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TEACHING NOTE: GS-53 TN
DATE: 09/30/06

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TEACHING NOTE FOR
WORLD WIDE TECHNOLOGY AND CLEARORBIT:
ENABLING SUPPLY CHAIN COLLABORATION

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CASE OVERVIEW

This case is about inter-firm, Information Technology-enabled supply chain collaboration. More
specifically, it focuses on supplier-manufacturer collaboration. In order to assess collaboration
from a holistic point of view, the case describes the distinct role played by the various parties
involved in the collaborative effort: not only the manufacturer and its large supply base, but also
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a management consulting firm, a supply chain process outsourcing company, and a software
provider. The case centers on the two latter companies—World Wide Technology (WWT), a $2
Billion supply chain process outsourcing company based in St. Louis, and ClearOrbit, a rapidly-
growing software company based in Austin, TX. It tells the story of a world-class automotive
original equipment manufacturer (OEM) whose purchasing operations for maintenance, repair,
and operations (MRO) material had grown complex, costly, and error-prone.
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In mid-2004, and in partnership with a management consulting firm, WWT proposed the OEM
an outsourcing program through which the consulting firm would perform strategic sourcing and
WWT would manage the entire fulfillment cycle on the OEM’s behalf. A critical feature of the
program proposed to the OEM was that it would be collaborative: WWT would exchange
information in real time with the supply base in order to prevent costly incorrect deliveries and
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time-consuming reconciliation transactions. Early on in the program, however, it became

apparent to WWT that delivering on the collaborative requirements of the program demanded the
aid of specialized technology capabilities. It was then that WWT decided to partner with
ClearOrbit. ClearOrbit had recently developed a software product called Purchase Order
Collaborator (POC). POC was an Internet-based, highly scalable, real-time, collaborative
solution for a company to manage POs, deliveries, and invoices with a supply base regardless of
its size and the technology resources available at each supplier. POC’s real-time collaboration
model helped ensure orders matched shipments before physical product started moving and
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additional costs were incurred. Despite being an independent best-of-breed solution, POC
integrated directly and seamlessly to any Enterprise Resource Planning (ERP) system, without
the need for additional layers of data. POC also featured a highly customizable software
platform, featuring a rules engine that allowed for user-controlled information flow. Adjustable

This note was prepared by Luis C. Blancas and Professor Hau L. Lee for the sole purpose of aiding classroom instructors in the
use of World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration, GSB No.GS-53. It provides analysis and
questions that are intended to present alternative approaches to deepening students’ comprehension of the business issues
presented in the case and to energize classroom discussion.

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 2

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and flexible, POC was a promising match to WWT’s specific technology and business process
needs.

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By February 2006—a year after launching the new software—1,200 suppliers used POC to
communicate with WWT/the OEM. Aided by an Internet-based link, both the OEM and WWT
saw a much lower overhead related to managing vendor transactions and addressing order
inquiries. It took only 15 to 20 minutes (compared to days with off-line processes) for a given

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PO to be accessed by the corresponding supplier. With POC’s order acknowledgement and
promised date capabilities, the OEM got early visibility on the timing and contents of the
different shipments. Finally, due to a substantially more collaborative working relationship with
the supply base, nonconformances at the OEM (arising from everything from wrong quantities to
missing line items on shipments) were reduced by 10-20%. To many suppliers, POC provided
visibility over the accounts payable process for the first time, ensuring faster cash transfers with
fewer reconciliation transactions.

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Ultimately, all parties had derived benefits from collaboration, from the OEM to ClearOrbit
itself—the latter by enhancing the standard POC product with ideas and suggestions derived
from WWT’s software engineers. There was, nonetheless, room for improvement. One of
WWT’s lessons learned from this experience was the importance of clearly understanding what
portion of a company’s needs are met by a technology solution right out of the box. Having
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guaranteed stability in the program, the company wanted to extend the power of POC to deeper
areas of collaboration, such as closer supplier performance tracking and greater automation of
the delivery process. ClearOrbit, on its part, faced the challenge of keeping up to date with its
best-of-breed offerings, as ERP systems were increasingly able to provide powerful solutions for
specific business processes under a single-platform IT model.
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PURPOSE OF CASE

This case was written to be used in MBA-level courses in supply chain management. Within the
broad area of supply chain management, it addresses the topics of inter-firm collaboration, the
role of IT in managing information flow in supply chains, the strategic importance of sourcing
and purchasing, and the role of MRO material in high-volume manufacturing settings.
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Consequently, the case can also be used in more focused courses on supply chain flexibility
management, information systems and technology, as well as on sourcing and purchasing in
organizations.

