Working on the Chain

With profits down and perils up, companies are focusing on supply-chain management.

It’s one thing to make internal supply chain processes transparent; bringing visibility to external parts of the supply chain is another, and that’s what supply-chain event management (SCEM) software is increasingly called on to do. Many vendors now offer Internet-based systems that monitor the status of orders to suppliers, distributors, and manufacturers and automatically report exceptions. Networking company Lucent Technologies, for example, uses Optum’s TradeStream in its Supply Chain Networks unit to make sure the hundreds of parts that make up a given customer order arrive at the same time — first at a Lucent warehouse, then at the job site for Lucent’s installers.

Lucent is “a very virtual company,” notes Jim Schoessling, senior manager for global logistics. It outsources most manufacturing, warehousing, and logistics, and so most of the material for, say, a data switch will come from external suppliers. The TradeStream application makes sure Lucent’s service people will receive all the needed parts at the right time to install the switch. It’s a hub-and-spokes model, knitting together disparate supplier systems over the Web into a single, seamless platform, says Schoessling. If something is held up in provisioning, such as a supplier shipment, the system automatically alerts users of the delay. The virtues of this approach include much smaller inventories and carrying costs (Lucent has reduced its warehouses from 200 to 33 in the past 18 months), greater productivity (installers don’t have to wait for straggling parts), and higher customer satisfaction, says Schoessling.

Where in the World Is…

SCEM systems can deliver up-to-the-minute information in the context of problem resolution or crisis management. “For example, there’s a late order — a delivery from overseas is being held up in customs,” says Macey. “Or, an Asian supplier has something at sea, and typically it just disappears for four to five weeks, because the boat is crossing the Pacific. Or, a company may be trying to merge deliveries from several suppliers in transit, so that it arrives at its plant in one delivery. All these sorts of scenarios could be facilitated by more-real-time information.”

Kimberly Knickle, research director at AMR, says most early adopters of SCEM are using it to share information about supply chain events with outsourcing partners, as Lucent is doing. Some tools have the ability in theory to resolve exceptions automatically, but few companies have tapped that ability, says Knickle.

Texas Instruments Inc. is installing an SCEM application from SAP that will help it move to an order-anywhere, ship-anywhere model. The $8.2 billion semiconductor-and-electronics giant has a product distribution center in four regions: the Americas, Europe, Asia, and Japan. Currently, customers order products from a regional center, but eventually, after the SCEM application goes live in October, a customer in Europe will be able to order a product from the United States and track its delivery to Japan, according to Ray Pechacek, TI’s logistics manager.

The application will provide door-to-door shipping visibility for both internal users and customers. Just as FedEx customers can track the progress of overnight mail via the Internet, so too will TI’s customers be able to track the status of their orders. Pechacek, who discussed the new application at an SAP user conference in June, said this will eliminate the costs, time, and inconvenience of a manually based customer service system.

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