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From the beginning efforts have been directed to improve process steps in SC. Techniques, best practices, technologies were introduced in SC. Future look at SCM will involve collaborations & technology. Industry leaders are thriving to create networked enterprise that dominate market and industry. This movement will be pioneered by a large branded nucleus firms rather than by smaller entities. The use of external resources is to achieve optimal conditions on daily basis. Network effort will expand to include activities normally left outside the scope of supply chain. It will include collaborative focus on productivity quality, and administrative issues that related to achieving optimized supply chain conditions.


Honeywell International failed to become part of General Electric. After years of use of six sigma they found that it is not enough to achieve goals in competition. This prompted Co; to reinvent & align & coordinate plant across four units involving HRD, finance, legal & SC.

The team delivered a plan setting $500 million savings target to be achieved by 2005.
There will be merging of technology, productivity, quality, effort with an end to end focus on extended enterprise network supply chain optimization. Overall, objective was to gain market dominance through superior customer satisfaction with SC being at the enter of strategy.


P & G also made a move in this direction to improve but it termed it as Reliability Engineering.
It applied defect and failure analysis productivity analysis, manufacturing technology to improve SC. This improved profit/savings across organization.

Blending of technology with productivity & quality improvement, end to end process improvement is the next frontier trying to optimise supply chain efforts. P & G developed operating arrangement with key customers for joint process development/management.

Steps Applied at Honeywell

Selecting a technology team to lead the efforts so the critical ingredient would be included in implementation actions.

Taking inventory of existing and planed technology initiatives so the right blending of legacy and new systems would be enabling factors and not obstacles.
Developing an institutional planning process to include:

Using a scorecard to monitor and manage allocations. Assigning a champion to drive success within each unit & function. Developing awareness and value of digital strategies and ownership at the business unit level.

New Business Model

Struggle for survival is important in global business environment

Important areas would be cost, quality productivity, asset utilization, customer satisfaction, time to market, value adding services.
Competitors will ambush wherever black siding takes place.

Solution. must be provided to the most demanding customer before competitor can.
Firms should review their current business model, strategies and capabilities & determine sufficiency of SC network.

Nucleus company works more closely with network partners sharing vital information investment.
Model must drive the firm to ward Advanced Supply Chain Management (ASCM) techniques & participate in network enterprise using collaboration & technology.

Future State Extended Enterprise Network

Tier n Suppler Tier 1 Suppler

Design partners

Creative Artists
Constraint Analysis Direct ship

Collaborative Design & Manufacture

Business customers C O M P T I O N


Component Supply Subcontractors Assembly Manufacturers Strategic Suppliers

Auctions e-Procurement Network exchanges Manufacturing Demand Forecasting Supplier Relationship Management

Design Development Customer Satisfaction

Customer Relationship Management


Nucleus Firm Cost to Serve Integrated Solutions Collaborative Planning, Fore Casting & Replenish

Competitors outsource supply Agents Brokers Distributors

Partnering System

Engineering Inventory Management Logistics Warehousing provider Distribution Exchanges Internal External

Distributors Resellers

Enterprise wide planning & replenishment Full Network connectivity Network Business Management

Nucleus Firm to Organize Keiretsu

Figure gives general view of the future state of extended enterprise networks
Nucleus firm & network companies must learn to balance conflicting demands for optimization. Company should discover to create & deliver new value adding proposition to the most important customers. Raw material suppliers will be in tiers but the closest suppliers will assume responsibility for delivering material. Extranet technology can be used for viewing, tracking etc. information.

Constraint analyse will analysis the actual needs of the manufacturers supply chain and suppliers capabilities for the direct flow of materials.
Material are supplied to the place of consumption. Company sponsored portals, where key suppliers gain access to manufacturing schedules & make deliveries linked to codeveloped plans.

Items of low importance are handled by e-procurement.

The suppliers are linked through SRM system. Agents, brokers are also needed. Design partners & creative artists trusted allies will be linked through collaborative design & manufacturing system.

These partners will work hard to put nucleus firm ahead of competitors. CRM will finally flourish & link nucleus firm with most important business customers. CPFR will be at work with any retailer etc. Distributors & retailers will play a role in new model as they take product & services to specific markets.