The learning objectives of this case, by topic, are as follows:

1. Supply chain collaboration. The case readily acknowledges that supply chain collaboration
is a broad term with many attributed meanings, depending on the conditions under which
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collaboration is conducted. By presenting several examples of collaboration, the case highlights

the importance of the term in supply chain management. Moreover, it explicitly relates
collaboration to often-used supply chain management concepts that might not necessarily be
understood as collaboration efforts, such as vendor-managed inventory or long-term supplier
contracts. At the same time, the case notes the common thread that is usually found among cases
of effective collaboration. These common characteristics provide the student with an evaluation

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 3

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tool that can be used as a framework to analyze the collaboration example presented in the case
and others elsewhere. The case also presents survey data revealing how and why sampled U.S.-

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based companies conduct collaborative efforts. Lastly, it is observed that collaboration has led to
a sizable software and services industry, similar to what has happened with other supply chain
management techniques.

2. The role of technology. As supply chains become larger (in many cases global), integrated,

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and more complex, the role of technology in effective supply chain management becomes
essential. This case provides students with an example of a collaboration effort for which
technology was indeed essential: without the appropriate software solution, the objectives of the
program in question could hardly have been accomplished. In particular, the case is detailed in
its exposition of ERP systems and sourcing/purchasing technology, touching upon concepts like
the in-house vs. outsource question, the best-of-breed vs. “all-in-one” model, the “single version
of the truth” model, EDI and non-EDI linkages, and Web-based solutions. The case also

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emphasizes the fact that companies are increasingly demanding software solutions that are
tailored to their specific needs, rather than implementing technology under a one-size-fits-all
paradigm. This is recognized as a challenge for software providers.

3. MRO purchasing and sourcing. Finally, the case describes the importance of indirect
materials in manufacturing as a source of potential savings and inefficiencies. Many indirect
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materials can be inexpensive and easy to buy (in terms of specifications) on a case-by-case basis.
Office material and cleaning supplies are a case in point. But added together, total spend in MRO
material can be, and often is, substantial. Moreover, not all MRO materials are the same. Though
indirect in nature, some MRO materials are critical to manufacturing operations and the
uninterrupted flow of an assembly line. The case highlights the importance of eliminating errors
in deliveries of indirect materials for manufacturers. On the sourcing side, the case presents a
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situation where spot-buy transactions are present, making it difficult for a company to implement
strategic sourcing and vendor consolidation programs entirely as planned. It then highlights the
volume-cost relationship typically seen by companies that purchase from small shops on a ‘spot-
buy’ basis, and presents an example of how technology can help enable such transactions cost-
effectively.
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ASSIGNMENT QUESTIONS

Students can consider the following questions as they prepare themselves for discussion of the
case in the classroom:

1. What were the main challenges facing the OEM’s MRO purchasing operations?
2. Why was collaboration so important for the WWT-led program? What type(s) of
collaboration were sought to address the OEM’s challenges?
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3. Why did WWT’s choose POC to support the OEM program? Was this the ideal solution
for the program?
4. Why did outsourcing MRO purchasing operations make sense for the OEM? Can they do
the same for direct materials?
5. What other forms of collaboration can the OEM pursue?

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 4

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ANALYSIS

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Question One - What were the main challenges facing the OEM’s MRO purchasing operations?

