"They expect suppliers to have the ability to transact electronically, with integrated order-to-delivery processes, rather than via fax and phone. They also expect suppliers to give them accurate, complete and up-to-date electronic catalogue information that confirms with the buyer's preferred catalogue standards. For large suppliers this isn't an unreasonable expectation, but buyers are increasingly looking to SMEs to have the same capabilities.
"SMEs are therefore looking to third-party service providers who can close the e-readiness gap. With low-cost, Internet-based tool sets designed for the SME market, a small to medium supplier can interact with a buyer in a manner that is very similar, from the buyer perspective, to large global suppliers."
In such a highly competitive environment, manufacturers have little choice but to become faster and more nimble, to implement high velocity, rapid response order-to-delivery processes or risk losing business to their more nimble competitors. But if those nimbler competitors are vastly bigger than themselves, they are likely to find some special challenges to meet along way.
One source of likely trouble, warns Gartner vice president research, Kristian Steenstrup, arises from the fact that even when mid-size companies do invest in technologies they are often implemented in isolation. Like Revolution Racegear, most mid-size enterprises are not fully automated, making their many manual processes a significant impediment to speedy delivery.
"And those that have invested in technology often do it by a small-scale integrated software package, an ERP package or starter pack of some sort, that's installed and run in isolation, so it helps to improve the internal efficiencies but doesn't help external efficiencies," Steenstrup says.
"I think there's effort being put into it, and it is manifested by investments in software. We read every day about various small and medium enterprises in the manufacturing sector buying software packages and ERP packages and upgraded ERP packages, which give them the extra connectivity that they need to increase that speed from order to delivery."
Such investments can make a huge difference, Steenstrup says. Take the case of a US timber mill, which used to have planning meetings every week that went on for hours and were rife with disputes between sales, order processing, manufacturing, shop floor and distribution, about whose numbers were right, the work that needed to be done and the most acute priorities. Once this company implemented more integrated software that took a process flow approach, those planning meetings seldom lasted more than 15 minutes and were much more harmonious because, "everybody knew what was going on, everybody knew what they were supposed to do, and everybody agreed on the numbers.
"This is a true anecdote regarding a US-based company but I have heard anecdotally the same conversations in Australia. We documented this one. It was all to do with integrating their shopfloor management, so accuracy of information was really important to improving the time it took to take something through the process," Steenstrup says.
Inaccurate data deals a double blow to the company, Steenstrup points out. Not only can it lead to design or delivery flaws, it can also mean spending a great deal of unnecessary time in working out the right number.
However, mid-size companies looking for solutions also face other constraints. Abbott Australasia business manager information technology, Mcgregor Grant, says while order-to-delivery in the company's Australian operation is relatively simple, globally the company has installed Manugistics to achieve a 24-month rolling demand forecast that feeds into the company's various manufacturing plants and produces a mass arrival schedule detailing what product will get shipped to where from where and when.
"It's all running off a central server in the US and performance has been a big issue, in that product people enter their forecast into Manugistics and it doesn't get updated until overnight, and so if you entered in an incorrect forecast or you wanted to see the financial impact of forecasts you entered, you don't get to see it until a day later. That whole kind of performance/communications issue has been a problem," Grant says. "[They are addressing that] with a combination of more intelligent design and greater communication bandwidth. It's sort of a never-ending process of improvement and refinement."
Speed lessons
Over recent times vendors have been moving away from the silo approach towards a business process approach that takes account of the needs of the various constituents - customer, manufacturer, software vendors and consulting companies - in terms of business process flow."For instance now we see discussions about order-to-cash, where you actually have this continuous flow through the whole business environment from taking an order to executing whatever that order is," Steenstrup says. "It might involve procurement or manufacturing or customization and all the way through to the other end of the cycle."
That is important, she said, because people haven't been thinking about that context in previous years, but now it is being considered in the context of business process definition.
Such an approach makes for a more seamless hand-off from one stage to the other, thereby improving both accuracy and latency of information. Steenstrup says the ideal solution for the mid-size company is to install integrated collaborative software that lets it collaborate internally via real-time sharing of a single set of accurate information, and collaborate externally with suppliers, third-party design and fabrication shops and other third-parties.
However, he says even a small company should not begin until the CIO has developed an IT architecture that can serve as a roadmap on how to expand IT.
"The best way to get started is to get some IT consulting assistance because you are only going to do this once, maybe twice in your career, whereas these guys do it for a living. And yes they're going to charge you money, but they are also going to offer you their experience, which is manifold over what you are going to have by yourself," Steenstrup says.
"You need to look at industry peers, and your ecosystem. That's two different things. Industry peers show what everybody else is doing and certainly consulting companies can help you with that because part of their experience base will be what other industry peers are doing. And the ecosystem is what all of those other industry participants are doing - whether they are electronically enabled or primitive in what they do."
Going to consultants helped Pearson Australia Group (comprising Pearson Education and Penguin Books Australia, which distributes 20 percent of all books sold through retail outlets in Australia) get BookMaster, its new fully integrated ERP system, up and running.
"We selected a company which specialized in publishing distribution systems as a supplier," says IS director Peter Dart. "The second thing we did is bring in an outside project director to work with me to make the thing happen and at the height of the project we had 40 or so contractors working for us.
"The lesson we learnt was never underestimate the people side of the project. We put about half of our budget into the people side of the project and we could have used more."
Still, with order-to-delivery a vital part of the company's business, Dart says the effort has been extremely rewarding. His customers would probably agree - and that in turn will inevitably put pressure on his competitors to follow suit. The wheel turns.
Race to the top
Australian company Revolution Racegear develops and makes its fashions with Australian conditions in mind. It delivers the needs of motor sport teams via its own retail network and keeps materials, fabrics and designs constantly under review in the interests of quality and maintains full custom design, digitizing, embroidery and sales departments.
In competing on the world stage against global manufacturers, Revolution Racegear has proved able to produce an equal quality garment probably 60 percent of the time, says managing director Dale Rodgers.
Partly that is because Revolution Racegear invested a couple of hundred thousand dollars beginning in the late 1990s on IT systems to help it improve production processes, scheduling and information back into stores and direct to the customers in a labour-intensive operation, and partly it is because of the dedication and skills of its staff. While Rodgers says those IT systems play a vital role in speeding delivery to customers, so do the consultants that have helped the company deliver.
"Certainly we have worked very hard on the operating platform for our business and our operating system is Attache. We've got a fairly hybrid version of that with various Attache consultants [working] on that," Rodgers says.
"As far as our direct IT involvement goes, we've swung right away from some of the larger suppliers ... over time ... and gone through smaller, consultant-based businesses where we know we get continuity of people, and where that person or the people know us and don't spend the first week trying to understand what the hell our business is about. And really that's turned around our view of IT.
"Quite frankly, we got fairly disenchanted with having people come in, tinker around with our IT systems and then leave the building without even us understanding what had happened, and then hearing the operators saying that something had changed and they didn't know what it was.
"So to my mind it's not actually technology at all - essentially the people around the technology that make the difference," Rodgers says.