Logistics companies will assume warehousing distribution & fulfillment.




Composite Supply Chain Model

Figure shows the process map detailing product & information flows occurring across nucleus co: to its partners. For complex manufacturing system, this model will grow in complexity. External participants are to be included & each step become subject of analysis and improvement. Technology plays key role in Kairetsu. Figure illustrates how choice of EDI and BPM is affected. Higher tier supplier will bring information forward to their fist tier supplier via EDI showing schedules, inventory movement, logistics plans, fill rates.

Supply Chain Model

Prices, Volumes, Planned Promotions Develop Sales plan Sales Fore cost Adjust Fore cost Promotion Management Promotion Eligibility Promotion Requests Promotion adjustments

Promotion requests Planned Orders

Distribution Planning

Supply Adjustments Supply plan (weekly by SKU)

Distribution Planning Net Require Mends Available To promise

Demand Adjustments

Demand Planning

Promotion Requests Planned Orders

On Order Inventory

Demand Plan (Weekly by SKU)

Ship point demand Planed Orders

Planed Orders

Vendors Purchases Production Returns Plants Authorisation Invoices Suppliers

Purchase Order Mgmt. Matched Receipts

Receipts On hand Inventory Anticipated Work Load Shipments

On Order Inventory Planned Transfers

Distribution Planning

Orders Committed Customer Order Inventory Returns Authorization Management Planned Transfers Invoices
Credit status

Category Management Sales Force Customer Contact Team

Authorisation to receive orders Authorisation to ship Authorisation to pay

Distribution Planning

Authorisation to ship order Authorisation to receive returns Authorisation to bill

Cyclical Inventories

Accounts Payment Deductions payable

Returns Shipment Payables

Shipment Returns Receivable

Accounts payable

Payment Deductions

General Ledger


Enabling the Network Enterprise

Strategies Access to demand Signals Inventory tied to use Interactive Design Product collaboration Planning connectivity/ control Automated Order Mgt. Electronic payment Strategic souring Supplier Relationship Mgt. Virtual Logistics Application Systems Integration VMI Decision Support CRM

Logistics Data

EDI Schedule

Second Inventory Tier Supplier

BPM Shipments Enterprise Apps Data Data Applications payment Orders Servers Planning

Inventory Control

Segmsents Service needs Access Trends

Product Selection

Strategic Payment suppliers product Nucleus Firm Delivery Business Channels Customers Of Distribution System Inventory Consumers Experience Promotions Events Prices

Tools Forecasting algorithm Online Inventory Visibility ERP-to-ERP Systems Integration e-commerce Content management B2B Integration Management Systems e-business software Standards IT fusion Event Tracking

Technology Enables e-markets for commodity supply Smart procurement for MRO & Supplies Ariba, Aspect, Commerce one Middleware Extricity Syncra Shaved Scheduling SAP, i2, Meningitis

ERP Systems SAP, Baan, JDE, People Soft Retail applications Retek CRM Data Siebel

First tier supplier & strategic supplier will interface directly into the nucleus firms extranet, making information visible on shipment orders & products.
Payment will be transferred electronically.

Nucleus firm used enterprise application for planning.

Servers are used to send data to customers. BPM technology increases connectivity with key partners, systems are interfaced to share vital orders, market data & payment executed. Service need, trends in buying patterns are found.

Product selection is reviewed with customers for jointly planning promotions.

Pricing becomes a joint decision

Future Models will Depend on House in Order

Internal house should be set in order i.e. prepared for collaboration. People in side the firm should be ready to participate on equal footing with technology being applied through network connectivity. Hill & Knowlton, Inc. have crated half million dollar system to makes information sharing more meaningful. Intranet lowered costs & increased revenues. Information on new employees displaced. System can alert HK about a particular client that has been added in database. Person can be told online. Brokers & suppliers carry large files for claims under their arms.

