Working on the Chain

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

When a shipment of die from TI’s Dallas wafer fab heads for assembly in the Philippines, the SCEM application will monitor its progress on the specified path — from the loading dock to Dallas-Fort Worth airport to Los Angeles International, through customs and on to Manila, and finally to delivery at the assembler. It will automatically notify TI if, for example, a shipment doesn’t leave an airport within a given window of time. It may also specify the reason for the variance (weather, equipment failure, customs). By tracking exceptions over time, the software will help planners identify bottlenecks in the supply chain.

The ability to confirm delivery electronically will itself pay for the cost of the system, predicted Pechacek, by eliminating the float associated with manual proof of delivery. For a multinational corporation, the cost of delayed payments can mount quickly.

Keep On Trucking

At the cutting edge of SCEM are agent technologies — smart software programs that handle predefined tasks, learn from experience, and make decisions when an event happens. Greg Cudahy, global director for the B2B/Supply Chain service line at Cap Gemini Ernst & Young, says agent technologies can make supply chains more reliable, a major concern in the wake of September 11.

Cap Gemini wants companies to think of supply chains as adaptive networks, where if a node fails, agent technologies can rapidly reroute the network around it. What if an ocean carrier loses a container ship, or if an entire port shuts down because of an earthquake or a terrorist threat? Instead of working the phones for costly ad hoc alternatives, a company could use an agent-based system to reroute cargo in seconds. Such decentralized decision support and execution systems, developed by companies like Living Systems and Bios Group, are winning favor with some of Cap Gemini’s large European customers, says Cudahy.

Extraordinary events aside, agents can make supply chains more responsive to routine demand volatility. One Cap Gemini client, a major European carrier with more than 10,000 trucks on the road daily, is using an agent-based SCEM system on a pilot basis to help dispatchers optimize routes and consolidate partial truckloads. If a new order comes in late, the system can weigh the cascading effects on the network and make schedule and route adjustments on the fly. “The system will calculate which truck it would go to, would it be profitable to pick it up, will it fit in the truck, and finally, will it violate any service commitments,” says Cudahy.

The system’s payback? So far, a 4 percent increase in capacity utilization at the test depots, says Cudahy. That may sound modest, but it translates into 15 percent greater revenues and a 100 percent increase in margins. Once spread across the entire truck network, the investment in agent technologies could look very smart, indeed.

Edward Teach is articles editor of CFO.

In the Air, on Land and Sea


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