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 Many
have tried to automate the supply chain link in the
past, but were not very successful. Organizations can
learn from past mistakes and use new technology for
automating the value chain. by S.R. Balasubramnian
A
good part of the last decade saw information technology
rising to dizzying heights. New technologies were unleashed
and, in an era which saw global markets opening up to
competition, many organizations thought it appropriate
to use technology to give them the much needed competitive
advantage. The rapid spread of the Internet created
its own hype, which none could escape, and had its effect
on the IT vendors' drive to sell and on the users' perception
of information technology.
During this period we saw companies get into a technology
buying spree, and spending cautiously was perceived
as a sign of backwardness. For many a CEO it became
fashionable to be IT savvy and to speak on technology
trends at various forums. All this led to a boom and
then the bubble burst. Having learnt from experience,
organizations are now taking a very realistic view of
IT. They are no longer impressed by the hype but demand
real benefits. Various options are analyzed and their
feasibility and applicability examined in detail before
according an approval.
The various technologies discussed today include mobile
computing, CRM, SCM, storage solutions, BPO, enterprise
portals etc. But it is essential to define our needs
and priorities before we embark on any of these projects.
Though all of these could be useful, I will specifically
discuss the automation of the supply chain link, falling
under the purview of SCM.
Many organizations have worked on it in the past, but
perhaps not with enough success. Though many have connected
their suppliers to the distribution link, there may
not be many cases where this would have given practical
benefit to business. I list below a few fallacies of
past implementations.
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Big plans for connecting business partners, but in
reality merely connecting for sharing some information.
This was done through private networks and information
was updated periodically. The main advantage was transparency
and convenience in accessing information, but it did
not significantly lower transaction costs or the cost
of doing business.
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Implementing some of these initiatives without reviewing
or changing the way we work—i.e. business processes
within the organizations operated the same way as
before notwithstanding changes/enhancements in connectivity.
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Hype on e-procurement, reverse auctions etc. Companies
would close a couple of deals, claim savings and then
become inactive. Such processes did not become a regular
exercise and a part of procurement processes.
New implementations for automating the value chain incorporate
the lessons learnt from the past and will also use new
technology solutions for deriving benefits. Let me discuss
a few technology areas that would be in the forefront.
ERP/PLM
ERP is certainly not dead and will continue to be an
important part of business processes. ERP implementations
of the past have to move over to newer versions so as
to exploit new features, and also to bring in efficiencies
through integration and better processes. Failed implementations
shouldn't deter us from re-evaluation. Standard ERP
packages need not be the only route—organizations
with sound in-house systems on industry standard platforms
are also good enough. Product Lifecycle Management is
also an important area that many organizations would
look at and try to compress the time cycle for bringing
out new products in the market.
Supply Chain Management
Going beyond ERP and connecting business partners is
a critical need today. Companies may choose between
extended solutions from the ERP vendor or best-of-breed
solutions, but it is certainly necessary to pick up
one of these solutions rather than to try customized
solutions. The usage could start with sharing information
but has later to extend to transactions over the Net
which will speed up the process and also bring down
the cost of doing business.
However simply connecting for transactions without changing
our business processes will not yield any advantage
to business. For example, if we were to place regular
orders on suppliers electronically and get quick deliveries,
the process of quality check and the resultant delay
would defeat the very purpose of automation. A system
of self certification could be introduced, obviating
the necessity of holding the goods for verification.
Similarly if we do not have an efficient order processing
mechanism, orders from customers on the Net may get
serviced in a time span that may leave customers dissatisfied.
Enterprise Portals
This facility, in my opinion, would be used extensively
in the coming year. Organizations can create portals
for specific purposes. These portals could be meant
for external parties like suppliers, customers and stakeholders,
or for use by employees.
Enterprise Portal is an excellent tool for creating
transparency and for simplifying business transactions.