MRO purchasing operations at the OEM had become too complex for the OEM to manage. This
purchasing process was characterized by:

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! A large number of suppliers
! Little consolidation of spend by commodity and by supplier across plants
! A marked heterogeneity across the supply base, from big, sophisticated companies who
could afford and were accustomed to working with value-added EDI networks, to small,
local “mom-and-pop” vendors who were unfamiliar with EDI, lacked technology
resources, and relied on phone calls and fax machines
! Many transactions touching paper documents

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! Little communication about in-house purchasing best practices among plants
! Disconnect between the centralized purchasing group, who administered the master
supplier accounts and blanket purchase orders, and the Tool Store Managers located at the
plants; the latter were used to firefighting, while the former were unable to provide
visibility into the fulfillment process
! Disconnect between Tool Store Managers and suppliers, to the point that suppliers had to
allocate representative agents at assembly plants in order to facilitate an error-prone
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process
! Disconnect between Tool Store Managers and the end-users of the tool/material in
question, as the latter would often pick up the phone and try to make sure their material
got to them on time
! An error-prone and costly end result, with repeated incorrect deliveries (and ensuing
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delays down the chain) and long, costly reconciliation transactions

! All of this in the context of fierce competition in the U.S. automotive market, where
OEMs were forced to eliminate waste as much as possible as part of the just-in-time
schemes pioneered by Toyota and now prevalent in the industry

The points above suggest a miscommunication problem in a crucial link of the OEM’s supply
chain. While it is true that MRO materials are largely transparent to the end-customer, these
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materials are vital to the everyday functioning of manufacturing operations. Office staff, cleaning
crews, IT managers, and production line operators all expect their materials or services to be on
hand when they need them. In the case of the more commoditized products and services, end-
users are usually not too concerned about where the material comes from, as long as it is
available. But in other cases, the “indirect” adjective has little meaning to MRO end-users: they
consider the materials in question absolutely essential, and demand specific suppliers to provide
them. The MRO link of the supply chain was thus an important one to the OEM. Nonetheless, in
many cases these materials were inexpensive (sometimes the purchase transaction itself was
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more expensive than the material being bought), a factor that in the OEM’s case had probably
contributed to the highly inefficient process at hand.

In the context of purchasing, as in other areas of supply chain management, communication is

analogous to collaboration. Perhaps the biggest challenge for the OEM was to enable a rule-
based, predictable, agreed-upon communication process with all parties involved in an MRO

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 5

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transaction. Fixing the miscommunication problem, however, was no easy task due to the
heterogeneity and high-count of suppliers. How could they communicate with the supply base in

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a scalable, cost-effective way? EDI was a proven B2B enabler, but uneconomical to many
suppliers. Phone calls and paper transactions were time-consuming, expensive, and not scalable.
Without the aid of a more “democratic” technology tool, dealing with supply base heterogeneity
would require the OEM to hire a large number of buyers and purchasing personnel to improve
the communication flow. Clearly, the Internet was an ideal communication enabler. Yet, the

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OEM had neither the human resources nor the expertise that an Internet-based MRO purchasing
program demanded. They needed help.

Finally, MRO sourcing and purchasing at the OEM, despite having staff at headquarters
managing vendor relationships and blanket orders, remained in effect decentralized. Tool Store
Managers and other assembly plant personnel still played important roles in the process of
making material available—or at least that was what they thought. Staff at assembly plants

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probably thought that no centralized group would understand their needs and those of the local
operations better than they did. Due to the lack of standardized business rules, employees wanted
to have control over purchases as much as possible. So they contributed to maintaining the status
quo. Or more simply, assembly plant employees were used to the way they had done their job for
years. Changing it required extra effort, which meant possible distractions from their “core”
activities. It also entailed the risk of putting in place a new process that would ultimately not
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work as well as the current one, or equally well but with immaterial gains for the company.
Changing business rules, that is, changing the way people did part of their everyday jobs, while
at the same time centralizing MRO purchasing in order to increase control, was an important
challenge for the OEM.

Before turning to the next question, it is worth asking, why was the supply base so heterogeneous
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in the fall of 2004? Was it not the role of the consulting firm working with WWT to perform
strategic sourcing and vendor rationalization? The consulting firm’s strategic sourcing plans
turned out to be overly optimistic, particularly with respect to IT support for the program. The
original proposal was to bring the number of suppliers down to 300, the majority of which being
large firms with sophisticated IT capabilities. However, going from thousands of suppliers to 300
is a very challenging task, especially for high-volume manufacturers of relatively complex
products.
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Rearranging a supply base takes time. Preferred suppliers for continued business must be
carefully chosen, preferably by means of a multi-dimensional set of criteria that goes beyond
price alone. Moreover, “backup” or secondary suppliers might be required if avoiding single
sourcing is an important goal for management. Some suppliers might even need time themselves
to accommodate higher post-consolidation volumes. It is also not uncommon for manufacturers
to work hand in hand with suppliers in order to help the latter be better prepared to do business
with the former. OEMs provide instructions or even full training programs on areas ranging from
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packaging compliance to just-in-time schemes. In addition, vendor consolidation efforts that

