Managing Automation - September 2007 - (Page 55)

communication and better planning mean fewer overstocks. Better inventory management reduces costs. Expenses associated with “buffer” inventory decrease when manufacturers create more accurate demand pictures. This may have a ripple effect on suppliers, which can offer price breaks if they aren’t forced to carry as much inventory to guard against demand variability, experts say. Another benefit can be improved customer service, as greater efficiency wards off late or missed deliveries. “You have more confidence that the ma“You have more confidence that the terials you need will be there materials you need will be there and and that your finished products that your finished products [will] arrive are going to arrive on time so that you can get them to the on time,” says Richard Howells of SAP. end customers,” says Richard dustry Directions, 73% of manufacturers say they Howells, senior director of solution marketing commonly find themselves expediting products. for supply chain management at SAP. Forty percent of that group note that the practice is Multi-tier inventory management requires a on the rise in their operations. Similarly, 83% decombination of technology and underlying business scribe overstocks as common. Industry Directions strategies that segregate important high-margin, also says most survey participants consider busicritical supplies from items that may be less imness forecasting to be an ongoing problem. portant, says Adeel Najmi, solution executive at i2 However, manufacturers can overcome these Technologies, a vendor of supply-chain managechallenges by reducing variability, optimizing inment software. “I need to keep [high-volume prodventory, and establishing a reliable flow of inforucts] close to the customer so I can turn on a mation across the supply chain, experts say. A key dime to meet customer demand,” he says. to establishing that information flow is to make Making those distinctions across a multi-ensure the interests of your supply network partterprise value chain can be difficult because many ners are aligned. Also, technology such as shared, parts of the supply network aren’t under a manonline inventory planning portals can help you ufacturer’s direct control. The question comes keep tabs on inventories as you outsource. down to: How do I align the partnership relaINVENTORY CHALLENGES Inventory inefficiencies often translate into overstocks and resulting carrying costs. In addition, inaccurate inventory projections in multi-tier supply chains hurt cycle times. “When people first outsourced, they thought, ‘We don’t have to own all these plants; we’re going to save a lot of money,’ ” says Bill McBeath, chief research officer at ChainLink Research, Inc. “But they didn’t really think about the consequences — that when a plant goes down, it’s their stuff that’s not being built.” The results can be missed shipments, strained relations with customers, and lost opportunities. Inventory levels and production schedules aren’t the only things that can go wrong with multi-tier, outsourced business models, McBeath adds. Transportation takes on new importance because delays anywhere in the network can thwart even the most carefully crafted inventory forecasts. Creating a reliable, collaborative communication flow with suppliers and contract manufacturers can help head off inventory problems. Closer sourced manufacturing] to lower costs. The more mature customers are revisiting that and understanding that you’ve got to look at the quality issue and the cycle time issue as well,” says Colin Masson, research director for manufacturing operations at AMR Research. In fact, recent research indicates that manufacturers are coping with the inventory management challenges of global, multi-tier supply chains with only mixed results. According to a survey by In- Single-Vendor Solutions or Best of Breed? anufacturers looking for applications to manage inventories in volatile multitier supply chains have a fundamental choice: Should they seek solutions from their ERP vendor or choose point solutions not tied to a particular enterprise application platform? Both options come with inherent trade-offs, says Colin Masson, research director for manufacturing operations at AMR Research. Platform solutions offer integration ease with the ERP foundation, including procurement modules. Conversely, point solutions free from a particular back-office system may better match the reality of multiple-ERP environments that characterize many supply networks. When shopping for point solutions, manufacturers should evaluate inventory planning and optimization features as well as the quality of integration toolsets for connecting to the back-end systems important to their organization, Masson says. When considering inventory and supply chain modules from a platform vendor, analyze the company’s ability to support a contract manufacturing view of things such as inventory levels, he adds. “With products that perform that function, you will better understand your costs and liabilities. If they can’t do that and they treat a contract manufacturer as just another supplier, then it’s difficult to manage those liabilities and financials,” Masson says. In addition, Masson advises manufacturers to determine whether the products have the tools to integrate design information with the manufacturing process and if they offer the ability to communicate in standard formats understandable to the industries the manufacturer sources from. “Those are areas where you still find that best-of-breed products bring a lot to the party,” he says. M September 2007 55

Table of Contents Feed for the Digital Edition of Managing Automation - September 2007

Contents Take 1 Europe’s Automation Chiefs Upbeat on ’08 Business Prospects Vendor Coalition Pushes Human Element of SOA Wireless: Users Still Approaching with Caution One Year Later, IBM Shows Plan for MRO’s Maximo Study: More Work Needed to Lure Next-Gen Talent Executive Q&A Notes Cover Story: 2008 Companies to Watch Special Report: The 2007 Progressive Manufacturing High Achievers Progressive Manufacturer of the Year Business Model Mastery Innovation Mastery Customer Mastery Supply Network Mastery Data & Integration Mastery Education & Training Mastery Operational Excellence Mastery Leadership Mastery Transformation: Orchestrating the Multi-Tier Supply Network Integration: The Timeless Quest for Accurate Data Industries: Maintenance No Longer on Schedule Product Scan Advertiser Index Next

Managing Automation - September 2007

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