For example a portal for suppliers could extend a self
service facility where he could access details of order
schedules, payment status, stock position, rejections—and
also post his entries on order acceptance, shipments,
and bills. A similar portal for dealers/distributors
could give him access to details like order status,
dispatches made along with shipment details, and outstandings,
plus he could place orders, amendments, payments transfer
etc. All this could tremendously reduce hassles in carrying
out day-to-day business and the efficient exchange of
information could reduce mistakes and improve material
availability, demand fulfillment etc.
Portals for employees can give them access according
to their pre-defined roles/responsibilities. Through
the portal they could seamlessly operate on the ERP
systems, legacy systems, intranet or the Internet. All
this would go towards de-layering and reduce bureaucracy
in dealings as both the external parties and employees
can do business as if they are part of the same setup.
Business Integration/ Collaboration
We have talked about the various modes of doing business
with partners that ease/simplify business dealings.
However the main benefits accrue when we collaborate
and optimize operations with each other. Operating a
separate front to enter transactions or to gain access,
amounts to duplication of work, and is not a seamless
environment. Integration of systems at both ends could
provide real benefits as the results of transactions
get automatically reflected in the partner systems.
The new business integrator, the middleware, is really
going to be the hot technology to use in the coming
year. These provide adapters that can link various platforms
as long as they conform to industry standards. For example,
a purchase order from Company A can automatically be
relayed to Company B and get reflected as the sales
order, and they can process it immediately. The sales
manager in Company B can view the order position in
his native systems and monitor execution. And payment
from Company A gets automatically reflected in Company
B as a receipt along with automatic credit to their
bank account—using the payment gateway.
There is another mode to these dealings. Companies could
collaborate on demand planning, production scheduling,
which would help firms to respond to the markets faster
and synergize their operations. Often companies produce
goods based on their estimates and then try a push strategy
to effect sales through dealers, but this may no longer
be possible as markets get more competitive with several
players jumping in. Similarly, there could be collaboration
in design and product development; the sequential methodology
of today when designs are finalized and then forwarded
to fabricators and suppliers, and then the prototype
and testing is no longer considered feasible. Collaboration
through simultaneous engineering could compress the
time cycle tremendously.
Such collaboration would mean a good degree of automation.
Processes would have to be rule based and not based
on individual discretion and ad-hoc decision-making.
For instance, order processing would be successful only
if a dealer placing an order is able to configure his
order based on the availability of stocks and the quantity
that he is entitled to. If the company officials continue
to allocate quantities or change deliveries on their
own, the service provided to the dealer becomes meaningless.
Similarly the supplier should get access to the production
plan or his delivery schedule so that he can respond
and supply the materials on time.
Such data has to be automatically calculated based on
production plan, stocks, and items in transit, and cannot
wait for a purchase official to calculate and apply
his judgment. The principle of 'Just-in-time' or direct
delivery of the materials on the production line would
take away the relevance of stores and recording of stocks.
Vendor managed inventory and payment-on-use are other
concepts that can reduce work tremendously. The question
here is what happens to the officials in marketing who
keep on tinkering with sales orders received or purchase
officials who constantly chase suppliers to deliver,
or from manufacturing who liaise with marketing and
purchase several times during the day to dynamically
change the manufacturing plans? The HR aspect of such
transformation is often ignored and needs to be considered.
All this places a responsibility on the CIO to evaluate
and absorb new technologies that add value to business.
The start of projects should be preceded by careful
assessment of work and the resultant changes, and carried
through efficiently, and in a short period. These measures
however call for considerable adaptation to the new
automated environment, and for bringing about a change
in the work processes adopted by organizations. These
lead to change in the roles of people and work hands
get a richer work content and become more responsible.
Those who cannot be re-trained for their new roles,
or those who are rendered surplus will have to be relocated.
These are difficult situations that organizations face
when implementing technology but not tackling them reduces
the effectiveness of the new solutions.
The
writer is Vice President-Information Systems, Hero Honda
Motors Ltd.
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