counter decentralized maverick buying are usually accompanied by centralization of spend at a
corporate-level procurement group. Transferring control from manufacturing plants to
headquarters is difficult because it challenges a seemingly successful status quo. Lastly, and this

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 6

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was a particularly pressing challenge in the WWT-OEM program, sometimes it is simply
unfeasible to substitute suppliers in the short to medium term.

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The OEM’s assembly plants relied on spot-buy transactions with local vendors for specialized
materials that were infrequently purchased and for which it was difficult to negotiate volume
discounts under contract. While spend analysis and vendor consolidation are proven ways for
large manufacturers to achieve savings and become leaner, the reality is that not everything can

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be readily consolidated. Underestimating the magnitude of vendor consolidation or the resources
such an effort would absorb can seriously affect a project, as it did for WWT and its consulting
partner. The presence of spot-buy transactions maintained the heterogeneity of the supply base. It
also impacted the expectation that most vendors would use EDI to do business with the OEM. A
change of the project’s course was in order. Technology had become critical.

Question two - Why was collaboration so important for the WWT-led program? What type(s) of

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collaboration were sought to address the OEM’s challenges?

Collaboration was crucial in this situation because, as previously observed, one of the main
challenges facing the OEM and its supply base was miscommunication. The OEM sought to:

! Prevent incorrect material from being put on trucks, as well as incorrect prices or line items
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from appearing on invoices
! Have visibility into delivery promised dates from suppliers on a real-time basis (thus
allowing the OEM to better plan production at the assembly plant level)
! Automate the invoicing and payment process (which largely benefited the supply base as
well)
! Enable cost savings from vendor consolidation via price concessions
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Attaining these objectives depended upon collaboration on two levels. The first one was
strategic. The OEM and the supply base needed to communicate their needs to each other in
order to gain trust and establish a win-win scenario. Trust and the perception of a mutually-
beneficial partnership motivated each side of the negotiating table to step up to the challenges of
the new program in a sustained, dependable way. The second was tactical. A purchasing
transaction is ultimately a contract and, as such, demands mutual understanding of what exactly
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is being bought, at what price, and under which conditions (delivery, returns, and so on). Such
terms had to be openly communicated on a case-by-case basis and exceptions immediately
handled (while fully automating exception-free transactions).

Question three - Why did WWT choose POC to support the OEM program? Was this the ideal
solution for the program?

The OEM’s objectives outlined above turned into WWT’s objectives as soon as the program
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came into effect. WWT needed to communicate with the large supply base, handling a
significant amount of MRO material volume. And, like the OEM, it needed to do so without
dramatically increasing the number of employees administrating the program. In fact, it was
crucial for them to minimize the number of people behind the program while delivering much
more than what the OEM had been able to accomplish on its own.

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 7

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There were two sets of reasons why WWT chose POC to fulfill the requirements of the program,
one product related and the other vendor related. From a product standpoint, POC was ideal

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because of the aforementioned heterogeneity of suppliers. Readily accessible via an Internet
connection and a Web browser, POC worked exactly like an e-commerce website. It was
therefore straightforward for suppliers of all kinds to start using the tool immediately, without
the need for formal training (other than a video tutorial made available through the tool). One
could argue that iSupplier, the main competing product to POC from WWT’s standpoint (given

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WWT’s close relationship with Oracle), was equally capable of accommodating a diverse and
large supply base. But from WWT’s perspective, it was desirable to avoid the proprietary nature
of Oracle Web pages and user interface which, WWT believed, could discourage supplier
adoption of the program. It is worthwhile to note that the “ideal” software solution for a specific
scenario will naturally differ from one situation or organization to another, and the argument
here does not pretend to indicate that POC is inherently superior to iSupplier or other products.
Rather, the argument here is to point out that from WWT’s perspective POC was a better match

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to their needs with regards to the software tool itself. Having noted that, a relevant underlying
concept to this topic is the importance of minimizing the burden on end-users of a software
solution when planning and executing IT projects.

