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Supply Siders

Global-supply management requires integrated, inclusive, real-time technology.

Archimedes, a guy who bought into leverage way before the concept became fashionable, reportedly summed up the power of the idea this way: "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

A couple of thousand years later, businesses of all sizes--from global corporations to small specialty manufacturers--are trying to redefine their relationships with their suppliers to lower costs, raise quality, increase speed, and reduce risk. In so doing, they're applying some Archimedean thinking as they attempt to move beyond the tactical realms of purchasing, procurement, and sourcing and into the more strategic area some analysts and observers are referring to as global-supply management.

"In some parts of our company, we've shifted the balance so that 60% or 70% or even 80% of what goes into our products comes from outside suppliers," says Mike Brown, VP of worldwide sourcing for $28 billion-a-year United Technologies Corp. "When you reach those levels, then you better have a real good handle on that supply base: who they are, what they can do, how they interact with not just some but all parts of your company, how good their quality is, how quickly they can adapt and change and customize."

One of the vendors United Technologies is working with to make that happen is FreeMarkets Inc. Known for its E-procurement service and expertise, FreeMarkets moved into global-supply management with the launch last week of a set of software tools that deals with supply issues such as contracts, requirements, collaborative design, spending, and performance measurement, by automating and integrating tasks such as configuration, workflow, project management, data transfer, access and control, and messaging. FreeMarkets ES software has an exchange-rate table that handles international currencies, says Chris Gormley, VP of product management, and later this year will be available in French, German, Italian, and Spanish and will support double-byte character languages Japanese and Chinese.

United Technologies isn't only a customer of FreeMarkets--it's an investor, to the tune of $20 million in 1999. But Brown says the company's global-supply management technology still needs stress testing. "The key for FreeMarkets is making the software so that anyone in a company can just drop in the data and have it work," he says. "Everybody wants something like that." The ES 1.0 software is being offered first as a hosted service, then as packaged apps by midyear.

Global-supply management isn't a new concept. Vendors have been offering services and tools for E-procurement, sourcing, spend management, and supplier-relationship management for some time. In the last year or so, supply-chain and ERP vendors such as i2 Technologies, Manugistics, Oracle, PeopleSoft, and SAP have incorporated such modules into their enterprise software.

But the need is increasing for software that integrates and optimizes these capabilities on a global basis, as opportunities for competitive advantage come from an ever greater number of international suppliers and customers. Gene Tyndall, associate director of the University of Miami's Center for Advanced Supply Chain Management and formerly executive VP of global supply-chain solutions at Ryder System Inc., says such software is "the next big frontier in supply-chain cost management."

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