Supply Chain Demands

Private and public e-marketplaces may help streamline supply chain activities, but data quality, privacy and organizational issues continue to challenge even the most adept managers.

Companies are "in a fight every day." They have to respond quickly to changing business demands that are "outstripping" the ability of supply chain management technology to keep up.

So says Robert Betts, a senior vice president and global supply chain executive at SAP Labs Inc. in Atlanta. Betts and two other industry executives -- Craig R. Jett, e-marketplace marketing manager for the B2B Solutions unit at IBM in Yardley, Pa., and Kevin O'Marah, service director for the supply chain strategies service at AMR Research Inc. in Boston -- recently got together in New York to discuss key supply chain management challenges that leaders across a wide swath of industries are facing.

The roundtable was moderated by Computerworld's Thomas Hoffman and publisher Sarwar A. Kashmeri.

Hoffman: To make sure we're all on the same page, please define supply chain management.

O'Marah: Supply chain management is simply the movement of materials in response to demand. It's all about supply meeting demand. But there are different components of this.

Supply chain planning is the decision-support part of it -- what's available to meet demand-planning decisions. How much do we expect to sell to ABC?

Supply chain execution is just what it sounds like, getting the job done. Fulfilling orders, delivering goods, replenishing, running the factory.

Betts: I agree with Kevin. But one of the differences we're starting to think about in the market is to stop thinking of supply chain as a sequential, simplified series of events. It's actually a highly complex network of participants, including suppliers and customers, where the actual demand comes from, and the need to integrate all of that together.

So the concept of this narrow, sequential world that we can draw on a PowerPoint slide just doesn't exist anymore. It's really a very messy, loosely integrated set of events that are usually not connected right now. And they need to be connected.

Jett: It's everything from how you design products on the front end to how the consumer is using those on the back end, and that's really the view of supply chain management as we see it.

O'Marah: The "supply chain" is a bad term because it implies linearity. I don't really like supply "Web" or "network" either because it's so fluid. But what's going on is supply and demand are being balanced by connecting up the components that allow bauxite to be mined and aluminum to be molded and products to be delivered.

Kashmeri: Are there other phrases that are more appropriate?

Betts: If you find one, I'd sure like to know what it is. [Laughter.]

Kashmeri: What are the key privacy and security issues surrounding supply chain management?

Jett: As you look across supply chains and what companies are doing, obviously they are becoming highly collaborative. You're talking about how you share data across companies. I think a lot of companies are dealing with those issues today and trying to determine what is the right kind of data that [you] can share without selling the farm, not giving up what's core to your business.

O'Marah: There are a few really big issues. Intellectual property -- what do I own patentwise? What do I own designwise? What core competencies have I built myself? What about regulation? How much responsibility do you have for what you've sold out in the marketplace, such as Firestone tires or meat with E. coli?

Those kinds of things are the responsibility of the brand owner who ultimately took the money, and as the security and privacy concerns grow out, that becomes a longer-lasting threat to your stability.

I don't think people are clear about whether sharing design data is a good idea or bad idea. They know they need to get connected, but they are not clear which one of these little pieces of data that they should share or make available to a supposedly password-protected component on an exchange or private trading exchange and how dangerous it is out there.

Betts: There's a bigger question here that we're not talking about: privacy. Right now, there is technology that basically tracks every movement that we make, whether you go to the gas pump and wave your little ticket, or go to Kroger's [grocery store] and put your little card on the scanner. All of that identifies you, and we have this electronic shadow that follows us around.

I don't know where it's going to end up, but I do know this: Each one of us in our electronic shadow is becoming a lot more sophisticated and a lot more complex, and the threat of that being opened is somewhat frightening.

In Georgia, they actually put our thumbprints on the back of our driver's license. It's a three-dimensional bar code. I refused to get my driver's license for three years because I consider that an invasion of privacy. If anyone got that thumbprint, I have no way to do anything else. I can't change my thumbprint.

I'm very uncomfortable with this, and I think we've got a lot of work to do about privacy -- what gets known, what does not get known from the individual and then what goes into the networks.

So the question is, where does the electronic shadow become a utility vs. an enemy?

Kashmeri: How do you advise senior managers as they start implementing these supply chains across countries?

Betts: This came up when I worked for IBM. I worked on a customer membership project for a client, and this question was asked: "Where does this privacy begin and end?" And it wasn't the senior executives that brought it up. It was the people who were doing the initial tests.

Eventually, they realized that everything was on [these customer statements], it wasn't just a bill for so much gas at the pump like a credit card transaction. And it frightened [the test team] a little bit. So the actual test scenario has brought this up. As we work now across the U.S. and Europe -- especially in Europe, as privacy issues and requirements are far different than in the U.S. -- I think this is going to be something that actually slows us down tremendously over the next few years.

Jett: CEOs we speak to are certainly looking at these security issues.

They're also worried about what information they can and cannot share. At IBM, we look at what we've done within our internal supply chain and the information that we share with our partners and all the outsourcing that we do from a manufacturing standpoint, which is pretty significant.