In addition, one of POC’s main characteristics was also one of WWT’s most sought-after
features: flexibility. POC’s rules engine was unique to the industry, and in this regard one could
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argue that, at least at the time of the OEM program (late 2004), no competing tool matched the
self-serve capabilities of POC. Even so, the caveat introduced above applies here too: from
WWT’s standpoint the rules engine became a very powerful advantage because of the
company’s highly-capable software engineers. Other companies might find the rules engine less
attractive, and might even prefer for the vendor to perform any customizations to the standard
product, so as to ensure full functionality. In contrast, WWT was a hands-on company from a
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software engineering and systems design and deployment point of view. On the one hand, they
knew from the outset that customizations would be the norm rather than the exception over the
course of the OEM program. On the other, they had already heavily invested in highly
specialized technical personnel and they wanted to put those valuable human resources to the
best use possible.

Another product-related reason why POC was an “ideal” solution for WWT was the
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upload/download capabilities it offered the supply base all along the fulfillment cycle. We have
already seen why (near-instant) back and forth communication between WWT and the supply
base was crucial in preventing errors and enhancing visibility. For ClearOrbit, prevention meant
enabling communication early on in the fulfillment cycle, as opposed to only in the latter stages
of it. POC allowed suppliers to upload such “early-cycle” documents as reject/accept
notifications and delivery promised dates via Excel, a familiar tool to most users. The
collaboration “loop” was closed later on in the process with download/upload capabilities for
advanced shipping notices, advanced shipping billing notices, and/or invoices.
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But POC was not the only reason why WWT ultimately decided to bring ClearOrbit on board.
ClearOrbit itself, as a company, played an important role in WWT’s decision-making process.
As a relatively small company, ClearOrbit had the nimbleness and entrepreneurship to offer
WWT both a customized service and a customized product. Not only did ClearOrbit alter

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 8

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underlying software code to align POC to what WWT needed, it also complied with the
aggressive timing requirements of the project (with little more than a month to deploy the tool).

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Over recent years, software companies have internalized the fact that supply chains and
businesses as a whole are unique. Thus, one-size-fits-all approaches to product development and
related services are limited. It has become increasingly common for companies to demand, and
providers to offer, customized software solutions that adapt to particular business challenges.
Those able to do it are thriving. WWT felt that ClearOrbit was in a better position to provide a

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more individualized service than industry giant Oracle. The result was a closely monitored
project that itself was an example of supply chain collaboration in the design and deployment of
technology.

Question four - Why did outsourcing MRO purchasing operations make sense for the OEM?
Can they do the same for direct materials?

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Outsourcing has become a popular strategy, primarily because it enables a more efficient
distribution of value-creation: OEMs focus on what they do best—design, final assembly, quality
assurance, and marketing—and so do their service providers. Such is the case in areas like
human resources, accounting, and customer care. MRO purchasing operations are no exception
to this trend. MRO materials, as a group, encompass a wide range of products. It is thus costly
for companies to maintain experts in all MRO categories in-house. And purchasing, for MRO
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materials or otherwise, has become a highly specialized, IT-intensive activity with strategic
prominence for companies. In many cases, however, manufacturers lack the specialized
capabilities that make collaborative purchasing possible.

It made sense for the OEM to outsource MRO sourcing and purchasing because it needed to
improve the bottom line via savings from operating activities. It also needed to focus its efforts
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on designing, assembling, and selling automobiles. And because the outsourcing deal was
comprehensive, including all supply chain processes from sourcing to delivery and reverse
logistics, the OEM could manage the full cost of doing business with suppliers—analogous to the
concept of total landed cost in “offshore” outsourcing.

