IT changes hit supply chains

Computerworld - San Diego
Citing a supply chain with no coordination, accountability or effective means of tracking inventory, Kmart Corp. CEO Chuck Conaway last week outlined the company's plans for overhauling its information technology systems to handle the stresses of conducting Web-enabled business.
"We're not where we need to be," he said of Kmart's online efforts. Conaway last week was here at the Planet 2000 trade show, sponsored by i2 Technologies Inc.
In the next two years, Kmart aims to beef up its supply-chain and Web storefront operations, standardize and automate its ordering and fulfillment processes and make sure products get to stores when they're supposed to, said Conaway.
Kmart will also be better able to forecast customer demand for its goods and improve its transportation operations.
Both Troy, Mich.-based Kmart and Caterpillar Inc. announced last week that they are working with Dallas-based i2 to revamp their entire IT platforms to join the electronic-business world.
The applications developed for these companies will eventually be sold to other companies within their industries, according to i2.
The partnership is just what Kmart needs, said Conaway. The company lacks integrated supply-chain processes, he said, and as a result, customers wind up going to stores looking for advertised goods that aren't available.
Moreover, the supply chain is "virtually zero" Web-enabled, he said.
Peoria, Ill.-based Caterpillar plans to let customers order and configure heavy machinery and other products via the Web and create a private online marketplace to connect its network of suppliers and dealers.
The 75-year-old maker of farming and construction equipment, which had revenue of $19.7 billion last year, hopes to squeeze out $100 million in costs during the first year the system goes live.
The ordering process on Caterpillar's legacy systems requires too much human intervention and takes too long to offer a build-to-order model for most of the company's customers, according to Bill Smith, a manager in the manufacturer's corporate information services department.
With a multitude of product options, Smith said, customers could order thousands of different configurations.
Some pieces are in place. Earlier this year, Caterpillar implemented i2's TradeMatrix digital marketplace software in its Performance Engine Products Division, which led to a $32 million reduction in product inventory and a 38% cut in assembly-line processing times.
However, Caterpillar's plans may not go down well with all of its approximately 5,000 suppliers, said Joshua Greenbaum, a principal at Enterprise Applications Consulting in Berkeley, Calif.
Interfacing with existing public and private online marketplaces is already putting stress on their IT resources, Greenbaum noted. Caterpillarmay meet resistance unless it does something to "take away the technological burden" for its suppliers, he said.
Michael Bittner, a research director at AMR Research Inc. in Boston, said that although these are both significant projects that could benefit the two companies, they could also result in long-term, complex implementations.