Global Logistics and Supply Chain Strategies - October 2008 - (Page 68)

OPINION manufacturer may implement multiple types of these collaboration mechanisms with one supplier. However, any of these types of collaboration mechanisms can be implemented fairly quickly. Purchase Order Process Collaboration: Purchase orders are the most common documents for execution of a procurement relationship with a supplier. In the supplier collaboration scenario, purchase orders are still created in a manufacturer’s back-end ERP system, but that information is provided to the supplier. The supplier uses this information to get visibility into the PO and dates and quantities required by the manufacturer. The supplier can then respond to the PO by entering order confirmation information (either full or partial quantities) and communicating it back to a manufacturer. This type of collaboration makes sure that manufacturers and their suppliers are in sync on purchase orders, their status and exceptions, to ensure that things don’t fall through the cracks. Suppliers also get early visibility into demand and can plan their supply accordingly. Manufacturers get supply commitments and are able to eliminate any supply-related surprises that are the cause of component shortages. Advanced shipment notices (ASNs) enable a manufacturer to be prepared to receive shipments and schedule internal manufacturing/assembly. Release Process Collaboration: This collaboration scenario allows the communication of schedule agreement releases to suppliers. Schedule agreement releases are maintained in the customer’s back-end ERP system. Releases are net customer requirements over time, usually with both a firmorder horizon and a forecast horizon. The supplier gets a notification about the releases and is asked to acknowledge the release. As a result, the manufacturer knows that the supplier has seen the release and has committed to the supply. ASNs enable a manufacturer to be prepared to receive shipments and schedule internal manufacturing/assembly. Supplier Managed Inventory (SMI): In an SMI scenario, the manufacturer hands over the replenishment task to an external business partner, usually the supplier of a product. The manufacturer makes available current inventory data, gross demands, and goods receipt references from its back-end systems to supplier. The supplier monitors this information on an ongoing basis. The supplier is able to calculate the replenishment quantities based on inventory, demand, and minimum or maximum levels and uses it to replenish the inventory. By getting this information, the supplier has clear visibility into consumption and demand and is able to replenish on time and ensure that there is never a shortage or excess of that component. An ASN enables a manufacturer to be prepared to receive shipments of the component. Kanban: This collaboration scenario allows an organization and its supplier to share kanban information to ensure just-inarchitectures, platforms, and applications as their business partners. Smaller organizations may not have the necessary IT infrastructure or support, so a solution that leverages basic internet technologies is needed. In such a situation, it’s still possible to achieve collaboration. Internet-based supplier collaboration software addresses these issues. Once the manufacturer deploys the internet based supplier collaboration software in their environment, they can begin information sharing with their suppliers, seamlessly and securely. Such solutions can implement the above-described collaboration models out of the box. Such solutions require suppliers to only have internet and email access (and no other software infrastructure) to start collaborating. Solutions that offer this information sharing provide many benefits: • Real-time synchronization of information—changing demands and inventory levels • Ability to integrate with any supplier IT infrastructure due to the interfacing technology • Use of various Web-based communication services to deliver proactive alerts • Ability to track and audit transactions online helps in quality assurance Companies also need to easily and openly share relevant information with their suppliers. For example, the increasingly popular practice of getting suppliers to monitor and manage replenishment in a “pull-based” model (rather than replenish to purchase orders in a “push-based” model), can generate significant inventory savings and service level improvements for an organization. However, for such a model to succeed, an organization must provide their suppliers ongoing and clear visibility into their forecast and consumption plans, as well as current inventory status and planned receipts for every component that the supplier is responsible for managing. By providing a mechanism for open and timely sharing of relevant information, supplier collaboration solutions can cut costs through reduction in inventory and safety stock, reduce overtime, lower administrative costs due to less processing effort and slash expediting costs. They can reduce risks of stockouts, production delays and increased accuracy in delivery dates, thus increasing customer service levels. To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Supplier collaboration solutions can cut costs through reduction in inventory and safety stock, reduce overtime, lower administrative costs and slash expediting costs. time deliveries. In this method, the manufacturer sends kanban signals to the supplier. The supplier receives these signals, prepares the replenishment and sends an ASN to the customer. Challenges to Collaboration According to a recent study by Aberdeen Group, more than 55 percent of the Global 2000 organizations surveyed had either no formal supplier collaboration processes or they varied significantly from site to site. Only 26 percent had consistent supplier collaboration processes in place. On the bright side, half of the executives surveyed expected to deploy a formal and consistent supplier collaboration process within the next two years. Assuming an organization and its suppliers are willing to collaborate, the biggest obstacle to achieving this is having an infrastructure in place through which the two parties can share relevant data in a timely manner. Few organizations share the same IT 68 OCTOBER 2007 www.SupplyChainBrain.com http://www.SupplyChainBrain.com http://www.SupplyChainBrain.com

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Global Logistics and Supply Chain Strategies - October 2008

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