One of the most important sources of savings for the OEM was inventory management. More
effective purchasing operations, founded on collaboration and control, ultimately translated into
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better inventory management. It took less time to process orders, less time to ship them due to
vendor consolidation and drop-shipping to assembly plants, and less time to process PO-invoice
discrepancies. What is more, lower levels of safety stock were necessary to protect everyday
operations from incorrect or faulty deliveries. These improvements directly impacted the bottom
line through higher revenue, lower transaction costs, and a more profitable use of current assets.
They also supported the core OEM activities of assembly and test by preventing disruptions to
the assembly line caused by out-of-stocks or untimely maintenance services.
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Can the OEM extend the outsourcing deal to direct materials? Typically, manufacturers
outsource purchasing of indirect materials, particularly those that are perceived as non-essential
for operations, such as computer equipment and peripherals, office supplies, cleaning supplies,
furniture, and others. Besides not being directly related to manufacturing activities, these
categories are relatively less specialized and thus in-house expertise in them hardly represents a

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 9

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competitive advantage for the firm. Knowledge of direct materials and long-term relationships
with those who supply them, on the other hand, are a big differentiating factor for manufacturers.

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As a result, purchasing of direct materials is overwhelmingly kept in-house.

However, outsourcing of direct materials purchasing is expected to grow in the future. A sign of
this can be found in the fact that, as noted earlier, some MRO categories, though indirect, are
indeed essential to manufacturers, such as machine maintenance, product packaging, and

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logistics. The lack of critical machining supplies can stop a production line, leading to substantial
lost revenue. Contract manufacturing, a widely sought after strategy by OEMs of all sizes in
advanced economies, is also an example of outsourcing of “core” activities. Thus, we can expect
that manufacturers, focused on driving costs out of their operations, will start outsourcing
purchasing of direct materials in the future, albeit gradually. For example, they can start with the
more commoditized items in the bill of direct materials, as suppliers of those materials will
mostly compete on price. Another possibility is for manufacturers to maintain sourcing of direct

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materials in-house, but outsource the everyday purchasing operations and related IT and logistics
activities. In that way, the vendor relationship and the strategic specifications of materials would
still be managed by in-house experts, while the information and product flow related to actually
acquiring the materials can be managed by outside experts.

One thing is clear: the outsourcing of purchasing operations has plenty of opportunities to grow
in the near future. William Atkinson, of purchasing.com, explains:1
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According to research from the Everest Group in Dallas, which publishes an
annual study on procurement outsourcing, the procurement outsourcing sector
grew 30% in 2005 to reach $297 million. It is expected to exceed $380 million in
2006. Given that the current “spend base” is estimated to be about $25 billion
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(translating into a current market penetration of under 1%), there is a huge

potential for growth in procurement outsourcing. According to Everest,
“Procurement outsourcing has the potential to become the biggest ‘game changer’
in business process outsourcing.”

Question five - What other forms of collaboration can the OEM pursue?
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As suggested in the case, WWT was thinking hard about extending the outsourcing program to
tighter supplier performance control. Supplier certification and periodic evaluation is an ideal
next-step in this and any other collaborative purchasing operation. Long-term contracts resulting
from strategic sourcing should be conditioned to minimum levels of supplier performance in
various categories, from on-time/accurate deliveries to open communication of business issues.
Aided by WWT, the OEM can start tracking supplier performance regularly. But it must do so
under a structured program, in which consequences associated with sub-par performance are
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clearly communicated and acted upon. Moreover, a strategy must be developed for dealing with
under performers. If supplier substitution is called for (which in the case of the more specialized
materials might not be an option), secondary suppliers must be ready to do business under the
1
Atkinson, William, “Outsourcing Lands in Procurement,” Purchasing.com, March 16, 2006,
http://www.purchasing.com/article/CA6315354.html (October 8, 2006).

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 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 10

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OEM’s specifications. By the same token, excellence in performance must be widely recognized.
Keeping track of supplier performance and their status is another collaborative, IT-intensive

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facet of purchasing that manufacturers might be ill-equipped to pursue. In our case, WWT could
provide the expertise needed. At the same time, periodic face-to-face meetings with suppliers
continue to be an effective way to manage expectations and discuss progress towards objectives
set forth in negotiated contracts.

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For categories with longer lead times or for which supply can be tight, the OEM can utilize a
more parameterized way of collaboration with suppliers. Rather than sharing production
forecasts and “hope for the best,” the OEM can commit to minimum consumption levels of the
material in question in exchange for guaranteed supply up to a maximum level from the supplier.
This type of arrangement brings certainty into the collaborative relationship and, if managed
properly, can result in win-win outcomes.

