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Supply chain apps go vertical

Heather Havenstein, Information Age

17/04/2003 16:42:05

In search of the real-time information exchange and collaboration required by complex supply chains, manufacturers are finding pre-specialised solutions may offer the boost they've been seeking.

Lessons learned from past supply chain deployments helped enterprises realise that the deep industry knowledge and scalability offered by specialised systems can be key to streamlining a supply chain. In response, best-of-breed vendors are ramping up supply chain offerings tailored for specific vertical markets, such as consumer packaged goods and process manufacturing.

Other companies are turning to their ERP vendors for supply chain modules that snap on to existing accounting and HR systems, and the enterprise application companies are mounting their own efforts to lasso vertical business by touting the easy integration of their products to existing back-end systems.

Many enterprises now are wielding their supply chains as competitive weapons. To succeed, some are partnering with a company well-versed in the key business drivers and supply chain processes core to their vertical. Fruit juice manufacturer Welch's, for example, wanted to collaborate more closely with its customers to ensure its products were always stocked on retailer shelves. Welch's turned to Prescient Systems, a supply chain planning vendor that focuses on the consumer packed goods industry.

"We like to do business with software companies who have a pretty ingrained understanding of the consumer products industry," says Dee Biggs, Welch's director of customer logistics. "This software didn't require a lot of customisation. It was made specifically for us."

Welch's is leveraging the software to create orders and manage the inventories of one-third of its retail customers, allowing some retailers to double the number of times they turn Welch's products, Biggs adds.

"The retailers share information with us, and we then take that information and create orders then send them back some information so they know the size of orders," Biggs. "It's easy for the users to manipulate the software to get in and out of the screens, to create forecasts and be able to execute those forecasts into orders for our customers."

Because Prescient specialises in the consumer products vertical, its supply chain app has built-in functionalities including new packaging design support and the creation of forecasts from point-of-sale data features that are key to the consumer packaged goods vertical while leaving out engineering and product design options that are more attractive to other verticals, says Kelly Vizzini, Prescient's vice president of marketing. This tight focus also allows implementations to move forward in an average of 100 days, she adds.

"There is not a lot of functionality that needs to get turned off. That is a significant contributing factor of why the implementations will go this fast. From a product development and product strategy perspective, you are able to better involve your clients...in build-to-market requirements," says Vizzini.

Specialising for efficiency

While strategy around packaging products and vendor-managed inventory are key to companies that manufacture goods, process manufacturers are homing in on specialised supply chain solutions calibrated to their complex product manufacturing processes.

Straightline, the online distribution arm of US Steel, is leveraging a vertical supply chain optimisation solution from Strategic Systems (SSI), to help processors manage their inventories to more effectively compete with overseas rivals. Straightline's processors help fulfil custom orders for configured steel materials from finished goods manufacturers such as automakers and appliance manufacturers.

"We are coordinating not only the inventory [but] taking the orders and allocating a variety of orders to specific processes," says Dan Pavlick, managing director of strategy and information for Straightline. "That supply chain module is going through and taking into account everything from freight costs configuration of orders, to other orders, inventory availability and processors to handle orders. It helps select the inventory to process that specific customer order given the actual grade of the material."

Semiconductor company Skyworks Solutions also tapped a verticalised supply chain solution from Adexa to master its complex global supply chain and to access real-time data to give customers accurate product availability information.

"We're trying to coordinate the capacity requirements and to coordinate the demand requirements to be able to deliver to our customer on time," explains David Halphide, Skyworks' manager of supply planning. "Most planning systems or ERP systems don't meet all of those requirements. We now have the ability to modify a customer delivery date and have that change when the factory is building tomorrow. The system can replan the entire supply chain overnight. When our customers ask us what we can deliver to them and when, we can give them an answer in hours instead of days."

Because the solution was built from the ground up for the semiconductor industry, Skyworks has been able to easily integrate the factory details and production capability data of a company it recently acquired, effectively combining the supply chains of the two companies in six months, Halphide adds.

The integration challenge

Also seeking a piece of the vertical-industry pie, ERP vendors are actively marketing their supply chain wares as an "add-on" capability to their e-business suites, touting easy integration to back-end ERP systems.