Lloyd decided to process claims electronically by London. Insurance markets suing changing Software. Linking the system with a new document repository cuts the cost of processing complex industrial claims. The repository not only lets brokers, underwriters, & adjusters digitally access the information they need, it provides tools such as online chat, instant messaging video over internet protocol (IP) for real time collaboration. C.B. Richard Ellis built intranet to deliver document library to its employees. This library makes available all companies procedures manuals available at reducing costs for printing & procedures reducing costs for printing & distribution. Employees get instant access to upto data information. Employees get involved & play greater role in SC Speed pass is a radio frequency identification device. Driver uses by handling it close to receive built into gasoline pump. The driver transmits credit information & customer ID to Exxaon Mobils information network. Transaction is approved & customer pumps gas.

Nucleus Firm Should be Capable

Ability to establish and successfully implement process integration across extended enterprise.

Automate connectivity & ability to collaborate with key business partners.

Technology links the constituents by extranet, information system. Nucleus firm will have to lead the drive for automation & links ERP & other means for exchanging knowledge Figure shows the future technology linkage. Process execution & deployment facilities will be established with a limited but critical supply chain constituents.

IT system will be connect over an extranet designed for sharing important knowledge.

Joint data bases & direction are setup to link back end applications.
BPM technology will be at the heart of the effort as process servers are set up to use the BPM language to facilitate access to key information & its sharing across many companies. Business to business collaboration is the focus of connectivity. Global networks will become visible as BPM becomes means to connect firms.

Technology Will Link Value Chain

IT System
Applications CPFR System Convergence BPM TMF FPML B2B Collaboration B2B Protocols Rosetta Net

Process Execution Facilities


Bin Talk BPML Protocols WSDL XAML

Process Execution Facilities

Directories BPQL LDAP DSML Process Repository BPML Org. Back End

Services UDDI tpa ML

Front End.

The focus of supply chain effort will move from efficient processing to sensible innovations that add value across the network. Metrics, Cycle times, increased networks sales, greater customer satisfaction & retention of most valued customers. is an example of new technology enabled network model. Consumer can brouse for new automobile coordinator AVIS, Bank of Scotland, Boston Consulting Group etc. providing creative collaboration.


Customer can select a new car, finance option, can return car in 7 days & get a refund.
Siemens is also undergoing Kieretsu. Boeing Toulouse, France based Airbus, the European aircraft manufacturers are using technology as competitive weapon. Project has spent $ 48.5 million to automate procurement of material to better manage SC interactions & track performance, data on suppliers. Ariba has created Enterprise Sourcing 4.0 for buyers. It automatically creates a RFP, comparison of costs etc.


ERP System Key for Connection

Takes advantage of potential offered by integrating networked enterprises through linking ERP System. Savings in inventory, synchronised planning & fulfillment to optimise the entire supply chain. Real power comes from integrating data across the network & delivery many of the promises. If each company achieves benchmark, reductions in inventory levels would be enormous. Visibility across the network showing forecasts, reliable data & actual replenishment needs. Discussion with key constituents, analysis of information leads to more robust model lowering stocks across supply chain.

Inventory and Cost Savings

# of Fiscal 2000 Inventory Annual companies Total Sales for Reduction Savings in the study Companies Potential Potential ($MM) (MM@10%) Food, beverages, & tobacco Consumer ProductsDurables Nondura bles Material & Construction Paper & Paper products 28 17 16 14 14 $351,602 $136,060 $126,944 $80,626 $72,789 $22,404 $11,632 $4,371 $3,573 $3,228 $2,240 $1,163 $437 $357 $323


Only few business organization have used there systems to improve supply chain performance.
Planners will be able to access what they need to improve forecast accuracy & plan closer to actual requirement. Buyers will order to match what is required to manufacture. Special shipments can be dramatically reduced.

Material shrinkages, lost product problems will surface.

RFID tags can track items after purchase so manufacture can easily recall defective goods.

Theft can be reduced by RFID tags.

Product movement & consumption information will help firms divert shipments & trigger other control steps in SC.

Companies adopt business intelligence extranets. Fedex uses. Partnering companies access reports about revenue, transit time analysis & other performance data. Energy companies use such extranets to let commercial customers access power consumption data. Personalization is an other phenomena email, multimedia contacts, voice messages moving into marketing functions. Site creacted by by Dow Chemicals has improved sales.. Firms in hospitality business are trying hard to make similar achievements..