Supply Chain Standards Up for Federal Funding

Bill calls for $47M to help accelerate integration efforts

WASHINGTON—Congress is considering legislation authorizing $47 million to help develop supply chain integration standards that bill backers say could save a variety of industries millions of dollars.

The legislation, the Enterprise Integration Act of 2002, has been approved by the U.S. House and is pending in the Senate. It has no apparent opposition and is backed by industry groups.

Efforts to establish supply chain standards are already well under way in various industries.

For instance, RosettaNet, a nonprofit consortium in Santa Ana, Calif., that sets standards for the high-tech sector, is working on global standards. But problems remain in other industries.

The legislation was prompted by a landmark 1999 study by the National Institute of Standards and Technology (NIST) that estimated that the auto industry alone could see $1 billion in supply chain savings annually with improved enterprise integration. NIST said "similarly dramatic savings" are possible in industries such as shipbuilding and home construction.

Inefficiencies Add Up

The report's conclusions remain applicable today, according to a NIST official. "There are a lot of inefficiencies due to the lack of effective standardization, and they add up," said Gregory Tassey, a NIST senior economist, in an interview last week.

The intent of standards is to streamline interaction throughout a supply chain, to speed up transactions, and to reduce inventory and delays. If a big automaker, for instance, changes a design specification in a bumper, its suppliers could quickly and easily see how the new specification affects their components.

Jeff Eck, who heads XML efforts at business-to-business services provider Global eXchange Services in Gaithersburg, Md., said one of NIST's strengths is its ability to provide vendor-neutral testing environments to determine product interoperability.

These standards efforts will move ahead with or without congressional support. Manufacturers "realize there is more opportunity to squeeze out cost" from the supply chain, said Eck. Without the congressional funding, "it might happen slower, but it will happen."

The incentives for companies to push for standards aren't always apparent. The savings are primarily in the supply chain itself, said Daniel Garretson, an analyst at Forrester Research Inc. in Cambridge, Mass. "It's a mismatch between where the savings are [with the suppliers] and where the power is" with manufacturers, Garretson said.

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CAD/CAM Conundrum

ADDED COST: Without standards compatibility among computer-aided design and manufacturing (CAD/CAM) systems, users have to invest in translators.

FORCED IT INVESTMENT: In some cases, large equipment makers force their suppliers to buy the same CAD/CAM systems that they use.

WHAT NIST WILL DO: The legislation would help NIST accelerate work on the Standards for the Exchange of Product Design Data, which can be used to support data exchanges across a wide range of industries.

Copyright © 2002 IDG Communications, Inc.

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