Other Challenges That Lie Ahead

Users also cite the following four challenges in the quest for online procurement of direct materials:

  1. The need to manage the changes in organizational processes and human resources. Although Bell Helicopter Textron has 11 factory planning modules in place and all of its part numbers cataloged, employees will still need to learn to use the new system, says Matt Cordner, director of strategic planning for operations.

Cordner explains that while the cost of the IT project may be "multiple millions of dollars," the company may spend "five to seven times more to change behavior in this project than on software. The people costs of doing this are enormous, and I don't think companies have fully grasped that yet."

Cordner says Bell Helicopter will first target manufacturing commodities like fasteners and tools as it begins to wade into an online model for direct procurement. After that, he expects to work out trading agreements with other business units under the umbrella of Providence, R.I.-based Textron Inc., such as The Cessna Aircraft Co. or Textron Aerospace Fasteners. After that, Cordner says, "we'll be ready for the outside world."

  1. The need for centralized systems management. The Hague-based Royal Dutch/Shell Group has undertaken a mammoth IT project it calls its MegaCentre. The project will link 60 different SAP AG ERP systems and a companywide SAP e-procurement system.

Houston-based MegaCentre program manager Carl Krite identifies a rarely discussed aspect of supply chain and procurement systems in multinational corporations like Shell: the need for rock-solid systems management.

Shell chose Houston-based BMC Software Inc.'s Patrol software for the job. It will have to monitor every server in more than 200 locations worldwide to make sure the applications run smoothly.

"It's the glue that makes everything else work," Krite says. "Without this piece, every outpost is still left to operate in an autonomous fashion."

  1. The lack of standards. Tom Warner, an e-commerce initiatives manager at The Boeing Co. in Chicago, has been active in establishing trading standards within Washington-based Aerospace Industries Association of America Inc. While the group has developed business-to-business trading standards for its members, there's no guarantee that Boeing will use them, because the aircraft manufacturer is also active in other standards bodies and online marketplaces.

"What I'm trying to do is come up with trading standards that leverage technology that most companies already have in place," Warner says. "I want to let my company do something [soon] rather than have it wait on a perfect solution."

The difficulty of getting small suppliers on board.</b> At Caterpillar Inc. in Peoria, Ill., Director of E-Business Mike Hackerson has partnered with IBM to get smaller suppliers the middleware and hardware needed to move from phone and fax connections to an online procurement model.

"If we don't get in the trenches and help our partners build these systems, we won't be able to migrate our own systems," he says. "We have to get deeper into our supply chain if we want to realize the [payoff]."

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