IBM Microelectronics, a division of IBM, began revamping its supply-chain management system five years ago. The division wanted to make a fundamental shift, from supplying semiconductors and packaged goods exclusively to IBM's PC and server divisions to supplying parts to outside buyers such as Advanced Micro Devices, Cisco Systems, Dell Computer, and Qualcomm. The company replaced a homegrown system with SAP's manufacturing resource planning software to gather and store data, capture and store orders, and track current inventory; it switched to Aspen Technology's Mimi toolkit to schedule the production of products and match demand with available resources. The IBM division also began to transmit information to customers over the Internet, including purchase orders, ship dates, logistics, and payment information.

"It's all being transitioned to make use of the Internet as a means of communicating requirements and sending status information back out," says Ken Fordyce, senior engineer at IBM Microelectronics in Essex Junction, Vt. "It creates some immediate benefits in reduced transaction processing, enhanced reliability, and improved customer responsiveness."

The explosion of E-commerce has raised the bar on how business customers and consumers expect to access information about products, orders, and account histories, according to analysts. "What's happening in the business-to-consumer space is probably the most fundamental shift today," says Stacie McCullough, a senior analyst at Forrester Research. "As companies put up Web sites, manufacturers, distributors, and resellers have direct contact with the customer. Distributors and resellers are selling to new markets. It opens all sorts of new opportunities." It also brings additional pressure: These days, when people send orders electronically, they expect to get a quick confirmation or denial if the order can't be met.

The trend has generated new software that can help companies defray the costs associated with finding and buying products and services. Chemical company DuPont & Co. hopes to manage its routine buying better by deploying Web procurement software from Ariba Inc., giving its 95,000 employees a single interface and consistent business rules to buy products such as office supplies, test tubes, and service contracts.

"Today, we have a fragmented legacy procurement system; our databasing capability is weak and not detailed," says Blair Althouse, business development manager of E-commerce at DuPont. "By going to a common system, we're going to learn a lot about our purchasing, gain more control over it, and help teams do better jobs leveraging purchase power with key suppliers."

Similarly, catalog software from Commerce One Inc. helps companies source the raw materials and finished products used in the production of their goods more efficiently; the software archives and searches large databases of product information from multiple vendors, significantly reducing search times.

According to analysts, while ERP systems have long helped companies manage their internal manufacturing, financial, and human-resources processes, they weren't designed to encompass all stages of the supply-chain management process, from planning to selling, sourcing to delivering. For manufacturers to streamline production, they need a higher degree of collaboration and transparency than an ERP vendor can provide in a traditional packaged solution.

"The challenge to ERP is how much extended, interenterprise, and collaborative functionality will ERP vendors have to provide so they won't be replaced," says David Yockelson, senior VP and director of electronic-business strategies at the Meta Group.

While ERP systems still form the backbone of many enterprisewide IT systems, a number of other software vendors--along with large services organizations such as Deloitte Consulting, Ernst & Young, IBM, and USWeb/CKS--have built capabilities

for companies that wish to share information. Manugistics Group Inc. and i2 Technologies Inc. each make advanced planning system software that helps companies do forecasting and capacity-planning for their manufacturing activities. Because their software runs over the Internet, the vendors have found themselves in a good position to bridge the gap among various ERP systems.

"Extending beyond the enterprise is where some of these tools and technologies are needed to do extended planning between your company and suppliers, and your company and customers," says Pedro Portugues, senior manager for supply chains at Deloitte Consulting.

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Photo of Loy by Michael Lowry