July 2001 | Commentary | IT Matters

Boosting Supply Chain Agility for a Competitive Edge

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The recent downturn in the high-tech economy is leading companies to scrutinize their supply chains more closely. With profits falling, staffs shrinking, and doors closing, it becomes even more imperative that companies foster supply chain agility to retain a competitive edge in the face of highly volatile demand. Companies can improve supply chain agility in two ways:

  • Speed production cycle times once new demand information works its way down the supply chain.
  • Reduce the amount of time it takes for that information to arrive. Because suppliers will always need a certain amount of time to manufacture, package, and ship items, companies wanting to reap immediate efficiency gains will focus on speeding information exchange across the supply chain.

Breaking Down Barriers

Over the years, companies have adopted a number of technologies to improve information sharing with supply partners, but many barriers still exist. While Enterprise Resource Planning (ERP) systems and Advanced Planning and Scheduling (APS) technologies improve internal execution, they do not facilitate communication across the supply chain. Cross-enterprise solutions such as Electronic Data Interchange (EDI) enhance data sharing, but at a high cost and in a rigid format.

As a result, more than 75 percent of procurement tasks are still completed manually by phone, fax, and on paper.

Recently, supply chain partners began turning to web-based technologies to increase productivity and respond faster to market changes. However, the benefits they have realized from basic data exchange—such as receiving online orders from customers—pale in comparison to the strategic benefits web-based procurement execution applications now provide.

Today's automated procurement execution applications increase supply chain agility by transforming the way partners interact. These applications leverage the Internet to speed procurement activities—such as sharing material forecasts, managing purchase orders, and collaborating on inventory replenishment—by streamlining the exchange of real-time information across the supply chain. Powerful yet easy-to-use systems automatically execute routine activities, help users detect and react to problems, and deliver a wealth of data and analysis to support tactical and strategic decisions.

Managing Manual Reports

Supply chain agility is impossible without the rapid execution of an automated system. Today, most buyers manage their daily activities manually. Every week, they face a towering stack of MRP reports that require hours or even days to communicate to suppliers via phone, fax, and e-mail. Closing the supply chain loop with trading partners can be a slow, arduous task. The sheer volume of manual activities impairs the organization's ability to respond to change, resulting in costly inventory build-ups or shut-down production lines.

Using a procurement execution solution, buyers no longer need to handle purchase orders manually. The procurement system automatically translates MRP requirements into purchase orders and updates. It distributes this information to each supplier via a range of methods—from faxes and e-mail messages to integrated EDI connections or complementary web portals.

Adaptable business rules support special handling of select orders, allowing the buyer to review or modify certain orders before delivery using a convenient browser-based workbench. The system automatically captures each interaction to provide users with transaction histories and sophisticated reports.

Suppliers benefit by receiving purchase orders and changes more quickly and can use a similar browser-based workbench to respond to and collaborate with their partners. Because these solutions leverage existing Internet and enterprise application infrastructures, technology investments for suppliers are negligible, increasing adoption rates. The result is a more responsive and profitable supply chain.

Agility Requires More than Basic Data Exchange

Advanced web-based procurement execution applications go beyond simple data exchange. In addition to accelerating execution and information flow, they offer three primary strategic benefits:

  • Flexibility to support existing processes as well as emerging best practices.
  • Increased partner collaboration.
  • Enhanced strategic decision-making through improved visibility and advanced reporting.

By providing these additional key features, procurement execution applications significantly increase a supply chain's agility. Buyers become immediately aware of order cancellations and can quickly share that information with suppliers. Partners can provide each other with inventory visibility or adopt best practices such as vendor managed inventory (VMI) programs to replenish stocks more efficiently.

Partners can also speed order confirmations by jointly collaborating on purchase orders on a line-by-line basis.

In addition, key performance indicators let buyers and suppliers continually assess each other's performance and work together to align business processes with common objectives.

Combined, these benefits allow companies to shorten lead times, reduce inventories, and dramatically increase the productivity of their personnel—all of which make the entire supply chain more able to respond to constantly changing market conditions.

Today's web-based procurement execution applications strengthen the links connecting supply chain tiers, resulting in increased agility and efficiency. Are you ready to strengthen the links in your supply chain?

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