"We're pretty close to being truly complete with supply chain automation supporting all the data in one model," says Ron Wohl, executive vice president of applications at Oracle. "You don't have to buy a product and figure out how to integrate that product; instead you can literally turn on different parts of the suite."

Some of Oracle's customers, such as window and door manufacturer Pella, are buying into that philosophy. At Pella which leverages multiple Oracle e-Business suite modules to help streamline its supply chain operations anything that is bolted on is "suspect", says Bruce Baier, director of new business systems at Pella.

"Best-of-breed technology interfaces have to be maintained, and those interfaces are always, at some level, batch processes," he says. "The ability to react quickly makes a big difference in our ability to avoid overtime in the factories. It's about getting leading indicators versus trailing indicators: I know this lead activity is going to produce a certain amount of orders; I know where those orders are going."

Issues surrounding the integration of vertical solutions are often one of the deciding factors for companies weighing a specialised vertical supply chain solution against a more horizontal solution, those actively marketed by enterprise application companies SAP and Oracle designed to seamlessly link with their own ERP solutions on the back end.

To combat the integration issue, SSI has developed a data synchronisation application that sits between its software and enterprise customers systems, says Shoaib Abbasi, president of SSI. The application automates the data synchronisation between a company's ERP system and the vertically customised supply chain app but also validates the quality of the data.

"We don't let the data into our apps, into the main application, until it is validated," says Abbasi. "If the data that has come in does not relate to any customers' products, we have actual flags that we point out to the users and say, 'This is what needs to get looked at to provide them with an opportunity to fix their data'."

While the battle between best-of-breed vs enterprise application companies rages on the vendor front, enterprises are often warring among themselves, says Steve Banker, an analyst with ARC Advisory Group. As ERP vendors add supply chain functionality, C-level executives have pushed to tap those new offerings while operational managers have thrown their weight behind more specialised vertical solutions, explains Banker.

"From the C-level, they want the ability for a corporation to be working off one data model, one version of the truth," Banker says. "At the C-level, that allows you to make more holistic decisions. The model that supports that isn't always fully valid for the particular circumstance for an operational manager."

"For example, a C-level executive may push to sell higher-margin items to boost profits, while an operation manager may be able to leverage a vertical supply chain solution to find out that the company could make more money by selling higher quantities of a lower-margin item," he adds.

As for the future of the verticalised supply chain technology, Banker predicts it will mirror the current movement of the enterprise applications market giants- SAP and Oracle winning at the largest, or Tier One markets, while Microsoft positions its Great Plains and Navision A/S general finance solutions to dominate the Tier Three small and midsize- market. Meanwhile, players aiming for the Tier Two market are beginning to get squeezed and may soon be forced to partner to survive, he adds.

Supply chain panels

Supply chain expectations

Here's what to expect when approaching supply chain decisions with an eye on customising for a particular vertical market.

Smaller, vertical market focused vendor

Usually a company with deep vertical expertise in one to three industriesFamiliarity with the supply chain nuances of the vertical, not just the technologyAccess to the vendor to collaboratively help mould next releases of the technologyAccess to other users from same industry for tips, adviceTechnology that usually doesn't need as much effort to "turn off" irrelevant features as a horizontal solution.

Larger, enterprise application/supply chain vendorUsually a company with a broad focus on multiple applications and/or multiple industriesConfigurations flexible post deployment, including system features, UI and databasesHorizontal solutions with templates or "add-on" packages for specialised vertical needsAccess to other back-end systems via familiar integration routinesSingle data model for all systems.

Liabilities of the supply chain

Although the onus of meeting Customs regulations rests on shippers, all members of the supply chain face hurdles in moving their goods, which supply chain solutions can either aggravate or solve.

Downstream liability. A supply chain partner can be held liable for contract and negligence damages if its lax security allows the network to be used as a means to attack and disrupt operations in other companies Contractual or good faith failures. As import and export regulations change, supply chains must be updated to allow all partners to meet all applicable import/export laws, even where contracts do not specifically call for such changes.

Foreign export laws. Non-US export laws can snarl the supply chain. Solutions must include fields and data variables that incorporate export restrictions.