It's Friday afternoon. Your biggest customer (a large engineering OEM) calls up out of the blue to "invite" you to a special meeting where you will receive details of their new Customer Relationship Management (CRM) initiative - next week! Your senior engineering director and IT manager are to attend and brief your organisation on their return.

Of course, this is not an unknown tactic to test suppliers' responsiveness as part of a supplier-reduction program, so you send your people along!

On their return, it transpires that for suppliers the relationship part of this initiative is very well defined - suppliers that don't take part in a pilot won't remain suppliers much longer! The OEM's aim is to reduce their suppliers by 40% in the next 2 years. In future, you will work within a new Internet based supply-chain management program designed to reduce the time customer-requested features are translated into new products.

The above scenario is not far from the reality faced by some suppliers. Some have already had that call. How do you think you would respond if that call came today?

Supply chain management (SCM) comes in many guises - part of collaborative product commerce (CPC) initiatives, part of enterprise resource planning (ERP) implementations, part of product lifecycle management (PLM), or other enterprise system implementations - so it is no surprise to see it wrapped up in a CRM banner. The one common, and to some companies, frightening aspect of all these systems is that they all require members of the supply chain to communicate via the Internet in some form or other. For those at the top of the chain, the opportunity is to bring onboard their suppliers by providing an IT framework that supports all their aims, without alienating their smaller partners.

Moving from fax and phone to digital communications networks and file transfer is a shock to some and the knee-jerk reaction is to resist change. Yet it does not take too much investment to exchange ideas and design files using a Web browser and free conferencing software over the Internet. In reality, once such a change has been made, the idea of not using workflow and file attachments appears ridiculous, especially when the alternative is jumping in the car and driving 100 miles to meet a supplier!

Of course, the slant for each implementation varies with the particular view and package that has been implemented. In an environment where rapid design evolution is key to success, managing design changes to bring new products to market faster must work hand in hand with SCM. Linking the new product introduction process to drive manufacturing planning is key, as make-to-order and mass-customisation pose manufacturers real problems relating to inventory and capital cost investments. Design reuse, standardisation of parts & libraries and increased outsourcing are just some of the attempts to address these issues. Introducing management of the new product introduction process also has implications for many other functions, not least procurement. And with procurement there is the likelihood of coming up against business systems users and links into other enterprise systems, like ERP, where established processes and practices can lead to inertia in any project. Keeping to the initial objectives and not being sidetracked into related, but secondary issues, like the interfaces into business systems, is important. When changes are demanded in other processes, these should form part of the project specification, which all parties need to buy-into.

Of course, the sponsoring organisation or a strong department may try to use their weight to dictate how the system works, pushing changes in the process down into the supply-chain or onto less powerful departments. However, such relationships are unlikely to foster the spirit of collaboration required for success - pushing costs across departments and down the supply chain may be initially advantageous to the project sponsor but does nothing to improve the whole chain's performance. Implementing SCM in this environment has been likened to "Herding cats" - a particularly fruitless occupation!

For many smaller members of the chain, SCM initiatives can be regarded as an opportunity, not a threat. Greater involvement in the initial design and change process adds extra value to their contribution, not to mention the better planning and scheduling of production that increased participation brings. Cost savings, across many functions, brought about by quicker design and manufacturing turnaround, should be spread up and down the whole chain. In this way, overall product costs are optimised and true design-to-order becomes an affordable option to customers.

For the large enterprise, strategic planning drives those sets of changes - for example, many industries have observed the success of consumer electronics in responding quickly to market demands. Here, design has been elevated from the off-line background of investment and asset-management processes, into the forefront of operational processes that operate to a much faster beat.

For the smaller companies that supply a dominant member of the supply chain, this can be an opportunity to demonstrate how agile and responsive they really can be. It can also be a nightmare, as changes to specifications arrive every hour, not in bundles every month. The burden for reacting to multiple suppliers with multiple systems still rests on the smaller companies. Large public exchanges were supposed to aggregate these sorts of information exchange and minimise the number of interfaces that each supplier uses. However, the commercial concerns of the major players overweighed such noble aims, and we find that private exchanges are becoming widespread, with the result that smaller suppliers still need to change the way they interface to individual clients.

Mark Twain said, "I'm all for progress, it's change I hate" - the implication being that whilst progress requires change, change does not necessarily bring progress! There is a well-founded and healthy skepticism of large, top-down initiatives in smaller companies, yet standing still is not an option. Whether it is collaboration or supply-chain brutality doesn't really matter. To retain your customers, you have to be able to react, and quickly.

Trade shows provide a showcase for many collaborative technologies. One thing I look for is to see how many vendors of supply chain and design collaboration technologies fully understand the links between them. But remember, technology is only half the solution - the hardest part is to get the involvement and active participation of all those affected up and down your particular supply chain. Start training those cats today!

Nick Ballard

First published in MCAD November 2001

Now available: enterprise applications market review at the Cambashi Seminar 2002

Other supply chain articles from Cambashi:

What are PLM and SCM?

Supply chain management: reinventing the wheel

Supply chain Babelfish

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