Strategy

By CIOinsight  |  Posted 03-06-2006 Print Email
Strategy

Turn your internally designed supply chain into an outwardly focused global network.

Traditional supply chains rely on a company's own historical data to do demand forecasting and inventory planning—and they often miss the mark. To create an effective global supply chain, companies must be willing to share sometimes sensitive business data that will lead to smarter, more realistic decision-making. That's easier said than done. "Companies don't want to share critical, internal business data," says Chuck Poirier, a partner at CSC Consulting, an El Segundo, Calif.-based firm that helps companies plan global systems. But it's critical, Poirier says, to making global supply chains work. "Look at Wal-Mart," he says. "It sends cash register receipts directly to its top suppliers so they know exactly what's being consumed and what needs to be replenished." Stanford's Lee agrees that supply chains cannot operate in a vacuum. "You have to set up information systems that are outward looking," he says. "It's not your company's supply chain. It's your company's supply-chain network."

Few companies understand this principle better than Procter & Gamble Co., the $57 billion consumer-goods manufacturer and operator of one of the world's largest supply-chain networks, with operations in 86 countries. To better connect with global suppliers, P&G created a Web portal that lets suppliers collaborate with P&G through every step of the procurement process. "We can review materials specifications, and suppliers see our production schedules so they can plan logistics in advance," says Alfonso Cos, vice president in charge of P&G's supply network.

Because P&G operates worldwide on a single ERP platform from SAP, supply-chain executives can easily aggregate data across divisions and "make it visible in ways that are more helpful for us," Cos says. For example, P&G creates digital dashboards and alerts for employees that provide end-to-end visibility into the supply chain—including the ability to track SKUs and see where a product is in any phase of its design. "When something goes out of whack, it can be dealt with quickly," Cos says. That makes it much more likely that Charmin will always be available at your local supermarket.

But most companies don't operate on just one platform, and that can make sharing data across the network even more daunting. At Ametek Inc., a $1.2 billion, Paoli, Pa.-based manufacturer of high-end scientific instruments and electric motors that operates 18 business units and 65 manufacturing plants around the globe, divisions aren't forced to migrate to a single platform. "Our company serves a wide variety of markets," says William Lawson, Ametek vice president and CIO. "To disrupt those businesses and force them to process orders in a way that doesn't help them directly wouldn't make sense." As a result, the company has no single technology standard, operates in a dozen languages, and has more than 30 separate ERP systems.

So how does Ametek maintain visibility into its supply chain, and share that insight with suppliers? The simple answer, Lawson says, is data cleanliness—an absolute must for any company that operates on multiple platforms.

Each quarter, Ametek gathers all the spending data from its operations, updates new data with the proper codes, and compares purchases from different units to get a clear picture of the company's total expenditure. The data is then translated into a common language so that a special team of procurement and technology executives can identify abnormalities—and opportunities. This information is then shared strategically with Ametek's suppliers.

Having that cross-system view of the supply chain allows Ametek to manage two very important variables: price and flexibility. It's a tough line to tread, says Mark Hillman, a senior analyst with AMR Research. "It makes sense to source parts where you can get them cheaper, but don't forget about logistics," he says. "An apparel company might source trousers from China because it's less expensive. But it might also want to keep some inventory in the U.S., so if a particular style becomes popular, the company can increase output to meet demand. If a hot item is stuck on a boat for 45 days, you're out of luck."



 

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