In search of the real-time information exchange and collaboration required by complex supply chains, manufacturers are finding pre-specialized solutions may offer the boost they've been seeking. Lessons learned from past supply-chain deployments helped enterprises realize that the deep industry knowledge and scalability offered by specialized 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. Concord, Mass.-based 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 West Chester, -based Prescient Systems Inc., 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 customization. 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 [and 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 specializes in the consumer products vertical, its supply-chain app has 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," Vizzini.
Specializing for efficiency
While strategy around packaging products and vendor-managed inventory are key to companies that manufacture goods, process manufacturers are homing in on specialized supply-chain solutions calibrated to their complex product manufacturing processes.
Straightline, the online distribution arm of U.S. Steel, is leveraging a vertical supply-chain optimization solution from Strategic Systems Inc. (SSI), to help processors manage their inventories to more effectively compete with overseas rivals. Straightline's processors help fulfill 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 Pittsburgh-based 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 Inc. in Woburn, Mass. also tapped a verticalized 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 Corp. "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, 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 the Pella, Iowa-based company.
"[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 specialized vertical supply-chain solution against a more horizontal solution, those actively marketed by enterprise application companies SAP AG 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 synchronization application that sits between its software and enterprise customers systems, says Shoaib Abbasi, president of SSI. The application automates the data synchronization between a company's ERP system and the vertical-customized 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," 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 enterprise application companies rages on the vendor front, enterprises are often warring among themselves, says Steve Banker, an analyst with ARC Advisory Group Inc. in Bedham, Mass. 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 specialized vertical solutions, Banker.
"From the C-level, they want the ability for a corporation to be working off one data model, one version of the truth," 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, adds.
As for the future of the verticalized 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, Microsoft Corp. 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.--InfoWorld