InformationWeek
Defining The Business Value Of Technology
November 9, 1998
Killer Supply Chains
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Target, for example, may agree that an earthenware manufacturer will supply a certain number of Italian-style bowls, without specifying anything more about the style. As Target draws nearer to the delivery date, it analyzes trends for colors and patterns that are likely to sell. Based on those numbers, the manufacturer makes trial lots of, for example, blue and burgundy bowls, and Target begins to sell them. If customers buy more burgundy bowls, Target can simply skew the order in that direction.
The evolving specifications and the constant dialog benefit the supplier, too: Its goods are more likely to sell, and its warehouse and production capacity aren't full of unwanted product.
Sara Lee Branded Apparel, a Winston-Salem, N.C., division of Sara Lee Corp. that sells clothing brands such as Hanes, L'eggs, Bally, and Playtex, says that Dayton Hudson's willingness to share information separates the company from its rivals. Dayton Hudson holds training sessions to teach Sara Lee employees how the Target supply chain works; in turn, Sara Lee brings Dayton Hudson's financial and vendor operations groups to its facilities to show how its process works. The result: Sara Lee has been able to help Dayton Hudson streamline its operation. "Other people would essentially say, 'Here's what I want' but would never listen to what it is you might have to improve their processes," says Wallace Balwah, Sara Lee's director of logistics.
Jane Windmeier, director of supply development for Dayton Hudson, says the company encourages innovation in its suppliers, simply because two heads are better than one. "You want to take advantage of everyone's best tools," she says. To foster innovation, the company rewards its best suppliers every year, and it penalizes suppliers if they fail to deliver their goods in the way Dayton Hudson has specified.
Singer says he'll stack up his supply chain against anyone's. Certainly, the system has delivered tangible results for Dayton Hudson: In-stock goods are up, markdowns are down, and inventory turns are at an all-time low. In retail, that's a sign that you're doing something right.
Dell Computer
Excess inventory is like a leech that slowly sucks resources and money out of a business. To kill the creature, Dell Computer is steadily replacing inventory with information. "Inventory is a security blanket," says Lance Van Hooser, director of E-commerce at Dell. "The only reason companies build up inventory is because they don't know about events that are going to happen. The more you know, the less inventory you will have to carry."
Right now, Dell carries about seven days of finished product. The goal is to count that already low figure in minutes. The company is turning to the Internet to collaborate and conduct business with suppliers and customers at unprecedented levels.
Dell recently created customized Web pages for its top 30 suppliers, whose employees can log on to a secure, personalized site to view demand forecasts and other customer-sensitive information--such as who Dell's customers are and how much equipment each is ordering--to help them better gauge demand. As a result, suppliers can more easily match their production schedules to Dell's--making only what is needed, when it's needed.
Dell is also passing on data about its defect rates, engineering changes, and product enhancements to these suppliers. Since both Dell and its suppliers are in constant communication, the margin for error is reduced. Also, partners are now able to collaborate in real time on product designs and enhancements.
Suppliers are also required to share sensitive information with Dell, such as their own quality problems. Van Hooser says it's easy to get its suppliers to follow Dell's lead because they also reap the benefits of faster cycle times, reduced inventory, and improved forecasts. And ultimately, the customer gets a higher-quality product at a lower price.
Dell is also using the Internet to create a community around its supply chain. The Web sites all have links to bulletin boards where partners from around the world can exchange information about their experiences with Dell and its value chain. "The Internet is the core of everything we are doing," says Kevin Rollins, vice chairman of Dell. "It provides the capacity to improve the flow of information, eliminate paper-based functions, and link global organizations."
Dell is also using the Internet to form tighter links with customers. For many of its business users, the company has created Premier Pages containing approved configurations, prenegotiated prices, and new workflow capabilities, so when an employee requests a new computer, the order is automatically routed to the appropriate person within the buying organization for approval.
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