over which your supplier of that material or component can spread their fixed expenses.
@Elredge: Agreed. Purchasing materials from a vendor that deals in bulk quantities might actually lead to cost savings.