Gaining better visibility

The goal of a supply chain system -- or any information system, for that matter -- is to make sure the right people get the right data at the right time. But that didn't always happen at Dresser Flow Control, a division of $1.4 billion Dallas-based Dresser Inc.

The Stafford, Texas-based division, which makes highly engineered equipment for the energy industry, is a make-to-order business where time is critical. But until last year, the staff often had to scramble to track customer orders. Sometimes they'd be short-handed as employees got bogged down trying to figure out the status of a customer's order. And sometimes purchase orders that should have been canceled weren't canceled fast enough, which resulted in inaccurate inventory counts and excess inventory.

All of these factors ultimately led to higher supply chain costs and signaled the need for change.

So in the summer of 2000, Dresser turned to supply chain event management (SCEM) software from Vigilance Inc. in Sunnyvale, Calif. It's a bolt-on system that allows Dresser to install triggers, which act as early warnings when problems develop on certain orders. For example, if you need to know about an order that's running late -- or if you need to know when a piece of equipment has gone down for the third time -- Vigilance Alerts will send a message via either e-mail, a Web page, a pager or a handheld device.

At Dresser, Vigilance alarms about pricing snafus are especially important. If a buyer enters a price of $2 for the cost of an item when the proper cost should have been $1, the Vigilance system catches the error and notifies the appropriate staff member, says Cory Nelson, Dresser Flow Control's vice president of manufacturing.

Dresser's supply chain IT system begins with BPCS, an enterprise resource planning (ERP) system from SSA Global Technologies Inc. in Chicago. "The Vigilance system marries into our ERP systems and serves to flag events which may cause problems, such as a supplier not delivering material needed to manufacture an order," explains Walt Albright, IT director at Dresser Flow Control.

Other vendors of SCEM software include Vizional Technologies Inc. in Santa Monica, Calif., and Categoric Software Corp. in Sterling, Va.

"Our manufacturing staff was often chasing down orders due to missed delivery dates," Albright says. "Vigilance acts as a second set of eyes. By providing the mechanism for proactive alerts, our existing employee teams can do a better job."

A major benefit of the Vigilance SCEM system is that the existing staff has been able to process a larger number of number of orders, Albright notes, because, on average, less time is spent per order.

And the efficiency seems to be paying off. Albright says the division has seen its profit increase 10% to 25% and sales increase from $150 million to $200 million since the Vigilance software was installed.

"Saving on labor costs is certainly good, but the real benefit comes from better customer service," says Tom Harwick, an analyst at Giga Information Group Inc. in Cambridge, Mass. "Increased supply chain visibility will raise the level of customer satisfaction, which will ultimately improve their bottom line."

Dresser is generally satisfied with Vigilance, but Albright says the package could be easier to use. Tracking and tracing a customer order is easy. But Vigilance is more difficult to use in complex situations that involve a combination of system modules such as those for manufacturing, managing the supply chain and scheduling, he adds.

Another problem was that in the beginning, the triggers were set to such a sensitive level that Dresser was being bombarded with many unnecessary alerts.

For example, the system was initially set up to raise a red flag if component prices appeared at more than 5% over standard costs. But "if we would buy 100 items at $1 per item and then need to place a rush order for 10 more, we might have to pay $1.20 per item. That would be acceptable, but we would still get an alert," Nelson says. "So basically it was a simple process to raise the trigger level to a range of 10% to 20% over standard costs."

Harwick sees pros and cons to the SCEM system. "It is an excellent tool and will tell you when materials are not moving according to plan," he says. "But there are some disadvantages of a bolt-on system such as Vigilance's compared to one which is part of an ERP. With a single system, there is a much better chance of the end user getting correct information and advice on what to do. A stand-alone system won't have the logic to develop work flow and stimulate action."

Looking ahead, Dresser is beginning to consider implementing a companywide ERP system to improve efficiency and reduce costs. "We need to act more as one company than a collection of operations," Nelson says.

It's a big job, though. Albright says that installing a single ERP and SCEM system at multiple plants and divisions within the company will require a concerted effort and will take at least two to three years.

In addition to the need to improve internal information flow with a single ERP system, Dresser wants to extend its IT to supply chain partners, says Nelson. "We are still working on improving the flow of information to suppliers," he says, "and we are trying to establish a more uniform reporting format for different plants buying from the same supplier, for example."

Coia is a freelance writer in Washington.

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