April - June 2003

INFORMATION YOU CAN SEE

How IT's contribution can have a huge impact in your organization.
By Robert B, Handfield.

Information visibility is a big area of opportunity for chief information officers (CIOs). It's 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 improved decision marking. Information visibility between original equipment manufacturers or large service providers (such as creating) 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 quickly. To improve responsiveness across their supply chains, companies such as Generals Motors, Johnson Controls, Inc., 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, and schedule labor and 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 planing, forecasting, and replenishment (CPFR) are evolving to help companies collaboratively forecast, manage customer relations, and improve after-market service.

Few organization have been as successful as Dell Computer in implementing information visibility as a competitive strategy. 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 which to do business with Dell have to hold some level of inventory, since their cycle times are typically much longer than Dell's.

Dell uses the Web to provide its supplier with forecasting information and receive information about the supplier's ability to meet the forecasts. Communication of engineering changes, component availability, capacity, and other data flows both ways between Dell and its suppliers, along with forecasting and inventory data. Dell also is able to review suppliers and place Web-based orders into their factories in hours.

APICS - The Performance Advantage

"Dell's direct model makes it possible for the company to hold only hours of inventiry."

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, the criteria for implementation, the content o information shared, and the technology used to share it. Clarifying these issues will help 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, an 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 with a limited number of plants and suppliers before full implementation.
Johnson Control, Inc., spent a good deal of time piloting its visibility system with a limited number of plants and suppliers before full implementation.

Research don here at the Supply Chain Resource Consortium (SCRC) with Solectron's implementation of its data warehouse has led to additional insights for managers who are implementing new systems:

• Increased management support and resources would improve organizational implementation success.
  
• A lack of effective and efficient team skills has hampered project implementation success, In the case of Solectron, however, the outsource vendor lacked many of these competencies. Thus, Solectron management used the team's quantitative data to renegotiate contract terms with the vendor an 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 an 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, key concerns include considering user requirements, measuring supplier performance, and approaching an implementation in a methodical manner that considers each of the different location's individual characteristics. And the importance of developing and using metrics can't be overstate. Unless the performance of software vendors is measured, the process is likely to quickly get out of hand.

Robert B. Handfield is the Bank of America University Distinguished Profesor of Supply Chain Management at the College of Management at North Carolina State University. He also is director of de Supply Chain Resource Consortium (SCRC) at NC State, working with manufacturers to solve their supply chain management challenges. He can be reached via e-mail at roberthadfield@ncsu.edu.