[From iSource Business, November 2001] How's this for a nightmare: One company with products designed in nearly 20 engineering centers and manufactured in about 81 plants on six continents tries to introduce new, standard supply chain management technology throughout the organization and its key suppliers. That nightmare is an everyday reality for Ed Williams, vice president of supply chain management for $8.4 billion Carrier Corp, the world's largest manufacturer of air conditioning, heating and refrigeration equipment. Four years ago, Williams launched an ambitious effort to install everything from reverse auctions to Web-based office supplies purchasing in the Farmington, Conn., subsidiary of United Technologies Corp. Because that initial implementation has been so successful, the company is looking for new ways to harness enabled technology to weather today's economic downturn.
It's far from being a walk in the park, and Williams sat down with iSource to give a supply chain manager's point of view on how enabled technology is creating some incredible opportunities - and how it is creating some incredible headaches, as well.
iSource: What do you see as the imperative driving enabled technology?
Williams: Every company will tell you that it has difficulty raising prices. In order to maintain profitability, the only other alternative is to reduce cost. In the environment of today, especially, that's the name of the game. And in most companies today, 70 to 80 percent of the cost of production can be found in purchases. As a result, if you don't optimize that area, your costs will creep up and hurt your margins. Enabled technology can help companies remove waste, reduce cost and increase margins.
iSource: What does that mean for suppliers?
Williams: Suppliers have to transform themselves so they can work in this Internet age and communicate appropriately with buyers. For example, they have to have online catalogs. All the suppliers we do business with are in transformation mode.
But what's super critical is that enabled technology has to take cost and waste out of the process; that's true for both indirect and direct buys. The Internet will drive the industry to the most cost-effective suppliers, particularly those selling commodities. The ones that aren't moving quick enough to lower costs will be out of business.
iSource: What about buyers?
Williams: Buyers have to become more like supply managers. The ability to be cross-functional, flexible and lead change are going to be the new things to look for in buyers, as opposed to their negotiation skills.
The whole value chain is affected because expectations throughout the value chain are constantly changing. You think you're moving forward, but everyone's expectations of time and cost are constantly fluctuating. Consumers expect things to be faster and they expect costs to be lower, so companies have to stay on track to keep up with customer expectations.
iSource: So, you find the fast pace of technological change to be particularly challenging?
Williams: The technology is changing - and will always change. And that means making sure you have a good handle on the latest online tools, whether you're talking about everything from reverse auctions to collaborating with suppliers. There's always a different mousetrap out there, and if you get yourself locked into something, you're in trouble. That means developing benchmarks, so you know whether to improve your current processes or look for something new.
iSource: Can you tell us more about those new metrics?
Williams: If you don't measure something, you will have a harder time improving your current processes. For that reason, we have a set of new, key metrics in our company that we've set up over a three-year window. In year one, we might see 20 percent of what we're looking for; year two, 50 to 70 percent; year three, 90 to 100 percent. We're in the 50 to 60 percent-range, as we speak. The beauty of the metrics is that, in a downturn, we can rapidly push the information to suppliers within minutes, as opposed to days.