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At 1,200 suppliers, there is significant room for further vendor rationalization, particularly for
spot-buy transactions. The OEM can seek to consolidate those transactions across plants, thereby
bringing them under long-term contract status. Doing this, however, is easier said than done.
Assembly plant employees must be part of the consolidation effort and their needs internalized.
Maintaining local or regional suppliers to the extent possible can ease the transition towards a
more compact supply base.
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Another way in which collaboration can lead to savings in the supply chain is by allowing
suppliers to help the OEM make a better use of the materials consumed. When inventory levels
are reduced to pre-defined targets without negatively affecting service levels, the next source of
material-related savings becomes the actual use of the materials. Tracking how materials are
used throughout the organization and consulting back with suppliers about more efficient ways
tC

to do so can make a difference in total spend. This is accomplished by bringing together process
expertise from the OEM and material expertise from the supplier.

As can be seen, additional forms of supplier collaboration are in essence examples of fluid
communication between a manufacturer and the supply base. Inward-looking policies focused on
the betterment of an OEM’s own organization alone are completely at odds with the way more
effective supply chains are managed in today’s competitive manufacturing environments.
No

TEACHING APPROACH

What follows is a suggested outline for a 90-minute class discussing the case and its concepts.

10 minutes – What constitutes collaboration in a supply chain?

Discuss what supply chain collaboration is and why it has so many dimensions to it
Do

Ask students to provide examples of supply chain collaboration they have been involved
with or know of

10 minutes – Collaboration at the OEM

Ask students to identify what particular type of collaboration the OEM was trying to
implement

This Teaching Note is authorized for use only by Dr. Pradipta Chandra, Prestige Institute of Management and Research, Indore until Aug 2024. Copying or posting is an infringement of
copyright. Permissions@hbsp.harvard.edu or 617.783.7860.
 Teaching Note for World Wide Technology and ClearOrbit: Enabling Supply Chain Collaboration GS-53 TN p. 11

t
Discuss why the OEM needed collaboration in its MRO supply chain in the first place.
This discussion should identify in detail what were the challenges facing the OEM, and it

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can be enriched with examples of the automotive industry in general

15 minutes – Finding a solution

Why is the OEM considering outsourcing its entire MRO purchasing operation?
What value added did WWT bring to the OEM?

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Discuss how enabling collaboration at the OEM was in itself a collaborative effort among
WWT, its consulting partner, and the third-party logistics service provider that conducted
most of the drop-shipping operations on behalf of the OEM
Discuss what pitfalls were encountered early on in the program and why a more IT-
intensive outsourcing operation was called for. Why was this issue not identified from the
beginning?

yo
15 minutes – The make or buy decision at WWT
Discuss the pros and cons associated with building a solution in house or buying a tool
from the outside, either a best-of-breed or an ERP-centric tool
Discuss the advantages and disadvantages of working with a big company like Oracle,
versus working with a smaller supplier, like ClearOrbit
op
10 minutes – The ClearOrbit solution
Ask students what the Purchase Order Collaborator tool was, what it did, and whether it
was the “ideal” solution for the challenges at hand
Ask students to identify pros and cons of POC

10 minutes – Implementation
tC

Ask students to identify the positive steps in the implementation process, as well as the
challenges down the road
Discuss what role did WWT, as an IT-savvy company, play in the implementation
process
What measures did ClearOrbit take to ensure a successful implementation in a short
period of time? How did the company support the supplier sign-up process?
No

10 minutes – Benefits
Ask students to identify and classify the benefits derived from the program by each of the
parties involved. Were some of the benefits more important than others?

10 minutes – Further discussion on supply chain collaboration

What other supply chain collaboration initiatives can the OEM/WWT pursue?
Could the OEM outsource direct material purchasing as well? Should it? If so, how?
How can ClearOrbit maintain its leading position as a best-of-breed vendor of outward-
Do

looking supply chain execution solutions?

This Teaching Note is authorized for use only by Dr. Pradipta Chandra, Prestige Institute of Management and Research, Indore until Aug 2024. Copying or posting is an infringement of
copyright. Permissions@hbsp.harvard.edu or 617.783.7860.