InformationWeek
Defining The Business Value Of Technology
November 9, 1998
Killer Supply Chains
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That's easier said than done, especially since each customer has thousands of configurations to choose from. The trick is to do all the customization in the last stage of production, rather than from the beginning.
With the use of Baan's ERP package and i2 Technologies' forecasting software, Boeing will be able to model the assembly of aircraft for each link in the supply chain and communicate to each supplier what parts are needed and when. "Airplanes need to have parts strategically delivered to where they are on the assembly line," says Jim Webster, a senior ERP consultant at Boeing. "As soon as our ERP system determines we don't have enough of a certain part in the assembly line to satisfy an airplane, we can identify which supplier we need and where that supplier's part needs to be delivered."
This communication is being done quickly and seamlessly through EDI links and, in the case of internal suppliers, directly from one database to another. The early results are dramatic: In one parts fabrication plant where the new systems are in production, Boeing Commercial Airplanes has cut its cycle times in half and reduced parts defects by 56%.
Boeing is also using Web technology to boost customer satisfaction after a sale has been completed. A year ago, Boeing launched the PART (Part Analysis and Requirements Tracking) Page, a secure Web site that its customers can use to order spare parts. The site is aimed at the 600 or so airlines that don't use electronic data interchange to order parts from Boeing. The company estimates that the site, which processes 4,000 transactions a day, has eliminated 25% of order-processing costs in the form of faxing, phone calls, and data entry. The service helps customers locate hard-to-find or obscure parts. And it has shortened parts delivery cycles usually to next-day, or same-day for emergencies.
Duane Berdahl, an inventory controller/buyer at Northwest Airlines in Minneapolis, has been using the PART Page since its inception two years ago. "I use it for everything--pricing, availability, lead times, placing and expediting orders," he says. "I don't have to keep as much inventory on hand, because I can always see what Boeing has in stock. And it has cut down dramatically on time."
Thomson Consumer Electronics
A well-oiled supply chain is a matter of life and death to Thomson Consumer Electronics Inc. Just ask Jim Meyer, the company's chief operating officer. "Our careers hang in the balance," he says. "If we are not successful here, it will be the end for Thomson."
The company, which makes TVs, VCRs, and other consumer electronic products under such brand names as RCA, GE, and Proscan, knows firsthand what can befall a company that doesn't master the art of supply-chain management. A little over a year ago, Thomson conducted a survey with about 70 of its top retailing partners, including Circuit City and Kmart. The results were eye-opening.
The No. 1 problem was product availability. A Kmart shopper hoping to buy an RCA product often could not because the item was likely to be out of stock. Retailers were also dissatisfied with Thomson's on-time shipping performance and its ability--or lack thereof--to fill orders exactly as requested.
"We were losing substantial amounts of money," says Terry Reuland, manager of supply-chain integration at Thomson. So in September 1997, Thomson launched its Chain Reaction program as part of a concerted effort to turn things around. The goal was to increase forecast accuracy, decrease planning cycles and lead times, and better manage relationships with suppliers and retailers.To make it happen, Thomson invested in a supply-chain management system from i2 Technologies, as well as a host of Internet and EDI tools. "This project represents a huge cultural shift in our organization," says Reuland. "In the past, information technology was thought of as an expense and not an investment. But we now look at IT as a critical investment in our future." All told, Thomson will put around $35 million toward the project.
The first area of concern for Thomson is building better forecasts so that retailers--and end customers--get the right products at the right time. Thomson is using i2's demand-planning software to gather statistical data such as past sales patterns and inventory levels, then turn the raw information into highly accurate forecasting models. Thomson is also collaborating with 55 of its top retail partners. The customers log on to a secure extranet site and feed their own forecast information and point-of-sale data directly into the system. From there, the information is automatically routed into Thomson's data warehouse, then into the i2 planning software.
Thomson and its partners will be able to share, compare, and modify their forecasts in real time, making them even more accurate. "We used to do it with calculators and napkins," quips Reuland, adding that retailers don't need convincing to participate in the program.
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Photo of Terry Reuland by Greg Whittaker
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