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March 6, 2000

Businesses Seek To Cut Weak Links From Supply Chains
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Related links:

Managing The Supply Chain: Customers Come First (2/14/00)

Supply-Chain Modules Improve On-Time Deliveries (1/24/00)

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Originally written to automate processes on the factory floor, advanced planning software from i2 now optimizes production activities by letting companies more easily communicate their production needs to suppliers, keep buyers abreast of production cycles, and respond quickly to changes in supply and demand. The software works by pulling order data out of and stuffing it back into any number of ERP systems. Because the applications are browser-based, suppliers, transportation partners, the distribution channel, resellers, and large business clients can all see into the supply chain without having to deploy any software.

But the ERP vendors aren't doing nothing. I2 had an original equipment manufacturer relationship with SAP, before the ERP vendor decided to launch its own advanced planning software offering, SAP APO, in 1998. Similarly, Oracle terminated an agreement with Manugistics and is building advanced planning software functionality into the upcoming version of its Oracle Applications 11i. Users can benefit from sticking with their ERP vendors' offerings, analysts say, to avoid the integration hassles of deploying third-party applications--but that means waiting until offerings from Oracle and SAP mature, a hard six months' delay for companies that needed the technology yesterday.

Millipore Corp., a Bedford, Mass., company that makes purification and separation devices for biopharmaceutical and microelectronics labs, decided to hold off buying a supply-chain management system from i2 and wait until Oracle ships Applications 11i in the second quarter. The goal: to keep its systems as much as possible on a single platform.

Millipore uses Oracle's customer-relationship management, financials, and manufacturing applications and has been working to build a single data repository to track sales demand for its products in global markets in an Oracle database. But integrating that sales-demand data with the company's other business software, such as Lotus Notes, is still an uphill battle. The dream of storing sales data, managing requests for proposals and quotations, and communicating logistics data through the same application set is a long way off, says Bertrand Loy, Millipore's VP of IS.

"We would really like to have one unique repository of information, from the time we take information on a prospect to contacting them, qualifying the lead, and eventually booking an order," Loy says. "Today all those activities are disconnected, with limited interaction with our ERP platform." Loy is confident that in time, Oracle's CRM and advanced planning functionalities will be industrial-strength and fully integrated with the ERP modules that are key to the day-to-day functioning of the manufacturing process.

At some point, however, vendors of traditional supply-chain management software may find themselves at a competitive disadvantage against nimble upstarts, especially when trying to reach small and midsize companies. Web sites such as EC Company, Electron Economy, Iconomy.com, MetraTech, OrderTrust, Tandata, and TheSupplyChain.com have narrowly begun to target certain functions of supply-chain management software--such as logistics, order management, purchasing, or fulfillment --and offer them on a subscription basis to companies on the Web.

The Internet is promising to change how companies manage their supply chains in other ways as well. Using their foundations in Web-based software from Ariba, Commerce One, i2, and Manugistics, companies are beginning to explore using trading hubs--online marketplaces such as Altra Energy Systems, Chemdex, and e-Steel that let businesses buy commodity goods such as bulk chemicals, metals, and power more efficiently.

Kurt Hentschel Photo by Brian Smith DaimlerChrysler, Ford, and General Motors are looking to portals to help connect them to suppliers, original equipment manufacturers, and resellers on the Web. The companies have joined forces to build an automotive marketplace that will use open Internet protocols and the Extensible Markup Language to help the participants exchange information on orders, inventory, demand, and payment with tens of thousands of trading partners.

The potential benefits include more accurate planning, easier data exchange--especially with small suppliers not equipped with electronic data interchange--and faster response times to customer needs.

"We've begun testing a system to do online quotation for the materials used in the manufacture of automobiles through the AutoXchange trading hub," says Mark Duhaime, a purchasing systems manager at Ford, which is building the hub with Oracle. "There will be savings in mail time, handling costs, and in making better decisions sooner."

Genome Therapeutics Corp. is experimenting with a number of services from online marketplaces. It's using chemicals exchange site Chemdex to source and buy about 10% of its indirect goods--the reagents, enzymes, plasticware, test tubes, and other finished products used in the research it conducts into human and pathogen genetics. The online marketplace also lets all lab personnel view and search the same product data via a Web browser--something Genome Therapeutics' 4-year-old CostPoint requisition software from Deltek Systems Inc. could not accomplish.

"Our ERP system has an electronic requisition module, but it's only PC-based, and we have a lot of different systems in the laboratory: Macs, PCs, and Unix systems. So we weren't able to roll out an electronic system to everybody," says Kurt Hentschel, manager of operational services for Genome Therapeutics in Waltham, Mass. Using the Chemdex site helps engineers find specific products faster, saving time otherwise spent flipping through product catalogs, and buy more easily by programming business rules into the Chemdex site so purchase orders are automatically routed to the right manager for approval.

When it comes to how companies find, buy, make, and move goods and products, the world is changing. Analysts predict the way companies manage their supply chains will continue to morph with each technological advancement and new Internet business model, and according to rules unique to each industry. What won't change is the fact that supply-chain management is an increasingly critical element of running a successful business--online or off.

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