What information is shared varies so drastically by company, industry and geography. Look at consumer packaged goods and retail. Four years ago, in Europe, collaboration was a dirty word in that industry. You didn't talk about collaboration. The sentiment there was, "There is no reason why a retailer should know what kind of costs I have going into my products."

That type of thinking has changed pretty significantly in the past three to four years.

O'Marah: From our clients' perspective, they have an implementation problem. If they can't count on their people within the supply chain -- truck drivers, dock workers, order entry clerks, home workers -- to do what they need them to do, then the system will break down.

And people don't like to be followed around. So anything we do philosophically with connecting functional applications, databases [or] business processes will break when people getting paid by the hour refuse to do what you think they're going to do. Then the data will be corrupted, and the whole database will be of no use.

Kashmeri: A few weeks ago, Mario Monti, [the European Union's competition commissioner], killed the deal between GE and Honeywell. Is this is a wake-up call for companies that are implementing supply chains across borders?

Betts: I think it is a wake-up call, but it may be a wake-up call for the countries as much as anything else. Businesses in Europe and the business world in Europe have a different view of mergers and acquisitions than the U.S. does.

Jett: Certainly, the big difference, from a company standpoint and a government standpoint across the water, if you will, is really based on workers and the focus on workers across the entire European Union.

That was one of the major reasons why this deal was turned down.

Hoffman: What are the key challenges managers are facing in running supply chains effectively?

Betts: They struggle. They're in a fight every day. And the fight they're in is that the businesses are changing and are adapting much faster than the technology. Frankly, it's outstripping the technology's capability to keep up.

I hear that constantly, and it comes out in different ways: "I can't add this company fast enough to my software," or, "It takes me six months to integrate this other company," or, "It took me eight weeks to bring on this warehouse."

Secondly, the need for better-quality information that's more readily available is key. And you can't do that unless all the facilities are connected.

Hoffman: Are there any companies that are doing this effectively?

Betts: There are a couple that have done a very good job. One of the things they've done is look for repetitive processes that can be replicated. So instead of trying to come up with a different process for, say, material tracking, they'll come up with a single process and simply copy it across their divisions as much as possible.

For larger companies like GE and others that are highly diversified across multiple industries, it's a little more difficult. But when you have a single, large company in a primary industry, that seems to be the easiest way to go.

Jett: A trend that we're seeing is that companies aren't looking to boil the ocean like they were a year or two ago. They're really looking at where their specific pain points are, looking through the microscope and saying this is where we see a lot of repetitive processes.

They're also looking at where they can automate and make a more fluid process and also try to gain some efficiencies.

O'Marah: The challenges we see our clients running into come in the following order:

Organizational. People don't want to do it; someone won't step up and own it. Too risky, so I don't want it on my particular comp plan.

Data quality. Where is it? How much is there? Can I get it? Can I see it? Is it going to be transaction quality? Those types of questions.

The response to these issues is, "Baby steps work; big bangs don't."

What I hear all the time from our clients is, "There's no finishing e-business." You don't finish your supply chain initiative. You don't finish your enterprise system. You continue to find ways to compete in your core business by using the tools that are out there, and so you go for something that you understand. You go for a process you know, [that] you can replicate, that makes sense.

You get over the data-quality issues by keeping the scope narrow, and you get over the organizational issues by finding someone who's actually got the guts and tapping him on the shoulder with your sword, like you're King Arthur, [and saying], "Go forth and conquer," and that person can be a hero.

Kashmeri: So is part of the problem that businesses are expected to move at cyberspeed?

Jett: Definitely. I just wish on a Friday I could have three hours to sit and think. Everybody wishes they could do that. And I think that's the nature of this problem: having the ability to really sit down and think through some of these processes. I think that's really what customers need to do.

Betts: Personally, I think it traces back to the financial markets. Everybody is responding to the quarterly analyst call. And really, that's a big problem, because we just talked about things that have to do with rolling out the technology or rolling out the organizational change.

Those things take time. If you're trying to respond to the quarterly financial requirements of Wall Street, you're going to end up shooting for that.

Jett: And it filters all the way back through the entire organization when that's the mind-set.

Betts: Later this week, I'm going to go talk to a board, a CEO, about this exact question. And what I've got to explain to this board is [that] basically, this company is being squeezed from both ends. Our friends [on Wall Street] expect this company to go from generating 3.5% of revenues into profit to 15%. This is a big jump. And this company is 135 years old. This isn't going to happen overnight.

First, you've got one battle front, where you must begin to compress the operation. You cannot continue to have multiple operations doing the same thing. And they've done that to date because they can't compress the systems fast enough. They've bought five companies. You've got four different order processing systems.

They get 25 different catalogs. They can't compress anything. So that's the first effort.

There will still be overlap, quite frankly, because we're not going to get rid of all the nonrationalized products and all that stuff; that takes years. But if we can get the customers into this business and focused properly, they can get better top-line benefit relatively quick.

This is not a long-term project. This is something that can take literally 60, 90 days.

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