The need for visibility is one of the top four reasons manufacturers invest in supply chain management applications, according to AMR Research, Inc. The other three drivers -- demand management, radio frequency identification (RFID), and sales and operations planning -- all contribute to visibility.
Manufacturers strive for visibility because a supply chain is a complex web of interdependent parts. "The key is finding the right balance of service, cost, and resources," says Jay Burkholder, director of product management at Optiant, Inc. (Burlington, MA), a developer of web-based supply chain design and optimization software. "The only way to do that," he insists, "is to provide visibility end to end, from suppliers' suppliers to customers' customers."
"Everything starts with visibility," agrees John Cummings, chief marketing officer at i2 Technologies, Inc. (Dallas, TX), a provider of supply chain management software. "You can't solve business problems or orchestrate supply chain efficiency unless you have visibility," he insists. "You have to have visibility before you can plan or collaborate with partners," he adds. Otherwise all effort is spent reacting to events.
The Tool Chest
Today, there are a number of tools available to enhance visibility of both finished-goods and service supply chains. RFID technology, in particular, can deliver more real-time information about item movement than has been accessible in the past. Still, "a lot of companies really don't have visibility into inventory, orders, invoices, and shipments," Cummings notes.
"Visibility is important so all stakeholders understand what their part in overall performance is and the impact of their actions on other players," Burkholder says. "It's difficult for many companies to really comprehend what a silo-driven mentality is doing to other parts of the supply chain," he explains.
Optiant's PowerChain Inventory and PowerChain Planner modules allow a manufacturer to map its supply chain, creating a graphic display that shows flow and highlights critical parameters at each stage. "A lot of customers tell us that this is the first time they have seen the supply chain modeled out," Burkholder says. More importantly, the software also provides tools to help understand the impact of changes. As a result, manufacturers can look beyond the current situation and examine the implications of various actions.
The PowerChain software collects data from the resident system of record, generally an enterprise resource planning or advanced planning system, using web services to access information or ping the system. An open XML architecture makes it easy to integrate with virtually any other system including demand planning and factory shop floor control. Since many customers run an SAP R/3 system, Optiant offers a certified integration with SAP (Walldorf, Germany). It also offers an interface certified by Microsoft Corp. (Redmond, WA).
Cost varies depending on the size of the company and the number of modules used, but return on investment typically occurs within 120 days, according to Optiant. In some cases, the company claims, bottom-line improvements can add up to hundreds of millions of dollars due to revenue growth, asset reduction, cost reduction, and/or better execution.
Other visibility-enhancing systems such as Supply Chain Visibility (SCV) from i2 focus more on execution than planning, so the system not only shows where an item is, but also links to decision support systems so action can be taken. Its service-oriented architecture helps to integrate SCV with an ERP, order management, transportation management, warehouse management, carrier, production, or supplier system. Web portals also can serve as the interface between systems. According to i2, payback for the licensed software is typically less than one year.
Taking an even more proactive approach, TrueDemand Software Inc. (Los Gatos, CA), a startup founded by executives from Manhattan Associates Inc. (Atlanta, GA), i2, and SAP, relies on algorithms to detect patterns and predict inventory fluctuations before they happen so action can be taken to avoid out-of-stocks or overstocks. TrueDemand's solution relies on data collected from RFID tags, bar codes, and various enterprise systems such as warehouse management systems. A service-oriented architecture based on IBM's Websphere provides access via a web portal.
At Your Service
Service supply chains also benefit from visibility, but the tools used to manage the long-lived assets typical in this segment -- along with related spare parts, multiple levels of supply, warranties, reverse logistics, and repairs -- are somewhat different. This segment also must handle a wide range of service-level agreements, which, in some cases, may call for response times as short as one hour.
"Customer expectations are rising," reports Bob Salvucci, president and chief executive officer of MCA Solutions (Philadelphia), a supplier of service planning and optimization (SPO) software. As a result, performance metrics are changing from monitoring parts availability to measuring how long a machine is down. In fact, some defense contractors are moving to autonomic logistics, whereby the asset actually communicates to the supplier about a problem. "Going forward, all Department of Defense procurements are going to be based on performance logistics," Salvucci says. "Being able to manage and model is key when you're repairing rather than replacing assets," he says.
Organizing resources for delivery at the lowest cost within a finite timeframe can be very complex. "Companies like Cisco Systems, Inc. [San Jose, CA], with seven levels of supply, 250,000 active parts, and 1,000 locations, want to optimize and reforecast on a daily basis," Salvucci explains. In addition, "Cisco wants to be able to adapt quickly to add service contracts closing on a daily basis," he notes.
MCA's SPO 5.1 suite draws information from a variety of sources, including product information from the customer's ERP, contract information from its CRM, and failure data from its product lifecycle management system. After performing its planning function, it sends information back to the ERP system for execution. "We want to be as close to real time as possible without becoming the system of record because most of our customers already have an ERP," Salvucci says.
Since ERP plays such a pivotal role and since most U.S. customers run systems from SAP, MCA's SPO is SAP-certified. Thus, integrations largely depend on SAP's i-DOC functionality, although MCA also can write custom interface programs and is working with SAP and other ERP providers on standardized interfaces.
Like many of today's software suites, MCA's SPO is modular. Thus, a manufacturer can implement the forecasting and optimization module alone and add "what if" simulation and tactical planning later. The "what if" simulation is particularly useful for determining the implications a specific service contract will have on cost, inventory, and field engineering locations.
Although MCA started out licensing its SPO, it now also offers a hosted version and has begun to offer a software-as-a-service option for mid-range customers like Tellabs (Naperville, IL), which used the software to reduce its service parts inventory 60% while raising service levels to 98% and saving $5 million.
MCA's SPO suite requires an investment ranging from $5,000 per month to multimillions, depending on the number of users and assets. According to MCA, ROI generally is achieved in less than a year. About two-thirds of the payback derives from savings related to inventory reduction, the company says, while the remainder comes from lower labor and transportation costs. A successful installation can also help improve customer satisfaction.
Despite advances in these tools, end-to-end supply chain visibility remains an elusive achievement. The best route to visibility involves multiple tools and efficient collaboration among manufacturers, suppliers, and customers.