Managing the supply chain

John Q. Manufacturing gets an order via electronic data interchanges, cueing the customer service representative to check for errors and process.

As the order enters the system, a raw materials request is aggregated with its sister division many miles away, bumping the price into the next lowest category. Several qualified suppliers place bids on the Web, and an e-procurement program signals the low bidder it has been awarded the order for the raw materials.

The supplier’s system responds with ship and arrival dates, which are automatically inserted into a work order. A lead time is assigned and an acknowledgement generated for the customer via EDI, including an in-house arrival date.

Thom Ruhe, vice president of business development of FutureNext Consulting Inc., asks, ”Can you imagine the possibilities?”

Forward focused

The eighth-floor downtown offices have a great view of the city and the ambience of yesteryear. The hardwood floor creaks as young staffers gather around a conference table, leaning on support columns, sitting on file cabinets and talking in indiscernible tech language.

There is no mistaking this company for archaic as the high-energy 30-something group discusses hyperlinks, Flash technology, cookies and transactive content integration. The team at FutureNext is hard at work.

Creating front-end Web sites, portal development and the integration enterprise applications are but a few of the solutions the 3-year-old e-business consulting company delivers. Its forte lies in providing innovative solutions to complex supply chain management issues, and its success is evident in its fast-paced growth.

Like so many Web-driven tech firms, FutureNext was not exempt from market pressures and declining confidence in e-business. But despite the release of a dozen employees earlier this year, it appears to be not just surviving but well poised to begin another stage of growth.

Formerly known as Vantage One Communications Group, the business was purchased by FutureNext in 1999, becoming one of 10 offices from Los Angeles to New York that total approximately 300 employees and $75 million in private equity capital.

Success may be due, in part, to the company’s niche focus in supply chain management solutions, a technology investment that has high probability for positive effects on a manufacturer’s bottom line.

In the Cleveland office, Ruhe analyzes the macro picture of the Northeast Ohio market. Tom Hileman, vice president of technology, climbs atop the mountain of technological advancements to segregate the microcosm of supply chain intelligence from the vast pool of enterprise applications.

Although they focus on different aspects, the two agree that Northeast Ohio’s highly industrialized economy is a hotbed for the execution of Web-based supply chain management.

Not just another trend

Supply chain management programs speed up the administrative-laden procurement processes, cut manufacturing costs and may drive middleman suppliers out of the equation. From procurement to production to payment, Ruhe says the key is in how the technology is applied to the processes.

”Most companies have some flavor … some degree of automation,” he says.

E-procurement, most typically utilized in industry, not only compresses the delivery timeframe with suppliers, it can drive down costs by communicating to the world a company’s aggregated requirements. Also known as net market or an exchange, when an order enters an automated supply chain, it acts as a catalyst in a cascading effect.

Another cost reduction comes in mandating suppliers to put product-tracking information online. Ruhe suggests a company could repackage shipment data, reframe it as though it came from your Web site, and, in essence, shipment data is outsourced for free.

Ultimately, procurement systems drive out time and expense.

”My supplier’s supplier is seeing that part requirement at the same time that their client, my supplier, is seeing it,” says Ruhe. ”More than any of the sexy stuff that’s on the Web, this is where the money is really being made for companies.”

Overpromising, underdelivering

Manual production forecasting can meet, exceed or totally miss the mark against production capacity.

”A lot of companies that don’t have an automated process, and take sales not knowing whether or not they have any ability to meet that demand,” says Ruhe.

Supply chain management allows for companies to track key performance indicators with a business intelligence system. If demand exceeds capacity, a business intelligence tool will notify production and marketing to take corrective action, whether that is horizontal marketing (shifting demand to another product), raising prices or borrowing allocated manufacturing time from other products.

Picking the low-hanging fruit

”Just about anything in manufacturing is very well suited to benefit from this type of technology,” Ruhe says.

Not only can suppliers do online pricing via a bid process, additional efficiencies can come from client relationship management systems that can push customers into a self-service mode.

”Instead of you maintaining a call center staff of say, 30 people, you find that maybe 15 people are sufficient,” Ruhe says. ”That’s 15 bodies you’re not paying salaries on.”

While many innovative applications such as wireless are getting attention right now, Ruhe says, ”the old traditional bricks-and-mortar company is going to get a more immediate return on investment dollars in supply chain management than they are going to with wireless. Let’s walk before we run.”

A glimpse at the future

Of the wireless applications that loom as potential killer applications, Hileman says those that cover production tracking or location-based services hold the greatest promise.

”Motorola is making these little chips less than about half a centimeter square that you can put on products and track them wherever they are,” Hileman says. ”You can truly have inventory management without going out to the warehouse and shooting everything with a bar coder.”

Future wireless communication for the B2B marketplace may be done with these radio frequency tags, he says. And applied to inventory and raw materials, companies will be able to better manage production schedules because they’ll know whether what should be on the shelf is actually sitting there.

”If you don’t know what is in the warehouse today, how do you know what you can make?” Hileman asks.

Location-based services would not only transmit the location of manufactured products, they would indicate where the product is along the supply chain process. Whether on the conveyor system, in a delivery truck, sitting in a warehouse, at the point of sale or consumed by the consumer, products could always be tracked.

The problem with getting this technology into the hands of consumers, Ruhe says, is price. But research and development for less expensive manufacturing processes is underway.

And there’s another issue that must be addressed, Ruhe says. The technology has ramifications that potentially infringe upon privacy concerns.

”Imagine, if you will, the manufacturer has the ability to know when you’ve consumed a product,” he says.

Take the analogy one step further and think about a case or two of beer.

”Imagine if that data can be shared by insurance companies,” says Ruhe, adding that they could know if you consume one or two cases of beer each week. ”See where I’m going with this?”

Unlocking the door to wireless communication may open nearly endless opportunities in gathering business intelligence information. However, when testing is complete and advancements in technology have driven down the cost, no locked door will stop a company from knowing what beer you drink or car you drive.

How to reach: FutureNext, 888 479-8663